News Release

Should Employees Sit on Corporate Boards? What is a Corporation?

At the recent Democratic presidential debate in Nevada, Sen. Bernie Sanders said: “You know what, Mr. Bloomberg, it wasn’t you who made all that money. Maybe your workers played some role in that, as well. … I want workers to be able to sit on corporate boards, as well, so they can have some say over what happens to their lives.” (See Sanders’ proposals on corporate accountability and democracy.)

In 2018, Sen. Elizabeth Warren proposed the “Accountable Capitalism Act“: “Borrowing from the successful approach in Germany and other developed economies, a United States corporation must ensure that no fewer than 40 percent of its directors are selected by the corporation’s employees.” Her proposed legislation builds on Sen. Tammy Baldwin’s “Reward Work Act,” which Warren has co-sponsored, and which would effectively ban stock buybacks while placing representatives of workers on corporate boards.

WILLIAM LAZONICK, william.lazonick at gmail.com
Lazonick is professor emeritus of economics at the University of Massachusetts and president of the Academic-Industry Research Network.

He was profiled last year in The New Yorker in “The Economist Who Put Stock Buybacks in Washington’s Crosshairs.” Lazonick “noted that both Merck and Pfizer, two of the largest pharmaceutical companies, had been spending heavily on buybacks, but had struggled to develop successful new drugs.”

His latest book (cowritten with Jang-Sup Shin) is Predatory Value Extraction: How the Looting of the Business Corporation Became the U.S. Norm and How Sustainable Prosperity Can Be Restored (Oxford University Press).

His most recent writing is at the Institute for New Economic Thinking.

Lazonick said today: “The stock market is an institution that enables owner-entrepreneurs to stop being owner-entrepreneurs, passing the control over management of the company to employees. Public shareholders who hold shares for a yield and who can easily sell those shares at any moment on a liquid stock market should not have ownership rights. Workers have a far stronger claim to call the company theirs, although workers can come and go. I would go for a trusteeship model of governance of publicly listed companies rather than a stakeholder model. That raises the questions of the purpose of the corporation as a public trust, how the trustees would be chosen, and how they would be held accountable.”