I am telling you about this mainly because I love a good fight about who controls a company, and this is an unusual and rich one. But we have also been talking a lot recently about “stakeholder capitalism,” the idea that a company should be run not just for the benefit of its shareholders—the classic residual economic claimants, the people who, in some theories, are considered the company’s “owners”—but also for the benefit of other stakeholders, for employees and customers and communities and the world in general. It is hard to think of a more stakeholder-governed company than Bremer Bank. Its main shareholder is a charity; its board represents employee-owners; its mission is to serve the community; the state’s courts and attorney general, as overseers of charities, get to sign off on its decisions. And they are all at each others’ throats. There are no rapacious hedge funds or amoral index funds in sight, or there weren’t anyway until the charity got frustrated and brought in some hedge funds to help it out.
The point here is not exactly “stakeholders can disagree just like shareholders can.” The point is really that stakeholders have more ways to disagree than shareholders do. The criterion of maximizing shareholder value is not necessarily socially optimal, and it is not necessarily clear what it requires; shareholders and executives regularly disagree about whether a strategic change or a stock buyback or a merger or whatever would increase shareholder value. But their arguments, at least in theory, appeal to the same criterion. If you’re choosing between providing more money for charity, on the one hand, and running a bank with strong employee rights and community ties, on the other hand, how do you decide? The answer might be that you have some people who care about the charity money, and other people who care about the workers, and you put them on a board together and hope they can work it out, and sometimes they do, and sometimes they all sue each other instead.
From the column: