Before we can describe how to bring about these reforms, the doubts of the skeptical must be spoken to first. Most dubious are those who think first of United Airlines' recent experience with worker ownership. As a corporation majority-owned by workers, United Airline's early collapse into bankruptcy after 9/11 has been interpreted by many as proof that worker ownership doesn't work. In actuality, United Airline's experience was merely just another case study in how the current system allows corporate insiders and agents to exploit absentee investors.
In the case of United Airlines, the insiders happened to be the workers, an ownership group that had taken majority control of the company in exchange for wage concessions. Once business conditions improved, they used their insider position to extract from other shareholders a contract that paid wages far above industry averages. In this regard, workers appropriated the wealth of absentee shareholders in essentially the same way that executive insiders at Enron, Worldcom, and so many others did. This appropriation of wealth can be thought of as a tax imposed on small investors by the agents and insiders who control corporate boards. Its myriad forms are far too extensive to describe here, but they extend from the executive suite to every corner of Wall Street.
In addition to this tax, there is a second levy placed on all individuals who deal with corporations. By granting the entitlements of limited liability, absentee ownership, and pooled capital to our corporations, they instantly gain a bargaining advantage against the individual. Whether as workers or consumers, an individual is nearly always at a disadvantage when negotiating with a corporation for the value of the labor they seek to sell, or the value of the goods they seek to buy. As a result, some discount is implicit in the price of our work wages, and some premium is implicit in the price of nearly everything we buy.
A share would not represent a stake in profits, but rather a stake in the total of all value created by the corporation. Looked at another way, this can be thought of as profits before wages are paid. In this respect workers and investors would be partners, sharing in the last dollar of value earned or lost by the corporation. Absentee shareholders would cede operational control of the organization to corporate work forces by allowing the creation of a separate class of voting stock solely owned by workers. The equity value of these shares would be nominal, but the voting rights would allow them to select their own leadership, and direct the growth goals and strategy of the corporation. The voting rights would not, however, allow workers to set wages to their advantage (as occurred at United Airlines). Instead, workers' share of corporate revenue would be established by the percentage split set through the issuance of the TVA shares.
Under this revised arrangement, executive management would no longer be thrust into the duplicitous role of leading a work force to act against their personal interests. Instead of workers being asked to assist the corporation in, say, outsourcing their own jobs, executives would be rated on their ability to keep a worker's job. The influence these changes would have on workplace effort, productivity and morale would be profound.
Gross returns on investments would be reduced, but net returns for small investors would remain essentially the same. This would occur as our financial markets were transformed from the casinos they are now, to markets dedicated to the legitimate purpose of providing investors liquidity and portfolio diversification. As a result, the monies now paid by investors to Wall Street for the impossible end of delivering above-market returns to all investors would be dramatically reduced. With these savings in hand, absentee investors would enjoy roughly the same net returns as they now get while incurring less risk.
Bringing these reforms into being requires a means for EOC conversions to come to life. Tax incentives could be used to facilitate this process. First, a tax breaks could be granted to those who invested in mutual funds chartered for the sole purpose of backing EOCs. In turn, corporations would be incented or mandated to create an employee-ran trust responsible for representing workers in the event the corporation was targeted for conversion. The conversion funds would defer control of their voting rights to the employee trusts, and commit their investments to any conversion efforts. Once a syndicate of funds accumulated a sufficient ownership stake, they could tender offers for specific corporations.
On economic matters, the divide between liberals and conservatives is typically said to center upon philosophical differences over the merits of free markets. In reality, conservatives are fully comfortable with governmental interventions in the marketplace, so long as they extend the entitlements of incorporation. Liberals should come to see this bit of hypocrisy as the Achilles heel of contemporary conservatism. Why not take conservatives at their word about the virtues of free markets, but take them to task for their hypocrisy? On this front, we need only have the imagination to ask of them this simple question: "Why not?" Why don't we even up the balance of power that exists between the corporation and the individual? Why don't we take back the concentrated power we've given over to unattended corporate agents? And since the corporation is merely a social invention created to provide us the social benefits of pooled capital, why don't we let those who produce the majority of the value created by our corporations control them? Why not, indeed?
