U.S. Senator Liz Warren (D-Massachusetts) has a dumb idea that will do nothing for American workers: corporate democracy.
Warren wants to require 40% of all corporate board members to be company employees. Predictably, leftists like The Week’s Ryan Cooper love this hare-brained suggestion.
All Warren and Cooper demonstrate is their ignorance of how corporations work. Historically, the role of corporate boards is to rubber stamp the chief executives’ decisions.
Corporate boards only make serious decisions when something is wrong. For example, a board might fire the CEO if the company loses a lot of money.
Corporate Democracy is Not the Answer
Adding employees to the board would not change this reality. The most likely result of corporate democracy is that the CEO would pack the board with his favorite yes men and yes women.
Disturbingly, employee directors would have less independence than other directors. Since the CEO would set the employees’ salaries, they would be more likely to follow his orders.
Strangely enough, outside directors who have other sources of income would be more likely to buck the boss’s decisions. Employee directors would be more likely to go along with the party line in hopes of getting a raise.
How Corporate Democracy would Destroy American Business
All corporate democracy would do is increase corporate greed. If employees elected directors, most workers would vote for whoever promised to increase their salaries the most.
A likely outcome of corporate democracy would be a board slashing every aspect of the business but the paychecks. Salaries would be high, but necessary changes; such as equipment modernization, expansion, and research and development, would not occur.
This horrendous status quo already exists at corporations where boards and management become obsessed with stock options. Directors slash operations and stuff all the cash into bigger dividends to drive up the stock price. For a perfect example of this sickness see Barnes & Noble (NYSE: BKS).
Worst of all, such a board would appoint a yes-man CEO who would sign off on any salary increase. The yes-man CEO would grant high salaries, long vacations, and big benefits as the company collapsed. Just as some of today’s CEOs sign off on any dividend increase to keep their seats on the corporate jet.
Corporate Dictatorship is necessary for Successful Capitalism
We need to ask ourselves; what sort of corporate leader would the average worker vote for? Would the average employee elect a revolutionary technologist like Elon Musk, a marketing genius such as Jeff Bezos, a visionary designer like Steve Jobs, or a brilliant number cruncher like Warren Buffett?
No, the average worker would vote for an incompetent glad hander such; as Donald J. Trump, George W. Bush, or William Jefferson Clinton. Corporate democracy would replace entrepreneurs with shallow, unimaginative, self-serving, corrupt, and incompetent buffoons.
A likely scenario is that an employee running for a director’s seat would tell voters about the good fight he intends to wage on their behalf. After election, the employee director would arrive in the boardroom, look at the large check the CEO has waiting for him, sit down, and follow orders.
Such leadership would be incapable of competing with China. There would be no new products, designs, platforms, markets, or technologies. Instead, the elected leaders would build whatever product that employed the most workers at the highest salary.
Corporate democracy is bad for business. Successful corporate governance requires dictatorial leadership. Somebody has to have the power to make the hard decisions.
Please, Liz Forget Corporate Democracy
Corporate governance in America works and works well. There is no need for employee democracy.
Government would best fix the major problems facing America’s employees such as low salaries and lack of health insurance. Our government is already a democracy. Therefore, there is no need for corporate democracy.
America’s workers will be better off if Warren devoted her energies to expanding the safety net. Working families need single-payer health insurance, a $15 minimum wage, tuition-free college, Social Security increases, and a basic income not the fantasy of “corporate democracy.”
Adding employees to corporate boards is nothing but window dressing that would do nothing to help workers. Employees already have all the elected representatives they need in Congress and the statehouses. There is no need for corporate democracy.
American Workers need Real Solutions not Window Dressing
Why is a self-styled progressive like Warren offering window dressing like “corporate democracy?”
The most likely reason is that “corporate democracy” is a “reform” that will not dramatically impact business operations and have no effect on anybody’s tax return. Single-payer health insurance, basic income, and Social Security increases would necessitate higher taxes. A $15 an hour minimum wage might cut into corporate profits or stock options.
Adding a few employees to corporate boards would not increase taxes or affect profits or stock options. Cynics will say Warren is offering solutions that will mollify leftist intellectuals and keep corporate donors happy.
America needs leaders willing to fight for real change not pander to Big Money and mouthy intellectuals. We need to say no to Warren’s corporate democracy, and yes to changes that will help average Americans.
Please Senator Warren, abandon corporate democracy and concentrate on real problems like Climate Change and Income Inequality.
This story first appeared at Market Mad House where we love to expose political insanity and corporate lunacy.