What Is A Stakeholder?

The dernier cri of corporate governance is "stakeholder capitalism", but this begs the question of what makes someone or something a "stakeholder".  Originally, the term referred to the person with whom, or on which, bets (the "stakes") were deposited.  Thus, the holder of the bets (the "stakeholder") did not strictly speaking have a financial investment (stake) in the outcome. 

In the parlance of stakeholder capitalism, the term similarly refers to a wide variety of persons who, like their etymological antecedents, have no direct financial investment in the event.  These interests may arise from contract (employees, for example) or proximity (the community, for example).  While these interests may be significant, they are fundamentally different from those who provide capital.  Hence, the term "stakeholder capitalism" is oxymoronic but without a point.

The Business Law Section of the California Lawyers Association recently announced the formation of a working group ostensibly to study stakeholder capitalism.  In announcing the new group, the BLS claimed that "stakeholder capitalism has been gathering momentum nationally since the onset of the COVID-19 pandemic with its adverse impact on the American economy, particularly on employment, and most recently the nationwide protests following the death of George Floyd".   These events, however, have nothing to do with who has a "stake" in the corporation.  Nor do they provide an analytical basis for rewriting the corporate model or granting quasi-ownership status to those who have an interest but no stake in the corporation.