Dr. Rado Bohinc: More research on how to reduce income inequalities is needed! (upcoming)

8 richest people had in 2017 assets that are equal in value to the remaining half of humanity (3.6 billion people) (Oxfam (2017)). The richest 10% in OECD countries is owned by half of all households, while the lower 40% owns only 3%. The top 1% owns 19%.  Income inequality (nowadays far greater than at any one time in the past) also affects equality of opportunities: education, access to modern technologies, health, culture, employment opportunities (welfare) is constantly increasing[. Precarious employment is becoming more and more evidently the accompanying social phenomenon (massive violation of labour legislation) of modern capitalism.


Economic liberalism

History of fighting against social responsibility on societal and corporate level is the history of modern capitalism. It starts with the A. Smith’s Wealth of nation[1] and Theory of moral sentiments [2] (the Smith’s idea on invisible hand and the doctrine of laissez-faire have always been closely related) followed by Hyek’s Scientism and study of society[3] in early forties of previous century. Central to Hayek‟s theory is the notion of a „spontaneous order‟ of social life, which is better than any kind of artificially created order when it comes down to securing individual liberty and well-being (cf. especially Hayek 1944; 1973).[4] A. Smith advocated the abolition of government intervention in economic matters (no restrictions on manufacturing, no barriers to commerce, no tariffs, free trade, free competition, free to make huge profits). It is obvious, that A. Smith’s economic liberalism prevailed in the United States through the 1800s and early 1900 then led to great depression of the 1930s.  For the time we live nowadays Smith’s concept is not applicable theory and no social responsibility aspect could be found in his approach at all.

J. M. Keynes challenged liberalism saying, that full employment is necessary for capitalism to grow and it can be achieved only if governments and central banks intervene to increase employment. The belief that government should advance the common good became widely accepted. Social responsibility dimension could be seen in Keynes’s economic approach and such were the consequences in well-being of that time[5]. Keynesianism, was the dominant theoretical framework in economics and economic policy-making in the period between 1945 and 1970, but was then replaced by a more „monetarist‟ approach inspired by the theories and research of M. Friedman. Since then, „neoliberalism‟, i.e. monetarism and related theories, has dominated macroeconomic policy-making.

Economic liberalism swears that maximization of profits is the most fundamental and ultimate corporate responsibility and that social issues are not the concern of business people (the business of business is business). Freedman’s Capitalism and freedom[6] is the first serious critique of the CSR concept in the sixties. Freedman held that management has one responsibility and that is to maximize the profits of its owners or shareholders. Friedman argued that social issues are not the concern of business people and that these problems should be resolved by the unfettered workings of the free market system. Further, this view holds that, if the free market cannot solve the social problems, it falls not upon business. Obviously there is no social responsibility neither in societal nor in corporate level in such an approach.

Coase in “The Problem of Social Cost” (1960) suggests that well-defined property rights could overcome the problems of externalities. The Coase Theorem holds that, regardless of the initial allocation of property rights and choice of remedial protection, the market will determine ultimate allocations of legal entitlements, based on their relative value to different parties[7]. Economic liberalism is, basically, the belief that states ought to abstain from intervening in the economy, and instead leave as much as possible up to individuals participating in free and self-regulating markets[8].

Classical liberalism and modern liberalism

Classical liberalism is often associated with the belief that the state ought to be minimal, which means that practically everything except armed forces, law enforcement and other „non-excludable goods‟ ought to be left to the free dealings of its citizens, and the organisations they freely choose to establish and take part in. This kind of state is sometimes described as a „night-watchman state‟, as the sole purpose of the minimal state is to uphold the most fundamental aspects of public order.[9] Classical liberalism has thus much common ground with what we described above as „economic liberalism‟. And it is often the case that classical liberals are, with their tendency to favour laissez-faire economic policies, portrayed as leading proponents of „neoliberalism‟[10].

Modern liberalism is, on the other hand, characterised by a greater willingness to let the state become an active participant in the economy: to regulate the marketplace, and to have the state supply essential goods and services to everyone. The state must play a significant role in the economy, but there is still no room for social responsibility on neither on state nor on corporate level.


Neoliberalism is the conviction that the only legitimate purpose of the state is to safeguard individual, especially commercial, liberty, as well as strong private property rights; the state ought to be minimal or at least drastically reduced in strength and size. Neoliberalism is a set of ideas of how the relationship between the state and its external environment ought to be organised, and not a complete political philosophy or ideology (Blomgren 1997)[11]. In fact, it is not understood as a theory about how political processes ought to be organised at all. Neoliberalism is the revival of economic liberalism in last 25 years on a global scale. It tries to prevent schrinking of profit rates by cutting public expenditure for social services like education and health care, reducing the safety-net for the poor, and reducing governmental role in development of transport, energy and comunication infrastructure by selling state-owned enterprises (including banks, key industries, railroads, toll highways, electricity, schools, hospitals and even fresh water), done in the name of greater efficiency. Privatization has mainly had the effect of concentrating wealth even more in a few hands[12].

Neoliberalism eliminates the concept of “the public good”, replacing it with “individual responsibility.” Obviously, there is no room for social responsibility as the governance on societal level is concerned and corporate social responsibility is invented moe or less as an excuse for the social averse economic policy, as neoliberalism is[13]. The implementation of neoliberal policies and the acceptance of neoliberal economic theories in the 1970s are seen by some academics as the root of financialization, with the financial crisis of 2007–08 as one of the ultimate results[14]

Corporate scandals and collapses (Enron in 2001 and WorldCom in 2002) triggered the development of reporting guidelines (Global Reporting Initiative (GRI), Dow Jones Sustainability Indices (UN Global Compact); followed by financial crisis, global recessionof 2008 influenced substantially contemporary discussion.

Social responsibility and income inequalities

Expectations that decolonization and industrialization of the Third World will gradually reduce income differences between countries and people have eroded. Differences in the level of industrialization in the world (convergence due to globalization) are decreasing, however the differences in income do not decrease and income inequality is increasing; the reason lies in the globally accepted capitalist socioeconomic system, based exclusively on the mechanism that wealth only creates a new wealth (capital, as the basis of appropriation and governance rights) and that labour creates no added value and therefore no rights.

Income inequality (nowadays far greater than at any one time in the past) also affects equality of opportunities: education, access to modern technologies, health, culture, employment opportunities (welfare) is constantly increasing[15]. Precarious employment is becoming more and more evidently the accompanying social phenomenon (massive violation of labour legislation) of modern capitalism.

After a series of structural adjustment loans and debt restructuring led by the International Monetary Fund in the late twentieth century, Latin America experienced a significant increase in inequality. Between 1990 and 1999, the Gini coefficient rose in almost every Latin American country.[16]

The unequal distribution of the benefits of economic growth proves that the capitalist economic model does not give advantage to all people; more and more income goes to capital in the form of rent, while wages stagnate, and poverty is increasing. Profit rates are higher than the rate of increase in salaries or otherwise: capital income is rising faster or more as incomes from work.

Share of the capital in the distribution of profits is rapidly growing, while the proportion of labour is decreasing, undependably from the value of the input or contribution to the product. Respectively, the income of the capitalists (wealthiest) are continually growing, the incomes of the poor (labour, workers) are stagnate, or in relation to capital, decreasing[17].

Globalization and trade have created growth, promoted competitiveness and efficiency. But, did it cut poverty and global inequality? Did it and narrow the gap between emerging economies and the rich world? The answer is No!

Inequality far exceeds, what can be justified by talent, effort and risk-taking; it is the product of inheritance, monopoly and corruptive connections to government. Uncontrolled corporate greed is accelerating inequality and insecurity.

Reducing inequality should be the priority agenda of global institutions and world leaders. The message is clear: we do not want to have an economy that serves the interests just of the 1% of the world ‘population; global economy must work for everyone!

Cyclical economic crises

Frequent (cyclical) economic crises have their roots in the social and economic order of the modern world, based on the describet economic comcepts f modern capitalize, deriving from various factors associated with the endless desire for economic growth and profits. The real cause of culmination of economic distress, which in the western economy occur in a variety of epicentres, emerges from the foundations of social and economic system of global capitalism, which is in itself immanently economically and socially imbalanced. The ambivalent ‘character’ of global capitalism, whose effect is intensification of social disparities and interference in democracy and democratic processes continually produce political conflicts.

Dominant political and economic system is forcing society to competition aiming to increase efficiency and profits, mainly benefiting the interest of capitalists. Respectively, the difference/gap between wealth and poor is significantly growing, which also produces wider and deeper social tensions between different social groups, social classes, which neither are ideological, religious or cultural nature. A growing part of humanity is at the brink of survival. In contrast there are a few immensely wealthy who own most of the world’s wealth.

Technological revolution, which enabled wider interconnectedness of communication between people, followed by the greater cultural awareness and in awareness in general, thus disclose the despair of the masses and at the same time privileges of elites.

Struggles for challenging and altering the existing socio-political and economic relationships, which are the source and the motor of differences and inequalities, has become more open, demanding and rigorous that ever occurred in the human history. Existing circumstances of such an immense social as well as political discontinuity already significantly intervenes into the sphere of human rights, dignity of the poorest and underprivileged. 

Another important dimension of contemporary global civilization is growing/expanding gap between the normative and the reality, between political and legal declarations and reality, or more specifically between declaratory guaranteed human rights of various kinds and origins, and the harsh reality of substantial intentional violation of law and the failure of rule of law. A good example, is the failure to comply with numerous regulations of socially responsible behaviour.

Thus, the intellectual forces of mankind must achieve the peaceful transition, ‘adopting’ social and economic structure of modern capitalism in terms of gradual reduction of income inequalities and consequently existing social disparities (income and social inequalities). Outset for socio-political and economic change is to comprehend that human labour has a higher/wider value and as such in relation to the other forces of production, significantly contributes to creation of new value. Namely, human work is becoming increasingly qualified, it requires high level of knowledge, competences and specialization.

A substantial (fundamental) change in the economic system should be oriented into the understanding of human labour as the responsible factor of production and therefore gradually integrated as a foundation of governance and appropriation.[18]

For achieving the transformation of unequal relationship between capital and labour, benefiting human work, corporate law should introduce and facilitate legal business forms as stakeholder corporations, labour-capital partnerships, trust-controlled corporations.

The 2010 world economic and financial crisis

The 2010 world economic and financial crisis which started in the USA and then spread to become an international, calls for a thorough conceptual rethinking of how to reshape the processes of societal and corporate governance and of financial, commercial and trade globalisation which have dominated the last decades. The research of this book is focused on the context of the global financial and economic crisis from the viewpoint of corporate governance in the areas of the real, financial and public sector.

The »postBretton Woods« arrangement has not only led to the concentration of capital and power in both developed and developing countries, but has also helped create a growing number of financial, commercial and social crises which are ever more frequently impacting various countries and regions. Each crisis presents a setback for many countries, social groups and individuals unable to integrate into the globalisation processes and benefit from it[19].

The shortterm measures applied by various governments around the world are useful and urgent steps. However, so long as the fundamental accumulated issues remain unresolved – for example, the unsustainable US fiscal and trade deficit; the huge trade surplus of China and a few other countries; the almost complete liberalisation of financial flows which are contributing more and more to global financial instabilities and crises; the role of big financial institutions; the deepening of social inequalities between and within both the most developed and developing countries – these measures will only partly alleviate and postpone the genuine search for new institutional solutions[20].

It is not a question of whether to have more or less globalisation, but a question of the alternative pathways of globalisation that will have to be put forward when discussing the future international economic, financial, social and legal framework.

The latest economic crisis deriving from the US real estate market and quickly turning into a global economic downturn is the consequence of a combination of several factors, including overheating of the economy, excessive expenditure, insufficient national savings, excessive growth of credit volume in consideration of the economic growth and the added value of GDP, exaggerating with derivatives, excess liquidity and an excessively long period of accumulating macroeconomic and financial unbalances that all led to an unsustainable growth of  the financial leverage and uncont rollable risks , which in turn led to a contamination of the financial and banking sector due to passing on derivatives among financial intermediaries and banks on several continents.  The real estate balloon and the exaggerated crediting of the real sector were followed by losses in both the financial and the banking sector, since the value of the neverrepaid loans exceeded the insurance value.Nontransparent loan emissions and a poor regulation of financial institutions that allowed the transfer of the risk to other financial subjects and investors were problematic, too[21].

The global financial and economic crisis of 2010 had its roots in financial and banking sector, spreading to real sector and also public sector. Financial malversations have been transferred to the real sector, whose business policy was also inadequate, since it was based, during the business cycle of prosperity, on debt financing and insufficient accumulation or inadequate structure of companies’ investments. A country that consumes too much in a time of prosperity does not create a surplus in the budget, and is not acting in accordance with the procyclical economic policy. Therefore, such country’s leeway in times of crisis is very limited[22].

The globalization of the financial markets led to a simpler access of the financial intermediaries to foreign markets, which allowed more opportunities to differentiate business strategies and diminish exposure towards single markets, but also – due to lower costs for entering foreign markets – increased the competitiveness and exposure to common shocks. Excess crediting and an anticyclical state’s expenditure further complicated the situation, requiring adequate corporate governance of the financial, banking, public and real sector[23].


Overcoming income inequalities

Instead of the present situation, where effects of increased economic growth are directed mainly to the capital holders as distributed profits and less or nothing for labour income, the future research should propose and improve legal framework for a property owning democracy, ED, SE and CSR (for ex. employee financial participation can substantially contribute to overcome this trends).

Research on that in the last 50 and more years has been focused mainly to the issues of agency problem, efficiency, productivity and competitiveness[24], identification with company[25], job satisfaction and motivation[26], recruitment, absenteeism, income after retirement, business succession, employment risk, wage flexibility, economic resilience, business succession, managerial drawbacks, etc[27]. None of the studies researches effect of employee financial participation on income inequalities.

Future research should rethink the implementation issues of the concept of economic growth for all; respectively, welfare/wellbeing of the people should be an equally important factor. The employee share in national income has, according to OECD, steadily declined over the last 30 years. The ownership capital is highly concentrated in Europe and so is the income.[28] Distribution that is more equitable supports social cohesion in the EU[29], which is no more part of social policy but a part of enterprise and labour policy.

Pre-distributive perspective

Future research should bring a pre-distributive perspective to the question. To reduce inequality, we have to go beyond placing new taxes on the wealthy; new policies, including the sharing of capital are needed[30].

Instead of focusing on the redistribution of the proceeds from the enterprise sector, the future research should address the question of pre-distribution[31] i.e., the question of the composition of the economic enterprises themselves which, inter alia, will address how income is distributed in the first place along with the other social and political benefits that can come from overcoming the gap between being owners and being only employees or rented people.

Membership (employee owned) corporation (association)

Creation of special type of membership (employee) corporation (association) and other ways to overcome the gap between ownership and employment should also be a part of future research[32].

For achieving the transformation of unequal relationship between owners and  workers (capital and labour), benefiting human work, the research should develop new labour based corporate law business entities and further develop the existing ones, like  cooperatives, trusts, mutual, social enterprises and other forms as for ex. employee corporations and employee cooperatives, labour-capital partnerships, trust-controlled corporations, inspired also by some of the existing ones, for ex. e.g., Novo Nordisk in Denmark, John Lewis Partnership in England, or Carl-Zeiss-Stiftung in Germany, worker cooperatives e.g., Mondragon and numerous ESOPs[33] in the USA. Rare cases of workers’ companies are for ex. Spanish Workers’ Company (Sociedad Lavoral)[34] and Polish Employee Companies, emerged out of Leveraged Leased Buy Out (LLBO)[35]

Companies, partly or entirely owned by employees

Numerous researches confirmed, that companies, partly or entirely owned by employees are more profitable, create more jobs and pay more taxes than their competitors without employee ownership[36]. It affects income inequalities, however, no research is known on that correlation.

Future research should extensively analyse different forms and models of existing EFP, including worker cooperatives or the leveraged ESOPs[37] and ESPPs[38] and find/propose best solutions for empowering people to overcome income inequalities, to be implemented in national and supranational legislation. The research should also propose how to encourage the development of trans-national employee share ownership schemes in the EU.

Non-property rights and not for profit based employee structural participation

Future research should, in the context of income inequality, analyse and make proposals, related to different forms of so-called structural participation like: Collective Bargaining, Works Councils, Joint Management Councils and Committees, Board Representation. There are several levels of workers’ participation as for example: Information participation, Consultative participation, Associative participation, Administrative participation and Decisive participation.

Corporate Social Responsibility (CSR)

CSR research and practice rests on a basic paradox between a liberal notion of voluntary engagement and a contrary implication of socially binding responsibilities.

Future research should examine legal frame for CSR in broader sense meaning the observance of income inequality, human rights, ethical labour, and employment practices, as a specific business approach (culture) whereby companies integrate social and environmental concerns into theira business operaations[39].Under the proposed pre-distributive approach, businesses, owned by the people who work in them will be naturally incentivized not to ‘foul their own nest’—regardless of the binding or nonbinding nature of CSR legislation.

Rethinking the classical corporation

From the point of view of empowering people and the rebalance of capital and labour relations, the classical corporation should be analysed and evaluated in future research; research objectives should be focused especially on the following topics:

-directors’ liability to all stakeholders, rather than just to shareholders, 

-directors’ conflict of interest with the interest of an enterprises, 

-gender equality, diversity, disinterested /independent members of the boards, 

-protection of minority shareholders

-protection of human rights, especially economic and social rights in multinational operating companies.

The rules should be analysed from the point of view, how legally binding and therefore effective they are and to what extent the rules might contribute to more social responsibility, therefore aiming to empowering people to handle income inequalities.


Addressing the question of labour versus capital

Future research on empowering people to overcome income inequalities should, as apriority, address the question of labour versus capital, where the purpose is:

– Firstly to deconstruct the discourse of labour, historically determined in liberal tradition and

– Secondly, to re-define the concept of labour it in terms of reflecting the relationship between human rights and property rights;

Next, future research should re-examine/re-evaluate the theories and practices of ED, SE, CSR, which have developed alternative pre-distributive mechanisms in terms of con-structuring labour (enterprise) within the concept of ownership; design of the efficient “model” which would present the alternative to classical corporation, as concerns relation between owners and employees (capital and labour) would more than welcome.

The prime objective of the future research should be, to take on historical and discursive (critical discourse theory) methodology in order:

– to provide the insights on owner-worker (capital-labour) relationship, particularly focusing on deconstruction the concept of labour and how it is conceptualized in (neo)liberal paradigm and

– to re-define the concept of labour (beyond binary notion of owner-owned, employer-employees) within the analyses of the relationship between property rights and human rights.

Next research objective is to take on critical – comparative analyses of alternative economic “models – legal tools” which are assumed to have a transformative impact on two levels:

-on the level of enterprise relationship between labour and capital and

-on general level in terms of measuring (reducing) the income inequality.

Creating a special legal form of labour controlled (membership) enterprise

This field of research should consist of creating an overview of existing special legal form of labour controlled (membership) enterprise as special legal form and other property based worker’s membership legal forms in EU countries and US (ESOP, profit-sharing, cooperatives, social enterprises….).

The main challenge of this field of research is to investigate:

-how and if (to what extent) the existing ‘mechanisms’ reduce income inequality (and inequality in general) in terms of their effectiveness;

– to what extent are transforming the existing relations between capital and labour in a sense that is actually changing the contemporary discourse of labour;

– if and in which way this ‘mechanisms’ are changing the concept of economic growth and in what way could be implemented in socio-economic life in terms of benefiting society as a whole;

-to determine to what extent this ‘mechanism are restructuring the composition of an enterprise, in terms of capital and labour rebalance.

Critical comparative analyses of theories of CSR, SE and ED

Critical comparative analyses of theories of CSR, SE and ED from which this “alternative mechanisms” were developed, normative – comparative method and econometric analyses like the one of Kruse et al[40] are more than welcome. Therefore, theoretical and methodological gaps and shortcomings of SE, ED and CSR, theories should be re-examined and legal and political level of implementation of these “mechanisms” should be analysed to:

-investigate the gap between political resolutions and declarations in global, national level and EU level;

– assess the grounds, scope and level of their implementation;

-design a legal framework (corporate law), that would enable the implementation of “legal tools” which would fundamentally follow the nature of the rule of law, social justice and effectively contributing to reducing (income) inequality.

Critical comparative analyses should first analyse the theoretical and methodological implications of ED, SE and CSR and define their shortcomings, gaps and new possible theoretical and practical solutions to more comprehensively address socio-economic life. The comparative – normative analyses of existing legal frameworks (political and legal documents, national legislation) should put forward a innovative legal framework which would facilitate and guarantee implementation of ‘legal tools’ in terms of reducing (income) inequality.

Innovative legal “mechanisms/tools” that address income inequalities

Next objective is to module the innovative legal “mechanisms/tools” that more comprehensively address and gradually overcome income inequalities; within the new theoretical investigation of labour and identification of shortcomings, gaps and potential innovative legal solutions which would eventually lead to new concept of labour and re-articulation its relation to capital.

The existence and efficiency of the following ingredients, elements (legal tools) of social responsibility on societal level should be comparatively (legislation, soft law and best practices) analysed in selected countries, from the point of view of to what extent are they empowering people to overcome social inequalities is facilitated (methodology for Social responsibility index could be one of the outcomes):

labour controlled (membership) enterprise as a special legal form, based on workers’ membership principle (the position of employees as members of the enterprise, rather than being hired or rented by outside owner)

– workers holding a share in the enterprise or other ways of labour controlled enterprise (member’s enterprise, partnership enterprise, …); Analysis of other property based workers’ membership legal forms as cooperatives, mutuals, different forms of social enterprises, etc; how are they legally defined, tax stimulated and therefore effective in real life;

acquisition of employee ownership share in the enterprise, where they are employed (members), consequently participating on the profit and governance, as employee stock ownership plans (US ESOPs), employee stock purchase plans (EU ESPPs, ESO, PS).

-other stakeholder’s (employees, business partners, consumers, local community) interest’s protection in different forms of enterprises and involvement in corporate governance of the enterprise; how are they legally binding, and therefore effective; is there a legal frame for stakeholder corporation, as opposed to shareholder corporation?

-labour (non-property) based employee’s participation in corporate governance of the enterprises (managing, supervisory boards, committees…) and the powers and operations of worker’s councils are legally binding and therefore effective;

-labour (non-property) based employee’s participation in the profit of the enterprise (profit sharing) are legally binding, tax stimulated and therefore effective and what models and processes are available;

gender equality, diversity, disinterested /independent members of the boards of the enterprise; how legally binding and therefore effective they are and to what extent the rules on directors’ liability to all stakeholders, rather than just to shareholders;

-directors’ conflict of interest with the interest of the enterprises: how are they legally defined and therefore to what extent effective;

-to what extent the rules on protection of minority shareholders against the majority shareholders are legally binding and therefore effective;

-to what extent the rules on human rights, especially economic and social rights protection in multinationals operating companies are legally binding and therefore effective.

-corporate social responsibility; to what extent the rules on CSR are legally binding, tax stimulated and therefore effective and how are the practices in reality.

Evaluation of the above elements by selected countries, compared to the data on their income inequality could show the level (ranking) as a Country social responsibility index.

Reshaping the legal framework in the fields of ED, SE and CSR

The research aiming to reshape the legal framework in the fields of ED, SE and CSR and to restructure the existing relationship between owners and workers (labour and capital, e.g., facilitating ESOP, ESO, PS, enabling legislation), creating a labour membership association (employee corporation) in order to gradually reduce income inequalities which continually re-produce cyclic crises and self-degenerative tendencies of unrestrained existing global capitalism, is undoubtedly of ground breaking nature. 

The ground breaking idea for the future research is offering legal framework solutions in corporate and labour law to enable and enhance a new balance of distribution of income/ownership between owners and workers (capital and labour).

The proposed research puts forward what is in the contemporary world a fundamental socio-political question – how to alter/change the contemporary socio-economic relations which are immanently confined in the classical liberal logic/discourse, grounded in Adam Smith’s notion: the “market is a superior mean for dissolving of class, inequality and privilege”. Smith’s vision of a market economy of largely self-employed people in small shops, artisanal enterprises, and family farms was clearly eclipsed by the rise of the factory system in the Industrial Revolution; it is thus even more obsolete in knowledge society and digital age.

The future research should take a pre-distributive approach to revive the classical liberal and democratic vision of a private property market economy without substantial and hereditary inequality by generalizing the small owner-operated shop or farm to larger enterprises where people are jointly self-employed—variously called a property-owning democracy and a republic of equals.

This vision requires legislation, which leads to employee membership corporation, to rebalance the roles of owners and workers (capital and labour) in terms of profit sharing, governance, and, indeed, the ownership of corporations.

Along these lines, the one most significant change would be to implement genuine leveraged ESOP, ESO, PS and other ED, SE and CRS legislation at both, the EU and national levels. With the coming wave of baby-boomer-entrepreneur retirements[41] and the different labour history in Europe, the uptake in Europe might even be greater than in America where it grew to about ten percent of the economy in a couple of decades. What other already-tested reforms can promise such an impact on income, wealth, and the sustainability of local economies?

Hence a core component of the future research should be to bring these ideas (and the accompanying social monitoring instruments) to the attention to business, labour, and political leaders in the EU—in order to jump-start and facilitate the process of drafting and implementing ESOP, ESO, PS and other ED, SE and CRS and other legislation.

New responses and proposals on theoretical dilemmas and practical chal­lenges in property and labour rights theory related to SRG will have to find the reflection in the future modernisation of corporate and labour law. Fields and chapters, covering directors’ duties and responsibilities, corporate structures (composition and powers of boards), conflict of interests, structural and financial participation, labour rights, property rights, types of corporate forms and related governance should be sub­stantially amended in the existing national and EU legislations. Further elaboration of necessary changes and improvements of legislations will have to be subject to future research of the SRG phenomenon.

Global and EU concept that CSR should be company led by voluntar­ily integrating social, environmental, ethical and human rights con­cerns into their business operations and that public authorities can play only a supporting role through a voluntary policy measure has proven to be insufficiently effective and should be abandoned and substituted with related changes in corporate and labour legislation. SRG should be shifted to legally binding and enforceable approach covering all three fields of SRG, ED and SD.

Country’s socially re­sponsible governance index (SRGI)

An empirical research focusing on good and bad practice examples of some leading EU and world countries and corporations and related to socially responsible societal and corporate governance would be more than needed in future in order to formulate proposals or necessary changes in all three fields, CSR, ED and SE. The outcome of the empiri­cal research should be the list of necessary complementary and support­ive regulatory measures to be taken, to make better progress in SRG.

Such empirical research shall propose the elements for definition and assessment of the level of socially responsible governance on the coun­try and corporate level, aiming to develop methodology for country and for corporation case study and to develop a country’s socially re­sponsible governance index (SRGI).

Basically, the level of socially responsible governance on a country level should be assessed upon three pillars:

legal and policy environment of corporate social responsibility;

legal and policy environment of social economy systems and tools;

legal and policy environment of economic democracy systems and tools;

The empirical research should show to what extent the SRG related UN, EU, and national strategies have been implemented in real life and thus contributed to higher degree of socially responsible govern­ance on a country level.

Research methodology and approach

Confrontation triangle (comparison): political ideas, legal framework and reality should be the polygon for the definition of the methodol­ogy to research the field of SRG. Theory, political and legal documents and initiatives related to SRG should be further analysed and compared with the respective relevant EU and Member States’ legal framework and jurisprudence, both analysed from the point of view of the level of implementation in reality, measured by existing and newly designed tools and methodologies[42].

A new, innovative methodology for the assessment of the country’s socially responsible governance as the ability of the country’s political, economic and social system to function at a level of social wellbeing, defined in relation to economic and environmental sustainability (the three pillars of sustainability), should be developed in future[43].

The theoretical concept of SRG encompasses issues like social equity, social capital, human rights, labour rights, social responsibility and social jus­tice; however, the proposed research is limited to issues referring to cor­porate social responsibility, economic democracy and social economy. A strong social pillar is the topmost goal of democratic systems. In consideration of the social dimension of sustainable development, including health, educa­tion and employment, the Human Development Index (HDI) of the UNDP represents a widely accepted methodology to be used as a starting point for building a more sustainable-oriented development index . CSS is mostly used to compare countries on the basis environmental, social and governance indicators (ESG) for investment purposes and rarely as independent indicator of a coun­try socially supportive political and legal system, see: RobecoSAM and Robeco Country Sustainability Ranking as a comprehensive framework for analysing countries’ ESG performance.

[1] Smith, A. (1776) Theory of moral sentiments. Oxford, UK: Clarendon Press.

[2] Smith, A. (1776) The wealth of nations. Oxford, UK: Clarendon Press.

[3] Hayek, F. A. (1944). Scientism and the study of society. Economica, New Series, 11, 27-39: to adopt CSR would put business into fields of endeavour that are unrelated to their ‘proper aim

[4] Hayek, Friedrich A. (1976): Law, Legislation and Liberty: A new Statement of the Liberal Principles and Political Economy. Volume II: The Mirage of Social Justice. London: Routledge.

[5] These ideas had much influence on President Roosevelt’s New Deal, which did improve life for many people.

[6] Friedman, M. (1962). Capitalism and freedom. Chicago, IL: University of Chicago Press, held,

[7] Parisi, Francesco. “Coase theorem.” The New Palgrave Dictionary of Economics. Second Edition. Eds. Steven N. Durlauf and Lawrence E. Blume. Palgrave Macmillan, 2008. The New Palgrave Dictionary of Economics Online. Palgrave Macmillan. 02 May 2016<


[8] Dag Einar Thorsen and Amund Lie What is Neoliberalism? Department of Political Science Univ. of Oslo

[9] Ibidem

[10] Ibidem

[11] Blomgren, Anna-Maria (1997): Neoliberal political philosophy. A critical analys of Milton Friedman, Robert Nozick och F. A. Hayek. Nora: Nya Doxa Bokförlag.

[12] Elizabeth Martinez, Arnoldo,Intercontinental Encounter for Humanity and against Neoliberalism, held July 27 – August 3,1996, in La Realidad, Chiapas.

[13] Around the world, neo-liberalism has been imposed by powerful financial institutions like the International Monetary Fund (IMF), the World Bank and the Inter-American Development Bank.

[14]  Susan Braedley and Meg Luxton, Neoliberalism and Everyday Life, (McGill-Queen’s University Press, 2010), ISBN 0773536922, p. 3: Neoliberalism and Everyday Life is an important assessment of a political system that makes profit easier and people’s lives more difficult.

[15] 8 richest people had in 2017 assets that are equal in value to the remaining half of humanity (3.6 billion people) (Oxfam (2017)). The richest 10% in OECD countries is owned by half of all households, while the lower 40% owns only 3%. The top 1% owns 19%. Nearly 40 million people are unemployed in the OECD countries. unemployment is expected to continue to increase and stay in the worst affected countries, even above 20%.

[16] ECLAC (2002). “Economic Commission for Latin America and the Caribbean”. Social Panorama of Latin America 2000-2001: 71.

5.Jump up ^ “Encuesta Latinobarómetro 1999-2000”. Retrieved 3 May 2013.

[17] The share of financial capital in the market value of the company is 15%, intellectual 85%. Share of the financial capital in revenues is increasing: in 1975 it amounted between 15% to 25%, in 2000 to 2010 has increased up 25% to 35%, in the future is expected to be even higher round 35% to 40%, which is more than in the period of classical capitalism of the 19th century.

[18] In economics, there is the old controversy about the labour theory of value. Modern economics rightly emphasizes that all factors of production, e.g., land, labour, and capital, are productive in the sense of being causally efficacious in production—otherwise they would not be needed. The real distinction that was overlooked in the old controversies is the juridical/moral distinction between persons and things. Things can be quite efficacious, say, in the commission of a crime, but the legal/moral responsibility is imputed back through the things to the persons using the instruments. This does not change in an economic enterprise, where all the persons working in the enterprise are, regardless of their legal status as “employee” or “employer”, are de facto responsible for the positive and negative results of their joint activity. As the legally-trained Austrian economist, Friedrich von Wieser put it: “If it is the moral imputation that is in question, then certainly no one but the labourer could be named.  Land and capital have no merit that they bring forth fruit; they are dead tools in the hand of man; and the man is responsible for the use he makes of them.” [Wieser, Friedrich von. 1930. Natural Value. Trans. by C. A. Malloch. New York: G.E. Stechert and Company, 79]

[19] Nahtigal 2013

[20] Ibidem

[21] Ibidem

[22] Ibidem

[23] Ibidem

[24] Kruse, Blasi, Freeman (2010) Shared capitalism at work, Employee Ownership, capital gain sharing, and brad based stock options, University of Illinois Press,

[25] Blasi, Kruse, Bernstein (2003) The company of owners, the truth on options (and why would employees have to have them), New York Basic Books

[26] Kruse 2002, Research evidence on the prevalence and effects of employee ownership, Journal of Employee Ownership Law and Finance 14/4

[27] Blasi, Freeman, Kruse (2013) The citizens’ share, Putting ownership back into democracy, New Haven, London, Yale University Press

[28] The promotion of Employee Ownership and Participation, Final Report 2014

[29]The promotion of Employee Ownership and Participation, Final Report 2014,


[30] Atkinson, Anthony B. Inequality, What Can Be Done?, Harvard University Press, 2014

[31]Hacker, Jacob. 2011. “The Institutional Foundations for Middle-Class Democracy.” In Priorities for a New Political Economy: Memos to the Left, edited by Olaf Cramme, 33–37. London: Policy Network.

[32] Long before the century and half detour of the “left” through socialism/communism, John Stuart Mill clearly enunciated the vision of a very different society. “The form of association, however, which if mankind continues to improve, must be expected in the end to predominate, is not that which can exist between a capitalist as chief, and workpeople without a voice in the management, but the association of the labourers themselves on terms of equality, collectively owning the capital with which they carry on their operations, and working under managers elected and removable by themselves.” [Mill, John Stuart. 1848. Principles of Political Economy, Book IV, Chapter VII].

[33] For a good overview, see: Blasi, Joseph R., Richard B. Freeman, and Douglas L. Kruse. 2013. The Citizen’s Share: Putting Ownership Back into Democracy. New Haven: Yale University Press.

[34] Law on workers Companies of 1986, as amended of 1997; In 2013, there were 11,557 such companies in Spain, providing 63.931 jobs. Workers companies are SA or SARL, more than 50% owned by its employees (none of them more than 33%), using also non-employee capital and tax incentives.

[35] Based on the law on Commercialization and Privatization, 1996; 62,4% of Polish enterprises undergone this type of transformation resulting 1563 Employee Companies with    131500 employees

[36] 2013 European Company Survey

[37] The best source on information about the American ESOPs is the National Center for Employee Ownership in Oakland California: Rosen, Corey, and Scott Rodrick. 2014. Understanding ESOPs: 2014 Update. Oakland CA: National Center for Employee Ownership; or Gordy, Vaughn, Neal Hawkins, Mary Josephs, William Mertin, Rebecca Miller, Scott Rodrick, Corey Rosen, and John Solimine. 2013. Leveraged ESOPs and Employee Buy-Outs (6th Ed.). Oakland CA: National Center for Employee Ownership. For a brief summary, see: https://www.nceo.org/articles/esop-employee-stock-ownership-plan .

[38] Wiefek, Nancy. 2016. Broad-Based Employee Stock Purchase Plans. NCEO Employee Ownership Report July-August: 6.

[39]Guidelines and Principles that the Commission’s CSR strategy is built upon: United Nations Global Compact, United Nations Guiding Principles on Business and Human Rights, ISO 26000 Guidance Standard on Social Responsibility, International Labour Organization Tripartite Declaration of Principles concerning Multinational Enterprises on Social Policy , OECD Guidelines for Multinational Enterprises.

[40] Kruse, Douglas L., Richard B. Freeman, and Joseph R. Blasi, eds. 2010. Shared Capitalism at Work: Employee Ownership, Profit and Gain Sharing, and Broad-Based Stock Options. Chicago: University of Chicago Press.

[41] Brill, Alex. 2017. “Employee Stock Ownership Plans as an Exit Strategy for Private Business Owners.” Matrix Global Advisors White Paper.


See also: http://www.nceo.org/articles/esop-business-continuity

[42]The key EC implementation measurement tools are: Eurobarometer survey, European CSR Awards, CSR peer review.

[43]Country social sustainability has had considerably less attention in public dia­logue than economic and environmental sustainability. See: Magee, L., Scerri A., James, P., Thom, J., Padgham, L., Hickmott, S., Deng, H., Cahill, F. (2013): Reframing social sustainability reporting: Towards an engaged approach. Environment, Development and Sustainability; (2012): “Measuring Social Sustainability: A Community-Centred Approach”. Applied Research in the Quality of Life. School of Global Studies, Social Science and Planning, RMIT University: Melbourne Australia. Hinterberger, F. et al. (1999): Sustainable Human Development Index. A suggestion for Greening the UN Indicator of Social and Economic Welfare. Wuppertal Institute: Wuppertal.