SEC Commissioner Heather Peirce spoke about her concerns when people talk about stakeholders. She recognizes that corporations have many stakeholders and are accountable to them in different ways. While her tone is condescending and dismissive at times, we are also concerned that stakeholder rhetoric can be misapplied, as with the state “stakeholder” laws adopted specifically to entrench management during the takeover era.
[T]o mandate stakeholder engagement after the model of shareholder engagement is to ignore the ways in which non-shareholder groups of individuals already influence company policy. Employees, creditors, suppliers, customers, communities, and regulators feature prominently in the thoughts of corporate boards and managers. All of these groups have avenues for making their voices heard by the companies with which they interact. Given the importance of many stakeholders to a company’s success, these avenues are unlikely to be dead ends. Any competent manager, for example, understands the role that employee satisfaction plays in productivity, retention, and development. Creditors and suppliers negotiate contracts with a keen interest in furthering their own interests. Community relations are likewise of paramount importance to companies. They often voluntarily take steps to ensure that they are contributing to the community’s well-being. Regulation also can play a role in ensuring that, for example, a company takes into account the interests of its neighbors and others affected by the company’s actions but without a contractual relationship with the company. Regulation can help to internalize externalities. Regulatory limits on noise, air, and water pollution fall into this category.Directors of corporations, other than benefit corporations which are a unique and limited category, have a fiduciary duty to their shareholders to maximize the value of the corporation. There will inevitably be disputes about how to achieve this goal, but the objective is clear.