(FORTUNE Magazine) – IT'S THAT TIME OF THE DECADE AGAIN: General Motors is in trouble, and its chief is pledging action. CEO Rick Wagoner has reclaimed his old job as head of GM's troubled North American operations, where he'll steer sales and marketing, try to rein in rampant health-care costs, and do his damnedest to make cars that sell. But while the former Duke basketballer is throwing himself into the job with gusto, there's no sign so far that truly radical change is on his agenda. He obviously aims to keep his company alive--as he told FORTUNE (see the following Q&A), "Nobody wants to be the guy who runs General Motors when it goes out of business." Actually reviving GM and its foundering stock price, though, might require more drastic action than Wagoner can conceivably deliver. Why is he so hogtied? Because GM isn't being run just for its shareholders--and it hasn't been for 40 years. The company has become, not entirely voluntarily, one where stakeholders such as workers and retirees have as big a say as those who own its stock. Not coincidentally, it has also become a company in seemingly perpetual decline, interrupted by periodic crises.

To understand the problems posed by stakeholder capitalism à la GM, consider the most spectacular American corporate turnarounds of recent decades: General Electric in the 1980s and IBM in the 1990s. At GE, Jack Welch acted before crisis struck, jettisoning businesses and more than 100,000 employees. At IBM, which was already in deep trouble, Lou Gerstner repositioned the company as more consultant than manufacturer and also shed over 100,000 jobs.

The common thread was that both men explicitly put the interests of shareholders above those of workers (and were able to because they weren't tied down by powerful unions). In both cases the decision eventually paid off, as GE and IBM began growing and hiring again. And for all the problems with "shareholder value" that have become apparent in the past few years as stock-price-obsessed CEOs at Enron and WorldCom drove their companies to ruin, the concept clearly has its virtues. It's not so much that shareholders deserve to have their interests made paramount as that they are far more likely than employees to support the disruptive policies often required to put a troubled company back on track.

This was certainly how things worked at GM in its heyday. After a brush with bankruptcy following World War I, the company's bankers and its biggest shareholder, the DuPont Corp., wrested control from founder Billy Durant. For the next 50 years DuPont and another significant shareholder, Alfred P. Sloan Jr., who sold his auto-parts company to Durant in 1916 and became GM president in 1923, called the shots. "The primary object of the corporation," Sloan declared in 1963, "was to make money, not just to make motor cars."

GM became hugely successful at doing both, so much so that it was saddled with other "objects," most significantly the provision of health insurance and pensions. (This was a side effect of government wage controls during and after World War II, as noncash benefits were promised in lieu of wage hikes.)

By the mid-1960s, after Sloan died and DuPont sold its 23% stake, shareholders had ceased to rule at GM. What followed were 15 more years of good times, then a decade of woe. First GM was blindsided by Japanese competition, then CEO Roger Smith spent $90 billion on acquisitions and capital investments that mostly didn't pan out. In 1992, GM's owners finally made themselves heard, pressuring the board to oust Roger Smith's handpicked successor and replace him with Jack Smith as CEO and former Procter & Gamble chief John Smale as chairman. The new team avoided the egregious missteps that defined GM in the 1980s. But there was no way it could return the company to its pre-1960s ways. "The obligation of management is to perpetuate the corporation," Smale said in 1996, "and that precedes their obligation to shareholders."

It is these competing obligations that so limit the maneuvering room for Wagoner, who succeeded Jack Smith in 2000. GM has been steadily shrinking its North American workforce, to about 181,000 today, but it can't do much about the 679,000 retirees and their dependents who rely on it for pensions and health care. In all, health and pension spending came to $2,200 for every vehicle GM built in 2004. The company has ratcheted back health coverage for salaried employees, but its commitments to hourly workers are contractually guaranteed--and UAW leaders have said no to any changes before 2007. The only way to get out from under this burden (unless Congress follows the advice Matt Miller offers in his column in this issue and takes health-care spending out of the hands of corporations) would be to declare bankruptcy. That would wipe out shareholders too.

And so GM trundles on, trying to achieve the not entirely compatible objectives of making money for its shareholders and paying its retirees' pension and health-care bills. The actual making of cars sometimes seems to get lost in the mix: Up to now, Wagoner's single most dramatic act as CEO was his 2003 move to shore up GM's pension plan using $18 billion from a bond issue and the sale of Hughes Electronics. Clearly, this is not a man to traffic in Welchian or Gerstnerian fireworks. That just wouldn't be the GM way.

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