Give workers a seat at the directors’ table

Download Policy Brief (PDF)
RECOMMENDED READING

What’s the Problem?

American workers highly value having a voice in the workplace and collaborating with employers to address workplace issues.

But workers face a representation gap, with much less input on workplace issues than they want.

Corporate executives and boards of directors tend to neglect the worker perspective, and have little familiarity with their own employees’ experiences, even though such input can be vital to retention, productivity, and innovation.

Worker Insight at the Table

American workers place enormous value on cooperative relationships with management. Poor labor-management relations harm job satisfaction even more than unpredictable scheduling or low wages. Worker voice can benefit businesses too, through increased productivity and job satisfaction, improved information flow, and strengthened trust.

Employee voice rarely reaches the corporate governance level. Corporate boards are under no obligation to hear or consider employee input about critical decisions. This is an enormous opportunity lost. Worker board representation brings direct operational knowledge to board deliberations and has been demonstrated to increase the typical firm’s market value, labor productivity, and rate of capital formation. It provides a useful check against corporate short-termism and can prove highly valuable when a firm navigates crises. By creating a credible, efficient mechanism for trustworthy information exchange between boards and workers, worker board representation allows critical decisions to reflect the input and better secure the support of the workforce and makes integrative business solutions more likely.

What’s the Solution?

Congress should amend the National Labor Relations Act (NLRA) to give worker organizations the option of electing worker board representatives from among the workforce.

This option should be a feature of federal labor law, rather than state corporate law, and initially focus on the largest corporations, which employ the largest share of American workers and have the most well-established corporate-governance infrastructure. 

  • The right to elect worker board representatives should accompany the presence of a nonunion worker-management cooperative organization made legal under NLRA reform
  • Board representation should be an option that workers can exercise, not an automatic obligation
  • Worker board representatives must be genuinely accountable to the workforce, which must be able to recall and replace representatives that no longer represent it well

Better Communication, Better Outcomes

The primary goal of worker board representation should be credible facilitation of information exchange, leading to increased trust and cooperation. Worker representatives will ensure board decisions are informed by real-world, ground-floor insight and scrutiny from the workers deploying and affected by those decisions—and that those workers understand the decisions a board makes. Workers are not interchangeable, disposable inputs of production—they are co-creators of economic value, and board representation treats them as such. When asked if they would support employees at large companies being able to elect board representatives, a majority of American voters say yes.

Frequently Raised Objections

“This will bring political activism into the boardroom.”

Political activism is already present in boardroom. Workers are likely to oppose initiatives that prioritize symbolic gestures over tangible benefits and press for focus on bread-and-butter economic issues relevant to business operations.

“This will obstruct U.S. business flexibility and harm innovation.”

One or two workers on a corporate board will not have the power to override the preferences of directors selected by shareholders. What they will have is an otherwise unrepresented perspective that can furnish invaluable information and affect the direction of the group’s deliberations. Empirically, such representation has been associated with improved business outcomes.

“Corporations can already do this if they want—it shouldn’t be imposed by law.”

Formalizing the procedure for seating a worker representative on the board will both force employers to consider the option and make clear the legal authority and requirements for doing so. The procedure would only be required where the corporation consents to form a nonunion worker-management organization. In that context, also providing a board seat ensures that the employer is genuinely committed to worker voice and representation rather than seeking to co-opt concerted worker action.

Further Reading

Recommended Reading
Michael Pettis on Dollar Dominance

Oren is joined by Michael Pettis for an in-depth discussion of the dollar as the global reserve currency: pros, cons, and what it all means for the American economy.

How Republicans learnt to love bigger government

The era of “the era of big government is over” may itself now be over, writes Oren Cass in the Financial Times.

Talkin’ (Policy) Shop: The American Appetite for Government

On this episode, Oren and Chris dive into our latest survey results on American attitudes toward the role and scope of government.