The chief justice of the Delaware Supreme Court, who has presided over a number of high-profile business cases, warned that corporations are failing their workers.
Leo Strine, who leads the top court in a state where many firms are incorporated in part due to its tax and corporate laws, called for companies to take better care of their employees and said the nation’s “corporate governance system has lost sight of its purpose.”
“Companies have become more responsive to the immediate desires of the stock market but are failing to move quickly toward sustainable business practices, adequately invest in human capital and, most importantly, fairly share gains from corporate profits with the workers who create them,” Strine wrote in an op-ed for the Financial Times published Monday.
Strine, who is retiring this fall, noted that since the late 1970s, worker productivity has grown nearly 70% while hourly pay has increased roughly 12%. Corporate profits, however, have reached record highs.
“U.S. workers are more educated, more skilled and do more to create corporate profits, but they share far less in the fruits of that labor,” Strine wrote.
The chief justice detailed steps companies should take to ensure the capitalist system works for all, including efforts to make certain that employees are given more priority by businesses and the appointment of board committees that focus on fair treatment of workers. Strine also called for increased transparency in how companies treat their employees.
Business leaders, Strine added, should back reforms to labor laws that give unions more of a chance to represent and bargain for their employees.
But prioritization of employees by companies cannot be done without the backing of institutional investors, who Strine wrote “should be focused on EESG, adding an ‘E’ for the interests of company employees,” a reference to environmental, social, and governance criteria.
“U.S. public corporations are not playthings. They create jobs, produce goods and services that consumers depend on, affect the environment we live in, and build wealth that help Americans lead more secure lives. They are socially chartered institutions of enormous importance and value,” the chief justice said. “Those who govern them should be accountable for the generation of durable wealth for their workers and ordinary investors.”
Strine advocated for a “new system that supports sustainable and fair wealth creation within a system of enlightened capitalism.”
“It should align the interests of institutional investors and corporations with those of the workers whose capital they control,” he wrote. “With some modest sacrifices by every interest that wields economic power, we can make the economy work better for all Americans.”
Strine’s call for corporations to put employees at the heart of their priorities comes after Business Roundtable, which represents the heads of the nation’s top companies, redefined how it views the role of corporations in American society. Nearly 200 CEOs signed onto a statement stressing that corporations should focus on all stakeholders rather than just maximizing profits for shareholders.
