Stakeholder capitalism - a wolf in sheep's clothing

Virtue signaling nonsense that will damage prosperity without benefit

The idea of “stakeholder capitalism” is getting a lot of ink these days, with its proponents advocating a sea change in the economic order where businesses (and particularly incorporated businesses trading in public markets) are legislated to have obligations to society beyond operating lawfully and profitably. The new obligations will include concepts like Environmental, Social and Governance (ESG) with metrics yet to be defined and broader societal goals set by governments including diversity and inclusion. Directors will no longer have a duty solely to act in the best interests of the corporation, but will have broader duties that will frequently pose conflicts of interest between their current fiduciary duties to the corporation and the new obligations inherent in the idea of “stakeholder capitalism”.

The seven principles of “stakeholder capitalism” have been stated as follows:

Absent from the list is any obligation to manage the corporation so that it is economically viable. Making the CEO responsible for all corporate decisions could be a challenge for corporations with hundreds of thousands of employees. Perhaps we should have “stakeholder” governments and hold the Prime Minister personally responsible for all acts of government including its employees. That could be fun.

It is interesting that the objective of stakeholder capitalism is to impose these seven principles on corporations but not on ordinary citizens or members of Parliament. What makes that interesting is that corporations are a legal fiction and exist solely as pieces of paper filed with government ministries setting out their by-laws and articles. Corporations came into existence to permit the existence of businesses where the investors risked no more than their investment, a concept called “limited liability”. This encouraged people to invest by ensuring they risked no more than the money they put at risk and were not personally responsible for acts taken in the name of the corporation in which they were investors.

Stakeholder capitalism won’t change that but it will make the people who are engaged to manage the corporations liable for acts taken in the name of the corporation which, while lawful and in the best interests of the corporation, do not meet some subjective standard of conduct that suits whoever is empowered to enforce the new stakeholder capitalism or ESG obligations. Unlike governments (the groups elected to enact legislation that meets society’s goals), this stakeholder capitalism “movement” seeks to supplant government by imposing these obligations on corporations. While goverments can be regularly changed at election time if society is unimpressed with the incumbent’s policies, electing a new board of directors won’t ease or alter the stakeholder capitalism obligations of the corporation under a “stakeholder capitalism” regime.

During mankind’s history, governments were intially monarchies where “law” meant whatever the anointed leader chose to inflict on citizens. Leaders were chosen based on birthrights (one wonders why people put up with that concept for centuries since it is a silly way to choose a leader), not elections, and in countries like England, Spain, France, Austria and Germany kings and queens were thought to have “divine rights” arising from being chosen by God. Organized religion was an early and persistent state of mass hysteria which continues to exist and exert power today, although most societies have abandoned the idea that the authority of kings derived from God. It took revolutions to get rid of that nonsensical idea, with King Louis XVI of France losing his head on January 23, 1793 and Czar Nicholas II of Russia executed by Bolsheviks on January 17, 1918 (together with his wife and five children). For some reason, the people of England still honor and respect the monarchy as if the mere existence of the “royals” warranted extraordinary benefits.

In England, the royalty was replaced by a parliamentary democracy. That was not the first such democracy in recorded history - in 1188 King Alfonso IX, King of Leon (today Spain) formed three states where representatives of the people were elected. But England did lead the world in advancing parliamentary democracy. In Russia, the Bolshevik Revolution created the first socialist government in 1917. Socialism as a system of government is just 205 years old, and emerged from the writings of Friedrich Engels and Karl Marx, with the terms “Marxism” and “Communism” coined to describe the extreme form of socialism adopted in post-Czarist Russia.

The traditional definition of socialism is state ownership or control of the means of production and distribution. Communism and socialism vary only by degrees, with religion and class banned in Communism while religion and some level of private ownership of property is permitted in socialism. Otherwise, both lead to tyranny.

Stakeholder capitalism on its face seems to be just another phrase for “socialism” and by putting the community first, comes close to “communism” in its insistence that corporations act in the best interests of communities rather than on behalf of their owners, with the best interest of the community both hard to define and hard to determine since every community is rife with competing interests. Neither Communism nor Socialism has worked well anywhere on Earth at any time in history.

It should surprise no one that the concept of stakeholder capitalism emerged from Klaus Schwab and the World Economic Forum (WEF) which Schwab founded and chairs. WEF is an organization dedicated to the “Great Reset” through which a post-national socialist world government replaces current governments everywhere. Justin Trudeau is a vocal proponent of the Great Reset and appears to be a big fan of Schwab, while Schwab publicly claims that he controls Trudeau.

Prominent Canadians are becoming enthralled with this dangerous concept. Global Canada is a group of such people whose objective is to influence not only Canadian governance but that of the world as a whole, providing “global leadership” and encouraging Canadian leaders from industry, academia and philanthropy to join this movement. Global Canada claims the status quo is not sustainable and business needs to be reimagined according to ESG principles. Global Canada states:

The motivation for this radical reshaping of corporate Canada is twofold - a specious but popular belief that CO2 causes climate change and an over reaction to COVID 19 which history will record as just another pandemic. Both “global warming” and COVID get a lot of press in the arguments for ESG which to me seems just a way to squander capital, reduce corporate returns and impair economic growth.

Free markets and capitalism are far from “broken” or “unsustainable” but remain the only system which has to date enabled prosperity to be achieved throughout world economies and even Communist China and Russia have embraced some elements of free markets and capitalism. Unsatisfied with the dramatic progress and accomplishments Canada has achieved since Confederation as a free market economy, the left wing of politics think they can re-imagine Canada in a way that will benefit all Canadians despite all the evidence of history which demonstrates that the more government intervenes in the economy, the worse the outcome for its citizens.

Canada’s march towards authoritarian socialism is well underway, Trudeau is leading it and prominent Canadians are supporting it. If voters don’t act to stem this rising tide it is only a matter of time before Canada as we know it is lost and with it personal freedoms and economic opportunity for our children.