Democratic employee ownership and challenging the ideology of 'shareholder value'.
| Author | Palladino, Lenore |
Bernie Sanders has recently proposed mandatory employee ownership trusts for all large and all publicly-traded companies. This could help rebalance the distribution of wealth, and also has the potential to challenge the narrow ideology of 'shareholder value' that has dominated in the past four decades.
For the last forty years, corporate governance has been dominated by the ideology of 'shareholder primacy': the concept that the only factor that decision-makers can consider is whether or not shareholders are made richer. (1) Suddenly, in the United States, the power of shareholder primacy over Democratic politicians seems to be crumbling: both Bernie Sanders and Elizabeth Warren have major policy proposals to rebalance corporate power, and the powerful Business Roundtable--a consortium of the largest US corporations--has declared itself committed to all corporate 'stakeholders'. What should take its place? One important component of rebalancing corporate power is the creation of democratic employee ownership funds.
'Shareholder primacy' is based on a false notion that the only group that contributes to the success of a corporation are those who buy its shares, both from the company directly and on the open market, from other shareholders. This ideology is powerful in the United States--in boardrooms, in court rooms, and until recently, in Congress. Yet its connection to reality crumbles when one considers what is in fact necessary to make a corporation successful: multiple groups of stakeholders, including employees, customers, suppliers, and the public, in addition to shareholders. Thus far, no corporation has ever succeeded without a workforce.
What shareholder primacy has meant is that on average over the last ten years, in nearly all sectors, shareholder payments have taken up one hundred per cent of profits. (2) Wages have been stagnant for non-executive workers for forty years, while the share of wealth held by the top one per cent has continued to climb. Shareholder primacy contributes to America's legacy of structural racism and the racial wealth gap: 92 per cent of corporate equity is held by white households. (3) Shareholder primacy is used to justify cutting costs--primarily by cutting workers or holding down wages--to justify increasing shareholder payouts. A recent prime example is the open letter sent by Elliott Management (an activist hedge fund) to AT&T, in which they essentially call for AT&T to mirror Verizon's reduction...
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