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Why the US right wants to put workers in the boardroom

The writer is executive director of American Compass

Many attendees at the recent National Conservatism conference in Orlando will have been perplexed to find a session on “Worker Power” on the agenda. After all, conservatism, at least in America, has long been synonymous with the interests of big business.

But globalisation’s fallout is weakening the social fabric, corporations are embracing progressive pieties and working-class voters are moving towards the Republicans. Revitalising the American labour movement has gained attention on the centre-right.

On Wednesday, Republican senator Marco Rubio and congressman Jim Banks, chair of the largest conservative caucus on Capitol Hill, will introduce a bill that would require worker representatives to be granted a seat on some corporate boards.

The bill updates the 1995 Teamwork for Employers and Managers Act, a Republican proposal to amend US labour law by removing its peculiar prohibition on formal co-operation between workers and management in the absence of a traditional, adversarial union. The TEAM Act would have permitted the creation of employee involvement organisations (EIOs) at American companies, akin to the works councils that facilitate labour-management collaboration in some European countries. But after passing the Republican-controlled Congress, it was vetoed by President Bill Clinton.

Creating a new forum for worker representation may seem to be a pro-labour reform. But in the US, the “pro-labour” Democratic party is, in fact, pro-Big Labour, with major unions historically among its biggest donors, regardless of the interests of actual labourers.

In returning to the idea of EIOs, Rubio and Banks are also proposing an intriguing innovation: their bill will stipulate that a large company opting to create an EIO must also seat a non-voting worker representative, chosen by the employees, on its board.

This proposal is significant in three respects.

First, it is a sign of the Republicans’ changing orientation. The 1995 version of the TEAM Act could well have been written by the US Chamber of Commerce, the main corporate lobbying group. It gave them something they wanted — more flexibility in collaborating with workers — and nothing they disliked. But in 2022, the Republicans’ priorities have shifted measurably in the direction of workers’ interests.

Giving workers a seat at the boardroom table also represents a sharp philosophical departure from the American centre-right’s previous dogmatic commitment to “shareholder primacy” and the idea that corporations should be managed solely for the benefit of shareholders. Progressives will no doubt complain that the proposal does not go further, but, when it comes to the principles of corporate governance, the step from zero worker representatives to one is surely significant.

Finally, and perhaps most important, adding a worker to the boardroom has the potential to alter the course of corporate deliberations, improve information flow both from and to the workforce, and build trust. Board members exercise meaningful influence rarely by their individual votes, and much more often by their presence, their ability to raise issues and gather information. Studies of works councils and board-level employee representation have found that they not only increase trust and co-operation, but also enhance productivity, capital formation, market value and resilience.

Rubio and Banks’ bill is likely to prove a potent political challenge for powerful interests on both left and right. Labour activists have in the past rejected EIOs that are by definition weaker than traditional unions. But can they turn their backs on a model that also provides a genuine new channel for workers’ voices to be heard, especially with their New Deal-era model of Big Labour enlisting just six per cent of the private-sector workforce and leaving most workers cold?

And big business faces a moment of truth of its own, after recent bromides to “stakeholder capitalism” have yielded so little real action. Does Business Roundtable chief executive Joshua Bolten’s belief that “the interests of all the stakeholders align in the long-run success of the enterprise” extend to giving the most vital of those stakeholders a role in setting the company’s course?

The competing interests that have shaped American economic policy debates in recent decades have fought themselves to a stalemate. In such conditions, quickly shifting battle lines can leave even the most powerful force badly exposed. And sometimes they yield surprising victories.

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