They owe little to the communities in which they operate or to the environment as a result of harmful byproducts, waste, depletion of resources, and pollution of earth, air, and water.corporations traditionally have owed little to their employees beyond wages, to their suppliers beyond payment for supplies, to their customers beyond delivery of purchased goods, or to governments beyond taxes – often relatively small.
That is beginning to change as some corporations
move toward the stakeholder model.
The stakeholder model requires that all of
the parties affected by management decisions, in addition to the
themselves, management, employees, customers, suppliers, communities
in which the company operates and the environment from local to
global, all must be considered as
fairly and justly as possible.
In the early days of capitalism goods were scarce
and the material needs of most of the population were greatly benefited
by expanding corporate operations and giving them limited liability,
thereby producing a cornucopia of goods and services.
The model did the job better than anything the world
had seen. In the current
era the need is increasingly to curtail, even reduce, total material
consumption and to live as lightly on the earth as we reasonably can.
At some point soon we are likely doomed to a vast
"dieback" of many living species including our own unless we
shift over from dominance of corporations operating under the
model to dominance by the stakeholder model.
Looking into the future as knowledgably, scientifically, and
practically as possible, we can curtail these risks and achieve
development sustainable for at least the next seven generations.
We need to curb the size of the regional, country, and local
"footprint", the contribution per capita to production
relative to depletion of resources and the hidden social and
environmental cost of that production (See "Ecological Footprint
Analysis", Wackenagel, 1999).
1. Stages in the History of Corporations
The old In the
feudal age and continuing for centuries, kings owned most property in
the kingdom. The first
corporations, such as the British East India Company, were broadly
chartered by kings or powerful nobility to achieve wealth by trading,
taking slaves and war booty, and stripping the commodity and resource
wealth of colonies and weak countries.
The managers and investors of the Company satisfied the needs of
the king, paid out to others as little as necessary, bilked most of the
investors and workers, and often kept vast amounts for themselves.
In the industrial and modern age, laws were passed
to curb the feudal excesses of companies and their benefactors.
The legal form of corporations evolved to the present
model. (See "Transnational Corporations and Global
In today's world, to meet the competition from
investors seeking high returns, corporations must grow their profits at
rates greater than the returns on low risk investments like government
and agency bonds. A typical
target is an annual increase in profits of 15%.
The most successful corporations have grown at that rate for many
years (both internally and by acquisitions) and are now among the giant
multinationals. To get into
that club they have also had to find and acquire new giant markets.
Growth rates in developed countries with a very few exceptions
simply cannot be as high as 15+% annually.
To realize that relentless growth imperative,
companies have turned to the global marketplace and fostered economic
globalization, opening up instant free flow of capital, access to lower
cost labor and supplies, and often lax legal and environmental
requirements. The top multinationals have diverse operations in many
countries. Often with
several thousand operating locations, these great corporations dominate
an industry, sometimes several. They
are often the dominant employer in many communities, the dominant
polluter in many of their locations, the dominant buyer in many markets
and the dominant supplier to many consumers.
2. Stakeholder Model to the Rescue
Established corporations make routine decisions on
entering or leaving new markets, on producing or discontinuing products
and on relocating or abandoning outmoded plants.
Sometimes this behavior eliminates a substantial fraction of the
jobs in a community. All of
this is controlled by the often distant corporate managers, under the
direction of the board of directors, and subject only to the needs and
wishes of the .
This is the situation prevailing in the developed world where the
dominant model of corporations is still the model.
The model requires that the needs and
interests of all of those affected by management decisions: management
itself, employees, suppliers, customers, communities, and environment
take a back seat to the needs and interests.
The stakeholder model as a key to sustainable development is increasingly understood and practiced. In the last few years it has been proven that it is possible to treat employees, customers, suppliers, communities, and natural environment well – better than most companies are now doing, and at the same time both make a good profit and produce products which themselves help assure sustainable development. Examples of such products are high efficiency, low cost, low polluting, alternative renewable energy sources.