The case was made in the last essay that a "new government" for corporations be based on the participation, of not only the shareholders, but also the employees and lenders. It was stated that these three groups would act as checks and balances, on the Chief Executive Officer, and the Board of Directors, as well as among and within each other.

Under the "new government" for corporations, the "legislature" (voters) would consist of three non-homogeneous "parties"; i.e., shareholders, employees, and lenders. The division of voting power would be determined for each fiscal year, and legislative (previously known as shareholder) meeting or mail vote on some question.

For a new fiscal year, the proportion of the total vote rated by the shareholders, would be based on the average of the market values of outstanding (non-treasury) stocks, on the last day of the four quarters of the previous fiscal year. For employees, their proportion would be based on the total of their wages, salaries, and benefits, paid to or for them by the corporation, in the previous fiscal year. The proportion rated by lenders would be based on loan balances or bond face values (including accrued interest), as of the effective date set forward for the meeting or indirect vote count.

In the cases of sole proprietorships, partnerships, and corporations, without a ready means of ownership market value determination, the owners portion of the voting power would necessarily be based on some well articulated definition of book value. "Start-up companies" (to be legally defined) would be exempted for a period of time.

Provision should be made for the three parties to nominate candidates for the Board of Directors, rather than letting top management have exclusive domain in this function. A ready means should also be established to permit, with adequate justification, one of the parties to call for special "legislative" meetings or mail votes.

The division of vote authority would act as a spur to shareholders to take an active, rather than passive, interest in the companies in which they hold stock in order to protect their investment. As in the despicable governance of our country in the 1980s and 1990s, the calamitous management of so many corporations was permitted by the lassitude of the shareholder voters. Shareholders sat back with a "let it happen" attitude, while the CEOs and Boards of Directors killed, wounded, or laid bare the businesses in their charge.

The small investors were daunted by the "institutional" investors (pension plans, mutual funds, insurance companies, et al), with their domineering large trades manipulation of the market, particularly their resort to "program trading". The institutional investors evinced little interest in oversight, of the management of the businesses, in which they were invested. They were interested only in the fast buck, the fortuitous timing of the turn over of their investments, and the appearance of their financial statements at the end of each quarter.

This situation is likely to be substantially resolved by the proposed repeal of tax deferment laws (see Responsibility #56). Institutional investors, whose investment results have been enhanced in the past by tax deferment, would now have to weigh the added costs of trading and current taxation, before churning assets to make a fast buck. This would make them tend to choose, and hold indefinitely, investments in well managed businesses. Coupled with the proposed divided voting power, this factor would likely cause the institutional investor to take an active interest, in the long term progress of each business, in which they are risking dollars.

Faced with these circumstances, the small investors would have a higher degree of protection from depraved acts of CEOs and Boards of Directors. They would also see the need to organize, and to take an active interest in the direction of their investments. They too could not afford to be complacent, considering the diversity of interests among shareholder groups; and more particularly in view of the possibly competing goals of the newly enfranchised employee and lender groups. Along with institutional shareholders, they would be less likely to blindly accept management proposals seeking their proxy votes.

Employees would no longer have to be unionized, to exert power to protect their jobs, wage & salary scales, and benefits. Unions as one of, and in some businesses the most powerful of, the employee groups, would have more direct and more timely say in the welfare of their members. Unions would have less, if not no, reasons to resort to divisive and costly tactics of sitdown and lockout strikes. The several employee groups would stand together, and stand apart, to cause just compensation arrangements from Chairman and CEO down to the lowest paid blue collar worker. Shareholders could no longer sit mute, smug in the possibility of short term stock gains, while lawyers negotiated unreasonable compensation packages and golden parachutes for top executives.

Employee portion of voting power would vary with the nature of the firm. They would hold a compelling portion in firms that are labor intensive, as it should be considering their degree of contribution to products and services of the company and industry. Their voting power would be much less in a highly mechanized enterprise, where the shareholders investment contribution is so much more important. For the relatively few employees in the latter case, their situation would be somewhat alleviated by the facts that they would generally be highly skilled, highly paid, and too valuable to readily short change.

Banks sometimes will not make loans to corporations, without placing restraints on management factors, that might jeopardize the firm's ability to meet the payment conditions, or that might effect the risk ratings of its debt instruments and therefore their market transferability. Now lenders will have a direct and continuous oversight authority, during their vested short or long term interest in the company. They can stand shoulder to shoulder, with employees and shareholders, to ward off unwise takeover attempts.

Under the new setup, seduction of shareholders, by corporate raiders promising high gains on investments, at the cost of the longevity or long term health of firms, would be precluded. Loyal managements could withstand takeover threats, without resort to over leveraging the businesses. They could do this knowing that employees and lenders, if not institutional shareholders, would stand with them to parry the takeover artist's thrusts. The stock markets would remain more stable, in the wake of rumors of possible raids. The economy and the nation would benefit.