Stakeholders versus stockholders.

With NAFTA behind us and GATT in front, it's no wonder that working people have begun to feel surrounded. There seems to foe little to stop these twin steamrollers from running us over, as the workers of the world prepare finally to unite--in the unemployment line.

But there have been stubborn pockets of resistance to free trade that have sprung up over the last few years. Particularly interesting are those that have redrawn the ideological battle lines in new ways. Free traders count on pitting disposable worker against disposable worker, state against state, country against country, rendering all like the helpless brazos at the end of the film El Norte, pleading "Take me, take me!" to the callous foreman. The partial antidote to such autocracy has been to incite not worker against worker as the corporations would like but, rather, impacted communities and families against capitalist greed. With occasional assistance from state and local government, abandoned communities have begun to devise new strategies for fighting back.

The two cases of community resistance examined in this article are worth noting for two reasons. First, support for this ideological realignment has sometimes come from odd--even suspect--sources, including corporations like Westinghouse Electric and Scott Paper Co., the Pennsylvania Chamber of Business and Industry, Republicans in the Pennsylvania state legislature, and one solitary circuit court judge and local government officials in Michigan. This wide base of resistance is reflective of a Perot style populist appeal that resounds through out the anti-free trade and anti-capitalist greed battle cry. Like its historical antecedents, 1990s populism is a curious blend of left and right, of local versus national politics (though the right wing of 1990s populism has paternalistically seized upon the theme of "the community" for its own purposes).

Second, despite the importance of what these two episodes reveal for the purpose of building a grassroots base for fighting "free trade," the progressive/left press almost entirely over looked their occurrence. As a result, the left/progressive forces largely missed the opportunity to glean how a powerfully populist message--one that poses communities against capitalist greed--might provide the foundations of a progressive strategy able to capitalize on the dislocation and havoc that multinational corporations have caused in the lives of working people in this country and others.

Case One: Pennsylvania Fires a Shot

In December 1989, articles first appeared in the New York Times and the Wall Steet Journal alerting the capitalist world to a new anti takeover corporate law proposed in Pennsylvania. For the next eight months, articles and editorials appeared regularly in the capitalist press, including the Wall Street Journal, Forbes, Business Week, the Philadelphia Business Journal, and the New York Times, reporting about--and, in most cases, vociferously condemning--this bill. Forbes called it "socialism Pennsylvania style," Business week labeled it "a dangerous game," and the New York Times opined that the anti takeover statute was the "sorriest example of state intervention" The mighty wallets of the financial world--including the United Shareholders of America, corporate raiders like T. Boone Pickens, the chair of the Securities and Exchange Commission, and institutional (mutual and pension fund) investors like the $60 billion California Public Employees Retirement System--condemned the anti takeover bill and threatened federal lawsuits as well as a boycott of Pennsylvania.

Why did this law strike such a nerve? And who was it designed to protect?

There were four provisions to the Pennsylvania law, the first two of which were designed to clamp down on corporate raiders by limiting the voting rights of any shareholder who acquired company holdings of 20 percent or more, and by fore ing corporate raiders to surrender short term profits (or "green mail") realized from unsuccessful hostile takeover attempts. The business press attacked these provisions as "welfare" for corporate managers, saying they would "entrench inept management at lazy local companies" (Forbes), invite "economic inefficiencies that could undermine competitiveness" (Business Week), and other such capitalist nightmares.

Adding insult to injury (from a capitalist standpoint), a third provision of the Pennsylvania law guaranteed severance pay for dislocated workers and the continuance of existing labor contracts once a hostile takeover bid had begun. This part of the bill attracted significant support from organized labor. "We feel corporate raiders are cannibals who financially attack healthy companies," said Bill George, then secretary treasurer of the state AFL-CIO.

But perhaps most interesting (from a progressive standpoint) was the fourth provision of the law, which allowed corporate directors who are weighing take over bids to consider not only the stockholders' interests but also those of employees, customers, suppliers, and the company's surrounding community--the stakeholders, as they are called. Business Week said this provision "undermined a key concept of capitalism: a board's fiduciary duty to shareholders" Translated, this meant that the law took away some influence from the stockholders--the absentee owners who often live hundreds, if not thousands, of miles from the community--and gave that influence to those who lived in the community in which the corporation was based. This provision was a step toward not nationalizing multinational corporations but, rather, communitizing them. Not surprisingly, this was the provision that resulted in the epithet socialism be ing hurled disdainfully at the Pennsylvania state legislature.

Red-baiting aside, there was over whelming support for the Pennsylvania bill. The support was best explained less by political or economic ideology than by populist local politics. Pennsylvania was a state whose industries had been particularly hard hit in the 1980s by corporate raiders, takeovers, and investment capital. An unlikely alliance of politicians, business executives, and organized labor, as well as significant grassroots support, viewed the bill as a means of protecting local jobs and communities. Weighing in as supporters of the bill were corporations like Westinghouse Electric, Scott Paper, Armstrong World Trade, and Aluminum Corporation of America (ALCOA), the Pennsylvania Chamber of Business and Industry, as well as the most powerful labor organizations in the state, in eluding the United Steel Workers and the AFLCIO. The bill passed over whelmingly in both the Republican dominated state senate and the Democrat dominated state house, and Governor Robert Casey signed it into law in April 1990.

Besides the stakeholder provision, and the unusual alliance that pushed it, the Pennsylvania bill was intriguing for one other reason: it pitted the directors; managers, and CEOs of corporations against institutional and pension investors and shareholders, exposing a crack in the capitalist alliance. At the same time, however, the bill pitted rank-and-file union members against union retirees and their pensions, threatening intergenerational labor solidarity. These paradoxical trends bear watching as the economic tensions of "free trade" in crease, since they may be precursors to shifting alliances. In an era of "free trade," where investors and pension fund beneficiaries are seeking to maximize their pension investment, is it possible that labor may not be able to count on its own retirees for solidarity and support? And is it possible that workers and organized labor may occasionally find allies in corporate managers, who are tired of being "green-mailed" by corporate raiders and then taking the heat for chopping jobs in their local communities?

To be sure, each part of the alliance that pushed this bill had its own motives, some of them contradictory. And there was undoubtedly some truth to the charge by investors that this law substantially removed stockholder over sight from corporate managers and their performance. From a progressive or anti capitalist standpoint, this was by no means a perfect law, since the "rights" granted to stakeholders could not be exercised by the recipients themselves but, rather, by "benevolent" corporate managers acting paternalistically in the stakeholders' interest. But the theme of local politics--of protecting communities, stakeholders, and jobs--prevailed because it had widespread Perot-style populist appeal. Pennsylvanians were mad as hell at Reaganomics and the takeover boom of the 1980s, and they weren't going to take it anymore.

The Pennsylvania plan clearly jangled some nerves in the financial and investment community, and that was surely a sign that the plan should have been more closely studied by progressives. The prevailing forces tapped into a genuine populist revulsion with the takeover boom of the 1980s, and in doing so mounted a campaign that drew together organized labor, Republicans, Democrats, and state business leaders. The populist theme of protecting communities from the excesses of capitalist greed rightly belongs to a progressive and socialist tradition--the legacy of Eugene Debs, Robert La Follette, and others. Yet the progressive media and organizations ignored this seminal event playing out in Pennsylvania.

Threats of federal lawsuits by the United Shareholders of America and institutional investors against the Pennsylvania law never materialized, and the controversy eventually died down. The law has been in effect for four years and, despite the initial hysteria and red baiting, its effects have been mixed and uncertain, depending upon whom you ask. But the Pennsylvania law introduced a truly radical notion--that of the rights of stakeholders--into the fray of corporate community relations. And it exposed a populist vein of widespread community and bipartisan discontent with capitalist greed, waiting to be tapped into by those clever enough to frame the public discourse and to pro pose workable solutions in a way that wins popular support.

Case Two: One Judge's Stand

Several years later, this populist discontent once-again crystallized around a flagrant instance of corporate greed. On February 9, 1993, Michigan Circuit Court Judge Donald Shelton issued a court order blocking General Motor's plans to pick up and relocate its Ypsilanti assembly plant to Arlington, Texas. Judge Shelton ruled that GM had promised "continuous employment" when it asked Ypsilanti for $13.5 million in tax abatements for the plant in 1984 and 1988. He said that a "gross inequity and patent unfairness" would occur if GM "is allowed to simply decide to desert 4,S00 workers and their families because it can make these same cars a little cheaper somewhere else."

At issue, similar to the Pennsylvania case, was the rights of the community, of the stakeholders and jobs, versus the rights of private corporate and investor wealth. In his ruling, Judge Shelton not only prevented GM from closing the Willow Run assembly plant but also asserted the rights of the "common welfare" and placed them on a par with the rights of private profit. Judge Shelton acted on the understanding that the economic pain and social consequences of unfettered corporate decision making had become too costly to leave unchecked. In his ruling, Judge Shelton stated:

The relationship of government

and industry . . . is necessarily

one of conflict, for it is the

purpose of government to

provide for the common welfare

of all and it is the antithetical 

purpose of an industry to strive

solely for the profit of its

owners.... Industry is a source of

many of the jobs in our nation

and it may well be that our

nation needs a new relation ship

of trust and cooperation

between government and

industry. . . . But such an effort

must be national in scope and

must be a real

partnership, not one in which

industry simply views

government as another

opportunity to in crease profits.

Except for articles in the Nation (April 1993) and Z Magazine (July-August 1993), the progressive media ignored this event as well. The judge's heroic decision was on shaky legal ground and certainly was not one that would ingratiate him with those influential powers that promote the careers of favored judges. It was a propagandistic home run pitch from a progressive standpoint, yet the progressive forces barely stepped up to the plate. Naturally, General Motors immediately appealed the decision. As expected, in August 1993 the Michigan Appeals Court reversed Judge Shelton's decision, and the state supreme court declined to review the appeal. GM closed the plant and took its jobs to Arlington, Texas. The appeals court's decision was hailed as a victory by the corporate world, since it struck a blow to other municipalities' attempts to prevent major employers from pulling up stakes and leaving town.

"Communitizing" the Economy

These two cases, properly understood and interpreted, still could serve as rally ing points for progressive strategies de signed to help communities fight back against corporate disinvestment and autocracy. This struggle between communities and corporations has been happening all over the United States: replace GM with Boeing, Hormel, or Pittston, and Ypsilanti with Seattle or the coal mines of West Virginia. In search of "ideal investment climates," and beholden only to stockholders who live hundreds and even thousands of miles away, corporations have relocated their operations with little concern for the decimation wrought to host communities and the stakeholders who live there. New strategies are desperately needed to give these communities the tools to fight back.

The fundamental issue at stake in the era of NAFTA, GATT, and "free trade" is the economic partnership between community and private business. Whether or not acknowledged, there is an inherent relational exchange--a partnership--between employer, employees, and their communities, whereby the employer avails itself of the human and natural resources of a particular community in exchange for offering jobs. But when the employer is a monstrous multinational corporation, beholden to absentee stockholders who care only about quarterly profits and their dividend checks, the exchange becomes one sided. Workers--indeed, whole communities--are reduced to a state of dependency so that even the mere threat of corporate flight or disinvestment is usually sufficient to squeeze concession after concession out of them.

Pushed by the anguish and fear in their communities, certain state and local governments have begun taking baby steps in the direction of legally codifying the rights and jurisdiction of stakeholders. Anti takeover statutes and voting restrictions on large shareholders have now been passed in 23 states, though none of them are as sweeping as the Pennsylvania statute. Louisiana, Ohio, and Texas, as well as some municipalities, have passed laws requiring disinvesting companies to financially compensate abandoned communities and municipalities. Called "exit fees," these reparations are intended to assist in the diversification of the local economy and the retraining of workers and to provide badly needed funds for the social services necessary to help unemployed workers.

The German Approach

Despite the state and local efforts cited above, the concept of stakeholder rights remains fuzzy and mostly unknown in the United States. Those who find the concept appealing may sharpen their focus a bit by looking across the Atlantic to Germany. In the German coal and steel industries, each firm has a supervisory board (called Aufsichtsrat), half of whose members are appointed by management and the other half elected by the workers. Ironically, this semi democratic economic structure was imposed on German industry by the victorious British after World War II at a way of punishing German industrialists for the support they had given to Hitler.

In addition, since 1952 all limited and joint stock companies in Germany with over 500 workers have had Aufsichtsrat supervisory boards with one third worker representation. In 1976, a controversial law called the Codetermination Act was passed, bringing this quota of worker delegates up to 50 per cent in all firms with personnel of more than 2,000. The Aufsichtsrat do not interfere in the day to day running of the company but must approve major policy decisions, especially those with human resource implications. When combined with powerful worker councils located at virtually every German job site, the Aufsichtsrat system obliges managers to confer extensively with employees and their unions. The Aufsichtsrat can use its influence quite powerfully, and it is one of the reasons that German workers have the highest wages, the shortest working hours, the finest benefits, and one of the strongest labor movements in the world.

This is not to say that the Aufsichtsrat are perfect by any means. In all but the coal and steel industries, the worker representatives must include the senior employee of the firm, who tends to side with management; and instead of a neutral chairperson--who often casts the deciding vote--the non-coal and steel Aufsichtsrats are chaired by a shareholder, who also sides with management. The worker delegates are usually outvoted, and by no means is the German model of Aufsichtsrat one of true codetermination between labor and management. But the framework is there, waiting to be improved upon by fighting for higher worker representation, a neutral or favorable chairperson, and a broader range of decision-making capability.

Progressive Gross Roots Strategy

The anti-NAFTA mobilization that took place in 1992 was modestly impressive, having brought together the widest grassroots coalition since the Persian Gulf War. Workers, organized labor, environmentalists, churches, social-justice and human rights advocates, Ralph Nader, Jesse Jackson, the Citizens Trade Campaign, the Sierra Club, and, yes, even Ross Perot and his United We Stand Americanos all joined forces, although in the end it was too little, too late. Still, the remnants of this coalition may be tapped for the purpose of promoting grassroots initiatives that trumpet the themes of "communities versus corporate greed" and "stake holders versus stockholders"

The example of the Pennsylvania legislature and Ypsilanti town officials notwithstanding, our elected representatives ordinarily cannot be counted on to lead this campaign. The political process is, by and large, corrupted by the very wealthy corporations and investors the communities would try to regulate. So why not end run the legislatures with voter initiatives at both the state and local levels? The issues could be crafted to have wide voter appeal, attracting votes from the anti NAFTA coalition from the left to the right. What's more, as voter initiatives they could become campaigns around which to mobilize entire communities, gather ing signatures and educating about the effects of global "free trade" and corporate disinvestment. Win or lose, such initiatives would have the power to educate, motivate, and galvanize an entire community like few other strategies.

Supervisory boards, "exit fees," and anti takeover laws are just the beginning. Once we begin to think in terms of worker representatives participating in corporate decision making, as in Germany, then other remedies become immediately obvious. For instance, why shouldn't elected community stake holder representatives sit as equals on the company board of directors, along side stockholder and worker representatives? This would be an improvement on the German Aufsichtsrat, forming a three way economic "separation of powers," much like the tripartite balance of power delegated to the executive, legislative, and judicial branches of the U.S. political system. And here's a heretical thought: since corporations are such dominant players in our communities, why shouldn't voters help elect the corporate CEOs, the "executive" branch of these crucial institutions that operate with so very little community oversight?

Similarly, organized labor has been banging its head against a Senate filibuster to pass a bill banning striker replacement. Why wait for Congress? State initiatives could accomplish the same thing and at the same time build a groundswell of labor activists and sup porters as organized labor mobilized its membership base. Organized labor's money and resources would be better used fighting locally and at the state level with voter initiatives to accomplish their objectives.

In an era hell bent on "free trade," it is essential that states and communities pursue strategies to make explicit and to solidify the legal framework of stakeholder rights. With occasional assistance from state and local government--and where these are non cooperative, from state and local voter initiatives--local communities can effectively "communitize" multinational corporations. Progressive activists and media will be at the forefront of this struggle if we can energize and unite the fragments of the anti-NAFTA mobilization into a campaign with a coherent vision: communities versus corporate greed, stakeholders versus stockholders.

Looking over the angry, anxious face of America today, can there be any doubt of the widespread support for such policies?

Steven Hill is a community organizer and freelance writer living in San Francisco. His articles and commentaries have appeared in The Humanist, Z Magazine, New Internationalist, the Seattle Times, Crossroads, the Madison Edge, the Seattle Post Intelligencer, the Portland Alliance, La Voz, African Literature: Analysis and Critical Perspectives, and others.