Firms as Political Entities – Saving Democracy through Economic Bicameralism, By Isabelle Ferreras (2017) Cambridge: Cambridge University Press, 215 pages. ISBN: 978-1-1082-3549-5

In the early 1980s, I became interested in the similarities between the corporation and the democratic state. I observed that the “public corporation” might be thought of as a “shareholder democracy” in which shareholder-citizens elect the board of directors (parliament?) who appoint top management (bureaucracy?). Management is legitimized by and responsible to the “shareholders.” I also realized that this conception had “two major flaws.” First, as noted by Berle and Means (1932), “a large gap opened during the twentieth century between ownership and the control of the corporation,” and second, as pointed out by Chayes (1959), “management does not govern the shareholders, it governs the employees.” Moreover, the notion that the owners of property should have a “right to control human organization” is “a vestige of 19^th century social relationships.” For much of the period between the 18^th and mid-20^th century, as discussed by Atiyah (1979) and Therborn (1977), “western nations were ‘landowner democracies’ and the state was considered to be the agent of landowner interests.” That notion, I argued, was (in 1988) archaic and “entirely inconsistent with the contemporary principle that governors should be responsible to the governed.” (Adams, 1988: 184). Nevertheless, in the modern corporation, employee status is much like that of landless “subjects” in the landowner democracies of the past. When the state made the transition from autocracy to democracy, the corporation did not follow suit. Instead, its legal form continues to be much like that of the British state of 200-odd years ago. Seen as a political entity, its citizens are shareholders and its subjects are employees. In her book Firms as Political Entities, Isabelle Ferreras, a professor of Sociology at the Catholic University of Louvain in Belgium, reaffirms that argument and proposes that the time has (finally) come for the firm to make the transition from a (hyperbolic) “property owner’s democracy” to a real democracy for all of its human constituents. Calls for “industrial democracy” have been going out into the world for a long time and, indeed, many institutions now in place, including collective bargaining and associated institutions such as works councils and worker participation on boards of directors, have been heralded as forms of industrial democracy (e.g. Webb, 1897; Clegg, 1960; Blumberg, 1968; Derber, 1970) But, Ferreras insists, those forms do not go far enough. They leave the legal right to rule in the hands of the shareholders. Through unions, collective bargaining and related institutions, workers may participate in the management of the firm but only within a framework set by the capital investors. This is wrong, Ferreras argues, because firms depend equally on capital and on labour. Both are essential “investors” in the firm and, thus, each should have an equal say in its governance. Indeed, drawing heavily on the work of Jean-Phillippe Robé (2011), Ferreras argues that the “corporation” is not the same thing as the “firm.” The latter is a real community of human beings engaged in a productive process. The former is a legal chimera that has taken over, haunted and kidnapped the real world firm in an intellectual “sleight of hand” that has left employees trapped in a historical cul-de-sac with a status similar to that of servants in a despotic household or as a “production factor among others.” (p. 114). Ferreras’s plan, the most innovative aspect of her book, is to follow the route taken by the United Kingdom and many other states which made the transition from despotism to democracy. Instead of a unicameral legislature with seats reserved for property owners, she would institute a bicameral government with two houses …