Corporate Democracy Act

The Corporate Democracy Act of 1980 was a bill introduced on April 2 to the 96th Congress by Representative Benjamin S. Rosenthal. The bill had eight cosponsors and was promoted by an alliance of consumer, labor, religious, and environment groups, most prominently, Ralph Nader, a lawyer and consumer advocate. It would have established additional federal standards for the internal governance and conduct of large nonfinancial corporations with more than 5,000 employees or $250 million in total assets. Although the bill was never passed, its introduction had lingering effects.

The sponsors of the bill and its advocates wanted to promote ethical business practices through broader public participation in and greater transparency of corporate activities, as well as increased rights for employees and penalties for corporate leaders who violated the new rules. Most significantly, the bill sought to democratize corporate governance by requiring that the majority of board members be independent from management and directors or officers serve no more than two corporations. The bill also mandated corporate disclosure of particulars, such as employee diversity, compliance with environmental regulations, and political activities. Furthermore, through community impact studies and corporate and federal assistance to employees and local governments, it sought to minimize the incident and impact of corporate relocations and closings. Last, it would have prevented corporations from dismissing or otherwise punishing employees for refusing to submit to a search or a polygraph test or for exercising legal rights in the workplace.

The debates that ensued over the bill centered on the question of whether management-dominated profitseeking behavior was at odds with or in favor of the public interest. Proponents of the Corporate Democracy Act argued that corporations had become too powerful and secretive and that concentrated leadership led to business practices detrimental to the well-being of employees, communities, and the environment. Opponents of the bill countered that profit-maximizing behavior, regardless of who makes the decisions, benefits shareholders, through increased share prices, and the public, through the assurance of low prices and responsiveness to consumer demands. Sharing corporate decision making with countervailing groups, such as labor unions, environmental organizations, and consumer advocates, opponents claimed, would politicize board members and reduce efficiency, thereby harming shareholders and the public.

The bill did not succeed, but the political goals continue to be pursued by Nader and others. The original bill was referred to the House Committees of Interstate and Foreign Commerce, Energy and Commerce, Judiciary, and, last, to the House Committee of Education and Labor, where no further action was taken. However, components of the act have emerged as principles of U.S. political parties, such as the Green Party and the New Party, and a retitled version of the Corporate Democracy Act, called the Corporate Decency Act, continues to be promoted by Nader through the Center for Study of Responsive Law as a “Model Law.”

In the Model Law version of the Corporate Decency Act, some changes have been made to the original act, including greater emphases on penalties for corporate crimes. However, it preserves the general [Page 466]intent of the Corporate Democracy Act—the protection of the public and employees through proposed changes to the corporate governance. Some key aspects of the Corporate Decency Act are as

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