# Legitimating Corporate Power: Shareholderism versus Stakeholderism

## TL;DR

The paper compares shareholderism and stakeholderism as ways to justify corporate power, finding both lacking in legitimacy.

## Contribution

It introduces a novel analysis using input and output legitimacy from political theory to evaluate corporate governance models.

## Key findings

- Shareholderism lacks input legitimacy due to issues like corporate political power and jurisdiction mismatches.
- Stakeholderism struggles with input legitimacy despite plausible output legitimacy.
- Proceduralist approaches offer a weak but emerging basis for corporate legitimacy.

## Abstract

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.