Thought experiment: Suppose the 21,000 employees of Hobby Lobby had been anonymously polled about whether their company should pay for insurance coverage for contraception, as required by the Affordable Care Act. Suppose the results showed that a comfortable majority, say 55 percent, believed — against the views of their leaders in management — in full coverage. What can we deduce from this hypothetical but plausible scenario? Three deductions come to mind.
One is that the notion of a poll, while interesting, is a meaningless act. Under commonly accepted notions of corporate law, employee voice does not really exist. It has no “standing.” It does not count. In light of that cold hard fact, employees should simply accept the judgment of their betters in management and get back to work.
To appreciate how we arrived at such a censorious reality in our corporations, we must reckon with the overlapping and reinforcing role of core doctrines in both law and economics. Over the past century, our commonly accepted legal categories — in this case our understanding of the status of employees — has been informed by the economic theory taught in our classrooms. That theory views employees as a variable cost, as impersonal inputs in a production function. In two somewhat more awkward words, we can perhaps best describe employees in our corporations as “human rentals.”
A quote from the generally accepted dean of economic education, Paul Samuelson of MIT, will help locate this point. The location happens to be the 10th edition of his best-selling 1976 textbook “Economics.”
Since slavery was abolished, human earning power is forbidden by law to be capitalized. A man is not even free to sell himself; he must rent himself at a wage. [p. 52]
Later on in the same textbook, Samuelson elaborates on this topic:
One can even say that wages are the rentals paid for the use of a man’s personal services for a day or a week or a year. This may seem a strange use of terms, but on second thought, one recognizes that every agreement to hire labor is really for some limited period of time. By outright purchase, you might avoid ever renting any kind of land. But in our society, labor is one of the few productive factors that cannot legally be bought outright. Labor can only be rented, and the wage rate is really a rental. [p. 569]
Human rentals do not get to vote. Everybody back to work!
A second deduction is that while the rented humans at Hobby Lobby of Oklahoma City and their counterparts at Conestoga Wood Specialties in East Earle, Pennsylvania, will have no say over what their company’s health coverage will be, someone else will. That someone is the company management. We accept that they are privileged to do so because they are the owners or, at the very least, the legal representatives of the owners. They get to decide policies. Workers just work.
This familiar but still vaguely odd narrative about who gets to speak in our corporations brings to mind another recent name in the news, Donald Sterling, the apparently soon-to-be ex-owner of the Los Angeles Clippers. Back when his ownership was unambiguous, when he was clearly in the saddle, he struggled over these awkward points of economic and legal theory in his infamous conversation with his alleged paramour, V. Stiviano.
Sterling: Just — do I know? I support them and give them food and clothes and cars and houses! Who gives it to them? Does someone else give it to them? Do I know that I have — who makes the game? Do I make the game, or do they make the game?
Sterling held on to the scepter of ownership until the norms of the day, a tidal wave of opinion, took him down. To be certain, he will get his mammon, but he is about to lose the legal title of ownership that previously seemed rock solid.
A third deduction is that with the Supreme Court and Sterling in mind, it appears that the architecture of rules regarding who gets to speak for our corporations –- the issue of “voice” — is in truth a bundle of poorly constructed legal Lego parts, vulnerable to collapse. The outrage that has emerged in the wake of the Hobby Lobby decision about allowing our “bosses” to make our most personal health and welfare decisions – and the apprehension that this precedent may lead to further moral mischief – may eventually make its way back into our judgments about the prevailing models of the corporation. A period of critical reflection on that topic may fuel an appetite for alternatives.
…with the Supreme Court and Sterling in mind, it appears that the architecture of rules regarding who gets to speak for our corporations – the issue of “voice” — is in truth a bundle of poorly constructed legal Lego parts, vulnerable to collapse.
There are alternatives. There are legal structures that can accommodate employee voice. Corporations can be managed and owned on a more or less democratic basis by and for the workers and managers who labor together under the same roof. Investment capital can be rented. Capital is not unimportant. It can and should have certain rights, such as “negative” rights that protect its risk-adjusted value, but it should not ultimately hold the “positive” rights of voice to govern an enterprise.
The principles of how to distribute power over voice that guide our political democracy are well established: One person, one vote. There is, however, a “lag” in our thinking about how to apply that same commonsense principle to the workplace. That lag cannot hold. For their service in bringing it to our attention, we must thank both the ownership and management of Hobby Lobby and the United States Supreme Court.
Guest Post: Christopher Mackin, is the founder of Ownership Associates, an advisory firm for broad-based employee ownership based in Cambridge, MA. He is an Adjunct Lecturer at the Rutgers School of Management and Labor Relations and a member of the core faculty of the Harvard Trade Union Program based at Harvard Law School. The bulk of this article appeared as Hobby Lobby hobbles worker voice, July 8, 2014 on PBS Newshour.