Abstract
The chief concern of this book lies with a critical analysis of the question ‘whether any goals can be pursued by a corporation in a market-based economy that are not reducible to the interest of the shareholders’ (p. 3). To this end, Mansell starts with an overview of the main critiques of shareholder value coming from the stakeholder theory debate. First, a critique of corporate ‘ownership’ by shareholders is recognized as present in Company Law. However, this critique is not taken up consistently by the majority of the defenders of stakeholder theory. A second critique is that the lock-in of non-financial investment by stakeholding groups is problematic. Although this lock-in may say something about residual risk, it does not say anything about the moral desirability of one corporate objective over another. A third critique, which receives a fuller investigation, is the idea of the corporation as a ‘social contract’. Drawing primarily on Hobbes and Locke, Mansell explores this argument but comes to the conclusion that the corporation is not similar to a state in multiple respects.
In order to reject these varieties of critique, Mansell makes the argument that the most prominent defenders of stakeholder theory depart from basic notions of capitalist relations, that is, the creation of obligations through contracts reached by rational individuals through voluntary consent and the idea of the corporation as a private entity in which the market provides the context for claims to sovereignty and hierarchy. Within the premises of these notions, he argues, there is very little to argue against shareholder ownership and a directedness towards shareholder value maximization. Indeed, within these premises, moving away from shareholders as the primary claimants makes the goal of the corporation unidentifiable and leads to managerial confusion, lack of accountability and (potential) abuse by the principals. Conversely, the overriding factor that leads to the amelioration of efficiency, overall social utility and Pareto-efficiency is the identification of the corporate goal with shareholder value. This means that pursuing an objective beyond shareholder value not only rejects basic principles underlying the free market and undermines legitimate claims to ownership by shareholders, it also leads to overall inefficiency. Based on these claims, the pursuit of stakeholder rights can be deemed ethically unacceptable within the framework of contemporary capitalist relations.
However, it is worthwhile to note that in Mansell’s account the corporate form appears as a ‘voluntary union arising from a rational judgement to realise a joint interest’ (p. 109) but the corporate form also appears to have no more power than a single individual (p. 76). This double ontology of the corporate form is notably present when the corporation appears both as an ‘author and actor’, as well as an ‘organization’ on one and the same page (p. 106). The basis for the construction of an ‘ethical’ framework for contemporary capitalism, therefore, relies on a very specific notion of the rational ‘individual’ encompassing both the natural person and the corporate form as the bearers of responsibility (p. 142) creating a synthetic concept if the ‘individual’ through which trade takes place in the form of voluntary contractual relations. The analytical framework that supports the ‘ethics of capitalism’ is, therefore, built on an implicit double ontology of the ‘rational individual’ which reappears in the assessment of social contract theories. The corporate form as a synthetic reified singular construct with a double ontology that is attributable with agency, ownership, and rights in notions of ‘property’ and ‘contract’ has been widely criticized in law, economics, and corporate governance theory (e.g. Berle and Means, 2007; Bratton, 1989a), and in social contract theory (e.g. Gierke, 1968; Harris, 2006; Maitland, 2003) both for the construction of internal governance structures (e.g. Bratton, 1989b; Robé, 2011; Stout, 2012; Tsuk, 2003) and for its wider economic and political effects (e.g. Bowman, 1996; Foucault, 2008; Ireland, 1996, 2009).
Not responding to such wider critiques of the corporate form as a synthetic construct with severe ontological and methodological problematics and wide effects may be important for the analytical exercise and for the strength of the argument put forward in this book, as Mansell argues. However, Mansell also states that stakeholder theory ‘has the potential to shape to a significant extent what is expected of the business corporation in society’ (p. 157). By leaving out these wider critiques, the reader is left to wonder how these expectations can ever be understood in a broader way. Framed securely within a neoclassical understanding of organizations, the question remains why a voluntary expansion of managerial duties on the basis of Kant’s ‘duty of virtue’ (p. 155) would ever be adopted by any manager, even if it would be presented as an ethical imperative or a legal option. Ultimately, the reader is left with the idea that the result of leaving those wider discussions out is essentially the reinforcement of the premises that underlie the neoclassical framework of capitalist relations, as exemplified by the unequivocal closing statement: ‘(…) within the ethical structure of a market economy the only objective that a corporation can pursue will be that which is consistent with the interests of the shareholders’ (Mansell, 2013: 167).
In sum, this book provides a provocative critique of stakeholder theory by making clear that the dominant claims in contemporary stakeholder theory mostly reinforce the ethical framework of neoclassical economics by accepting common-sense notions of individuals, corporations and contracts and that for this reason claims in stakeholder theory remain little more than inconsistent and untenable moral claims to entitlement. However, the argument could have been strengthened by making the limits of the assumptions and the conclusions clearer, by using a broader set of historical and philosophical theoretical backgrounds to further question the premises and by further interrogating the type of synthetic constructs that form the basis of contemporary capitalist relations.