Status and Corporate Stakeholders

Check out High-Status Versus Low-Status Stakeholders, an intriguing paper authored by one of our business school brethren, Justin Pace.  In this work, Justin approaches an important, yet difficult, topic at the intersection of corporate governance and the class divide.  The SSRN abstract follows.

The literature on stakeholder theory has largely ignored the difficult and central issue of how judges and firms should resolve disputes among stakeholders. When the issue is addressed, focus has largely been on the potential for management to use stakeholder theory as cover for rent seeking or on disputes between classes of stakeholders. Sharply underappreciated is the potential for disparate interests within a stakeholder class.

That potential is particularly acute due to a (largely education-driven) stark and growing class divide in the United States. There is a substantial difference between the interests of a highly educated professional and managerial elite and a pink-collar and blue-collar working class who mostly do not hold four-year degrees. Despite their smaller numbers, the professional and managerial elite will frequently win out in intra-stakeholder disputes with working class stakeholders due to their greater status, power, and influence.

Because this class divide is cultural, social, and political as well as economic, these disputes will go beyond financial pie splitting to culture war issues. This threatens to be destabilizing for both the republic and individual firms and undermines both the practical and ethical arguments for the stakeholder theory.

I also have been engaged by the idea that no class of stakeholders is homogeneous.  Business law scholars certainly could do a lot more work fleshing our salient differences of interest among stakeholders of a single type (including shareholders).  I (along with many others) have been known to note that not all shareholders have the same interests, for example. 

I look forward to digging into Justin's article in more depth.  Based on my review so far, there are insights in it for many different business law scholars.  (Co-blogger John Anderson might enjoy his references to virtue theory, for example . . . .)  Anyway, give it a look.