The Wall Street Journal is reporting that shareholders in General Motors may face the grim scenario of having a board saddled with representatives from the autoworkers unions. It’s always been a possibility that lawmakers would required broader ‘stakeholder’ representation as a condition for the bailout. This would be a disaster for shareholders of the company, and make it much harder to raise private capital in the future.
Imagine that the labour union negotiating its members’ pay and benefits with GM’s management. Now if the union were to have a board not linked to economic ownership of the company but to political connection, it could easily and cheaply vote against, say, the pay packages of the executives they are negotiating with. More likely, they would hold management pay hostage for worker pay. The situation would quickly develop into a way for workers to force management into a bargain to exploit the resources of the company—basically expropriating the gains from the disinterested shareholders.
Of course, GM shareholders have very little room to object to anything like this. Of course government money was going to come with political strings. Pipers, payment, tunes called, etc.
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