Eric Pickles: Putting the stakes on hold Stakeholding emerged as New Labour’s big idea in the 1990s. Its 1997 manifesto called for “a stakeholder economy — where everyone has a stake in society and owes responsibilities to it”. Labour was seeking to repackage itself, ceasing to be purely about representing trade union and public-sector interests while attacking the unfettered free market: the “third way”.
Will Hutton was Tony Blair’s guru on this with his briefly fashionable 1995 book, The State We’re In. By the time his next book, on the stakeholder society, was published in 1998 the theme already felt tired. Hutton didn’t invent the vacuous concept but borrowed it from the United States. R. Edward Freeman, a professor of business administration at the University of Virginia, was author of A Stakeholder Approach, published in 1984. The communitarian guru Amitai Etzioni also took up the theme. (Incidentally, Hutton continues to be treated with great deference by the establishment. David Cameron appointed him to advise on capping the pay for “top people” in the public sector.)
For companies, stakeholding meant “mission statements” where their one genuine responsibility — to deliver a return for the shareholders on their capital — was invariably not mentioned. Rather than an obligation to maximise profits within the law, there was an undefined requirement to go further in being “ethical”, with an implied threat should they fail to do so.
Some may shrug that stakeholding was just a meaningless fad. Yet it has proved worse than that. The Blair/Brown years saw a steady flow of regulation to ensure that companies ticked the stakeholding boxes. In the public sector, stakeholding notions remain well entrenched even when no longer legally required. Not only are they expensive, they are also anti-democratic and lead to weak and tardy decision-making. Quangos and local authorities as well as government departments undertake “consultation exercises”. A botch-up of messy compromise results. For example, local councils were told to have “local strategic partnerships”. They were obliged to defer to groups whose views are often unrepresentative. This meant the power of the electorate as a whole was diluted.
The Communities and Local Government Secretary, Eric Pickles, should be commended for scrapping much of this. Yet the flawed reasoning behind stakeholding persists in skewing accountability. There is still a culture of “consultations” and “community engagement”, of deference to an oligarchy of “key stakeholders”. You can have the same half-a-dozen people popping up under an array of auspices, such as amenity societies, and being earnestly consulted while hundreds of thousands of other local authority residents are disregarded. Elected councillors’ wishes are regarded as an afterthought.
We used to decry politicians “caving in to vested interests”. Now the corporate state is elevated to a high moral purpose as it “engages with key stakeholders”.