General Motors Corp., which until several years ago led not only the U.S. economy but the global economy as the world’s largest automaker, filed for Chapter 11 bankruptcy on June 1, concluding a corporate history that spanned more than a century.

That GM was eventually forced into bankruptcy despite massive injections of taxpayer money demands we rethink our concepts of what a corporation is, what the responsibilities of management should be, and who its stakeholders are.

“Stakeholder” is a term used to differentiate company parties from “stockholders.” They include not just shareholders, but other parties needed for a company to exist: customers, employees, regulators and members of the local community.

In a market economy, the purpose of management is to maximize profits and distribute the proceeds to stakeholders in a balanced manner. I believe GM’s bankruptcy derived from lack of balance in this respect. What can we learn from GM’s demise — especially in light of what happened to Japan in the “lost decade” following the bubble economy’s collapse in the ’90s?

The first issue we should take up is the mind-set of GM’s managers. Even as the automaker was receiving huge bailouts from the government, GM’s top managers flew to Washington in a costly company-owned jet to attend public hearings, raising the ire of congressmen who lambasted them over their huge salaries, stock options and retirement pay.

In contrast, a typical Japanese manager usually receives only a modest salary. But many Japanese, to be fair, also appear unaware of what corporate responsibility is and are choosing to blame the “worst in a century” economic environment for their companies’ problems.

The second issue that begs examination is the behavioral principles of hedge funds.

Typically, a hedge fund uses borrowed money as leverage to purchase stock worth several times its own resources, then uses its status as a major shareholder to push for higher dividends.

Demanding higher dividends is a natural course of action for a stockholder, but hedge funds often set their eyes on selling those shares once the higher dividend boosts the price. People should take a serious look at whether those shareholders should be considered stakeholders in the real sense. Some experts forecast that the ongoing shakeout in the hedge fund industry will reduce shareholder proposals at Japan’s annual shareholders’ meetings this month to about 30 percent from last year.

The third issue to consider is the impact of labor unions. Unions of course play an important role in protecting workers’ interests. In GM’s case, however, their demands went too far and became one of the major factors in its demise.

The fourth issue is the actions taken by fund managers, including those at the pension funds, who became lax at managing risk as they attempted to stop the declining returns on their investments.

Particularly alarming was their inability to recognize the higher trading risks posed by advances in Internet technology. Even credit-rating agencies — supposedly experts at risk management — boosted the credibility of new securities linked to subprime loans without fully understanding them, leading investors to believe what the agencies said.

As the Japanese sayings goes, “There’s nothing to be afraid of if everybody is doing the same thing.”

And nobody bothered to heed the lessons of Japan’s late 1980s bubble boom and its subsequent collapse.

But the fifth and most important point as we go forward is: How can corporations respond to consumer demands and provide the products and services they need?

GM has announced that Edward Whitacre, former chairman and CEO of telecom giant AT&T Inc., will become chairman after it emerges from bankruptcy. It remains to be seen how the new GM, which will have Uncle Sam as its largest stockholder, will respond to the market’s increasing concerns about energy conservation and the environment.

As President Barack Obama said, GM’s bankruptcy only marks the beginning of the new and improved one.

Taking the broad definition, public-sector entities, like the government and Congress, can also be considered stakeholders in a company. But with the rapid changes taking place in the economic environment, it is extremely difficult to create laws and regulations to deal with each new challenge that emerges in corporate management.

Thus it is essential that each of the stakeholders again recognizes the social significance of being a corporation and acknowledging its responsibilities, and act in accordance with that recognition.

Teruhiko Mano is chairman of the Mano Economic Intelligence Forum.

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