There is a third way to direct public Corporations.
New "Mercantile" or "Commercial" Capitalism is the original system of capitalism whereby Corporations are traded into into indefinite existence based on the second law.
Under the conditions of commercial capitalism, the basic function of a firm is to convert and exchange useful energy, stored in the capitals, more efficiently than the alternatives based on simple arithmetic:
This arithmetic described the equivalent of process of internal combustion that drives a firm into a virtuous cycle of capitalization:
Shares, financial and produced capital are the lowest value capital. These must be converted into higher value and rarer capitals - human, intellectual, social. All capitals are then combined to produce lower value capitals to produce a theoretically endless cycle. The business model describes the logic of capital conversion.
Commercial capitalism is agnostic when it comes to the capitals and their sources.
Shareholder or democratic capitalism works on a different set of principles. Under the conditions of shareholder capitalism the function of the corporation is to create and transfer financial capital to shareholders.
The problem with this model of capitalism is that to create financial capital a corporation must exhaust other vital capitals. Under the influence of shareholder primacy the corporation begins to convert it higher capitals into the lowest value capital - financial capital. It's called efficiency and costing out. The resulting dividend is then not converted out of self interest but transferred for little or no return out of duty. Left to run its course, the process of decapitalization exhausts the company of the capitals needed to survive. Some people call it short termism. Drucker called it suicide.
Nothing could offend Adam Smith's model of capitalism than the the principles of shareholder capitalism.
Under the principles of commercial capitalism corporations are not property but legal persons with the right to pursue their own self interest rightly understood. Freed from the duty to serve stakeholder and shareholders, the corporation must focus on the process of sustainable capital conversion.
* revised 14/03/17, 08/06/17