Hobby Lobby and Rented Humans

Christopher Mackin

Christopher Mackin

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.

Hobby LobbyTo 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.

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6 Responses to Hobby Lobby and Rented Humans

  1. James McRitchie 07/18/2014 at 2:33 pm #

    I took the liberty of posting a comment by Marc Hodak from a Linkedin group “Corporate Governance” at https://www.linkedin.com/groups/How-much-say-should-employees-38740%2ES%2E5895211257090293760?qid=a6966507-c5f7-40f2-9202-510f9c5a6b7a&trk=groups_items_see_more-0-b-ttl

    “Employees are free to own any enterprise they can buy. Employees are free to join or leave the employ of any owner (including businesses managed for the benefit of the owners). To compare the free exchange of work-for-money to slavery is insane–an insult to the memories of all who lived in slavery (including my forebears), and would have given everything for the opportunity to be persecuted by the likes of Hobby Lobby (by persecute, I mean denied the right to have them pay for abortifacients simply on account of a little thing like the owners religious beliefs. In fact, of few of my forebears did give up everything to work in far worse conditions, and never had the audacity to complain about the things their employers DIDN’T give them).

    To answer Jim’s question more directly, I believe that employees should have as much say as they can negotiate. To give them any less would be exploitative. To give them any more would weaken property rights, and reduce the incentive to invest in and build businesses.

    Since the article indulged in a thought experiment, here is one of mine. Let’s say you had a choice of investing in a business under one of two governance regimes. The first gave you, as an investor, the right to delegate all decision making authority to a management that you could hire or fire. The second delegated much authority to management, but some authority to the other employees with regards to their benefits. Which would you invest in?”

  2. Marc H 07/18/2014 at 12:24 pm #

    Jim -what you’re saying sounds reasonably, if a little socialistic for my tastes. What Mackin wrote is ridiculous. Ted is right in suggesting that equating free labor to slavery makes anything else the author says difficult to assimilate.

    I should probably not throw stones if I’m not ready to contribute, as you have graciously invited me to do, so I will stop here.

  3. Christopher Mackin 07/18/2014 at 12:07 pm #

    Well Mr. Ted Anderson, the last time I checked, socialism meant government ownership of businesses and an antipathy toward markets and competition. I favor management and employee ownership of business and I believe in market competition.

    Dana Rohrbacher, one of the more conservative members of Congress, embraces this idea seeing in it an opportunity to further “conservative” values of broad based property ownership by workers, thereby reducing dependence upon government.

    As for your lawn, I imagine a freely entered into contractual relationship between me as an individual or me as part of an employee owned company on the one hand and you on the other. You as the customer get to set out your desires in the form of a proposed contract for services. If I/we agree to those terms, you get your lawn cut according to the contract.

    I am sorry you find these ideas offensive.

  4. James McRitchie 07/18/2014 at 9:12 am #

    Ted: I don’t think Mackin is arguing owners should have no voice in its governance. You’re right that when they don’t participate that is when we really get in trouble. And, I agree with you that when we hire someone to mow our yard they shouldn’t have voice equal to our own. However, most employees are not hired on a one off basis.

    “Many of the investments made by employees and the assets they have developed over the long term are realizable only within the firm, and these assets would not be fully appreciated in the market place. Hence there is greater commitment, though not necessarily happy, satisfied commitment. Where the ‘logic of exit’ prevails, however, the freedom of exit of uncommitted shareholders, and the insecurity thereby induced in managers by frequent takeovers, has a knock-on effect to reduce commitment, as much on the part of senior managers as on rank and file employees. [p. 9, Dore, Ronald and Hugh Whittaker 1994. Introduction. In Business Enterprise in Japan: Views of Leading Japanese Economists. Kenichi Imai and Ryutaro Komiya ed., Cambridge MA: MIT Press: 1-15.}

    Employees also have long-term investments into the companies that have worked for if they have been there for years. It only seems logical to me that they should also have some voice in it, especially in bargaining around wages and benefits. How this is done… wether through a co-determination model such as Germany’s, through unions, through participatory teams (such as Whole Foods), or through worker ownership mechanisms such as ESOPs is up in the air. I’m sure there are many women working at Hobby Lobby, Eden Foods and others who don’t agree with company owners on the issue of birth control and wish they had some kind of voice in choosing their benefits.

  5. James McRitchie 07/16/2014 at 2:15 pm #

    Chris Macken points to Hobby Lobby and the Clippers as examples that parallel slavery. Is he right to do so? Should employees have more say? If so, how?

    • Ted Anderson 07/18/2014 at 8:39 am #

      Wow. What an offensive concept to actually post. To in any way equate or “parallel” the tragedy of slavery with the completely voluntary association of employee/employer is ridiculous and offensive in concept.

      I thoroughly disagree with the religious views of the owners of Hobby Lobby. However, as to corporate governance, as the owners of the company, they are appropriate in operating the company in the manner they deem best suited to maximize its valuation. Does Mr. Macken really believe that if he hires me to mow/landscape his yard we should have equal voting power in what we choose to do with his yard? One vote for him, one vote for me?

      His view that shareholders of corporations should not have a positive voice in corporate governance goes against the recent decade of experience of what happens when the owners of a corporation DO NOT PARTICIPATE in its governance. Without a voice in what happens with their capital/investment, why would investors provide their capital? Mr Macken’s view of the world is a socialist one without innovation, individual responsibility and appropriate balance of risk and reward.

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