The Competitive Advantages of Stakeholder Mutuals

Abstract

This paper compares the competitive advantages of stakeholder mutual firms with firms that are publicly traded, family or government owned. A stakeholder mutual is owned and by its employees, customers and suppliers. These strategic stakeholders can have greater knowledge and commitment to the business than investors. The efficiency and effectiveness of competition for control between stakeholders is compared with competition for control through the stock market in making a firm a competitive. The empowerment of stakeholder constituencies to directly participate in corporate governance is identified as a means for reducing the need for detailed prescriptive government regulation to protect stakeholders. The operating advantages, the flexibility and the competitiveness of a stakeholder mutual is compared with government or private ownership. Examples are used to support the analysis that stakeholder governance can provide a superior approach for increasing efficiency and equity while creating a building block to develop a participatory stakeholder democracy.

JEL Classification: D890, G380, H190, K290, L200