The GameStop Saga Unravels Stakeholder Theory

Societal ownership of business firms traditionally takes three prominent forms, specifically socialism, communism, and fascism. But in 2021 these terms fail to shock or alarm us as they once did. The constant use attenuated language makes us almost immune to powerful words that ought to be used judiciously. Socialism is increasingly popular, while fascism is the pejorative increasingly aimed at market capitalism. The newspeak of equity and stakeholders is yet another "third-way" bridge blurring the distinction between private and state, between the economic means and the political means. And to be fair, equity and stakeholder movements per se do not represent outright socialism (or fascism) in either the Misesian or Rothbardian sense. We still have stock markets, we still have private owners, and we still have profits and losses. The equity revolution takes place within the form, as an evolution rather than a deviation.

Enter GameStop and its Reddit WallStreetBets bros, determined to prop up the fading retailer's stock price in the face of intense short-selling pressure by powerful and rich hedge funds. This uprising, whether motivated by greed, gamer culture, or sheer spite against perceived Wall Street fat cats, is as much imbued with notions of fairness and societal benefit as any protest movement. Yet suddenly the champions of stakeholder theory, like the predictably despicable Washington Post, find themselves singing a new tune about vulture capitalists, deciding that hedge fund short sellers are the good guys in the story.

After all, stakeholder theory means investment funds and major corporations have the right—or even the duty—to make uneconomic decisions. Broader societal interests, not just bottom-line profits and shareholder value, must be considered. So funds and companies frequently invest in supposedly green but inevitably less efficient technology, make donations to left-wing social causes like Black Lives Matter, and give money to a variety of charities. These actions may in fact provide long-term economic benefits from a positive public image, but they do not directly increase share prices or dividends.

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