Shareholder versus Stakeholder – is there a Governance Dilemma?

• Published date: 01 January 2001
• DOI: http://doi.org/10.1111/1467-8683.00224
• Date: 01 January 2001
• Author: Gerald Vinten

Shareholder versus Stakeholder ± is

there a governance dilemma?

Gerald Vinten*

All directors are faced with real, or imagined, conflicts of interest or competing demands for

time and resources, between shareholders and stakeholders. This has always been the case,

but the contemporary emphasis on stakeholders has brought this to a head. Although astute

organisations and directors maintain a suitable balance between the various demands placed

upon them, and there are systematic ways to do this, there are a few voices opposed to

stakeholding in any shape or form. In order to suggest that stakeholding is the viable and

sustainable way for companies to proceed, the article considers and criticises one anti-

stakeholder, together with other antagonists, before bringing in endorsements from different

quarters, and introducing three categories of stakeholding of which the normative holds most

promise. Practical approaches to discriminating among the claims of various stakeholders are

indicated.

The shares are a penny, and ever so many

are taken by

Rothschild and Baring,

And just as a few are allotted to you,

you awake with a

shudder despairing.

WS Gilbert (1836±1911)

Iolanthe, 1882, Act 2.

Given the despair, and the generalised

small shareholdings available if you are

not fortunate enough to be a Rothschild or a

member of the Dutch banking group Ing,

which took over Baring Brothers, it may seem

that the way ahead for most of the population

is to opt to be a stakeholder, assuming that

the two are exclusives! There is no such thing

as a transferable or tradeable stakeholding

certificate, and neither is there any Company

Act that legislates or company secretary to

protect rights, responsibilities and duties.

Stakeholding very much appears to be in the

eyes of the beholder. Maybe stakeholding is

part of a Marxist revolution whereby private

ownership is replaced by mass public owner-

ship whereby the population as a whole is

empowered, at least in rhetoric and theory.

There is little pronouncement of stakeholder

theory that would take such an extreme view.

Generally a capitalistic market economy is

assumed, and the group of stakeholders

envisaged depends on the size, nature and

geographical and product spread of a par-

ticular company. The small business, fighting

for survival, cannot be expected to take into

consideration the range of stakeholders ap-

propriate to a multi-national company.

Professor Milton Friedman (1962, 133)

represents an extreme form of monetarist

economic theory, which considers notions of

company social responsibility beyond a duty

to shareholders to be subversive, and by

extension ideas of stakeholder rights. To him

social responsibility is:

a fundamentally subversive doctrine. . . few

trends could so thoroughly undermine the

very foundations of our free society as the

acceptance by corporate officials of a social

responsibility other than to make as much

for their stockholders as possible.

The Sternberg view

In a similar tradition, Elaine Sternberg (1994,

41) defends and extends Friedman, and echoes

* Address for correspondence:

Professor Gerald Vinten,

Deputy Dean and Professor

of Management, Southampton

Business School, East Park

Terrace, Southampton SO14

0YN. Tel: 020 7588 0675; Fax:

02380 337438; Email: gvinten@

hotmail.com

CORPORATE GOVERNANCE36

Volume 9 Number 1 January 2001 #Blackwell Publishers Ltd 2001. 108 Cowley Road, Oxford OX4 1JF, UK

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