This is the second in a series of discussions about changes that need to be made to modern capitalism to protect the mass of humanity in advance of a full and revolutionary change to mutual aid and co-operativism. In the first, I proposed new taxation rules for corporations; here I discuss corporate governance in more general terms. I note once again that these are just notes, eager for debate and adjustment.
The key to the improvements required for corporate governance is a constitutional amendment (or similar, depending on each national situation) stating specifically that corporations do not have the same rights as human beings; they have only the specific and particular rights granted to them by legislative or executive action.
More specific changes would include a ban on quarterly reporting and forecasting; possibly the half-yearly reports, too. This will enable a new cadre of senior executives to concentrate on managing their companies for the long-term rather than for short-term stock market speculation. The CEO of the world’s largest investment management firm, Larry Fink of BlackRock agrees that CEOs should “focus on creating long-term value instead of emphasizing quarterly targets.” This is such a fundamental and important priority that I would impose severe penalties (including mandatory jail time) on CEOs for any breach.
Loans from the taxpayer would be permissible (see the current Bombardier requests) but indulgence of this kind in state socialism would trigger a specific set of rules of governance. Until the loan has been completely repaid:
- no dividends or similar may be paid to shareholders;
- no share buy-backs or similar schemes are permitted;
- no increase in executive emoluments (of any and all kinds);
- no executive bonuses of any form.
Lay-offs totalling 5% or more of company personnel in any two-year period trigger the same rules for a period of two years; this sanction shall not be concurrent with the loans’ rules. The two-year sanction for any breach of maximum lay-offs will be imposed at the end of any loan repayment.
Corporations may pay unlimited salaries and bonuses to executives, subject to sanctions not being in place. However, the portion of any emolument exceeding thirty (30) times the average non-executive wage or salary shall not be a deductible expense for purposes of determining the corporation’s taxes (in a corporation income tax situation), or shall be added to aggregate revenues (in the license scheme proposed earlier). This will assist the system to return to the Eisenhower days (for example) when profits from increased productivity were shared more equitably among all workers. Currently, CEO pay and benefits are on average more than 300 times that of the average employee.
Bankruptcy rules for corporations must be changed to ensure that non-executive wages, salaries, and pensions are first in line for payment. Labour should not be a risk proposition. If you work, you must be paid. I believe trade suppliers should be paid next. Banks, other lenders, and investors have to bear the risks that their rewards suggest.
Finally, no corporation should be allowed to make political donations (in cash, in kind, through third-parties, etc. without limitation) without the express consent of sixty percent (60%) of all shareholders both as to amount to be contributed, and to whom donated.
If we put these rules in place, then we will mitigate some of the worst excesses of modern capitalism. If they stay in place long enough, these changes will tend to lean us in the direction of mutual aid and co-operativism, which should be the ultimate aim.
The next in this series will look specifically at reform proposals for banks and insurance companies.