Financial Times: The failures of stakeholder capitalism

May 2, 2022 Media

People who care about creating a fairer and more sustainable market system tend to think about things like “ESG” investing (environmental, social and governance issues) and “stakeholder capitalism”. But what they need to start thinking about is power.

Regulators in Washington are beginning to sniff around any number of companies perceived as having benefited from the current inflationary pressures in the economy by raising profit margins unfairly.

Some leading companies haven’t covered themselves in glory, with chief executives boasting about their pricing power on earnings calls.

Yet stakeholder capitalists, “while assertive about the obligations of firms in many areas, have been utterly silent” on instances of concentrated corporate power, say Denise Hearn, a senior fellow at the American Economic Liberties Project, and competition lawyer Michelle Meagher, co-founder of the Balanced Economy Project. They make a good point.

The pair released a paper last week arguing that those who care about more equitable markets should focus on monopoly power. “The inherent dissonance between the perpetual drive for scale and dominance, and the recurring market abuses of the largest corporations, is a conflict that stakeholder capitalism ignores,” they write.

Hearn and Meagher point out that America’s most “just” company, according to JUST Capital, is Google — a behemoth accused of antitrust violations on two continents.