In 1600, a revolutionary corporate change occurred – one that was to shape the global economic sphere ever since. Queen Elizabeth’s Royal Charter for the creation of the East India Company gave rise to one of the defining features in corporate history; the limited liability company. Limitations on investor risk led to a flurry of investment into grandiose, capital-intensive industries, from railways to ship building. And here began the era of corporate capitalism.
Corporate capitalism dominates the modern economy. Hierarchical structures are imposed on our workplaces, with boardrooms reserved as much for wealthy merchants now as they were at the inception of the East India Company 400 years ago. But whilst undoubtedly serving major benefit, striding us through the Industrial Revolution and into the modern technological age, change is in the wind. Corporate capitalism’s days are numbered. Amidst the storm of economic progress has been an unnerving surge in inequality – with this economic structure enabling bankers bonuses to emerge unscathed from the 2008 crisis whilst average real wages declined 0.3% annually in the decade since.
As wealth further accumulates in the hands of the few, opportunities are being skewed away from the working class heartlands not only of Britain, but across the Western world. Yet the Shadow Chancellor may be on the cusp of a corporate revolution.
In an echo to Tony Benn in 1980, McDonnell this week called for an “irreversible shift” of wealth and power towards the working class in our society. The corporate model under creation is yet to be revealed in full. But its central premise is a fundamental change in corporate control away from career managers by creating employee funds, into which firms would legally pay a set percentage of their profits. Using this to purchase shares for workers, which would accumulate over time, would enhance their ability to influence corporate destiny – an ability they can utilise for transforming the corporate hierarchy, pay structure and national economic inequality.
And with the prospect of a general election before the year end looking an increasing realistic possibility, Labour’s corporate transformation may be just around the corner.
Under Thatcher’s corporate restructure plan, workers were allowed to sell the shares they owned in the company, an economically illogical decision – cash-strapped workers with little belief in their ability to individually influence corporate affairs would be totally rational in selling to exactly the people who already dominate the corporate hierarchy. Yet whilst McDonnell’s plan allows for collection of dividends, shares can not be sold. Worker power would be enshrined in law, an irrefutable force for corporate redirection.
Yet a central question remains: how much influence would workers have?
The magic number lies in the percentage of profits firms must devote to employee shares – for the corporate behemoths of the financial and technological spheres, this could result in a significant ownership stake for the employees. Yet with a threshold of only 250 employees for this percentage to be applicable, too high a number could place the health of smaller enterprises in jeopardy – and as such, a progressive number should instead be used to enable those with smaller profits to continue to sustainably invest.
But the more pressing problem lies in the lair of the profit-hungry, tenacious corporate moguls: the boardroom.
This is the ultimate goal of the worker, the only realm where true change can be achieved. Whilst McDonnell is yet to state the route to this upper echelon, the most likely answer is that workers with the most shares accumulated will be the chosen ones. Yet this is a dangerous proposal and the alternative could be an elected position, similar to a syndicalist minus the unions.
The end of the corporate capitalist era is in sight. As our society has transformed from a sea of local rural communities to an eruption of industrial heartlands, our transition to the ultimate goal of a developed modern society is almost complete. Humanity’s next stage of economic progress must come through a redirection of our goals; away from macroeconomic numbers, and towards shared prosperity and equality. Cooperatives number only 6000 in the UK, with 13.6mn members – far behind the OECD average. Yet numbers have been growing across the continental mainland, with the idea gaining traction amongst mainstream political powers.
A new corporate structure lies on the horizon. Whilst its details remain to be confirmed, a new model with workers at its epicentre will propel us into a future of shared wealth and greater equality. McDonnell may not have the key; but his solution is certainly one step closer to achieving the corporate revolution that we so desperately need.