We all have a stake in corporate behavior (Yosifon | SF Chronicle)

[struggle4progress]

David Yosifon
Friday, January 22, 2010

Corporations are crucial institutions in our society. Consumers rely on them for everything from the basic provisions of food and clothing to the more dispensable delights of computers and cell phones. Workers rely on them for jobs. Communities need them for a tax base. Shareholders rely on them for profits that fund retirement, or entrepreneurial activity.

We all have a stake in effective corporate operations. Yet corporate directors are not required, indeed are not allowed, to put the interests of any party above shareholders in their decision making.

Now the Supreme Court has declared that the First Amendment forbids us from restricting corporate spending on political campaigns. If we cannot restrain corporations from influencing our democracy, then we must have more democracy in the management of our corporations. Directors of publicly traded corporations should be required to become informed about and to deliberate on the interests of all corporate stakeholders, not just shareholders.

The idea that we all have a stake in corporate behavior might seem at odds with the current "shareholder primacy" rule in corporate governance. But it could make sense. Most shareholders are highly diversified, with small investments in a large number of funds or corporations spread across the country and the world. The profit-maximization rule provides shareholders sufficient repose to invest their money at such a distance and with so little say in corporate decisions. Workers, on the other hand, can negotiate and monitor their wages and working conditions directly, or through unions. Consumers can manage their corporate interests at the cash register - they can buy at the offered price or walk away ...

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/01/21/EDPG1BLKND.DTL