WHICH STAKEHOLDERS?

WHICH STAKEHOLDERS?

Those of you who have read The Dictatorship of Woke Capital or who recall the essays that formed the backbone of its arguments undoubtedly know that one of our chief gripes with what is known as “stakeholder” capitalism today is that it actually perverts the very idea of stakeholder.  It takes the common-sense notion that businesses must cater to several different constituencies and turns it on its head to create a small number of niche pressure groups that are thoroughly removed from traditional business operations but demand to be treated as primus inter pares, i.e. first among equals.

For nearly two decades, the idea that business owners and managers needed to concern themselves with their companies’ stakeholders was considered standard, inarguable business-folk wisdom.  Or, as I put it in the book:

The idea was to chart the course of the company, to plan strategically by analyz­ing input on strengths, weaknesses, opportunities, and threats from a variety of “stakeholder” groups, each of which would have a different interest in the company—shareholders, customers, employees, manag­ers, unions, and so on. A logical and natural extension of the idea of strategic planning, stakeholder analysis was intended to force managers and executives to see how their decisions affected different groups and how best to handle an array of often conflicting and competing interests. The idea—which seems entirely commonsensical in retrospect—was that it would be difficult, if not impossible, to plan effectively for the future without knowing what customers, employees, and others might need and want in the future.

This is an important point to remember: When stakeholder analy­sis was introduced, it was introduced as an analytical tool, the means by which the managers of organizations could better understand their organization’s position in its environment and, thus, better understand how to solidify and improve that position. Additionally, it’s important to remember that the Stanford Research Institute was not, and is not, an academic institution. Rather, it is a practical research organization. It is affiliated with an academic institution, obviously, but it nevertheless had and has clients in the business world who are looking for practical advice and help, not theoretical concepts.


The sea change moment in the practice of stakeholder analysis came in 1984, when R. Edward Freeman, a philosophy Ph.D. who, nevertheless, worked at the University of Pennsylvania’s Wharton Applied Research Center, penned a literally world-changing document, Strategic Management: A Stakeholder Approach.  Therein Freeman introduced a normative – or moral – component to the stakeholder model, which he intended to provide a more accurate reading of stakeholder needs and to help compensate for the perceived collapse of business ethics during the previous decade.

Today, “stakeholder” capitalism is the height of moral posturing in business.  It is, as we said, a term that has been turned on its head, often rejecting the actual needs and wants of real stakeholders in favor of the demands of social activists.  It has become, in other words, the backbone of “woke capital.”

As I also note in the book, two of the most aggressive and egregious practitioners of contemporary stakeholder capitalism are Tim Cook, the CEO of Apple, and Bob Iger, the former CEO and guy who won’t go home from Disney.  Cook may be the wokest man in America – if not the world.  Again, from the book:

On June 1, 2020, Apple Inc. CEO Tim Cook sent a memo to his employees, addressing the issue of racism in the United States in the wake of the death of George Floyd. Floyd, recall, had been killed while being subdued by police officers in Minneapolis, Minnesota, and his death sparked national and international outrage. And Tim Cook wanted his employees to know that he, too, was upset. “At Apple,” Cook declared, “our mission has and always will be to create technology that empowers people to change the world for the better. We’ve always drawn strength from our diversity, welcomed people from every walk of life to our stores around the world, and strived to build an Apple that is inclusive of everyone.”

Cook continued, saying that Apple would make donations to several different groups, including “the Equal Justice Initiative, a non-profit com­mitted to challenging racial injustice, ending mass incarceration, and protecting the human rights of the most vulnerable people in American society.” He concluded by insisting that “With every breath we take, we must commit to being that change, and to creating a better, more just world for everyone.”…

Cook has distinguished himself from his predeces­sor, Apple founder Steve Jobs, by being outspoken on social issues and by reinventing Apple not as a technology pioneer but as a pioneer for social and political justice.


He’s the stakeholder capitalists’ favorite capitalist. And yet

Apple, known among its Silicon Valley peers for a secretive corporate culture in which workers are expected to be in lock step with management, is suddenly facing an issue that would have been unthinkable a few years ago: employee unrest.

On Friday, Tim Cook, Apple’s chief executive, answered questions from workers in an all-staff meeting for the first time since the public surfacing of employee concerns over topics ranging from pay equity to whether the company should assert itself more on political matters like Texas’ restrictive abortion law.

Mr. Cook answered only two of what activist employees said were a number of questions they had wanted to ask in a meeting broadcast to employees around the world, according to a recording obtained by The New York Times. But his response was a notable acknowledgment that the workplace and social issues that have been roiling Silicon Valley for several years have taken root at Apple.

Over the past month, more than 500 people who said they were current and former Apple employees have submitted accounts of verbal abuse, sexual harassment, retaliation and discrimination at work, among other issues, to an employee-activist group that calls itself #AppleToo, said Cher Scarlett and Janneke Parrish, two Apple employees who help lead the group.

The group has begun posting some of the anonymous stories online and has been encouraging colleagues to contact state and federal labor officials with their complaints. Their issues, as well as those of eight current and former employees who spoke to The Times, vary; among them are workplace conditions, unequal pay and the company’s business practices.

A common theme is that Apple’s secrecy has created a culture that discourages employees from speaking out about their workplace concerns — not with co-workers, not with the press and not on social media….

“Never have I met people more terrified to speak out against their employer,” said Ms. Scarlett, who joined Apple as a software engineer in April and has worked at eight other companies.


Now, you might think that people would know better, that they’d be aware that Apple has a long history of treating employees poorly.  The suicide nets put up on the factory floor at Apple’s infamous iPhone plant at Longhua in China should have been their first clue that Apple’s concern for “stakeholders” was somewhat less dramatic than Cook et al. would have us believe.  And yes, we know that plant is operated by Foxconn, an Apple contractor.  But that’s one of the keys to understanding Apple’s grand strategy for avoiding responsibility and putting a happy face on its ugly practices: pawning off its problem to others and then closing its eyes to the truth.

In any case, it’s unsurprising that Apple and Cook would face worker unhappiness.  When you promise stakeholders primacy, you can hardly be surprised when it turns out that that’s what they expect.

As for Disney, Bob Iger has always been very clear that he believes the social well-being of his employees is paramount.  He protests bills in Georgia (Disney’s film-production capital) about religious-conscience exemptions, about abortion, and about election integrity – all in the name of his employees.  His company has been at the forefront of a variety of social issues, including gay rights.  Iger is not Tim Cook when it comes to protecting and advancing the concerns of social stakeholders, but he’s no slouch either. And yet

"We feel like there’s always somebody else that will fill our spot,” Disneyland cast member Gabriel Sarracino told SFGATE, “and we’re just there.”

Sarracino has worked at the Disneyland Hotel for 15 years as a valet, parking cars and assisting guests with their luggage. For all of those 15 years, he’s earned minimum wage from Disney and supplemented his income with tips. But a recent decision from leadership that prevents valets from handling luggage has cut substantially into his earnings. 

He’s now one of the 25,000 cast members, as Disneyland calls its employees, who are participating in the class action lawsuit against Disneyland that alleges the company is legally obligated to pay a living wage.

“I couldn’t make it on minimum wage, which is how much they pay me,” Sarracino explained. “If they are going to make changes where I have less opportunity for tips, then that’s half my income [gone].”…

[A]ccording to a survey of 5,000 cast members, many are experiencing difficult living conditions because of low pay. “Working for the Mouse,” a study by Occidental College and the Economic Roundtable published in February 2018, found that 11% of Disneyland employees reported experiencing homelessness in the previous two years, 68% were food insecure and 73% said they do not earn enough for basic living expenses. While many employees said they would like to take on second jobs, Disneyland often schedules most workers different hours every week, preventing them from doing so.

Other cast members sleep in their cars, or make two-hour drives each way to sleep at relatives’ homes or experience food insecurity, the New York Times found shortly after the survey was released….


Far be it from us to tell successful businessmen like Cook and Iger how to run their companies.  Still, it seems obvious to us, at least, that any honest reading of “stakeholder” theory would acknowledge that the three most important stakeholder groups are shareholders, employees, and customers.  If any of the three is unhappy, then it almost goes without saying that something is screwed up in corporate operations.

That’s not, however, what contemporary stakeholder theory teaches.  It teaches that social justice and grand political gestures are the keys to making business more “moral.”

It won’t surprise you to learn that we think that’s a bunch of horse-hockey.  More to the point, it’s poor business practice.  Eventually, it’ll catch up to them.

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