Economic Democracy: A Brief History and the Laws That Make It

Ewan McGaughey

Working Papers from Centre for Business Research, University of Cambridge

Abstract: How has our economic constitutional order developed, and which laws make our economy democratic? Democracy in politics is familiar and starts with ‘one person, one vote’, but economic democracy is less familiar. In its ideal, it means ‘three stakeholders, one voice’. Workers, investors, and service-users make different contribution types in the economy, so rules to give them voice differ and are still evolving. This paper gives a brief history of how economic democracy developed, the evolving theories, and practices for democratic workplaces, capital, and public enterprise. It then unpacks the laws that make it. First, a board of directors will answer to an enterprise’s stakeholders, not simply appointing itself via so called ‘independent’ directors. Second, workers elect at least one-third or properly one-half of a board of directors, rather than shareholders monopolising all votes, and worker cooperatives are encouraged. Third, all capital fund directors, whether pensions or mutuals, are majority-elected by beneficiaries, and they set the shareholder voting policies, not allowing asset managers or banks to vote on other people’s money in what they deem to be the interests of the ultimate investor. Fourth, in public enterprises, where private competition fails and consumers cannot truly ‘vote with their feet’, service-users hold voting rights for representatives on the board, rather than appointments being monopolised by the state or board incumbents. These norms are spreading, and overcoming evidence-free theories that excuse illegitimate corporate power.

Keywords: Economy; democracy; labour; capital; public services; enterprise; vote (search for similar items in EconPapers)
JEL-codes: H40 J01 K0 K11 K22 K23 K31 (search for similar items in EconPapers)
Date: 2024-09
New Economics Papers: this item is included in nep-cdm, nep-his, nep-hme, nep-hpe, nep-ipr, nep-lab, nep-law and nep-pol
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