The shareholder and stakeholder theories aren't arguing about the goals of business. Both agree a CEO should maximize profits. All the stakeholder theory is saying is that acting in moral interest can achieve this goal.
I am generally pro-capitalism, because I think it has raised billions out of poverty, and elevated life to the state where im writing this on box that uses sand to think. Overall, capitalism has done some good.
But I also am trying to change my focus to also be about the bad parts of capitalism in these debates. I still don't believe capitalism is a bad system, but if I focus on the problems, then I can consider them in context with how a solution would affect the benefits.
For example, if we chose to move away from a profit motive entirely, then it would be functionally impossible to determine what the best uses for resources are. After all, resources are costs, and in our current systems, costs need to be outweighed by profits.
But if a cure to cancer is found tomorrow, and the cost for it is millions because of a pure profit motive, then I think there needs to be some form of intervention.
Overall, I want us to have a more nuanced conversation that "Corporation bad - NO! Corporation Good!"
@Blurred_Lines I would agree that without weighing costs vs profits, it would be impossible to determine what best use for resources are. However, I don't think "profit" necessarily needs to be determined by capital gains. You could weigh the cost of developing something (time, resources) with the benefit it would bring to society, which would act as the "profit" in a system that analyzes best use on a cost vs profits model. I think that capitalism is a great concept on paper, but that the drive to maximize profits becomes incompatible with the public good over time.
@AngFloz Respectfully, I think this is an oversimplification of a possible real world example. What if the owner started the business (attained the knowledge and skill to start and run a business, developed the business plan, secured the bank loan at personal risk, found the proper market, found the proper workers, etc), developed the method/avenue by which the worker is able to create the $100 in goods (designed and hand made the original good, purchased equipment to scale the manufacturing through the business loan, rented a space to perform the manufacturing, etc), and developed the market and sales side to actually sell the item for the $100? The worker was taught how to create the item but didn't take any of the risk or input any capital into that equation. Even then, the 'owner' isn't likely getting 90%, rather the business is getting 90% because all of this effort cost resources that the owner has to ensure is paid to start/continue the business as a going concern. It's more likely that the owner is getting 1%, the worker is getting 10%, and 89% is going into the business costs. Where you start to see issues is when the owner is getting 1% from the goods every worker creates, but the business has grown and there are 40,000 workers now. Granted, to grow to that size most companies will have moved to the public markets to secure capital and the original owner likely owns a significantly smaller portion of the company than originally, but when you upscale these figures, you get the outlandish net worths of the largest stock holders/founders of huge businesses.
@AngFloz OP's post - "Overall, I want us to have a more nuanced conversation than "Corporation bad - NO! Corporation Good!" "... I think I can make a solid argument you missed the OP's point. I'd wager we're both on the same side of what we think is right or wrong in this study break -- I believe we need corporations to shoulder more social responsibility. However, your question was in bad faith because you started with an apparent straw man argument -- that left a lot to be desired in representing our likely shared opinion -- which I challenged. I engaged with your argument since we are both apparently trying to go to law school...
@KevinBoudreau No offense, but, I really have no idea what you're going on about or how you made all of these assumptions about a simple question. Also, I highly, highly doubt we have any shared opinions.
@Blurred_Lines my main contention with that is: who are the billions its raised out of poverty?
let's just take the example of food insecurity as one metric of poverty (the most basic, ignoring other necessities like housing and healthcare)
According to the 2024 edition of the State of Food Security and Nutrition in the World report, between 713 and 757 million people faced hunger in 2023– one out of 11 people in the world, and one out of every five in Africa.
Apart from hunger, the report also highlights that 2.33 billion people experienced moderate or severe food insecurity and 900 million people faced severe food insecurity. Over 3.1 billion people could not afford a healthy diet. Many children under five suffer from malnutrition. Exclusive breastfeeding has improved, but more effort is needed to meet the malnutrition targets by 2030.
so out of 8 billion people, 3.1 billion are food insecure (leaving out other indicators of poverty like not being able to afford housing and healthcare, which would incerase that number)
these 3.1 billion people do not all live in "communist" nations (most are in south asian and subsaharan africa according to the report, and countries there participate in capitalism and global trade.) if they are working under capitalism and still unable to afford necessities, then why would capitalism not be the system keeping them poor?
obviously we live in a better world than the past, but that can be attributed more to technological advancement than capitalism is basically what i want to say.
also, if your issue is "determining the best use of resources" then the answer to that can simply be maximizing human welfare and minimizing human suffering rather than increasing profits.
if the argument is that because resources are costs, so profits should be considered - well why ARE resources costs? and why is "profit" implied to be only "money" - if i spent 5 hours on a task that benefitted 100 people, would their benefit not be a profit?
The concept of corporations as people dates back to 1886 in the Supreme Court case Santa Clara County vs. Southern Pacific Railroad where they were given personhood under the Equal Protection clause of the 14th Amendment. I was pretty surprised to learn this recently because I previously thought it started with Citizens United and was, of course, highlighted by Romney's comments.
In many ways your right however, Citizens United v. Federal Election Commission & Burwell v. Hobby Lobby are examples of companies and NGO's being protected by the first amendment. I could be wrong but, there is not a clear case that claims "corporations are considered people". Overall Burwell v. Hobby Lobby expanded rights to corporations, but it did not redefine corporations as people.
Not that you're wrong, but I don't think anyone here is expecting that corporations were legally defined as people. Calling corporations people always meant that corporations were extended rights that were traditionally thought to belong only to humans. Corporations are people in terms of first amendment considerations, but of course corporations are not actually human beings.
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20 comments
Going through this lesson I had Mitt Romney's "corporations are people" comment in my mind lol. 7sage guys- we have the same brain.
The shareholder and stakeholder theories aren't arguing about the goals of business. Both agree a CEO should maximize profits. All the stakeholder theory is saying is that acting in moral interest can achieve this goal.
Was not expecting to see Mitt Romney on 7sage lol
SKIP!!!
Hey yalls. I have some feelings about this.
I am generally pro-capitalism, because I think it has raised billions out of poverty, and elevated life to the state where im writing this on box that uses sand to think. Overall, capitalism has done some good.
But I also am trying to change my focus to also be about the bad parts of capitalism in these debates. I still don't believe capitalism is a bad system, but if I focus on the problems, then I can consider them in context with how a solution would affect the benefits.
For example, if we chose to move away from a profit motive entirely, then it would be functionally impossible to determine what the best uses for resources are. After all, resources are costs, and in our current systems, costs need to be outweighed by profits.
But if a cure to cancer is found tomorrow, and the cost for it is millions because of a pure profit motive, then I think there needs to be some form of intervention.
Overall, I want us to have a more nuanced conversation that "Corporation bad - NO! Corporation Good!"
Thanks for reading and have a blessed day.
@Blurred_Lines I would agree that without weighing costs vs profits, it would be impossible to determine what best use for resources are. However, I don't think "profit" necessarily needs to be determined by capital gains. You could weigh the cost of developing something (time, resources) with the benefit it would bring to society, which would act as the "profit" in a system that analyzes best use on a cost vs profits model. I think that capitalism is a great concept on paper, but that the drive to maximize profits becomes incompatible with the public good over time.
@Blurred_Lines If a worker creates $100 in goods, paid $10 for it, and the owner keeps $90, is that a fair exchange?
@AngFloz Respectfully, I think this is an oversimplification of a possible real world example. What if the owner started the business (attained the knowledge and skill to start and run a business, developed the business plan, secured the bank loan at personal risk, found the proper market, found the proper workers, etc), developed the method/avenue by which the worker is able to create the $100 in goods (designed and hand made the original good, purchased equipment to scale the manufacturing through the business loan, rented a space to perform the manufacturing, etc), and developed the market and sales side to actually sell the item for the $100? The worker was taught how to create the item but didn't take any of the risk or input any capital into that equation. Even then, the 'owner' isn't likely getting 90%, rather the business is getting 90% because all of this effort cost resources that the owner has to ensure is paid to start/continue the business as a going concern. It's more likely that the owner is getting 1%, the worker is getting 10%, and 89% is going into the business costs. Where you start to see issues is when the owner is getting 1% from the goods every worker creates, but the business has grown and there are 40,000 workers now. Granted, to grow to that size most companies will have moved to the public markets to secure capital and the original owner likely owns a significantly smaller portion of the company than originally, but when you upscale these figures, you get the outlandish net worths of the largest stock holders/founders of huge businesses.
@KevinBoudreau Nice job writing a whole bunch of words while missing the entire point.
@AngFloz OP's post - "Overall, I want us to have a more nuanced conversation than "Corporation bad - NO! Corporation Good!" "... I think I can make a solid argument you missed the OP's point. I'd wager we're both on the same side of what we think is right or wrong in this study break -- I believe we need corporations to shoulder more social responsibility. However, your question was in bad faith because you started with an apparent straw man argument -- that left a lot to be desired in representing our likely shared opinion -- which I challenged. I engaged with your argument since we are both apparently trying to go to law school...
@KevinBoudreau No offense, but, I really have no idea what you're going on about or how you made all of these assumptions about a simple question. Also, I highly, highly doubt we have any shared opinions.
@Blurred_Lines my main contention with that is: who are the billions its raised out of poverty?
let's just take the example of food insecurity as one metric of poverty (the most basic, ignoring other necessities like housing and healthcare)
so out of 8 billion people, 3.1 billion are food insecure (leaving out other indicators of poverty like not being able to afford housing and healthcare, which would incerase that number)
these 3.1 billion people do not all live in "communist" nations (most are in south asian and subsaharan africa according to the report, and countries there participate in capitalism and global trade.) if they are working under capitalism and still unable to afford necessities, then why would capitalism not be the system keeping them poor?
obviously we live in a better world than the past, but that can be attributed more to technological advancement than capitalism is basically what i want to say.
also, if your issue is "determining the best use of resources" then the answer to that can simply be maximizing human welfare and minimizing human suffering rather than increasing profits.
if the argument is that because resources are costs, so profits should be considered - well why ARE resources costs? and why is "profit" implied to be only "money" - if i spent 5 hours on a task that benefitted 100 people, would their benefit not be a profit?
Citizens United ruined my life
I don’t have nice things to say about mitt Romney nor corporations. Thanks for coming to my Ted Talk.
The concept of corporations as people dates back to 1886 in the Supreme Court case Santa Clara County vs. Southern Pacific Railroad where they were given personhood under the Equal Protection clause of the 14th Amendment. I was pretty surprised to learn this recently because I previously thought it started with Citizens United and was, of course, highlighted by Romney's comments.
And of course, that ruling came in the middle of the Gilded Age...
Under the law, corporations are considered people, as seen in the case of Burwell v. Hobby Lobby.
Thanks for mentioning the case! That was an interesting read.
In many ways your right however, Citizens United v. Federal Election Commission & Burwell v. Hobby Lobby are examples of companies and NGO's being protected by the first amendment. I could be wrong but, there is not a clear case that claims "corporations are considered people". Overall Burwell v. Hobby Lobby expanded rights to corporations, but it did not redefine corporations as people.
Not that you're wrong, but I don't think anyone here is expecting that corporations were legally defined as people. Calling corporations people always meant that corporations were extended rights that were traditionally thought to belong only to humans. Corporations are people in terms of first amendment considerations, but of course corporations are not actually human beings.