Oct 13, 2026 · 51 min · 10 segments
Who really controls corporate America—the shareholders who own companies, or the executives and institutions managing their money? On this episode of *The Economist Next Door*, AIER's Paul Mueller is…
But maybe let's just start with some kind of basic definitions for people who aren't reading The Wall Street Journal every day, who are not really involved in these topics.
How would you guys categorize stakeholder capitalism versus shareholder capitalism? And maybe I'll start with I'll talk about shareholder capitalism a little bit, like the traditional idea of capitalism.
And you guys can share, you know, how that's been changed and co-opted in various ways towards the stakeholder kind of model.
Shareholder capitalism, capitalism in general is about property, property rights, private property.
And we form corporations and companies, different people pooling their assets, having shares or ownership in those companies, giving autonomy to the executives who run those companies.
who are the ultimate owners, who provide the capital, and the business is seeking to make a profit, right? Doing it ethically, generating good profit.
We can talk about some of the constraints there, but their goal is to make money by providing goods and services in an efficient way where their revenue is greater than their costs, their profit flows through, whether it's dividends or increased value.
And so that's, I think, what many people probably think of as business and shareholders, right, are the ones who own the companies and companies should be run primarily, maybe even exclusively in the interest of shareholders.
But that has been contested for decades now, but especially in the last 10 to 20, it's been strongly contested with this more.
So do you want to each kind of take a crack at sort of either adding anything I said on shareholder or how you would characterize stakeholder and some of the values that stakeholderism brings to bear?
Our general understanding of the shareholder model was probably best expressed by Milton Friedman in an early 1970s piece for the New York Magazine in which he described an agent corporate responsibility, the managers of a corporation's responsibility generally to keep in line with the interest of the shareholders, which will almost always be to make as much money as possible within ethical guidelines and within the limits of the law.
A lot of people forget that last bit when they choose to pick on Friedman and say, look, it's all about making money.
Friedman was very careful in how he wrote that to make sure that There were ethical considerations and legal considerations built into his description of the shareholder model.
What we understand today as stakeholder capitalism or the stakeholder model is actually the third version of a stakeholder model.
The original version began about the same time that Friedman was formulating his ideas on shareholder capitalism at the Stanford Research Institute, where one of the groups that they had at SRI was trying to develop a best practices method for corporate planning.
But maybe let's just start with some kind of basic definitions for people who aren't reading The Wall Street Journal every day, who are not really involved in these topics.
How would you guys categorize stakeholder capitalism versus shareholder capitalism? And maybe I'll start with I'll talk about shareholder capitalism a little bit, like the traditional idea of capitalism.
And you guys can share, you know, how that's been changed and co-opted in various ways towards the stakeholder kind of model.
Shareholder capitalism, capitalism in general is about property, property rights, private property.
And we form corporations and companies, different people pooling their assets, having shares or ownership in those companies, giving autonomy to the executives who run those companies.
who are the ultimate owners, who provide the capital, and the business is seeking to make a profit, right? Doing it ethically, generating good profit.
We can talk about some of the constraints there, but their goal is to make money by providing goods and services in an efficient way where their revenue is greater than their costs, their profit flows through, whether it's dividends or increased value.
And so that's, I think, what many people probably think of as business and shareholders, right, are the ones who own the companies and companies should be run primarily, maybe even exclusively in the interest of shareholders.
But that has been contested for decades now, but especially in the last 10 to 20, it's been strongly contested with this more.
So do you want to each kind of take a crack at sort of either adding anything I said on shareholder or how you would characterize stakeholder and some of the values that stakeholderism brings to bear?
Our general understanding of the shareholder model was probably best expressed by Milton Friedman in an early 1970s piece for the New York Magazine in which he described an agent corporate responsibility, the managers of a corporation's responsibility generally to keep in line with the interest of the shareholders, which will almost always be to make as much money as possible within ethical guidelines and within the limits of the law.
A lot of people forget that last bit when they choose to pick on Friedman and say, look, it's all about making money.
Friedman was very careful in how he wrote that to make sure that There were ethical considerations and legal considerations built into his description of the shareholder model.
What we understand today as stakeholder capitalism or the stakeholder model is actually the third version of a stakeholder model.
The original version began about the same time that Friedman was formulating his ideas on shareholder capitalism at the Stanford Research Institute, where one of the groups that they had at SRI was trying to develop a best practices method for corporate planning.
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