Predistribution and governance

A large part of my work these days is on corporate governance reform, where we have a project running at the Predistribution Initiative (PDI) called Broadening Corporate Governance Participation. I imagine many of you will be familiar with predistribution as a concept, and an approach to a more equitable distribution of wealth at the point of production, rather than after the event through tax, transfers etc.

It’s a particularly live discussion at the moment because there is a lot of interest in employee ownership models. In practice, proposals range from giving employees a slice of equity up to full ownership of a business, and from employer-specific ownership to wider ownership funds.

Such efforts are well intentioned and can deliver meaningful economic benefits for workers. But they are not enough of their own. Workers deserve a reliable living wage first, before they have access to variable reward in the form of equity. Nor does employee ownership of any kind obviate the need for representation and collective bargaining through unions.

As a governance wonk, my interest is very much in voice. Equity participation can provide a form of voice, but it can be very limited in both scale and nature. That’s why personally I advocate for unions and, in governance, for expanded forms of participation. This is very much where PDI’s work sits.

This is a very pertinent issue. Despite the obviousness of the existential threat from climate change, the industrial transition that this requires is throwing up all kinds of challenges and there is a clear political backlash. This is why it is vital that workers and communities that will be most affected by industrial change resulting from decarbonisation have to be part of the decision-making. In an era of widespread mistrust of institutions, participation in decision-making is a route to rebuilding legitimacy and trust: ‘Nothing about us without us’.

The same principle also applies to technological transitions - whether it is the shift to autonomous vehicles or the development and deployment of AI. At the moment the discussion of, for example, ‘the governance of AI’ often gets stuck at questions such as ‘does the board have a committee/lead director for AI?’ or ‘does the company have a policy on AI risk?’. The approach PDI is taking is to expand the discussion outward to questions about who is impacted by the development and deployment of AI, who should have a say in decision-making in both areas and what is their participation in wealth generated by the technology?

Again, as someone with a governance background, what strikes me about the big US tech companies in particular is that they are a type of business without a history of accountability. Because they are ‘new’ businesses there is very little tradition of collective representation for the workforce, and no history of worker participation in governance. At the same time many of them have also been created with a share structure that deliberately also shields them from investor activism. I personally don’t find it surprising that the leaders of autocratic organisations are attracted to (in the case of Elon Musk, for example) or at least see little problematic in an autocratic style of politics.

I was recently flicking through my copy of Political Power and Corporate Control, which I read years ago and was (I think) quite influential on my generation of people interested in governance. In particular the emphasis on the different constellations of ownership, politics and resulting alliances seemed to help explain why, for example, labour might end up allying with capital to some degree in some markets. In an era where investors risk having their rights - both control rights and rights to information - reduced perhaps this is worth revisiting. Is there is a shared agenda we can develop around expanded governance participation?

PDI has a bunch of information online for those of you interested in this conversation. I would particularly highlight the series of papers relating to AI that are available here: https://www.predistributioninitiative.org/projects/ai-lab

This includes a very practical proposal called Driver Equity Transition Stakes which is addressed to the impact of the shift to autonomous vehicles.

Meanwhile on the PDI substack I’ve written a few blogs about corporate governance reform. The most recent one looks at the emphasis that the post-war German conservatives put on the risks from economic concentration, and the co-option of monopolistic firms by authoritarian powers, and how this led them to advocate for dispersed ownership (including employee ownership) and workers participation in corporate governance.