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The Problem With Voting About Corporate Policies

Dave Hoffman

Dave Hoffman is the Murray Shusterman Professor of Transactional and Business Law at Temple Law School. He specializes in law and psychology, contracts, and quantitative analysis of civil procedure. He currently teaches contracts, civil procedure, corporations, and law and economics.

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17 Responses

  1. Eric Hodgdon says:

    Could be the past experiences of the ever changing “terms of service” and said abuses.

    I’ve never had a FB account and prefer it that way. I’ve seen parts of what goes on and it’s not an attractive system for myself.

  2. Paul Gowder says:

    Yeah — I suspect that the general issue is less lack of desire and more lack of faith in the effectiveness of the process. And I use the term “faith” advisedly.

  3. Jesse says:

    I would imagine it is merely a case where the same rational reasons note to vote (tiny chance of affecting the outcome, the results have very little effect on your life) are at their zenith, and the reasons people do vote (sense of civic duty, patriotism, involvement in something meaningful) are at their lowest. I mean, is anyone could to wear a button that says “I voted in the face book terms of service election.”

  4. How about the woefully inadequate notice, Facebook’s long history of indifference towards user expectations, and a rigged election in which the two choices were an existing set of terms that were tilted in favor of Facebook and a new set of terms that are even further tilted in favor of Facebook?

    When Facebook created this “experiment,” they set the threshold at 30% in order to ensure that no user vote would ever come close. (No user vote on any online site with millions of users has ever had that kind of turnout.) Facebook had the trappings of democracy — and the publicity — without the responsibility to the electorate that ordinarily comes with it. But then, they realized how cumbersome the voting apparatus was, and decided that by going through it once more, they’d never have to bother with it again.

    More significant, I’d say, is that those who did vote voted against the changes by a margin of 8:1. If this were a “real” election, without a quorum imposed by the incumbents, well — the bums would have been well and truly thrown out.

    And Dave, blaming Facebook’s users for the cynicism of the company? I expected better from you.

  5. Jennifer Taub says:

    Comparing FB user voting to shareholder proxy voting is apples to oranges. At the 1,000 largest corporations, institutional shareholders, on average hold 70% of common shares outstanding. A good portion of these are fiduciaries who are required by law to vote. If one looks at Item 5.07 on Form 8K filings one can see the results of both corporate and shareholder-initiated resolutions. Voting aligns with institutional ownership.

    What would be apples-to-apples, though would be comparing voting rates for the individually-helded shares (after excluded broker nonvoters) to the FB user voting.

  6. Dave,

    I appreciate the rhetorical hyperbole, but it would help matters if you evidenced a clearer conception of what generally is meant by corporate, or perhaps better, economic democracy, by those who’ve argued and advocated for same: I can assure you that this recent Facebook users’ vote on its “governing documents” is worlds away from exemplifying anything remotely like an exercise of corporate or economic democracy. I agree with the bulk of comments above: from my vantage point, it seems very few individuals were adequately informed as to what this vote was all about in the first place, in other words, there was virtually no (time for) discussion of the meaning and purpose of the vote, a discussion that, presumably, would be guided in the first instance by experts on such matters. If such informative and deliberative fora took place, I missed them (for better and worse, I check in on my page daily). Users who are ill-informed are hardly motivated to vote on matters they know little or nothing about, lacking any clear sense how their vote might affect their use of Facebook. From my end, I noticed not a few FB friends who believed their votes would not matter one way or another, indeed, I recall in the Los Angeles Times a corporate spokesperson saying the results of the vote were not binding: why vote if one knows the vote is likely ineffectual or meaningless? In any case, none of this has anything whatsoever to do with economic democracy, let alone the possible revealed preference for same one way or another, thus it is simply silly to infer anything along these lines from this rigged electoral experiment (thanks James!).

    And yet I suspect it is true that there is not, as yet, anything resembling an ardent desire among the masses for economic democracy in any strong or sophisticated sense (in effect, a desire for self-realisation or something similar to Marx’s conception of the ‘good life’ as outlined by Jon Elster). Hence the Left beyond Liberalism has proffered any number of ideological explanations to account for this fact, that is, the fact that there is widespread wishful thinking, individual and collective self-deception, alienation, states of denial, and sundry difficulties arising from adaptive preference formation, myopia, risk aversion, and free riding within capitalist democracy, owing in large measure to social relations structured to satisfy first and foremost the economic interests of capitalists, which effectively trumps or denies alternative economic conceptions that would subordinate social relations to the “authority of the Good,” rather than the authority of Capital. To be sure, the dehumanization and alienation of workers under capitalism is fostered by the Faustian bargain for the promises of conspicuous consumption and affluence in which the lack of joy and fulfillment often intrinsic to the working life is notoriously compensated by the elusive pursuit of “happiness” in one’s leisure time, after work, on the weekends, in which one “forgets” about the work week with the help of recreational drugs and alcohol as part of utter indemnification by possession and consumption. This is the price paid for workers in the form of commodified labor subject to the whims and caprices of labor markets. This is the price paid for exploitation, alienation, and degradation of human beings, the price paid for identities forged by dehumanizing economic relations in an ethos of envy, fear, suspicion and cynicism. Not a few individuals bear the scars of barely concealed or improperly sublimated anger and hatred that are the inevitable spillover and by-product effects of this exploitation and alienation. Work can and should be the locus of “such basic qualities as a sense of self-respect, dignity, self-discipline, self-confidence” and so forth, yet it is only incidentally or haphazardly so in a capitalist democracy.

    Jon Elster proffers one such ideological explanation to account for the widespread failure to see beyond the current economic system:

    “Marx’s most original contribution to the theory of belief formation was…his idea that economic agents tend to generalize locally valid views into invalid global statements, because of a failure to perceive that causal relations that obtain ceteris paribus may not hold unrestrictedly. For instance, although any worker may be seen as the marginal worker, not all workers can be at the margin. This is a local-global fallacy that leads to cognitive failures, different from yet related to the local-global confusions that lead to failures of action. This is perhaps the most powerful part of the Marxist methodology: the demonstration that in a decentralized economy there spontaneously arises a fallacy of composition with consequences for theory as well as for practice. [….] Outside the factory gate, no one can tell the worker what to do. He can purchase the goods he wants to, within the limits of his wage. He can change employer, within the limits of alternative employment. He may even try to become self-employed or an employer himself, and sometimes succeed. That freedom, while ultimately a danger to capitalism, has useful short-term ideological consequences, since it creates an appearance of independence not only from any particular capitalist, but from capital itself. [….]

    Both the freedom to change employer and the freedom to become an employer oneself give rise to ideological illusions that embody the fallacy of composition. The first is the inference from the fact that a given worker is independent of any specific employer to the conclusion that he is free from all employers, that is, independent of capital as such, to the conclusion that all workers can achieve such independence. It might look as if the conclusion of the first inference follows validly from the premise of the second, but this is due merely to the word ‘can’ being employed in two different senses. The freedom of the worker to change employer depends, for its realization, mainly on his decision to do so. He ‘can’ do it, having the real ability to do so should he want to. The freedom to move into the capitalist class, by contrast, only can be realized by the worker who is [to quote Marx] an ‘exceedingly clever and shrewd fellow.’ Any worker ‘can’ do it, in the sense of having the formal freedom to do so, but only a few are really able to. Hence the worker possesses the least important of the two freedoms—namely the freedom to change employer—in the strongest sense of these two senses of freedom. He can actually use it should he decide to. Conversely, the more important freedom to move into the capitalist class obtains only in the weaker, more conditional sense: ‘every workman, if he is an exceedingly clever fellow…can possibly be converted into an exploiteur du travail d’autrui.’ Correlatively, the ideological implications of the two freedoms differ. With respect to the first, the ideologically attractive aspect is that the worker is free in the strong sense, while the second has the attraction of making him free with respect to an important freedom. If the two are confused, as they might easily be, the idea could emerge that the worker remains in the working class by choice rather than necessity.” From Jon Elster’s Making Sense of Marx (1985): 208 and 211 respectively.

    In addition, as Joshua Cohen and Joel Rogers have explained, the nature of “capitalist democracy” places structural constraints on both the articulation and satisfaction of interests within the system. With regard to the latter, for instance, and owing to their control of investment, “the satisfaction of the interests of capitalists is a necessary condition for the satisfaction of all other interests in the system,” which means “the welfare of workers remains structurally secondary to the welfare of capitalists,” a fact we conveniently forget in times of economic abundance and low unemployment but is resurrected in the wake of the cycles, crashes, and panics endemic to capitalism. The decisions of capitalists are directly responsible for the well-being of workers, and thus we see the “interests of capitalists appear as general interests of the society as a whole, [while] the interests of everyone else appear as merely particular, or ‘special.’” As for the articulation of those interests inextricably tied to basic human and political rights:

    “In a capitalist democracy the exercise of political rights is constrained in two important ways. In the first place, the political rights granted to all citizens, workers among others, are formal or procedural, and not substantive. That is, they do not take into account in their own form and application the inequalities in the distribution of resources, characteristic of capitalism, which decisively affect the exercise of political rights and importantly limit their power of expression. [….] Capitalist democracy also tends to direct the exercise of political rights toward the satisfaction of certain interests. The structuring of political demand, or what we call the ‘demand constraint,’ is crucial to the process of consent. [….] [C]apitalist democracy is in some measure capable of satisfying the interests encouraged by capitalist democracy itself, namely, interests in short-term material gain.”

    This “demand constraint” canalizes the articulation of the interests of working people into the exclusive pursuit of economic advantage, in part owing to the ubiquitous conditions of “material uncertainty” for all but the wealthy classes: “There is a characteristic economic rationality to the actions of workers encouraged by capitalism. In the face of material uncertainties arising from continual dependence on the labor market under conditions of the private control of investment, it makes sense for workers to struggle to increase their wages.” See Joshua Cohen and Joel Rogers, On Democracy: Toward a Transformation of American Society (1983).

    Although neo-Keynesian solutions to our current economic woes and general malaise strike me as clearly preferable to both elitist economic proposals of neo-liberal pedigree and wildly implausible—because naïve and fantastic—yet vaguely populist libertarian yearnings, Ian Shapiro reminds us why they remain, after Marx and the utopian socialist tradition he failed to fully appreciate, insufficient:

    “The ambiguous moral status of Keynesianism and welfare economics has always inhered in the fact that they appeal to the short-term interests of the disadvantaged (such as unemployed workers and firms on the verge of bankruptcy during recessions) by ensuring subsistence, creating employment, and expanding credit, yet these policies are geared in the medium term to sustaining the system which generates those very disadvantages—hence the ironic force of Joan Robinson’s quip that the one thing worse than being exploited is not being exploited at all.” (Ian Shapiro, The Evolution of Rights in Liberal Theory, 1986: 152-153)

    Heretofore, the manias, crashes, and panics endemic to capitalist cycles (Meghnad Desai) have been subject to (i.e., tempered or tamed by) Keynesian and conventional or neo-classical economic discipline, but one wonders if the combined effects of global economic consolidation and environmental degradation are creating conditions that render obsolete these calcified models of neo-classical economic growth and capital accumulation. Those of us passionately committed to democratic socialism or economic democracy believe it is a propitious time to once again think about alternatives to capitalism. We therefore ask a number of questions:

    Is it still possible to achieve a globally egalitarian (neo-) Keynesian Golden Age as envisioned by the social democratic tradition? Poverty remains recalcitrant in several regions of the world while regional and global inequality is increasing, economic facts we might grant without in any way diminishing the historic significance of capitalism for wealth creation (and thus betterment of standards of living if not quality of life indices). Are we, at last, reaching the structural limits of capitalist economic logic? Have we exhausted the economic—and, yes, moral—virtues of the neo-classical economic worldview? Or, are we merely at the lowest ebb of an economic cycle that will be cured by some fortuitous combination of conventional and creative politico-economic policies crafted by prudent democratic leaders of countries North and South? Is this an auspicious occasion for seriously contemplating the imminent dissolution of the “aristocracy of capital” and the “economization of social relations?” Is the time ripe for (re)articulation of the authority of the Good by way of abandoning the capitalist criteria for market success? Are we prepared to break, once and for all, the structural socio-economic and political constraints of “capitalist democracy?” Must the welfare of the many and their generalizable interests remain subordinate to the welfare of capitalists and their particular or special interests? Are the interests of working people fated to be canalized into the exclusive pursuit of economic advantage? Must labor markets remain plagued by the material uncertainties and insecurities intrinsic to the private control of investment within the terms of finance capitalism?

    Can we, instead, accord socio-economic primacy to creating the necessary (and thus not necessarily sufficient) conditions for generalizing psychological and moral individuation or self-realization? Assuming the capacity to meet basic material human needs, can we resort to criteria associated with the recognition and fulfillment of our moral and spiritual needs by way of the regulation of economic life and therefore the subordination of economic life to the goals of establishing the conditions necessary for generalizing the pursuit of self-actualization or self-realization in a psychological, moral and spiritual sense, for generalizing the innate incentive toward worthy living, for generalizing, within the constraints of dignity and self-respect (as Dworkin says), the capacity for realization of what it means to live worthy lives? As John Dewey said, “Democracy has many meanings, but if it has a moral meaning, it is found in resolving that the supreme test of all political institutions and industrial arrangements shall be the contribution they make to the all-around growth of every member of society.”

    For further reflections along these lines, please see my post on the “economics of unhappiness:” http://ratiojuris.blogspot.com/2011/07/economics-of-unhappiness-syllabus.html

    As to thin conceptions of corporate democracy as well as thicker conception of economic democracy, please see, at least:

    ·Carnoy, Martin and Derek Shearer. Economic Democracy (Armonk, NY: M.E. Sharpe, 1980).
    ·Cheney, George. Values at Work: Employee Participation Meets Market Pressures at Mondragon (Ithaca, NY: ILR Press, 1999).
    ·Dahl, Robert A. A Preface to Economic Democracy (Berkeley, CA: University of California Press, 1985).
    ·Dolgoff, Sam, ed. The Anarchist Collectives: Workers’ Self-Management in the Spanish Revolution, 1936-1939 (New York: Free Life Editions, 1974).
    ·Elster, Jon and Karl Ove Moene, eds. Alternatives to Capitalism (Cambridge, UK: Cambridge University Press, 1989).
    ·Jackall, Robert and Henry M. Levin, eds. Worker Cooperatives in America (Berkeley, CA: University of California Press, 1984).
    ·MacLeod, Greg. From Mondragon to America: Experiments in Community Economic Development (Sydney, Nova Scotia: University College of Cape Breton Press, 1997).
    ·Morrison, Roy. We Build the Road as We Travel (Philadelphia, PA: New Society Publishers, 1991).
    ·Roemer, John E. A Future for Socialism (Cambridge, MA: Harvard University Press, 1994).
    ·Santos, Boaventura de Sousa Santos, ed. Another Production is Possible: Beyond the Capitalist Canon—Vol. 2 of Reinventing Social Emancipation: Toward New Manifestos (London: Verso, 2007).
    ·Schweickart, David. Against Capitalism (Boulder, CO: Westview Press, 1996).
    ·Thomas H. and C. Logan. Mondragon: An Economic Analysis (London: Allen and Unwin, 1982).
    ·Whyte, William Foote and Kathleen King Whyte. Making Mondragon: The Growth and Dynamics of the Worker Cooperative Complex (Ithaca, NY: Cornell University Press, 1988).
    ·Wright, Erik Olin. Envisioning Real Utopias (London: Verso, 2010).

  7. Brett Bellmore says:

    I’d say the lack of notice was responsible; I’ve been on facebook a lot lately, using it to communicate with my wife while she was on a foreign trip, and I had not the slightest clue this “election” was happening.

  8. Shag from Brookline says:

    A good dose of medicine for all this brouhaha is Roger Cohen’s NYTimes column today, following up on his earlier column, on social media addiction., with the bottom line (in my view): GET A LIFE! Do we need “nano-democracy,” whether in corporate or non-corporate form? By the way, are adhesion contracts involved?

  9. In correspondence Dave kindly informed me that corporate democracy has a technical meaning for lawyers and law professors who study firms and I don’t doubt that is indeed the case, particularly for those of strong L & E background (rather than, say, classical political economy). So, we have different conceptions of what is…and should be meant by the term “corporate democracy.” I had assumed this technical meaning typically went under the heading of “corporate governance” and was quite modest, in number and scope, in its elaboration of democratic norms like, say, transparency, diffusion of power, or ethical responsibility. I’ll concede these are not unrelated to a broader and theoretically more ambitious notion of corporate democracy that envisions at once more voice and participation among all levels of the firms internally (from the ‘lowest’ worker on up), while externally assessing corporate practices according to standards and criteria derived from traditional democractic theory and practice.

  10. erratum: “traditional democratic theory and practice.”

  11. shg says:

    Dave’s post: 147 words.

    Patrick’s comments: 2,677

    Patrick wins!!!

  12. shg:

    I’m sure I can speak for Dave as well as myself in stating that neither of us were (or are) concerned about “winning” anything. And if you read the words instead of counting them, you might learn something. It’s rather (literally or figuratively) adolescent, is it not, to fixate on a putative connection between numbers, size, and competition in a post and comment thread speaking to questions of corporate democracy?

  13. dave hoffman says:

    I agree with Patrick’s 7:22 comment.

  14. shg says:

    Of course you do, Dave. There was never any question.

  15. Eric T. says:

    More is not better; it is often worse.

    Gettysburg Address = 272 words.

  16. Joe says:

    Patrick S. O’Donnell spends time to provide extensive comments on blogs in various cases and it is appreciated. But, for some, they might not have the time or wherewithal to read the whole thing, so briefer comments would be more successful in certain cases. It depends on the person and situation.

  17. PrometheeFeu says:

    Voter delegation might be a way to get a better turnout.

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