It is perhaps the core question in the ongoing debate over corporate governance: Does the corporation exist for the benefit of shareholders, or does it have other, equally important stakeholders, such as employees, customers and suppliers?
A new study titled, "Stakeholder Capitalism, Corporate Governance and Firm Value," by Wharton finance professor Franklin Allen, Elena Carletti of the Center for Financial Studies at the University of Frankfurt and Robert Marquez of Arizona State University does not provide a definitive answer. But in showing the various benefits of the stakeholder approach, it demonstratesthat the issue is not as settled as some researchers and business people in the United States, United Kingdom and other shareholder-oriented nations might think.
Several conclusions emerge from the study, which uses a mathematical model to explore the advantages and disadvantages of stakeholder-oriented firms. First, stakeholder-oriented companies have lower output and higher prices, and can have greater firm value than shareholder-oriented firms. Second, firms may voluntarily choose to be stakeholder-oriented because it will increase their value, according to the study.
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