How We Curb Shareholder Power

August 23, 2019

Momentum Is Building Against Shareholder-First Ideology

The Roosevelt Rundown is an email series featuring the Roosevelt Institute’s top 5 stories of the week.

1. The End of Shareholder Dominance

After 50 years, shareholder-first dogma is finally waning. This week, in their “Statement on the Purpose of a Corporation,” America’s leading CEOs declared that corporations must serve not just shareholders but all stakeholders—including workers and customers. As Senior Economist and Policy Counsel Lenore Palladino writes in a new Boston Review essay, these cracks in the foundation of shareholder primacy may signal the beginning of an economic and political transformation: “Any such massive change must be driven by public policy. But remember that corporations are creatures of public permission. This means that we—the public—can choose the rules that govern how corporations interact with their stakeholders.”

2. Industrial Policy Can Increase Equality

The left and right rarely agree on which stakeholders matter. In response to conservative writer Julius Krein’s take that industrial policy has “united the left and right,” Roosevelt Vice President of Policy and Strategy Nell Abernathy argues that progressives should proceed with caution. Noting that today’s economy is, in some ways, a product of conservative industrial policy, Abernathy makes the case that progressive industrial policy can target economic inequality—especially across race and gender. “The tools we promote are an essential component of building an innovative and sustainable multiracial democracy,” she writes.

3. Pay Inequality Is Built into the System

As demonstrated by Black Women’s Equal Pay Day, today’s shareholder-first economy hurts some more than others. Black women earn 61 cents on the dollar compared to white men, which means it takes them 20 months to earn what white men earn in a year. For Time, Roosevelt Fellow Andrea Flynn traces the history of this gulf—from the racist roots of tipping to exclusionary New Deal carve-outs to the 1970s backlash against civil rights legislation. “This day—like the staggered equal pay days to follow—begs us to understand how such inequities came to be, and why they have been so difficult to move beyond.”

4. The Pay Gap Reinforces the Racial Wealth Gap

Pay inequality contributes to a widening racial wealth gap, as explored this week in O. In the article, Roosevelt Fellow Anne Price explains that Black women are more likely to be financial caretakers of family members. “This strips away about 27 percent of a Black family’s wealth,” she says. “The choice is, ‘What do I do: Pay off my student loan? Start to save for retirement? Put away money for my child’s education? I can’t do all three and take care of parents or siblings.’”

5. How Unions Can Help

Labor law can help remedy these racial and gender inequities—though not for everyone. As noted in an On Labor piece, “Under current law, workers in the fastest growing sectors of our economy are excluded from the protections of labor law due to the continuing impact of institutional racism in the 1930s.” The labor plans of 2020 candidates like Sen. Bernie Sanders and former Rep. Beto O’Rourke tout the need for strong unions and echo the calls of Roosevelt Fellow Brishen Rogers and Kate Andrias of the University of Michigan: All workers must have a voice in their workplace.

What We’re Listening To

On Wednesday’s episode of The Daily, host Michael Barbaro and journalist Andrew Ross Sorkin examine CEOs’ ideological shift toward a shareholder-first vision decades ago—and how the renewed focus on workers, wages, and communities is good for business. “It was the idea that if you could attract great employees and you could keep those employees—often for life—that you would have a better product, that you would have a better company,” said Ross Sorkin.