Bernie Sanders has a new plan to transfer corporate shares and board seats to workers. Bill Black describes what’s included—and what’s not.
DHARNA NOOR: It’s The Real News. I’m Dharna Noor.
Bernie Sanders unveiled a plan on Monday to transform major corporations and put power in worker’s hands. It’s called the Corporate Accountability and Democracy Plan and it would require large companies to give employees at least 20% of stock and 45% of seats on corporate boards. The plan would also reverse Trump’s corporate tax cuts, returning the corporate tax rate to 35% from 21%. The senator’s campaign released this proposal the day before the fourth round of the democratic presidential debates.
BERNIE SANDERS: When you have a half a million Americans sleeping out on the street today, when you have 87 million people uninsured or under insured, when you’ve got hundreds of thousands of kids who cannot afford to go to college and millions struggling with the oppressive burden of student debt, and then you also have three people owning more wealth than the bottom half of American society. That is a moral and economic outrage.
DHARNA NOOR: Here with me to talk about all this is Bill Black. He is a white collar criminologist, a former financial regulator, and an associate professor of economics and law at the University of Missouri, Kansas City. He’s also the author of the book The Best Way to Rob a Bank is to Own One and he’s a regular guest here on The Real News. Thanks for being here.
BILL BLACK: Thank you.
DHARNA NOOR: So before we even start, I just want to be up front about this. I did donate $27 to Sanders’ campaign. Let’s get into it, Bill. This plan would apply to companies that are publicly traded or bring at least 100 million dollars of annual revenue in. And again, one way it transfers power to workers is through stock. Companies that meet those guidelines would have to give 2% of shares to workers every year until they’ve forked over 20% at least. So just to start with the very basics, why are stocks so important and what power would that actually give to the workers?
BILL BLACK: It wouldn’t give the workers all that much power in fact, but why is stock important? Stock is important because it is by far the greatest source of wealth for the really wealthy. And periodically in the United States and in other countries you get very large percentages of the middle-class investing in stock. And then something happens like the Enron era frauds, like the Great Financial Crisis, like the Great Crash before the Great Depression and that number draws back dramatically. So the poorer people lose when the stock market collapses, and they tend to withdraw from the stock market. The ultra-wealthy stay in and when the recovery in the stock market occurs, the vast bulk of that recovery goes to those stockholders and such. So if you’re able to maintain it for very long term, and of course you start with massive wealth, this is how you end up with three times massive wealth. Conversely, stock is often a trap for less sophisticated people in which they suffer crippling losses.
DHARNA NOOR: So you’re saying that stock can actually kind of be a liability and can kind of screw people over if companies fail. Is that a concern with this plan for workers?
BILL BLACK: It normally is a concern. Stocks are riskier than bonds statistically and so there’s more danger of losing. And Enron, the workers lost enormously because all of their pension funds were invested in Enron stock.
DHARNA NOOR: Right.
BILL BLACK: So you’re not diversified and that’s a problem. The Bernie plan has a provision in it that they don’t emphasize that is designed to deal with this problem. And that provision says you can’t sell your stock. And presumably you can’t pledge your stock as collateral to borrow either because that would have the same problem. And the problem they’re trying to deal with is the Soviet Union problem. The former Soviet Union was famous once it broke up for taking all the state owned enterprises and saying, “Ah, the public owns it,” and giving stock for free. And of course, what are you supposed to do with five shares in some weird corporation that’s losing money? So people would sell it for next to nothing. And then the oligarchs consolidated control and they used bribery to make the corporation incredibly valuable to them. And so you spread corruption and the public ended up with virtually no stock ownership. So it was the worst of all worlds. So that’s what the Bernie plan is trying to prevent by not allowing you to sell and presumably not allowing you to pledge your ownership.
DHARNA NOOR: Yeah, and it seems pretty clear that the stock is there to give you equity in the company, not so that you can gamble it essentially. Yeah, and Bernie’s proposal would also transform corporate boards too. This is something they’re really emphasizing. For applicable companies 45% of board seats would be controlled by workers and boards would also have to make sure that: “A significant portion of every board be comprised of people from historically underrepresented groups.” Handing over almost half of board seats sounds really radical. But the campaign actually themselves points out that there is a precedent for this. In Germany big corporations have to give half of their board seats to employee representatives. What effect would that actually have and what effect has it had in other places?
BILL BLACK: Okay. So first, as you say, there are two big parts. One is the stock ownership and one is changes to the way you run corporations. The stock ownership one probably is unconstitutional, right? It’s a takings property without compensation. So, that one is very dubious legally in the US context. But as you say, other countries have different legal structures and different constitutions and so in the Germanic nations it is very common to have dual boards or some variant of this that gives employees a organized structural say in how the corporation is run. And that varies. Germany tends to be about the most vigorous in this.
The Dutch are closer; some of the Scandinavian nations have their own variants of these things. They’re not panaceas, they do not end income inequality. They do not transform corporations into kumbaya type places. The German and the Dutch companies include many of the most rapacious companies and most corrupt and criminal companies in the world, like Deutsche Bank and other of their entities, VW, right? VW committed 10 million felonies, that’s hard to do, and their felonies killed people and such. The Siemens, the glory of their manufacturers is this amazingly corrupt, foreign corrupt practices, foreign bribery as an absolute way of doing business. So let’s not overstate how we transform entities by giving workers some involvement. Some involvement almost never means control, right? There is a different system, worker’s collectives and worker ownership of entities, and those actually are different. But this is a step that shouldn’t be oversold but has potentially some advantages on the margins of reducing some forms of fraud by CEOs.
DHARNA NOOR: And Sanders has–we’ll talk later–in the plan, some policies in here that actually could uplift people trying to take complete ownership of their corporations. But in cases like Germany, I think that the big thing that’s pointed to is like if it’s more profitable to move all of your labor overseas, then workers can vote to ensure that that doesn’t happen to preserve jobs. So for those kinds of things, I think that that’s the kind of thing that I think people are really excited–
BILL BLACK: German manufacturers move businesses overseas all the time.
DHARNA NOOR: I was just going to ask you. Is that–
BILL BLACK: To screw German workers. No, if it’s low tech, Germany moves it out of Germany is the answer. If it’s very high tech, you’re correct that as a matter of governmental policy, corporate policy and employee policy there they sort of the interests overlap and they will tend to keep those jobs in Germany. Remember, Germany has very substantial inequality and indeed led a campaign that became the model for austerity in the EU in which the repression of worker wages was the goal to quote unquote make them more competitive so that they could export more. Right? So that again, yes, these can have some advantages on the margin, but they are not panaceas they do not transform corporations into kumbaya land.
DHARNA NOOR: Sure. And to go back to stock quickly; earlier this month the Labor Party in the UK proposed something similar to give 10% of shares to workers for companies with more than 250 employees, I believe. And critics there were also saying, some were raising this criticism that yes, it’s not a panacea. But others were saying that it might actually cost businesses too much. I think in the UK it would have cost like 3 billion Euro. Should we be concerned about like that, the effect that this could have on the national economy more generally?
BILL BLACK: Well, no, actually. Again, the provisions for having much more diversity, and this would be particularly true on gender, would actually make business much more productive. And this is my wife’s research in large part, June Carbone at U Minnesota and her colleagues. As you add women board members, corporations perform better, right? They make higher levels of profits. They have less fraud, less predation on people. It’s a win, win, win, so that’s unambiguously good. And that’s sort of the point. Since it is a win, why doesn’t it occur already in the private market? Under the neoclassical economics, because it’s a win, win, win, of course it must have already happened. But not only has it not happened, the gender wage gap for women as a whole that have college degrees is actually increasing and has been for a number of years. So that’s the entrenched power of male basically because quasi hegemony.
DHARNA NOOR: Right.
BILL BLACK: In a bunch of different fields. So that’s an excellent area where all the data suggest that Bernie’s plan will be a huge win for business and a huge win for workers as well. And again, all male or overwhelmingly male workforces, they’re much more likely to engage in fraud and predation and those kinds of things. So on many, many different dimensions that part of the plan is unassailable, and the business community should be all in favor of it. And the fact that it isn’t tells you a lot about the business community.
DHARNA NOOR: Sure. So I think actually the concern in the UK was that transferring that 10% of stock to workers was what would cost that much money. But as you say, there are also provisions that require companies to get federal corporate charters from the Department of Commerce and then quote, “Consider the interests of all the stakeholders in the company.” So that includes like workers, but also customers and communities. Elizabeth Warren has a proposal like that too, but it applies to billion dollar companies and Sanders’ applies to $100 million companies. But that’s not really the biggest difference about those two plans. Right? Warren’s plan tells workers to prioritize or tells owners rather to prioritize workers and customers and communities. But Sanders’ plan gives them a stake in the company. Talk about that distinction and how those sort of would function differently.
BILL BLACK: Right. So to pick up on your first point about the labor plan in the UK, it’s not that it costs $3 billion. What it does is it dilutes current shareholders.
DHARNA NOOR: Right.
BILL BLACK: In other words, if there are more shares issued, then I don’t own the same percentage of the corporation I once did. And since the corporation, if it’s value is unchanged, then my net worth is reduced. And the fear is that people will say, “Well, why should I be a shareholder in a British corporation then and get diluted? Why not go to China or something like that and buy the stocks there?” So as your broader question about the difference between changing the institutions in this fashion, I think changing the institutions, which is more of the Bernie plan, is a superior device because the institutions largely shape the incentives. And many of those incentives are quite perverse, like on stock buy backs, right? And indeed I think the Bernie plan doesn’t make this clear enough.
The stock buy backs are overwhelmingly devices by managers to increase the share price so that they’ll get a bigger bonus, right? That should just, you know, as what Bernie’s plan says, this is stock manipulation and it shouldn’t be permitted. So institutionally will having worker ownership stop that? No. So Bernie doesn’t just institutionalize, he also has more prohibitions on things like stock buy backs and those I think do make a lot of sense and indeed are necessary and are likely to be more transformative. And again, that probably would not run afoul of a claim that it was unconstitutional on a takings basis. But footnote, we now have an extraordinarily conservative judiciary and one of the things you can expect is that they’re going to increasingly interpret the takings clause of the constitution to strike down all kinds of governmental efforts that they don’t like.
DHARNA NOOR: And as you said, worker ownership, partial ownership, or partial control rather is not the same as a cooperatively owned business. But the plan also does have a proposal for a US employee ownership bank with $500 million of funding to help employees transition to owning their companies via like low interest loans and other kinds of assistance. What do you make of that part of the plan?
BILL BLACK: 500 million in the US economy isn’t going to transform much of anything. But worker cooperatives have to be organic, they have to come from workers. And so having a relatively, a word like moderate size plan, makes a lot of sense at the beginning. Again, we’re not going to wake up with this plan and suddenly worker cooperatives are going to be 20% of the workforce. But you start, and the arc of history is what you’re aiming to change so it’s sensible.
DHARNA NOOR: I guess my last question is: what else is missing from this? What are the sort of accountability measures that you would’ve wanted to see from this? Does it leave anything to be desired?
BILL BLACK: Well, it has some odd gaps and I don’t think they’re intentional. So the word whistleblower never enters, right? And we’re in the age of whistle blowers and you’ve seen how absolutely critical they are to transforming things and they’re overwhelmingly workers. So it’s a worker’s rights issue.
DHARNA NOOR: Yeah. You’ve got your whistleblowing shirt on today as well.
BILL BLACK: I’ve got my whistleblower shirt, yeah. So in full disclosure, I’m a co-founder of Bank Whistleblowers United, I’m a serial whistleblower. But, and obviously it’s a super salient issue with the political stuff that’s going on. So it’s odd that they left whistleblower protection out. From my perspective as a friendly amendment, there’s much too much vague stuff about greed. Well, I don’t think people suddenly got greedier and that’s what caused the problems in the world. What happened is we have progressively by institutional change made the incentive structures incredibly pathogenic or criminogenic in our jargon. And we need to reverse that.
And so, I would have liked to see a plan that specifically talked about the two key things that have changed: control fraud and predation. These are schemes led by those who run seemingly legitimate entities, which is of course what Bernie’s plan is dealing with, the seemingly legitimate corporation. But he says, “Well, it’s just sort of imperiled by greed.” Well, no, it’s actually functioning as a criminal enterprise, right? And it being America, it isn’t just a fraud scheme, it’s a production scheme that goes after people of color, that goes after women, that in particular their ideal target is the African American widow and such. The intersection of all those things. So we really need to think of a) getting rid of criminogenic corporations, the ones that are really criminals.
And again, that brings us back to whistle blowers, give us that critical information. And then when we take and declare that it’s a criminal enterprise that we should offer to the workers, right? First and with potential financial assistance. So I think it fits in the logic of their plan. I just don’t think they had much input from people who were either whistle blowers or criminologists.
DHARNA NOOR: Well, Sanders’ campaign: if you’re listening, I’m sure that Bill’s available to talk. We have to leave it there. Great to know. Bill Black, the author of The Best Way to Rob a Bank Is to Own One, regular contributor at The Real News Network. Thank you so much for being here.
BILL BLACK: Thank you.
DHARNA NOOR: And thank you for joining us on The Real News Network.
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