A Stakeholding Society — What Does It Mean for Business?

The paper describes the differences between stakeholding and shareholding views of the objects of business. In the former, the object of business is to develop good businesses. This is defined by the criteria normally associated with good businesses and valued by good businessmen themselves—satisfying customers, developing the skills and motivation of employees, earning good returns for investors. In the latter, profit is the defining purpose of business; and other objectives, although often pursued, are purely instrumental to that end. By emphasising the difference between a characteristic of an organisation— behaviour that is developed and valued for its own sake—and the policy of an organisation—behaviour that is adoped for the time being because of its hoped for consequences—I explain the greater capacity of the stakeholding company to make commitments in implicit contracts with all stakeholders. For this reason, it may perform better for all stakeholders, including shareholders.