Ten Things Dems Could Do to Win
7. Let employees sue corporate officers for breach of fiduciary duty to the corporation.
Under federal law, directors of our corporations owe a duty of "loyalty, care, diligence and prudence"—they have to pursue not their own interest but the best interest of their firms.
But in fact, they loot them.
And the firms go belly up and workers end up on the streets. We become less competitive.
As officers and directors loot our companies, we have fewer stockholders willing to stop them. With the rise of mutual funds and fund managers who don't seem to care, the old model of corporate governance is broken.
If stockholders do nothing, unions don't even exist. Our corporate boards are self-perpetuating. Directors keep re-nominating themselves with no real check or balance.
Yes, the Dodd-Frank Act gives mutual funds a shot at electing an occasional outside director. But even if—a big if—there is a lonely dissenter on a board, that won't fix the model or do much for workers.
It's this broken model that has hurt us so badly in competing with Germany and China, the two biggest exporters in the world. The German model has "co-determination," with workers making up half the board. The Chinese model is even simpler: over there, Big Brother is either directly or indirectly in charge; if a Gordon Gekko pops up there, he's taken out and shot.
In Germany, even a corporate rock star like Josef Ackermann—who pays out a relatively small bonus to a fellow officer—can be prosecuted for pillaging the firm.
If we can't do what the Germans and Chinese do, what can we do to stop the looting of our corporations?
Let workers—not stockholders but the people who get the W-2s, even the janitors—have the right to sue officers who loot the firm. Right now, only stockholders can sue; and the fund managers don't care. But the people with the paychecks are out on the street. Now I admit, the threat of a lawsuit, even a class action one, is not as good as the checks that the Germans and Chinese use. But why not bring a little folk justice to American capitalism? People are entitled to a bit of revenge.
So it does something for our base—it puts a weapon in the hands of some who are starting their second year of unemployment. It's simple. It's available to everyone, postgrad or janitor. And it's part of a plan—to make the country more competitive by making managers pay if they try to loot the firm.
And by the way, this may open up a check on corporate contributions too. Right now, the Democrats are flummoxed about Citizens United v. FEC. As the Court ruled 5 to 4, corporations have a First Amendment right to dump money from the corporate treasury directly into the pockets of the candidates. But the Supreme Court did not change the old legal fiduciary duty—in place since Queen Elizabeth I—that in effect requires managers to use money only for "legitimate" corporate purposes, the ones that are set out in the articles of incorporation.
How does buying off a politician serve any legitimate purpose set out in these corporate articles?
Consider the litigation if workers had the right to sue for each use of corporate money that does not serve a "legitimate" corporate purpose, one that is at least set out in the articles of incorporation. Every time BP gave cash to a politician, a guy out on the oil rig could sue Tony Hayward directly, to get his own money back.
"Oh, but the suits may not succeed."
Maybe, or maybe not—but I would not want to be a director defending any of the suits. And whether the money served my own or a corporate interest would make for a nice seven-hour deposition.
Even to put them under oath would give some pleasure to our base.