[WSJ] Elizabeth Warren: Companies Shouldn’t Be Accountable Only to Shareholders

What are you claiming is the difference between governance and operations? BoD decides who runs the operations of the company. They have total control of operations.

As far as ownership, you would claim the employees don't own the company since they don't share in the profits. I would claim they do own 40% of the company because they have 40% say in what happens to the company. As in, i can take a baseball bat to my car because i own it.

Either way. nobody would call this anything close to capitalism.

 

Isnt this the point of unions?

 

Basically

 

SOCIALISM

 

Those without a monetary stake in the company should have essentially no say. Allowing employees to have a say over the direction of a company is equivalent to allowing your children to have a say in how you set your budget. In some rare cases, it might work out, but on average it'll be a disaster.

The rational self interest of the owners is more trustworthy than the employees who have no monetary stake in the company and if the employees followed their rational self interest they'd loot the company for all it is worth and then retire or head to another company to do the same. The long term good of the company is irrelevant when it comes to an employee's rational self interest, that's often not the case with owners or those who have a monetary stake in the long term success of the company.

 

Well, I would still call it capitalism, though it does certainly have socialist elements to it (yeah, I don't think they are mutually exclusive). The difference between the 3 is this. Ownership has equity in the company and they own all the free cash flows that are spun off the company (dividends or sale of ownership stake). Right now, ownership elects the board of directors according to their relative share of ownership in the company. The board of directors is the vehicle of corporate governance. They choose the CEO and other officers of the company, they are the representatives of the owners that oversee the quarter-to-quarter performance of operations, they establish executive compensation schemes to incentivize the right leadership behaviors, and they make big decisions about the fate of the enterprise (like consenting to a merger or something). But they aren't operations, the CEO runs operations. They have oversight to decide if he's doing a good job, they give him incentives to engage in certain behaviors, they give him advice, they fire him when they don't like what he's doing. But they don't do anything on daily operations. To go a fourth entity, employees, they do work and are paid for their efforts and are sometimes incentivized with bonuses, but they do not own free cash flows, they have no say in corporate governance, but are responsible to different extents for operations. The proposed change opens a little door for the employees to have some say in governance which oversees what they do in operations, but still leaves them out of ownership. They need to buy shares for that. But, do they de facto "own" the place if they have a voice in governance? No, owning is having rights to the free cash flow. They do de facto "control" the place, at least in part. Does that mean they can take a baseball bat to the company if they want, and hurt the interests of ownership? Maybe. I'm not sure that they would; after all, their interests are somewhat aligned with the interests of owners. If they use their power to inflate worker wages to the point that the company is uncompetitive, for example, it will ultimately hurt workers and shareholders alike. If they narrow salary dispersion so much that the best executives leave and the company suffers from bad leadership, it hurts workers and shareholders alike. So sharing control with other people (who, it must be said, still have a big stake in the company even if it's not an equity stake) is not necessarily a death knell for the investor. The investor still has cash to invest and is still looking for a vehicle that will give him returns. If the investor doesn't have total control (and most investors do not have any as it is), he can still be happy if it generates returns. To say the scheme wouldn't work, I think you'd have to demonstrate that the bias of employee governance would be to fundamentally undermine the competitive of the enterprise. And I don't think that'd be the case.

 

Unions don't do governance. Unions provide a counter-party in negotiation for the company to acquire one of its key inputs. It is an outsider that stands at arm's length from the company and is disinterested in the success of any particular company. With board members elected by labor and others by capital, you would likely have more contentious board meetings. But it is still a board that'd be dedicated to the particular success of that particular company. So the goals might be similar, but I don't think the two approaches are redundant.

 

Wages aren't stagnant for those that work hard *and* smart, and bring creativity to their jobs.

It's much better than the imposed redistributionist schemes that seem to be gaining such popularity. At least in the Oliver Twist scenario, merit might have something to do with charity. Which is to say, many affluent people would readily give to the deserving poor.

 

I have a crazy idea...

If employees want the same say as stockholders in how the country is run, why not do both?! We could call this....an Employee Stock Ownership Plan!

Wait....

 

Lol... come on dude. Obviously it would be on a case by case basis that employers would have to make. Don’t make that stupid argument, “well why don’t we double minimums raise then”.

Probably not if you increase wages significantly, but I get the feeling you are using extreme examples to get the result you wanted.

 

Governance is a much better term for what is being discussed.

 

Lol. Likewise, move to Zimbabwe to achieve your capitalist goals. The US is a mixed economy brotein shake.

 

Trump said it was those unfair trade deals...

 

The argument being made is stupidly simplistic. You said more ownership and more benefits increase productivity. I'm trying to figure out how, why and when in your mind. I'm not using extreme examples to be ridiculous. I'm using any examples to try to understand how this works from the perspective of the people who think ideas like this are good.

 

And who decides if that plan gets approved?

 

Why wouldn't providing more incentives to workers increase productivity than not?

Do you understand what Warren is proposing about corporate governance? I don't mean that snarky either. This isn't new and already has been signed into law within state legislators, Mike Pence signed this when he was governor.

From Forbes:

Benefit corporations are exactly the same as traditional corporations except for one important thing that is uniting strange bedfellows: Benefit corporations fix a source code error in the operating system of capitalism—a legal concept called “shareholder primacy.” Unlike traditional corporations, the boards of directors and officers of benefit corporations are required to consider the impact of their decisions not only on shareholders, but also on other stakeholders, like workers, customers, communities, suppliers and the environment. Research, business leaders and investors are increasingly on the same page that this kind of stakeholder governance is not only good for society—it is good business.

 

No, corporate governance is different. Here's a Forbes opinion piece on the matter:

https://www.forbes.com/sites/jaycoe...e-around-accountable-capitalism/#727ed39651d9

 

Agreed

Wages are being evened out globally because of the global economy. Ford can just move the plant to Mexico.

CEO's making a lot is somewhat greed but shareholders making so much is about ownership. The stock market growth in the last thirty years is good for everyone ultimately.

 

The reason America isn't Germany is because German workers are more educated.

 

When your real wages haven't increased but the stock market has tripled then yeah, it's obviously not good for everyone ultimately.