If “what's good for business is good for the country,” if our prosperity truly depends on the profits of huge corporations, many of which are not within said country – or at least their profits aren't...
...If we really are to profit from their prosperity, and we will all suffer if they are less profitable, then we do, whether we own shares or not, have an interest in how they are governed, and what strategies they should pursue.
Since the decisions made in corporate boardrooms can effect the lives of millions of our citizens, even those who are neither employed by them, nor hold their stock, given their track record in taking profits from firing workers, driving competitors out of the market, gutting the economies of entire communities and regions, we do have a public interest. Where there is public power, there is public responsibility.
If these corporations are, as they never cease to remind us, critical to our economic health, if they feel free to ask for public funds when they make a poor decision, or to ask for special privileges in terms of taxation, it seems logical that corporate boards should have public representatives.
These representatives, with full voting rights and compensation in line with other board members, would be appointed by localities if the corporation operates only in that locality. If the corporation operates or does business in several localities, all of those localities would collectively appoint the public board members. The public board members cannot be fired by the corporation, or removed by their shareholders.
The proportion of the board of directors that are publicly appointed would be determined by the demonstrated impact of the corporation on the public welfare. The corporation's history, its importance to the economy of the impacted localities, and its history of legal compliance should be considered. In any event, it should be no less than a third of the voting seats, and no more than half.
There should also be a “Tribune of the Plebs,” a single member elected yearly by the public representatives, who has the power to veto any action of the corporation, thus delaying it for one year.
One final reform that is necessary to the bringing of public responsibility to the corporate model: All board meetings should be publicly recorded, and open to public review. Why should these important decisions, which are, as the corporations remind us for “the good of the country” be considered and enacted in secret?
The objection will be made that allowing people who are not corporatists to participate in corporate decisions will result in less emphasis on immediate profit. That is to the good, in my view. And there is little evidence that the current model of corporate governance is efficient or even functional. The largest corporate bankruptcies of the last twenty five years included the following:
Lehman Brothers (2008): 691.06 B$
Washington Mutual (2008): 327.91 B$
Silicon Valley Bank (2023): 209 B$
Signature Bank (2023): 110.4 B$
Worldcom Inc. (2002): 103.91 B$
General Motors (2009): 82.29 B$
Pac. Gas & Electric (2019): 71 B$
(This was their second bankruptcy.
Their first was in 2001. 36.15 B$)
CIT Group (2009): 71 B$
Enron (2001): 65.5 B$
Conseco Inc. (2002) 61.39 B$
I have only included those bankruptcies that involved assets of over fifty billion dollars. It is to be remembered that every one of those bankruptcies had catastrophic impacts on people who were neither stockholders or employees of those companies. People who worked for suppliers, debtors who saw their debts discharged, pension funds, losses to the public treasury – all suffered from the decisions made by the boards and executives of these corporations. The state administers the laws, and expends resources on courts and regulatory agencies that make bankruptcy possible. Some of these cases take years and millions of dollars in public resources to resolve. The collapse of Lehman Brothers was one of the causes of one of the largest economic collapses in the history of the United States; a collapse that effected almost every sector of the American economy. Banks and utility companies also damage communities when they fail in many ways.
Again, where there is public harm, there is public responsibility.
Another objection that I would anticipate is the assertion that corporations are private property. That the government has no legal right to interfere with corporate ownership and governance.
This is a spurious objection. Neither the corporate form, which allows the ownership to avoid public liability, nor the right to sell shares on a publicly provided and regulated market is, in any sense, a constitiutional right. Corporate charters are granted by the state, and these charters must be granted in the public interest. The right to sell shares is a publicly granted right, and must be regulated in an environment where, historically, compliance has been difficult to enforce and incomplete.
The captains of “industry” and the robber barons won't like it? There is a simple “out” for them. Don't ask the public to protect you from your losses, or to grant you shelter from liability behind the corporate form. Again, incorporation is not a “right,” it is a custom – an arrangement made to encourage investment that, from the public view, is meant to stimulate economic activity and common prosperity. Where it demonstrably fails to do so, public responsibility demands that changes must be made.
Consider these facts:
Productivity since 1980, when deregulation of financial institutions and corporations as a whole has become the norm, has increased 64.7%.
After tax corporate profits have increased from 223 B$ in the first quarter of 1980, to 2909.8 B$ in the first quarter of 2023, an increase of 1204.843 percent.
CEO pay has increased over 1300%.
The average stock price of a share traded on the Dow Jones Industrial Average was $891.14 in 1980. In 2024, it has been $38,445.62. (Numbers adjusted for inflation)
Clearly then, business as a whole has done quite well for itself. But how has it done for the public good? Is what is “good for business” good for the country?
Inflation since 1980 has increased prices by 276.61%. What would have cost $1 in 1980 would cost an average of $3.77 today.
The average non-supervisory, non salaried worker made about $21 an hour (inflation adjusted) in 1980.
The average in 2023? $23 an hour. An increase of about 9.5 percent.
Consider those numbers carefully. Workers have been almost sixty-five percent more productive. Corporate profits have increased twelve hundred percent. The average price of shares on the market has increased over four thousand percent.
The share of this increasing bounty to those who work for a living? The average hourly earnings for workers, hourly and salaried that make less than $70,000 per year increased 9.5 percent.
So where did all this money go?
The richest American in 1982 was Daniel Keith Ludwig with an estimated $2 billion net worth. In 2019, the minimum net worth to make the Forbes 400 list was $2.1 billion. The richest American in 1982 wouldn't even make the list today, even adjusted for inflation.
The top five richest Americans today — Bezos, Gates, Buffett, Mark Zuckerberg, and Larry Ellison — are worth a collective 434.5 $B— more than 2% of America's GDP.
The share of wealth that is held by the top 1% of Americans today is sixteen times the wealth held by the bottom 50%. In 1990, the bottom 50% held 3.5% of the nation's wealth. In 2023, it was 2.5%. In 1990, the top 1% held 22%. In 2023, they held 30.3%.
Incredible increases in executive compensation, the decline of union representation, automation aimed at reducing labor cost and participation, and the outsourcing of skilled industrial jobs to low-wage, low-regulatory countries have all contributed to the fact that for the average, working American, they are getting a smaller and smaller piece of a rapidly increasing pie.
So, why have we come to such a pass? In 1980, Ronald Reagan was elected, and every President and Congress since then, Democrat and Republican alike has enacted, more or less, the Neoliberal Agenda – lower corporate taxes, lower income taxes, less regulation of campaign spending, less financial regulation, measuring the success of the economy by rising profits and stock prices, and more “personal responsibility” for anyone who isn't rich.
Why did they do this? PACs donated about 59 million to political campaigns in 1980. In the 2022 election cycle, political action committees (PACs) raised $5.5 billion and spent $4.6 billion, according to campaign finance reports filed with the Federal Election Commission that cover activity from January 1, 2021 through June 30, 2022.
The cost of an individual campaign for Senate in 1982 was a median of $4,636,541. In 2022, it was $13,887,581. (inflation adjusted, 1981 dollars.)
We changed the rules, and let corporate and financial interests buy our political system, and our economic system. They have not run these systems in such a way as to benefit the vast majority of Americans. In fact, the share of wealth arriving in the hands of fewer and fewer people has increased at a higher and higher rate, while the wealth “trickling down” has decreased at an accelerating rate.
Thus, I posit that it's time for a change. If the most important decisions made about the American economy, how it is regulated, and how we live are to be made in corporate boardrooms, it is time we had representation there, and knowledge about how and why those decisions are made. If corporations insist on influencing, in fact, dominating our government, we, as a free people, have a right to a direct say on how that governance is done.
Sources:
The gap between productivity and a typical worker’s compensation has increased dramatically since 1979
https://www.epi.org/productivity-pay-gap/
Corporate Profits After Tax
https://fred.stlouisfed.org/series/CP/
Comparing Forbes' lists of America's richest people from 1982 and 2019 shows how differently wealth is tracked today
https://www.businessinsider.com/forbes-rich-americans-list-1982-versus-today-wealth-trends-2019-11?op=1
CEO pay has soared 1,322 per cent since 1978
Pay of typical worker increased just 18 per cent during same period
https://www.independent.co.uk/money/ceo-pay-rise-increase-since-1978-b1900222.html
Dow Jones - DJIA - 100 Year Historical Chart
https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart
$1 in 1980 is worth $3.77 today
https://www.in2013dollars.com/us/inflation/1980?amount=1
50 Years of Wages in One Chart
https://www.weforum.org/agenda/2019/04/50-years-of-us-wages-in-one-chart/
Trends in income and wealth inequality
https://www.pewresearch.org/social-trends/2020/01/09/trends-in-income-and-wealth-inequality/
The top 1% of Americans have about 16 times more wealth than the bottom 50%
https://www.cnbc.com/2021/06/23/how-much-wealth-top-1percent-of-americans-have.html
America's Poorest Only Own 6% of Assets
https://www.statista.com/chart/30962/share-of-total-assets-in-us-held-by-the-bottom-50-percent/
Statistical Summary of 18-Month Campaign Activity of the 2021-2022 Election Cycle
https://www.fec.gov/updates/statistical-summary-of-18-month-campaign-activity-of-the-2021-2022-election-cycle/
Table 2-5: Senate Campaign Expenditures: Major Party General Election Candidates, 1974-2018 (full cycle) Adjusted for inflation, 2018 Dollars
http://www.cfinst.org/pdf/federal/HistoricalTables/pdf/CFI_Federal-CF_18_Table2-05.pdf
Share of Total Net Worth Held by the Top 1%
https://fred.stlouisfed.org/series/WFRBST01134
Share of Total Net Worth Held by the Bottom 50%
https://fred.stlouisfed.org/series/WFRBSB50215
Exactly...evolve or wither....
Revolutionary, and necessary recommendations.