Democracy in business is much more than “the vote”

We are interested in nurturing businesses that, among other things, harness broader democratic involvement. But given the complexity of democratic forms, we need to be more precise about what exactly we mean by democracy in the context of business ventures.

First off, let’s clear up one common misconception. It is unhelpful to focus on “the vote” as the locus of democratic action. Exercising a vote is arguably the thinest mode of participation. As we shall see several forms of action and interaction that are important for democracy have little or nothing to do with voting.

Umair Haque in The New Capitalist Manifesto argues that authentic democracy is participative, deliberative, associative and consensual:

Participation means that those most affected by management decisions have the right to take part in them. Deliberation means that participants can reason, not just vote, to reveal different perspectives and values. Association means public spaces for that deliberation to place unencumbered. And dissent is the only path to a truly meaningful, authentic consensus.

Let’s take a particular example to reveal how authentic democracy can be exercised in a business context. If your company uses a supply chain that can potentially harm the environment, then you could act like companies have done in the past and externalise these aspects and take no responsibility for the associated costs now or in the future. Or you could involve an independent organisation to regularly define the parameters of how your company uses the resources. The independent organisation must have the trust and/or a mandate from the public to act on behalf of the environment and future generations in this regard. It clearly cannot be funded or controlled by your company.

Why would your company do this? Why would you agree to give an independent instance effective ability to veto decisions about your immediate supply chain? Because it makes business sense – that’s why! The potential cost in years to come to your business of, say, public outrage, lawsuits or government interference, are far greater than the immediate cost of adjusting your purchasing and sales approach. It’s simple: making decisions about small dilemmas early and often is better than having a huge dilemma in the future. The beauty of this approach is that it is also the right thing to do – right by the environment and right by society.

In this example, if your company gets it right, the external organisation can participate, deliberate with you and others to agree the supply chain parameters. In addition, you’ll have to establish some public enough associative spaces to accomodate dialogue and demands for public scrutiny and you’ll need to grant some genuine right to dissent.

This is strong and meaningful democratic practice that does not necessarily involve a formal voting mechanism. This does not mean that voting rights are not important – indeed the reluctance to grant such rights beyond shareholders goes to show how ill-disposed many businesses are to meaningful democracy (see for example the difficulties agreeing employee participation for EU corporation forms).  But it is too simplistic to imagine that merely granting some voting rights beyond shareholders is the way to change companies for the better. It is vital that we create the means for real democracy and not concentrate just on “the vote”. The vote is certainly not sufficient nor always necessary for enabling democratic involvement.

In what ways, does your business create democratic forms of interaction? Can all constituencies impacted by your management decisions participate? Do you foster spaces for them to associate and deliberate? And can they really dissent?

If you are not enabling any of the above, it could be that you are not creating genuine value at all. Worth thinking about, right?

PS. I am indebted to Umair Haque’s The New Capitalist Manifesto for revealing to me the true meaning and potential of democracy in creating economic value.


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