Democratising the corporation and empowering workers is an essential part of moving beyond neoliberalism.
Labour leader Jeremy Corbyn making a keynote speech at The Landing in MediaCityUK in Salford on 2 September. Image: Danny Lawson/PA Wire/PA Images
The corporation is an extraordinary social institution. Endowed with a set of expansive legal privileges that enable it to structure external capital investment, produce profits and accumulate wealth, its productive capacity has created the world we live in. Yet in its current form the modern corporation is profoundly undemocratic, and acts as a driving force for inequality in the heart of our economy. Both the uneven wealth of society and the depth of crises confronting us are consequently inseparable from the corporation.
Any attempt to overcome the democratic neutering, economic inequality, and accelerating forms of planetary breakdown endemic to capitalism must therefore have a strategy for transforming the corporation. It is in this light that the importance of Labour’s Inclusive Ownership Fund – which a recent Financial Times analysis suggested would redistribute corporate wealth and spread share capital to workers worth up to £300bn over a decade – becomes clear. It is a part of a wider progressive policy agenda for transforming and democratising the corporation and therefore reshaping wealth and power in society.
…The Inclusive Ownership Fund is an attempt to reshape the corporation toward those ends. The policy would require large companies to issue 1% of outstanding equity annually into a locked fund, democratically controlled by the workforce, which would grant dividend and voting rights equal to the Fund’s equity share. By diluting stock, rather than expropriating existing shareholders, it would not adversely impact the working capital of the company but would broaden income and control rights within it, ensuring everyone within it had a genuine stake and a say. There are important debates over design but its direction is clear.
Instead of the governance of the firm being dominated by external investors and their managerial agents, many of whom hold important ownership stakes in their own right, the Funds would help ensure labour had a powerful voice in shaping strategic decision-making. Alongside wider corporate governance reforms and the strengthening of organised labour, it would democratise the governance of the firm. Through broadening ownership via new collective forms of property, the Funds could act as a powerful mechanism towards the redistribution of resources and power within companies and wider society. By removing a growing proportion of corporate ownership from financial intermediation – and the short-termism and poor decision-making that often occurs as a result – the ownership funds could act as a powerful steward for the sustainable creation of value, helping foster a more prosperous and inventive economy. In short, the funds could help enable a more generative and committed company form to emerge.
Reimagining patterns of income and control within the firm may appear radical. Yet the privileges ascribed to the corporation and the powerful governance and income rights assigned to shareholders – in contrast to labour – are socially assigned and politically mediated. As Katrina Pistor demonstrates in her brilliant new book, the law produces new forms of capital through the encoding power of legal instruments. How capital is produced, and for whom, is malleable and a site for political struggle. We have before and must again remake the governance of the firm and how it distributes its surplus. At the same time, it is also worth noting the existing scale of share issuance to senior management through remuneration in shares and share options. In many ways this process mimics the mechanisms of Inclusive Ownership Funds, but in ways that deepen inequality and narrow power. MORE