Tuesday, September 3, 2019

Voting Requirements in the Economic Arena :: Political Economic Business Essays

Voting Requirements in the Economic Arena Status as an adult citizen in a political jurisdiction is seen as a sufficient condition to entitle one to a vote for a representative or participate in collective decision-making. Why not apply that same criterion and entitle adult citizens to voting rights to decide the composition of corporate boards of directors and decide other corporate matters? If mere adult status and citizenship is sufficient for decision-making in the political arena, why not in the economic arena as well? The easy answer/question is: why should anyone who has no stake or interest in a corporation have a say in its decision-making? The only people who should have voting rights are stockholders who have ownership rights in the corporation manifested by stock ownership. We generally agree that voting power should be proportional to their stake in the corporation, namely how many shares they own. If votes were not proportionate to one's stake (stock) in the corporation, including none at all, people might easily vote in ways that personally benefit them but harm the best interests of the corporation and other stockholders. For example, imagine if all Detroit citizens were entitled to vote on decisions made by General Motors. Suppose these voters managed to get on the ballot the question whether the corporation should give all of its profits to local charitable organizations or be plowed back into the corporation as retained earnings. It is not at all inconceivable that donating General Motors' profits to local charities might win by a landslide. People who have little or no stake in General Motors can be expected to behave differently than those who do, simply because their decisions are less costly to them - others bear the cost of their decisions. The identical cost/benefit assessment applies to decision-making in the political arena. Suppose a politician campaigned on the promise to increase spending on various social programs that would be funded with higher taxes. People who pay little or no taxes would see themselves as coming out ahead by voting for that politician. They would bear little or none of the costs, at least directly in the form of taxes, and they would benefit from the promised social spending increase. As such they could be counted upon to support such a politician. Survey polls showed a less-than-enthusiastic response to President George Bush's calls for tax cuts. Maybe a good part of the reason is the fact that so many Americans pay little or no income taxes.

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