Ewan McGaughey is Senior Lecturer in Private Law at King’s College, London. This post is based on his recent article, forthcoming in the Seattle University Law Review.
When the Dean of Harvard Law, Robert Clark, wrote his classic text on Corporate Law in 1986, he said that if you only wanted to grasp the basics, “you must, at the very least, also gain a working knowledge of labor law.” That neglected truth might become much more significant soon, because a growing number of lawmakers are proposing federal rights for employee representation on corporate boards. The Accountable Capitalism Act, which is getting a lot of attention, would require 40% of boards in $1bn companies are employee-elected, and those companies would also get a federal charter. The Reward Work Act, which caught less attention, would require one third employee-elected boards in all listed companies.
On this forum, four posts have been sceptical about the merits of ending the shareholder monopoly on corporate governance. Summarizing a forthcoming article of mine called “Democracy in America at work: the history of labor’s vote in corporate governance“, this post sets out a positive case: (1) the evidence shows worker voice is embedded in American tradition and would expand economic prosperity, (2) worker voice now represents best corporate governance practice in the majority of OECD countries, and (3) there is no credible defense for “shareholder primacy”, because asset managers are voting on “other people’s money”: those people are usually employees saving for retirement.
