The structure of ownership and control in most American corporations is seriously flawed. It creates an adversarial relationship between workers and those who own or manage workplaces. Fortunately, a better alternative is emerging in the U.S. and elsewhere.
This alternative is a genuine "third way," different from both socialism and capitalism as usually understood. It is workers owning their workplaces, especially in the form of worker cooperatives.
A worker cooperative is not socialist. It is a private enterprise, owned by those who do its work, and competing in a free market. A system based on worker cooperatives is not capitalist, since it refuses to treat workplaces as commodities to be bought and sold by outsiders.
In a typical American corporation owners are shareholders whose interests are represented by a board of directors who oversee hired management. The goal of the corporation is to maximize the returns of shareholders on their investment. The goal of its workers is to maximize their income and benefits (at a cost to the corporation).
Managers typically see workers as lacking managerial and entrepreneurial skills. Moreover, workers have no direct or intrinsic interest in the goal of the corporation (profits for investors). So they must be closely supervised and motivated by some combination of rewards and penalties.
Management tends to resist unionization for the obvious reason: union demands will add to the labor costs of the corporation, reducing profits. Moreover, if unions don't get what they want, they threaten to damage the company by striking.
American management has been very successful in fighting unions. Only 7.2% of private-sector workers are unionized. Management has used threats of plant closings and outsourcing to compel a disorganized workforce to accept stagnant wages and declining benefits.
If our society were to start all over and design a structure for ownership of corporations, would anyone advocate such a top-down, authoritarian model in a society that calls itself democratic?
Milton Friedman once said that "The Social Responsibility of Business is to Increase its Profits." Under the standard American model of corporate ownership, Friedman is quite correct.
Under that model, the only legitimate purpose for corporate expenditures by management is to generate profit for shareholders. For management to spend money on the welfare of workers and their community is to misappropriate other people's money.
But what if businesses can both compete in a free market and be dedicated to the personal fulfillment of their workers and the betterment of their communities? Of course, businesses must be profitableotherwise they are wasting scarce resources.
However, why must profit be the only goal of business activity? Food and drink are necessary for human survival, but that does not imply that they are the only, or even the primary, goals in life.
One of Britain's top ten merchandisers is John Lewis Partners (JLP). The "Partners" are its 70,000 permanent staff who jointly own 29 John Lewis shops, 228 Waitrose supermarkets, and several other businesses, with total sales of nearly $9.5 billion last year.
As the company's website explains: "The Partnership's ultimate purpose is the happiness of all its members, through their worthwhile and satisfying employment in a successful business."
Italy's prosperous Emilia Romagna district has a population of 4 million, including the city of Bologna. It is home to 8,000 cooperatives, producing everything from ceramics to fashion to specialty cheese. Their combined output is 30-40% of the district's GDP.
Spain's seventh largest corporation is Mondragon. It is a federation of 256 companies, half of which are cooperatives. Since 1992, the number of its employees has quadrupled to almost 100,000, with more than 16% outside Spain.