IJMB Journal – Abstracts
International Journal of Management and Business
IJMB Volume III, Issue 1
Towards a New Model of Wealth Creation: Shareholders and Stakeholders
Charles Hampden-Turner and Raymond Ferris Abelin
Institute for Manufacturing, Cambridge University
There are currently two distinct approaches to a capitalist model of free enterprise. The first is the Shareholder Model. In this approach the prime purpose of the economy is to enrich individual shareholders. All other activities like satisfying customers, developing employees and rendering the company more innovative are means to the end of profit maximization. In the Stakeholder Model the several stakeholders, employees, customers, shareholders, the community, the supply chain, banks, the government and the environment are all believed to have a stake in the output of the business and the outcome of its policies. Such policies should benefit the entire range of stakeholders. This article argues that the second model leads to faster economic development and better all-round outcomes for the stakeholders.
Historically the shareholder model came first. Pioneer Capitalism is more risky and more individualistic than Catch-up Capitalism, which is more community oriented. The latter generally follows the path of the first and because many of the shareholders are foreigners and pioneers, it seeks to benefit its own employees, workers, suppliers and customers who are those in pursuit of individual and often competing interests.
Keywords: Shareholders vs. Stakeholders, Catch-up Capitalism, Individualism-Communitarianism, Anglo-Saxon Model, Asian Model, direction vs. indirection.