A Simple Fix

Chris Hedges recently wrote about some top CEOs who proclaim the positive value of capitalism. These terms and ideas get packaged and promoted so heavily that it becomes very difficult to see how they actually work. I'd like to take them apart a little bit and suggest a simple change that could have profound effects.

Our large scale society functions by way of complex organizations. Our welfare, indeed our survival, depends on the smooth functioning of these organizations. These organizations can only maintain themselves by earning profits, i.e. by selling finished products for prices high enough to pay for raw materials, maintain factories, pay workers and managers, etc. Investors who contribute start-up and expansion up-front costs need to earn a reasonable return on their investment, or they'll find something better to do with their money.

The distortion at the foundation of many of our problems today is that investors hold the ultimate decision-making power of corporations. Corporations are created and structured by means of the law. The law gives investors this power. A change in the law would change the way corporations are organized.

The classic straw-man for corporate governance is government control of corporations. But there are many other alternatives. Much of our problem today is that corporate power is too centralized. Government control would increase centralization. What we need is to distribute power.

Corporate governance needs to be widened. The Board of Directors of a corporation, the embodiment of regular decision-making, should include representatives from the workers and the managers, from suppliers and customers, from the local community, from folks living downstream and downwind, as well as from investors. Investors should not, in most cases, have a majority vote. Investors deserve a fair return on their investments, but this should be balanced with the legitimate concerns of the other stakeholders of the business.

It would be a catastrophic error to blame all our ills on big businesses and therefore to work to destroy those businesses. The fabric of our society consists of the goods and services flowing through these businesses. A small adjustment to the steering mechanism would have a profound effect on the path of evolution of this fabric. This is a simple and practical step that could fix the worst excesses of our current system.