Legitimating Corporate Power: Shareholderism versus Stakeholderism

This article assesses the legitimising strategies of 'shareholderism' and 'stakeholderism' through the dual lenses of input and output legitimacy widely used in political theory. Here, output legitimacy evaluates corporate decision making by its contribution to societal welfare, whereas input legitimacy requires that corporate decisions reflect the preferences of its legitimate stakeholders. On both fronts, shareholderism and stakeholderism offer incomplete strategies to legitimise corporate authority. Shareholderism, although firmly grounded in state-derived legitimacy, fails to address certain structural problems, such as corporate political power and the geographic mismatch between jurisdictions and capital. Most stakeholderists, by contrast, would have corporate leaders make distributive judgments in place of the majoritarian, yet ineffective, political process. In terms of output legitimacy, their alternative is plausible, but they fail to engage with the participatory requirements of input legitimacy. The emerging proceduralist agenda, drawing on principles such as transparency and stakeholder engagement, offers a thin basis for corporate legitimacy.