Stock for Stakeholders
Corporate leaders could prevent all this by going back to Henry Ford’s original credo — or so implies Mr. Gates. But he goes further than Ford ever did. Henry Ford kept most of his company’s stock for himself (buying it back from the Dodge brothers, for example, as soon as he could). Jeff Gates proposes a kind of “democratic capitalism” in which companies distribute their equity as broadly as possible. Only by spreading the wealth can you spread your customer base, he says, and let profits fall “incidentally” into your own hands.
If this reminds you of the rhetoric of Employee Stock Ownership Plans (ESOPs) from, say, the 1980s, when they were championed as a vehicle for making corporations more vital by involving employees as full-hearted owner–participants, that’s probably no coincidence. Mr. Gates is a long-standing proponent of and legal counselor to ESOP programs in the U.S. and elsewhere. His current prescriptions, however, extend far beyond that. For instance, corporations would routinely grant stock to customers, suppliers, and local community members, using computer-based networks (or perhaps a new form of “frequent customer” cards) to keep track of the recipients.
Anyone who bought a General Electric refrigerator, for example, might get a quarter-share of GE packed in with the ice-cube tray. Under such a system, people would gradually learn the ins and outs of ownership, and they would then become far more sophisticated in building their own portfolios (particularly as companies like J.P. Morgan Chase & Co. switched their emphasis from serving the wealthy few to serving the wealth-building many). By the time most people retired, they would have accrued a diversified portfolio of stock in all the companies they had regularly dealt with over their lifetimes. They would have assets, in short, on which they could live for years, and then pass on to their children, and they would have a far more personal relationship with capitalism that would also be a prevalent source of dignity and participation in the economy. Businesspeople would do all this not only because they were incentivized by new laws that Mr. Gates proposes, but for the sake of their own markets and revenues, and because they believed in the market as a democratizing force.
“The premise of this approach,” said Mr. Gates in a recent conversation, “is that a genuine free enterprise democracy will only show up when there is genuine dialogue. It needs more robust feedback loops from the general public back to financial decision makers, so they’re attuned to something more than the simplistic pricing of products and securities — so they’re better attuned to the social, financial, and environmental needs of the large number of people who are influenced by their decisions.” His new, more democratic forms of stock ownership would provide some of those feedback loops.
It all sounds terribly utopian, but Mr. Gates makes it sound almost plausible, as though it really could happen — until you remember that most businesses are steering as hard as they can in the opposite direction.
Seat at the Parade
Jeff Gates lives in Southern California, but he is by birth and temperament an American southerner. He grew up in Athens, Ga., the son of a business school dean, and graduated from the University of
Virginia. He has craggy features (similar to those of the actor Billy Bob Thornton) and the cheerfully morose talkativeness of a William Faulkner character. He first became interested in ESOPs while at Hastings College of the Law in San Francisco during the early 1970s; in 1979, after a decade as an ESOP lawyer, he was recruited as counsel to Senator Russell Long, Democrat of Louisiana, the son of the legendary populist governor Huey Long and the long-standing chairman of the Senate Finance Committee.