Aaron Swartz on Progressive Shareholder Activism

I don’t often agree with Aaron Swartz on questions of political economy — he thinks of certain open questions as definitively closed — but he’s incredibly smart and often very insightful. He has an interesting post in which offers a few rough cuts at a Theory of Change for U.S. politics. Here’s the most intriguing:

Shareholder Democracy

Supposedly, corporations aren’t actually controlled by their CEOs. The CEOs are instead hired by the shareholders, to run the business that the shareholders actually own. A lot of these shares are held by people who aren’t big fans of business as usual. If they got together they could use their shares to vote for reform.

Now voting on shares is complicated enough that most people don’t bother, but increasingly votes are being moved onto the Internet. It’s possible for an aspiring organization to build some software that could automatically vote for people if they wanted. So you could imagine, for example, a couple million MoveOn members letting a new progressive group vote their shares for them, allowing progressives to apply some real pressure to misbehaving corporations.

Combined with legal changes that are being considered that would further make corporate voting more fair, this is something that could make a real impact.

This could be a recipe for disaster, but I wonder. Aaron is a fan of Rakesh Khurana’s work, and I’ve always wondered — if the Rakesh Khuranas of the world are right, isn’t there an arbitrage opportunity for an alliance of shareholders that explicitly aims to break with the supposed dysfunction and self-dealing of contemporary corporate governance? One can imagine a progressive group that applies its values to corporate governance and, if they’re right, use the resulting value they’ve created to effect the kind of change they’d like to see. This kind of experimentation is what a free society is all about — it’s much better than imposing rules by fiat.