The irony of sages of the West offering stakeholder capitalism to Asia
- Given Asian corporate governance issues, the West’s stakeholder campaign merely offers gleeful Asian tycoons new opportunities to financially underperform
- Meanwhile, CEOs who support the campaign have been found to furlough staff and cut benefits amid the Covid-19 crisis while paying dividends to shareholders
Last month marked 50 years since Milton Friedman published in The New York Times Magazine his epochal essay “The social responsibility of business is to increase its profits” – making clear his idea that “the business of business is business”. But there is little cause to celebrate his defence of shareholder capitalism.
Having seemingly won the battle in Western corporate boardrooms (western Europe’s “social-democratic” corporations have long had management boards which include powerful trade unions), the idea of stakeholder capitalism has now been brought to the East.
Schwab said in a recent Nikkei Asian Review interview that “Asia may be philosophically more prepared for the stakeholder concept than the West … Asia puts emphasis on collectivity, while the West is very much influenced by individual freedom”. Asian companies, like their Western counterparts, must show they are “trustworthy”, that they do not merely maximise profit but “also really care about people, staff, suppliers and customers”, he added.