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Commonwealth Companies

From a Temple University Press Fall 2021 Arrival

The Many Futures of Work:

Rethinking Expectations and Breaking Molds

Chapter 16

Commonwealth Companies:

A Path to Restore Workers’ Rights and Economic Democracy

Thomas Croft and Annie Malhotra

Democracy is, among other things, the ability to say “no” to the boss. But a man cannot say “no” to the boss, unless he is sure of being able to eat when the boss’s favor has been withdrawn.

Aldous Huxley, Themes and Variations

For over three decades, progressive investment policy leaders have been saying that the owners of workers’ capital—the workers themselves—must act to prevent the misuse of their hard-earned retirement savings and other assets by financially harmful short-term Wall Street schemes. In Working Capital: The Power of Labor’s Pensions, we labeled that harmful process “collateral damage.”i In this chapter, we present our view that shareholders and stakeholders alike have an imperative to make corporate management more accountable and to move toward what we call a “commonwealth company” framework. We call for workers to take stronger action in their roles as shareholders (who own a large chunk of the capital markets) and as stakeholders (who are crucial, after all, to the success of any enterprise) to invest responsibly and reclaim their power to participate in the governance of companies. As a result, they would be better able to protect the beneficiaries of pension investment.

We begin, in Section 1: The Nature and Importance of Commonwealth Companies, by explaining the meaning of the commonwealth framework for companies and the importance of a balance between shareholder value and stakeholder rights within that framework. To illustrate the importance of this discussion, in Section 2: Destroying Company Value, Destroying Workers’ Rights, we relate two separate events that reveal how worker shareholders and stakeholders have been ignored and disparaged. Then in Section 3: Regaining Control of Workers’ Capital and Voice, we outline new pathways for moving toward the growth and development of commonwealth companies. In Section 4: Toward Commonwealth Companies, we discuss how workers in their roles as both shareholders and stakeholders can help change the status quo. Based on this discussion, Section 5: Strategy and Policy Recommendations presents our proposals for actions that would ensure worker shareholders can protect their rights and move toward a broader balance for shareholder and stakeholder value. Finally, in Section 6, Shareholder and Stakeholder Activism in Perspective, we present our conclusions from the perspective of democratic values.

Section 1: The Nature and Importance of Commonwealth Companies

The commonwealth framework is another way of describing a company that subscribes to “codetermination.” Codetermination is a legislative framework in many countries of Europe under which workers are elected by their peers to the governing boards or supervisory boards of companies. By allowing elected employee representatives to join shareholder representatives on corporate boards, codetermination gives workers a voice and provides them with the opportunity to improve corporate governance, accountability, and oversight. Additionally, codetermination gives employees the ability to elect representatives to works councils, through which they can participate in other levels of corporate decision-making. Works councils are joint labor-management systems that facilitate shop-floor participation and represent workers’ interests to management on operational issues and long-term strategies.

Germany is often cited as having the most robust codetermination system in place. Instead of an all-encompassing single board of directors, German companies generally have a supervisory board composed of worker and shareholder representatives, a management board composed of company executives, and a works council.ii As Rainald Thannisch, policy officer at the Department of Co-determination of the Executive Board at the German Trade Union Confederation, has said, “From the trade union point of view, co-determination plays a key role in the debate on sustainable company development and management pay.”iii More generally, he has explained in Global Unions conferences that codetermination creates the conditions—especially in global companies—for democratic control of economic power. It is important to note that true codetermination does not include employer-driven “company unions” that have been created in the United States.

Studies have found that codetermination and works councils “lead to higher wages, less short-termism, greater productivity, even higher levels of income equality.”iv These outcomes are the opposite of what happens in shareholder-centered work systems.v Under the commonwealth framework, ethical and corporate governance failures can still occur—as seen in Volkswagen’s emissions scandal, in which the company’s attempts to introduce a works council were perversely shot down in the United States (a case that will be discussed later in this chapter). Nonetheless, codetermination has been shown to improve governance outcomes along with productivity and company strategy. Most importantly, by giving workers a stronger voice in the governance and management of the companies that employ them, codetermination allows for a long-term stakeholder orientation over short-term shareholder capitalism.

In recent decades, the concept of the commonwealth corporate framework has spread from Germany to many countries in the European Union. Australia and Britain have also taken up the idea. Since 2017, there has been an explosion of developments with regard to codetermination, including proposed federal legislation in the United States, collectively bargained efforts, shareholder resolutions, corporate statements, and academic and policy research. Some examples:

  • In the United States, Senators Tammy Baldwin, Bernie Sanders, and Elizabeth Warren—the latter two were 2020 Democratic presidential aspirants—have introduced federal legislation to require companies to seat workers on corporate boards in a manner analogous to that of German and European Union codetermination structures. Other senators and members of the U.S. House of Representatives have signed on, with many Americans supporting the idea as

  • A majority of Organisation for Economic Co-operation and Development (OECD) and European Union countries have laws in some form guaranteeing the right of workers to vote for board representation.

  • A similar push is happening in the U.K., which recently passed a new Corporate Governance Code. vii All U.K.-listed companies must comply with three corporate governance alternatives—in order to make management more accountable—or explain why they do not. Options include appointing worker directors, designating an existing non-executive director to engage with the workforce, and setting up advisory panels. The Trade Union Congress (TUC) has argued for worker directors, and a few firms have appointed workers.

  • A Canadian Supreme Court decision in 2008 cleared the way toward more stakeholder-shareholder balance (BCE Inc v. 1976 Debentureholders, 2008 SCC 69 (Can LII), [2008] 3SCR 560).viii In its decision against a hostile takeover by an Ontario pension fund, based on the charge that the buyout would have left the target company deep in debt, the court backed a ruling that “helped shift more responsibility to directors, and made it clear that acting in the best interests of the corporation allows directors to consider the interests of a broader range of stakeholders.” ix

  • Through collective bargaining, unions have pushed for decades to win seats representing workers on boards. Following the precedent set by United Auto Workers (UAW) president Douglas Fraser’s stint on the board of Chrysler (announced three days after the U.S. government’s 1980s bailout of that company), in the mid-1990s the United Steelworkers(USW) bargained for seats on the boards of USX Corporation, Bethlehem Steel Corporation, and other firms. Today, the Autoworkers, Machinists, and Pilots have seats on Daimler AG, United Continental Holdings, Delta Air Lines, and Navistar International.

  • Union and worker shareholders, including the Change to Win Federation (CtW), have proposed resolutions demanding that Alphabet Inc. (Google’s parent), Walmart Inc., and Microsoft Corporation each seat a non-management employee on their boards. These proposals have come after increasing unionization and worker agitation efforts at the large “techs,” including a global walkout by twenty thousand Google employees demanding changes in how the company treats its workers, resulting in Google ending its forced arbitration rule.

  • On August 19, 2019, the Business Roundtable announced the release of a new “Statement on the Purpose of a Corporation” signed by 181 CEOs who committed to lead their companies “for the benefit of all stakeholders—customers, employees, suppliers, communities, and shareholders.” x The announcement was said to have come after many ofits leaders pushed back on the long-held theory that the only purpose of a company is to maximize shareholder value. Some analysts, rightly skeptical of the Roundtable’s motives, also noted that public opinion has been turning against corporation wrongdoing (especially since the massive frauds exposed during the financial market crisis that cost working families $4 trillion in lost retirement funds and $12 trillion in lost household wealth).

  • A steady stream of new academic and policy research on codetermination has come forward from prestigious thought leaders, including former chief justice of the Delaware Supreme Court Leo Strinexi; Lenore Palladino and Susan Holmberg, both of the Roosevelt Institutexii; Ewan McGaughey, senior lecturer, King’s College, London xiii; European Union researchers and friends xiv; and others.

  • The idea is also politically popular. In a recent poll by Data for Progress(, in which Senator Tammy Baldwin (D-WI) made the case for stakeholder governance, 52 percent of likely 2018 voters supported “establishing worker representation on companies’ boards of directors.” Another 25 percent were unsure. Overall, employee governance had net positive support in 100 percent of states and congressional districts.

We welcome this onrush of ideas for economic democracy. In our work, we endorse these diverse paths toward a stronger role for worker stakeholders in American companies. However, rather than pitting stakeholder rights against shareholder values, we argue that corporate governance should reflect a balance between them. We argue for an evolution toward a stakeholder society that includes worker shareholder rights and recognizes, retains, and respects the long-term value of responsible shareholder action.

i.Archon Fung, Tessa Hebb, and Joel Rogers, eds., Working Capital: The Power of Labor’s Pensions (Ithaca, NY:ILR Press, 2001). “Collateral damage investing” is the opposite of “collateral benefits,” an allowable outcome of economically targeted investments (ETIs) by the Department of Labor (DOL). DOL 1994-1, updated by DOL 2016-1, allows pension investors to achieve “collateral benefits” as long as that investment is risk-adjusted competitive with comparable investments. Those benefits might include, for example, union construction jobs or affordable housing units. The authors of the “Collateral Damage” chapter in Working Capital coined that title to indicate that bad short-term investment practices could yield societal or environmental damages (e.g., Love Canal).

ii.Warren Staples and Andrew Linden, “Giving Workers a Voice in the Boardroom Is a Compelling CorporateGovernance Reform,” The Conversation, October 27, 2019,

iii.Rainald Thannisch, “Reorienting Management Remuneration toward Sustainability: Lessons from Germany,” inThe Sustainable Company: A New Approach to Corporate Governance, Vol. I, ed. Sigurt Vitols and Norbert Kluge(Brussels: ETUI, 2011),

iv.Dylan Matthews, “Workers Don’t Have Much Say in Corporations. Why Not Give Them Seats on the Board?,” Vox, April 6, 2018,

v.George Tyler, “The Codetermination Difference,” The American Prospect, January 10, 2019,

vi.Matthews, “Workers Don’t Have Much Say in Corporations.”

vii.Financial Reporting Council (FRC), “The UK Corporate Governance Code” (London: Financial Reporting Council, July 2018),

viii.Wikipedia, “BCE Inc v 1976 Debentureholders,”

ix.Tim Kiladze, “Playing on the Edge of Laws: Ed Waitzer, Partner at Stikeman Elliott LLP, on Breaking Norms inBig Law,” The Globe and Mail, June 24, 2016,

x.“Business Roundtable Redefines the Purpose of a Corporation to Promote ‘An Economy That Serves All Americans’” (Business Roundtable, August 19, 2019),

xi.Leo Strine, “Workers Must Be at the Heart of Company Priorities,” Financial Times, October 1, 2019,

xii.Susan Holmberg, “Fighting Short-Termism with Worker Power” (Roosevelt Institute, October 2017),; Lenore Palladino, “Why Corporate Social Responsibility Won’t Be Enough,” (Roosevelt Institute, February 1, 2018), See also the webpage “Codetermination: Bringing Americans Together,” accessed June 30, 2020,

xiii.Ewan McGaughey, “Corporate Law Should Embrace Putting Workers on Boards: The Evidence Is Behind Them,” Harvard Law School Forum on Corporate Governance and Financial Regulation (September 17, 2018),; see the related Comment, September 24, 2018,

xiv.European Trade Union Confederation (ETUC), “Towards a New Framework for More Democracy at Work: ETUC Resolution” (ETUC, November 3, 2014),


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