Shareholder Capitalism & Stakeholder Capitalism

In today's economy, how a company defines its purpose shapes not only its profits but also its impact on society.

What is Shareholder Capitalism?

- Shareholder capitalism is a system where the primary goal of a corporation is to maximize profits for its shareholders, the people who own the company's stock. This model has been most prominently used in the United States, where stock markets and financial institutions have a strong influence over corporate decisions.

Merits:

• Drives rapid growth and innovation

• Encourages efficient use of capital

• Attracts investors looking for high returns

Downsides:

• Often ignores the needs of workers, customers, and the environment

• Focuses on short-term gains rather than long-term value

• Can lead to mass layoffs, underinvestment in R&D, and rising inequality

Success Example: Apple Inc. 
Apple delivers huge shareholder returns while investing heavily in innovation (like the iPhone and Apple Silicon). The result was that Apple Inc. became the first $3 trillion company with long-term global success.

Failure Example: General Electric (GE)
GE focused too much on boosting short-term stock prices through massive buybacks and cost-cutting. The result was innovation declined, core businesses weakened, and GE lost over 90% of its market value.

What is Stakeholder Capitalism?

- Stakeholder capitalism takes a broader view. It considers the interests of all parties involved in a business, not just shareholders, but also employees, customers, suppliers, communities, and the environment. The goal isn’t just profit, but sustainable and inclusive growth.

Merits:

• Promotes long-term stability

• Builds trust with customers and employees

• Supports ethical and socially responsible business

Downsides:

• Decision-making can be slower

• Balancing multiple interests can create internal conflict

• Requires strong systems for transparency and accountability

Success Example: Mondragon Corporation
A Spanish worker cooperative where employees share ownership and profits. Focuses on community, stability, and long-term growth. The result was operating globally with billions in revenue, proving that stakeholder capitalism can work.

Failure Example: BP (British Petroleum)
BP promoted a green, stakeholder-focused image (“Beyond Petroleum”), but in 2010, the Deepwater Horizon oil spill exposed cost-cutting and poor safety practices. The result was extensive environmental damage, 11 deaths, and billions in penalties.