The commission’s report makes detailed arguments for a host of familiar policy solutions to rising inequality, slack consumer demand, and a labor market that fails to reward workers for their productivity. It spells out the rationale for a higher minimum wage that will rise automatically in the future, family-friendly labor policies around paternal leave and universal pre-school access, broadened public investment to make both education and housing more affordable and accessible, larger and better-targeted investments in public infrastructure, and tax code changes to support the middle class. When it comes to corporate governance and how American businesses behave, though, the report calls for a set of policies that have received much less attention in the past few years. Restructuring corporate culture is essential to preserving democratic political systems, the report argues. In its policy chapter and an appendix about U.S.-specific recommendations, the commission sets out two distinct ideas that would break new ground if they become prominent parts of the 2016 political landscape. First, policymakers should promote “inclusive capitalism.” Companies should be encouraged to experiment with various systems that “compensate a broad base of workers — not just top executives — on the basis of group performance rather than individual performance.” The report details various ways of achieving that, including by giving employees stock, forming companies as worker cooperatives where employees hold direct ownership stakes, or providing cash pay to workers based on the capital gains their productivity brought to the company as whole. In addition to serving the core goal of broadening the group of people who share in corporate profits, these systems have been shown to provide permanent gains for the companies themselves. Second, policymakers should combat the corporate tendency to think in the short-term rather than basing decisions on long-term outcomes. The sort of short-term thinking that shareholder demands impose on public companies create an artificial restriction on business investment, with one study finding that private companies invest twice as much of their assets into their business each year as public companies. The report’s recommendations for encouraging long-view thinking are mostly focused on executive compensation, because “as executives have become increasingly incentivized to focus on short-term share prices, the firms they manage have turned away from investments in innovation and long-term capital formation, as well as wage growth and workforce investments.” -Mihkel I told you so Teemant
Posted on: Fri, 16 Jan 2015 06:51:19 +0000