This is a post by Iñigo González-Ricoy (University of Barcelona) and Pablo Magaña (Pompeu Fabra University).
If you have ever wondered why you have a say over who gets elected to your city council, your children’s school board, or the parliament of your country but not to the board of the company you work for, then you are not alone. In recent years, lawmakers across the political spectrum, from Elizabeth Warren
to Theresa May, international institutions, from the European Parliament to the International Labour Organization, and workers in Europe, the Americas, and elsewhere have entertained similar thoughts.
In response, they have requested that workers be represented on corporate boards—whether alongside shareholders, as in codetermined companies such as Siemens and Adidas, or alone, as in worker cooperatives such as the Emilia-Romagna and Mondragón cooperatives.
Suppose extending democracy to the workplace is a good idea, as some philosophers also believe. A further question immediately ensues. Should stakeholders other than workers, like customers and local communities, be included as well in the governance of democratic firms? The idea is not outlandish. Indeed, some codetermined businesses and worker cooperatives have recently adopted measures, like multi-stakeholder committees, to involve nonworker stakeholders in advisory roles. But should these be included less symbolically? Should they have a binding say over corporate policies including business aims, product design, executive compensation, or mergers and acquisitions, as workers in democratic firms do?
In a recent paper, we seek to answer this question by leaning on the “boundary problem” in democratic theory. The boundary problem is the problem of defining the apt constituency of democratic Governments—the problem of defining, in sum, whether nonnational residents, expatriates, minors, or the cognitively impaired, to mention some contentious cases, should be entitled to vote. In our paper, we lean on the responses that philosophers and political theorists have offered to the boundary problem in the state. And we extend them to the particular case of the workplace.
We are not entirely alone in proceeding thus. In recent years, some philosophers have resorted to one of the two chief responses to this problem to define who warrants a say over democratic firms’ governance. This is the All-Subjected Principle, which says that all and only those subject to a decision merit inclusion in its making. But others have objected that this principle misses the mark. When applied to the boundaries of the firm, they object, it excludes third parties that, albeit unsubjected to democratic firms’
decisions, may be objectionably affected by them—say, due to their pollution, relocation decisions, or monopoly pricing. The All-Affected Principle, which requires including all those affected by a decision in its making, is better suited for the task, they claim. Which path should we take?
A difficulty is that five decades of philosophical debates on the boundary problem in the state have yielded a stalemate. So, leaning on the available responses to the problem to draw the constituency of democratic firms risks reaching a similar stalemate. But this difficulty can be skirted. It can, we suggest, by resorting to the reasons that justify democracy in the first place. After all, it would make little sense to seek to establish who should have a say over democratic decisions without asking why democracy is called for.
To move forward, then, we propose to lean on the reasons that may ground a requirement that firms’ governance be democratic as a benchmark, and use them to assess the existing responses to the boundary problem in the workplace. Moreover, to minimize the risk of stalemate, we lean on reasons—mitigating the abuse of companies’ power without undermining the efficient production of goods and services—that most proponents of workplace democracy already endorse.
Against this benchmark, we argue that the All-Affected Principle, for all its merits, is unsuitable for defining who should be included in the governance of democratic firms. Including nonworker stakeholders thus would involve significant efficiency costs, we argue, and it would also fail to register what is normatively distinctive about being under the directive power of a boss.
The All-Subjected Principle, by contrast, suitably captures the distinction between internal corporate power over employees and external impacts on third parties. And it also favors a composition of corporate boards that does not harm companies’ productive efficiency—if anything, it boosts it—as a wealth of econometric evidence suggests for both codetermined companies and worker cooperatives. Though our view does not entirely preclude the inclusion of nonworker stakeholders in corporate boards, we conclude that the power that companies wield over them is best checked through alternative means, such as environmental regulation, antitrust laws, product safety regulation, and industrial policy.
To read more about this, check out Iñigo and Pablo’s article, “The Demos of the Democratic Firm,” which is forthcoming at Politics, Philosophy & Economics. The preprint version of the article can be freely accessed here.
Iñigo González-Ricoy is an associate professor and an ICREA Academia fellow at the University of Barcelona and is a member of BIAP and Law & Philosophy. His research is in political philosophy, with a focus on labor, firms, and intergenerational justice.
Pablo Magaña is a member of the Law & Philosophy research group at Pompeu Fabra University, and a board member of the CAE-Center for Animal Ethics. His research interests lie at the intersection of democratic theory, animal ethics, and intergenerational justice.
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