Let me explain. Here’s a common shareholder theory:
Here’s the most popular version of the shareholder theory, from The Game of Lies: The Untold Story of Wall Street:
So how do we solve the problem of crisis management? We can’t expect people at all levels to be informed enough about the companies and markets in which they are working. Yet we are so used to corporate board meetings in which directors do not provide time for much discussion and ask only one question at each and every meeting, and in which shareholders are treated like thugs and rivals rather than people who are concerned about their companies and their stock price.
The shareholder theory says that the more people that are trying to find out about the company, the better.Because, if everybody shareholder theory is searching around for the information, they are learning. What’s a “healthy” shareholder theory for a corporation?
The common shareholder theory was probably best described by a recent post by Tom Rollins:
It does not mean that you cannot argue in favor of something just because it’s in the best interest of your company or shareholders, but it does mean that you must be consistent and work within a particular set of rules and do not resort to undue coercion. When the hand is forced to do something you cannot defend it, for fear of what your coworkers will think.
This article has presented the definition of the stakeholder theory and asked the question, how do we use this new definition to make boards smarter? One more point about the stakeholder theory:
Having thought about it, it’s sort of a toss up whether it might be useful to put it into practice and promote great new ideas that the corporation would be excited about doing. I am not sure that I have enough influence on the board to move the agenda to try to create a system that is well defined and can help a lot of them rather than just some of them.
The next article will define what it means to be a stakeholder, which is the most important concept of the stakeholder theory. After that, I will be explaining why sharing doesn’t always help, and how it doesn’t need to. I’ll give an example of how one company found a way to divide the stakeholders to win support for a good idea.
In the shareholder theory, the staff of shareholders should be actively engaged in all of the aspects of the company that matter to them. As long as people know what the goals are, and they know where they stand in relation to the rest of the shareholders, then it makes sense that staff members will be able to get engaged.
Tom’s view is that the stakesheets are where the core of the stakeholder theory can be found. They have to be checked
regularly and updated regularly. People should feel that they are respected by everyone at the company.