The Case for Introducing Stakeholder Corporations
Institute for International Corporate Governance and Accountability, The George Washington University Law School
13 Pages Posted: 26 Nov 2003
The objective of this paper is describe how the nature of corporations can and should be reformed to make them an explicit instrument for building an efficient, equitable and sustainable society that is locally controlled. The paper traces how the current concerns over the role of the modern corporation arose from their origin as an explicit instrument of political and economic colonisation. While rights of perpetual succession were consistent with the political origins of corporations, this allows investors to get overpaid with "surplus profits" that exacerbates global inequality in income and wealth. Another problem arises from democracy being undermined by family ownership and/or through what Peter Drucker describes as "pension fund socialism". Tax incentives are proposed to provide shareholders a bigger, quicker less risky short term profit in return for changing corporate constitutions to transfer their property rights to stakeholders over 20 years. The competing interests arising from stakeholder governance introduces self-governance, sustainable competitive advantages and enriches democracy. A Global Community Investment Code to promote the adoption of incentives to create stakeholder corporations is suggested in multi-national forums to counter concerns over globalisation.
Keywords: Community Investment Code, Corporations, Democracy, Globalisation, Ownership transfer, Stakeholders, Surplus profits
JEL Classification: D21, D31, E61, F02, G38, L16, N20
Suggested Citation: Suggested Citation