Corporations. What are they good for? Limiting the liability of investors and owners who are innocent of any potential shenanigans, of course. An incorporated company limits the liability of a stockholder to the value of the stock rather than making each and every partial owner fully liable for anything done by anyone else involving the company. This is a good thing. But even with that, it is the stockholders company; they own it. Stockholders elect Boards to act on their behalf and under their collective vote. A corporation itself does not have rights, but the stockholders through their elected representatives and those corporate officers chosen thereby that exercise their rights through whatever proxies are so approved.
That is hos “Capitalism” works: Owners deciding how their assets are used and appointing representatives to take care of the particulars on their behalf. What isn’t “Capitalism” is “Stakeholder Capitalism” whereby a company must answer not to the people who own it, but to a more socially democratic voice of elitists playing a Fascist game of Corporatism. In such cases, these elitists rule over corporations via approved executives and business elite.
This isn’t the free-market under the Rule of Law or the property rights of owners; this is the very Leftist face of Leviathan. Alas, even states known for limited or small government are not immune from the lure of the imposition of “Stakeholder Capitalism”. Sadly, Nevada is just such an example of this being able to happen:
“Nevada passed a law in 2017 that weakened shareholder primacy. The paper compares Nevada corporations before and after the law on a variety of measurements. It finds that after the law passed:
- Corporate governance worsened in several ways:
- More relatives of executives served on corporate boards.
- Board independence and director attendance rates declined.
- Auditors raised more concerns about accounting.
- Firms are more likely to be flagged by the SEC for their reports to that agency.
- Shareholders had less ability to monitor corporations and take them to court over the worsening governance.
- CEO excess pay increased, and the connection between CEO pay and performance weakened.
- The valuation of Nevada corporations dropped relative to corporations in other states.
- Corporations made more acquisitions, but they were viewed as lower quality by the markets.
- Lenders viewed Nevada corporations as less creditworthy.
- Corporations’ investment decisions are more discretionary and manager-driven.
“Perhaps most disappointingly for stakeholder capitalism activists, the ESG scores of Nevada corporations went down after the law was passed. The environmental score dropped by 7 percent; the social score dropped by 16.6 percent; and the governance score dropped by 15.4 percent. ‘The decrease in the Social score is the most direct evidence that stakeholders do not benefit from the Bill since this score incorporates how employees, customers, and the community in which a firm operates are treated by the firm,’ the paper says.”
If top-down government dictates demonstrate anything, it is that everything gets worse, even the distance to their eschatonal goals. Stockholders have something tangible to gain or lose; for Stakeholders, it’s all tabletop game or LARP to mess around with as a lark.
It’s not yours to lose, you “Stakeholders”.
