[Contemporary Opinion] Shareholder capitalism and Stakeholder capitalism_Dean Ahn Heejun.
- 경영대학
- Hit476
- 2021-09-17
The fall semester of college start this week. In the first week of financial management class, I always mention maximizing corporate value as a goal of corporate management that managers should pursue. Maximizing corporate value means maximizing corporate asset value evaluated in the market, which is in line with maximizing shareholder value. Maximization of shareholder value is based on shareholder capitalism, and discussions on stakeholder capitalism are active as an alternative along with recent criticism of shareholder capitalism.
Criticism of shareholder capitalism varies, ranging from claims that maximizing management's decision-making standards can harm a company's long-term value by focusing only on short-term performance, to claims that it can lead to contrary to the interests of employees, partners, and society. On the other hand, in stakeholder capitalism, managers aim to coexist with the internal and external environment of the company while pursing the common interests of various stakeholders.
Are shareholder capitalism and stakeholder capitalism completely different concepts? I tell students that these two are not conflicting concepts in the developed capital market.
Some says that stock prices are short-term indicators that are prone to immediate corporate, but stock prices are by no means a short-term concept. For example, it is often observed that the stock price of a company with high growth potential but not making immediate profits is high. In other words, stock prices are the product of long-term valuation, taking into account corporate performance in the distant future. In addition, market valuation reflects not only sales and costs, but also various information such as risk and corporate reputation. When a company acts against its stakeholders, it affects its reputation and negatively affects its stock price. If the stock market plays a proper role, maximizing share holder value does not conflict with the needs of stakeholders, and shareholder capitalism and stakeholder capitalism converge with each other.
In particular, as a recent that makes this possible, information technology development, citizenship maturity, and ESG(environmental, social, and governance) investment are emerging. If a company acts against stakeholders such as employees or local communities, it will be immediately reflected in stock prices and undermine shareholder value. A few years ago, a high-ranking executive of an airline in Korea overuse power against employees or overuse power against an agency of a local food and beverage company's power abuse is typical. Immediately after the incident, the news spread rapidly through media and social networking services(SNS) and caused a significant drop in stock prices.
Next it the rise of investment in ESG. According to the US SIF, ESG investment in the U.S., which was $3 trillion in 2010, quadrupled to $12 trillion in 2020 in 10 years. In addition, about a third of investment assets currently managed by experts in the U.S. are reported to be related to ESG investment. The characteristic of ESG investment in recent years is that companies are not only pursing social values, but also require financial performance. The expansion of ESG investment, which pursues both social and economic performance at the same time, makes shareholder value and stakeholder value closer.
It is now difficult to achieve maximum shareholder value without consideration for stakeholders. As in the case of Emmanuel Faber, who recently stepped down as CEO of Danonm it is difficult to continue the act of pursing only social values at a time when economic values are neglected.
Source : The Asia Business Daily https://view.asiae.co.kr/article/2021083000154682528