21 Pages Posted: 10 Sep 1997
Some of the most successful businesses in the world involve employees, customers and suppliers in their control. This paper describes why this is so and how stakeholder governance could be introduced into English speaking countries. The competitive advantages of establishing co-operative relationships with stakeholders are illustrated by analyzing a Japanese Keiretsu and the stakeholder co-operatives found around the Spanish town of Mondragon. These are shown to share common features in their information and control architecture, which are also shared by all living things, which depend upon obtaining feedback information from their environment to exist. Elements of information theory, which is used to design self-regulating devices, are introduced to indicate how firms could be designed to mimic life forms to become self-regulating. Besides introducing competitive advantages, this would minimize both the internal and external costs of regulation. The paper recommends that governments provide leadership in introducing competitive self-regulation using the strategy proposed by the U.S. Vice President. The result would be to create a "Stakeholder Economy."
JEL Classification: G3, K2, L2
Suggested Citation: Suggested Citation
By R. Freeman