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.
The answer is no, even if Khurana is right it probably doesn’t imply an arbitrage opportunity. The reason is that corporations do a lot of things (including their CEO recruitment) in large part to appear legitimate to their peers and this legitimacy is necessary to gain access to resources. The logic is so strong that even if a firm became aware of the “arbitrage” opportunity it would make more sense to forgo it and do things by the book.
— gabriel · Sep 13, 02:01 AM · #
Suppose activist shareholders in drugstore chains used their influence to get the chain to implement a policy of not selling abortion drugs. I guarantee you would see some howling from the MoveOn types, arguing that people’s consciences should not allow them to dictate such policies that would reduce the availability of legal medical treatments from the market. (I know because I’ve been on one side of this argument many times.)
— The Spokesrider · Sep 14, 01:04 AM · #
Having no intellectual talent or skill for finance, I can be sure of missing something; but it sounds to be a promising way to break the corporate logjam, and shake up the sediment clogging the culture’s commercial soul.
Spokesrider speaks truly. This could be a point where ideas of democracy become elaborated as complexities multiply, along with unexpected vistas.
The times continue to mine whole new veins just when it seemed the arteries were nearly clogged.
Maybe even an economy no longer requiring Chinese life support?
Maybe not.
Damn.
— felix culpa · Sep 15, 04:38 PM · #