Stakeholder ownership and maximization

Purpose – The purpose of the paper is to clarify the relationship between stakeholder interests and the ownership of a company, and to specify the distinctions between three types of maximization: shareholder‐, stakeholder‐owner‐ and total stakeholder maximization. Design/methodology/approach – This conceptual paper first analyzes how company‐related rents are connected to different stakeholder groups. These rents are defined as the monetary and non‐monetary returns from stakeholder involvement in a company, in excess of what stakeholders could achieve from their best alternatives. The paper distinguishes between general stakeholder benefits and the additional owner benefits a stakeholder secures by having controlling ownership. The stakeholder having the highest net benefits (benefits minus costs), and thus paying the highest price for ownership, will be the controlling owner. The controlling stakeholder‐owners' benefits are those which are maximized by the company. This leads to the second part of the paper, which analyzes different types of maximization. Findings – The general type of maximization that companies pursue is stakeholder‐owner maximization. Maximization of shareholder value is a special case of stakeholder‐owner maximization. Only under quite restrictive assumptions is shareholder maximization larger or equal to stakeholder‐owner maximization. Total stakeholder maximization is calculated on the sum of the returns to all stakeholders including shareholders. Because of problems of measurement and practical application, total stakeholder maximization is difficult or impossible to achieve. Firms generally approximate to total stakeholder maximization by implementing stakeholder‐owner maximization under constraints defined by other stakeholder interests. With stronger regulation, pressure from different stakeholder groups, and more emphasis on corporate social responsibility, the decision area where the company can simultaneously maximize stakeholder‐owners' returns and stakeholder interests will be increased. Originality/value – This paper breaks new ground by linking controlling ownership and stakeholder interests/rents. This is used to give precise definitions on three types of maximization: shareholder‐, stakeholder‐owner, and total stakeholder maximization.