The principle of democracy is widely celebrated in the United States as a central feature of the constitutional system which has, according to public mythology, produced an exceptional degree of equality, freedom, and prosperity. The uncomfortable realities that the framers of the Constitution deliberately limited democratic influence over the mechanisms of government and that the American political system functions more as an oligarchy than a democracy have done little to dampen that public’s insistence that the United States is a nation devoted to the ideals of democratic rule. But as theorists ranging from Louis Brandeis to Noam Chomsky have long shown, this conception of democracy rests on an artificial distinction between the “private” and “public” sphere. In reality, the promise of democracy is greatly diminished, perhaps even rendered illusory, if limited only to the political arena. To truly enjoy the benefits of democracy, popular participation must extend into the hearts of the private institutions that wield tremendous authority to determine economic conditions and social welfare. In other words, to live in a truly democratic society, we must democratize the corporation.
At its core, democracy is the idea that individuals should have some influence over the decisions that affect their lives. But many of the rulings that shape both daily material conditions and broader social conditions are removed from the purview of legislative chambers and instead made in private corporate boardrooms by unelected and self-interested corporate officers. Corporations should be understood as private, authoritarian governments; a rigid hierarchical structure places ultimate authority in the hands of overpaid board of directors, and the workers must submit to the often brutal consequences. Corporate leaders unilaterally decide how much to pay their employees, their schedules and working conditions, and even when they can eat or use the restroom. On a broader level, they decide how many workers to hire and fire; what to produce and how to produce it; when, where, and how to discharge waste, build new plants, deploy new technology, and countless other decisions about production, investment, and distribution that greatly impact not only the lives of their workers, but the social, political, economic, and environmental conditions of their communities.
Democratic control of the corporation, popular across ideological lines, is a simple, intuitive concept. At its core, corporate democracy means that all decisions made by an economic firm — from wages and the organization of production to plant relocation and capital investment — must, to some substantial degree, be determined by the workers themselves. In other words, workers democratically control not only decisions about firm management, but also decisions about firm governance. The ideal serves as more of an orienting principle than a specific policy prescription, and there are many viable proposals about how it might be achieved. Strengthening and expanding labor unions is one option. Unions are organized democratically and, though their transformative ability may be limited, they have a democratizing impact on the workplace by redistributing power from capital to labor. Another path would be some sort of power-sharing dynamic between owners and workers, ranging from establishing representative institutions to govern corporate decisionmaking to requiring that workers elect a certain percentage of the board of directors. The latter approach is practiced extensively and successfully in some European nations. The most transformative model would be some form of worker cooperative or workers’ self-directed enterprise, where workers outright own the company and either entirely elect the board of directors or, in the most thoroughly democratic enterprises, participate equally in decisionmaking. Thousands of these worker-owned enterprises exist around the world, including hundreds in the United States, and some are quite large and successful.
Corporate democracy has the potential to greatly reduce the inequality, suffering, and displacement generated by shareholder capitalism. When workers democratically control management, production, and investment, they do not choose to pay executive salaries hundreds of times higher than employee wages, to impose exhausting productivity targets on themselves, or to ship their own jobs overseas. In fact, studies reveal that workplace democracy, particularly the worker cooperative model, leads to significantly higher wages, drastically reduced income disparity, more stable jobs, lower unemployment, greater job satisfaction, higher efficiency and productivity, less crime, and even fosters local economic development. The average wage paid at a worker co-op in the United States, for example, is more than double the federal minimum wage, and, astoundingly, the vast majority report a top-to-bottom pay ratio of 2:1. By way of contrast, the average CEO in a traditionally structured American company rakes in a salary more than 300 times the wage of a typical worker.
Americans spend most of their waking hours in the workplace, and human beings derive a large share of their meaning, dignity, and identity from work. Corporations often wield their vast authority to abuse and even humiliate their workers, and the mere existence of subjugation and hierarchy has harmful effects on emotional wellbeing. Enabling workers to more meaningfully control their own destinies goes far beyond improving economic outcomes; it will enhance their sense of individual dignity and genuinely empower some of the most marginalized individuals and communities in the existing social order.
Private control of economic firms has produced historic levels of wealth disparity, and political equality is ultimately precluded by such extreme economic inequality. For this reason, economic democracy has historically been linked with the struggle for political democracy. In the early 20th century, future Supreme Court justice Louis Brandeis woefully noted “the contrast between our political liberty and our industrial absolutism” and concluded that “industrial democracy should ultimately attend political democracy.” The Walsh Commission, created by Congress in 1912 to examine labor conditions, declared in its final report that “political democracy can exist only where there is industrial democracy,” and recommended “the rapid extension of the principles of democracy to industry.” Even Senator Robert Wagner, sponsor of the landmark 1935 National Labor Relations Act, believed that democratizing industry was critical to preserving political democracy, asserting that “democracy cannot work unless it is honored in the factory as well as the polling booth.”
Although often cast as a radical idea, democratizing economic firms has deep roots in the labor movement. Labor unions in the 19th and 20th century routinely advocated for worker control of factories; achieving industrial democracy was one of the original goals of the Industrial Workers of the World, and the Knights of Labor made the establishment of cooperative firms a priority in their constitution. The National Colored Labor Convention of 1869 championed “co-operative workshops…among our people,” and the National Labor Union endorsed democratic worker control as “a sure and lasting remedy for the abuses of the present industrial system.”
To be sure, it remains uncertain how democratized firms might operate and interact within a ferocious regime of competitive capitalism. Corporate democracy will not entirely eradicate the destructive pressures of economic competition, and complete democratization of the economic system will likely require going even further. But at the very least, corporate democracy will permit working people to more genuinely control their own lives. If we cherish the principle of democratic rule and wish to live in a free and equal society, we need to rectify the absurd contradiction of democracy in politics and tyranny in the economy.