Saturday, August 14, 2010

The Full Employment Corporate Reform Act.

The Full Employment Corporate Reform Act.

Standard American corporate law states that the directors and managers of a corporation owe a fiduciary duty to the corporation to manage the corporation in its best interests. The statutes, however, do not define the interests of the corporation, leaving that largely to the discretion of each firm's board of directors.

In the last generation, corporate boards have come to believe that their primary duty is to maximize profits, regardless of the impact on society in general or their firm in particular. This view is indefensible.

First, the pursuit of profit, like the pursuit of happiness, is best done indirectly; firms that explicitly make profit their goal too often disregard their own long term interests, taking safety shortcuts, polluting or otherwise damaging the environment and society on which they depend, evading the law and exploiting their own customers and employees.

More fundamentally, profit is a tool, not a goal. Firms are not created to maximize profit. Instead, profit is a tool to encourage firms to fulfill their proper goals: to create useful and decent jobs producing useful products and services at reasonable prices.

This statute aims to remind boards of their true duties and to reduce the idolatry of profit.

  • Every corporate board shall have a fiduciary duty to the employees of its company to operate the company in such a way as to maximize the number and quality of jobs to the degree commensurate with the healthy functioning of the enterprise.
  • Every employee shall have a private right of action to enforce this duty.
  • This statute shall apply to all corporations having securities registered under the Securities Act or which engage in interstate commerce.

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