10 - Democratic Participation and Shared Governance

Summary

This chapter sets out the second of two positive arguments for extending corporate voting rights to employees. Democratic participation theory provides a unique argument for extending governance rights to both shareholders and employees. The theory is derived from the uncontroversial propositions that governance rights should be tied to interest and that we must be able to assess that interest in a way that is both accurate and manageable. These notions largely spring out of political theory, but are also consistent with economic and social choice theory and their focus on preference fulfillment and the construction of incentive structures designed to promote good decision-making. And, like the theory of the firm, democratic participation theory generally counsels in favor of adding employees to the corporate electorate, but also tells us when we might be in one of those rare situations where governance rights should be extended to other stakeholders. That is, both aspects of the shared governance model of the corporation – the theory of the firm and the theory of democratic participation – have a flexibility that the arguments for the exclusive shareholder franchise seem to lack.