The Stakeholder Capitalism of DAO that Cannot Be Ignored

In the wave of Blockchain and Decentralized Autonomous Organizations (DAO), Stakeholder Capitalism is becoming a key concept for redefining organizational governance and value creation. The traditional shareholder primacy is struggling to adapt to the distributed nature of DAOs, while Stakeholder Capitalism provides a theoretical foundation for the sustainable development of DAOs by balancing the interests of shareholders, members, communities, partners, and the environment. This article will explore the core concepts of Stakeholder Capitalism, its historical evolution, and its application in DAO governance, revealing why it is an indispensable guiding principle in the DAO ecosystem.

1. The Core Concept of Stakeholder Capitalism

Theoretical Background

The stakeholder theory originated from management studies, emphasizing that enterprises not only create value for shareholders but also need to meet the needs of stakeholders such as employees, customers, suppliers, communities, and the environment. In 1963, the Stanford Research Institute (SRI) first proposed that stakeholders are a necessary condition for the survival of enterprises, surpassing the traditional perspective of focusing solely on shareholders. In 1984, R. Edward Freeman systematically elaborated on this theory in "Strategic Management: A Stakeholder Approach," defining stakeholders as "individuals or groups who can affect or are affected by the achievement of an organization’s objectives."

Stakeholder capitalism stands in stark contrast to shareholder capitalism. The latter focuses on maximizing economic returns for shareholders, while the former advocates for companies to create positive impacts on economic, social, and environmental levels, achieving sustainable development. Its core characteristics include:

Expand the scope of accountability: decision-making considers the impact on all stakeholders, not just shareholders.

Long-term focus: emphasizing long-term sustainability rather than short-term profits.

Social Responsibility: As a part of society and the environment, enterprises must assume the responsibility of making positive contributions.

Balancing Interests: Coordinating the interests of all parties in a way that benefits both the organization and society.

Stakeholders in DAO

In the context of DAO, stakeholders encompass a broader group, including token holders, community contributors, developers, users, partners, and external participants in the on-chain ecosystem (such as cross-chain protocols and regulatory bodies). Chatham (1992) classified stakeholders into contractual (token holders, developers) and public types (community, regulators); Clarkson (1994) further divided them based on risk-bearing into active (core developers, major token holders) and passive (ordinary users). Caro (1996) further proposed a classification of core, strategic, and environmental stakeholders, providing a refined perspective for DAO governance.

The decentralized nature of DAO makes stakeholder management more complex, but it also provides a technical foundation for balancing the interests of all parties, such as smart contracts and governance tokens.

2. The Historical Evolution of Theory

The evolution of stakeholder capitalism has gone through several stages, establishing its important position in modern governance:

In 1963, Stanford Research Institute: The concept of stakeholders was first proposed, emphasizing the necessity of employees, customers, communities, etc., for the survival of enterprises.

In 1965, Igor Ansoff introduced the concept of "stakeholders" in "Corporate Strategy," advocating that business objectives should balance the interests of shareholders, employees, suppliers, and other longer parties.

In 1973, Henry Mintzberg emphasized in "The Nature of Managerial Work" that managers need to consider the dynamic balance of a wide range of stakeholders.

In 1984, R. Edward Freeman proposed the stakeholder theory, advocating for the integration of ethics and social responsibility into corporate decision-making.

In the 1990s, Peter Drucker advocated for businesses to go beyond profit goals and focus on social responsibility and moral values.

Contemporary, Klaus Schwab: Promoting stakeholder capitalism through the World Economic Forum, emphasizing the role of enterprises in society and the environment.

In addition, John Elkington's "Triple Bottom Line" theory (1997) and Michael Porter's "Creating Shared Value" concept (2006) further enriched this theory, providing an interdisciplinary perspective for DAO governance.

3. The Application of Stakeholder Capital Theory in DAO

Stakeholder Perspectives on DAO Governance

The decentralized governance of DAO naturally aligns with stakeholder capitalism. Through smart contracts and token mechanisms, DAO can achieve transparent decision-making and profit distribution, catering to diverse interests. The role of stakeholders in DAO governance is primarily reflected in the following aspects:

Informal influence: Community members influence the strategic direction of the DAO through forums, social media, or proposals.

Specialized assets: Core developers and token holders obtain residual claims through technical contributions or capital investments and participate in governance.

Supervision and Pressure: Communities and external regulators exert supervisory effects through public opinion or compliance requirements, promoting governance optimization.

Governance: DAOs create a governance mechanism that balances the interests of all parties through on-chain voting and negotiation, forming a governance structure that lies between the market and the organization.

Specific strategy

To integrate stakeholder capitalism into DAO governance, the following strategies can be adopted:

Organizational Culture:

Advocate for a fair and transparent governance culture, encouraging community participation.

Enhance members' recognition of DAO goals through education and training.

Internal Process:

Design multi-dimensional performance evaluations to measure impacts on the community, users, and ecosystem.

Optimize the proposal and voting process through smart contracts to ensure fairness.

Decision-making mechanism:

Establish a diversified governance committee that includes representatives from different stakeholders.

Enhance on-chain governance transparency by publicly disclosing proposals and decision-making processes.

Implementation Steps

Clear Vision: Define the long-term goals of the DAO, balancing economic and social value.

Identify stakeholders: classify core (token holders, developers), strategic (partners), and environmental (regulators) stakeholders, and analyze their needs.

Cultural Change: Promote the concept of decentralized governance through community activities and education.

Process adjustment: Optimize the on-chain governance mechanism to ensure transparency and efficiency.

Transparent communication: Regularly publish governance reports and accept community feedback.

Continuous Improvement: Enhance participation based on the iterative mechanism of governance effectiveness.

4. Long-term Benefits and Challenges

long-term benefits

Sustainability: By balancing the interests of various parties, the DAO can reduce governance risks and enhance ecological resilience.

Brand and Reputation: Fair governance enhances community trust, attracting more users and developers.

Member participation: A transparent benefit distribution mechanism enhances members' sense of belonging and stimulates their motivation to contribute.

Ecological cooperation: Establish long-term partnerships with cross-chain protocols, communities, etc., to promote ecological prosperity.

Challenge

Defining the Dilemma: How to Accurately Define the Stakeholders of a DAO and Their Priorities?

Participation Path: How to design incentive mechanisms to ensure widespread and effective participation?

Performance Evaluation: How to Quantify Governance Effectiveness and Assess Stakeholder Contributions?

System Adjustment: Do the existing on-chain governance rules support complex interest balancing?

Strategies include strengthening community education, designing flexible governance mechanisms, utilizing data analysis to optimize decision-making, and collaborating with regulatory bodies to ensure compliance.

5. Future Outlook

With the deepening of blockchain technology and global attention to sustainable development, stakeholder capitalism will play a more important role in the DAO ecosystem. Future trends include:

ESG Integration: DAOs will place greater emphasis on Environmental, Social, and Governance (ESG) metrics to attract sustainable investment.

Data-Driven Governance: Utilizing AI and Big Data to Optimize Stakeholder Management and Enhance Decision-Making Efficiency.

Global and Local Balance: DAOs need to find a balance between global ecosystems and local community needs.

Co-creation model: Encourage the community and partners to innovate together through open governance.

Regulatory Collaboration: Work with regulatory agencies to formulate rules that support decentralized governance.

VI. Conclusion

Stakeholder capitalism provides a governance framework for DAOs that goes beyond traditional shareholder primacy. By balancing the interests of token holders, developers, users, and the community, DAOs can not only achieve economic value but also promote sustainable social and ecological development. In the blockchain era, adopting this model is not just a strategic choice, but also the key for DAOs to stand out in competition. Decision-makers should actively embrace this concept and build a more resilient and impactful decentralized ecosystem through transparent governance and innovative mechanisms.

The future of DAO lies in collaboration and co-creation, and the stakeholder capitalism is the bridge that connects technology and value.

Further Reading

In 1971, Professor Klaus Schwab founded the European Management Forum (EMS) and held the first meeting in Davos.

Participants discussed Schwab's "Stakeholder Theory," which asserts that businesses should serve all stakeholders, not just shareholders, but also all parties including employees, suppliers, and the broader community. Today, the stakeholder concept has become the guiding principle of the forum.

In 1973, the annual meeting adopted the "Davos Manifesto", which is a code of ethics designed for business leaders, and was updated in 2020 to articulate the mission of enterprises in the Fourth Industrial Revolution, a concept also proposed by Professor Schwab in his 2016 work.

In 1974, politicians were invited to participate in the Davos Forum for the first time. In 1987, EMS was renamed the World Economic Forum, aiming to provide a platform for collaboration between the public and private sectors to address current pressing issues.