Can workers make better decisions than CEOs?
7/1/2020 - Bama Athreya, Economic Inequality Fellow, Open Society Foundations
Workers should be key to any new 'corporate purpose', writes Open Society fellow Bama Athreya
This article is part of our Rethinking Corporate Governance blog series
CEOs and corporate executives may lack the skills needed to make decisions that can benefit society at large. It’s true that all of us have ‘blind spots’- areas where our own implicit bias makes it very difficult for us to observe or process external realities.
Recent sociological research suggests that people in positions of great wealth and power, such as corporate CEOs, may be subject to empathy deficits - their ‘blind spot’ prevents them from perceiving harm or pain to others. This suggests that the executive class are the wrong people to entrust with an expanded vision of 'corporate purpose'.
From Hong Kong to South Korea, Lebanon, France, Chile, Algeria and elsewhere, 2019 has been the year of the popular protest. What these protests have in common, as the Philadelphia Inquirer’s Will Bunch noted, is: "The people we’ve tasked with running the world have, for the most part, turned out to be corrupt. Did they really think that citizens wouldn’t notice?"
It’s hard for global corporations to argue that they promote ethical values when their actions undermine citizen control over governments. And it’s fair to say that popular unrest will carry on in 2020, as citizen frustration with crony capitalism builds. .
Some CEOs may be hoping statements about a new corporate purpose that ‘serves all’ will hold the pitchforks at bay. But how will they know whether their decisions are actually good for anyone but themselves? One important set of stakeholders is well-placed to serve as the corporate conscience, if executives and boards can be persuaded to listen: Workers.
Here are some recent examples of how workers can stand up and convince giant corporations to confront important social and ethical challenges: In late 2018, thousands of Google employees protested against projects that enabled surveillance and repression, including the Dragonfly project enabling Chinese government censorship and surveillance.
In 2019, hundreds of Facebook employees signed an open letter published in the New York Times urging the company to prohibit outright lies in political advertising. In the same year, hundreds of warehouse and retail employees for Wayfair walked out to protest the company’s decision to supply US Immigration and Customs Enforcement with materials to furnish detention centers housing migrant children.
In all these cases the protests called out the unholy alliance between companies and repressive actions by governments. Executives and boards were apparently not losing sleep over these questions. Employees demonstrated much greater moral clarity.
Employees arguably are better positioned than chief executives or boards to understand what stakeholders and communities might perceive as ethical or unethical. In many years of leading anti-sweatshop campaigns, I learned that consumers were notoriously fickle.
The people whose hearts and minds we could permanently affect, though, were those who worked for the companies and were unhappy to be associated with the human rights abuses we exposed. Once engaged, these employees became our fervent advocates. They helped bring about incremental changes in labor and human rights due diligence.
Behind the scenes, executives admitted to us that they knew our campaigns would not affect their bottom line. However, they were sensitive to the need to recruit and retain talented employees, and this was where the reputational damage was most felt.
It’s long been the case that employees serve as an important first defense against safety hazards that can affect the general public. This is why whistleblower protections have been so important over the years. But we wouldn’t have to wait for whistleblowers if workers had regular channels by which they could engage in management decisions.
Workers have a self-interest in flagging risk, particularly the sort of moral hazards that may be perfectly obvious to average working people, but less so to executives in their filter bubbles, let alone boards which tend to rely on executive guidance.
Also, workers are not likely to negotiate against the long-term interests of the company; if anything they will care more about the long-term health of a corporation than its leading executives or board members, who, given decades of fixation on quarterly stock market returns, may only be able to take a short-term or self-interested view.
What could co-governance look like? An exciting and very recent example is the ‘mirror board’ set up by workers at Toys R Us. After the parent company went bankrupt, new ownership reorganized the firm into a smaller entity.
The mirror board for this entity is composed of workers, who will have access to key internal documents and input into key corporate decisions. This governance model emerged from an existential threat to the parent company, but it serves as a useful example and a step towards genuine co-governance.
Corporations are facing ever more challenging ethical questions in a rapidly changing global economy. Corporate ethics will not be improved through current governance models. Executives need to hear from their employees on potentially controversial contracts and business decisions.
Boards also need worker input on such questions lest they just become an echo chamber. All stakeholders concerned with how businesses operate should push for giving some decision-making power to employees. Business will thrive and give people a reason to put away their pitchforks.