California Governor's Executive Order on AI Supports EO
California Governor Gavin Newsom, who stated on May 19 that "You cannot save democracy unless we democratize the economy," issued an executive order on AI on May 21 that in part directs the state government to review opportunities to expand employee ownership and review policies to provide displaced workers with a safety net that could include stock and other forms of equity.
Tech companies, many of them headquartered in California, have recently announced a number of large layoffs, with a transition to greater AI use often cited as the cause. For example, Meta recently announced it was laying off 8,000 employees, or about 10% of its workforce, as it transitions to a more AI-centric company. In a talk at the CAP Ideas Conference in Washington, DC, on Tuesday, May 19, Governor Newsom stated in part that having an ownership stake is part of the solution:
Something big is happening in the plumbing of the world. And we still have systems that were designed in 1935 that are no longer viable...unemployment insurance? You think that's going to work and hold up?...Universal basic income? We don't need charity. We need ownership. It's universal basic capital...the voters are demanding it. Got to have an ownership stake. You cannot save democracy unless we democratize the economy."
On Thursday, May 21, Newsom issued Executive Order N-6-26, which seeks to head off the negative effects of an increasingly AI-driven economy on the state's workforce. The order mainly requests various state departments to document what is happening and evaluate solutions. For example, the Employment Development Department is to document the layoffs and "launch a dashboard showing AI's impacts on employment across various sectors" (section 7 of the order).
Regarding employee ownership, section 10 of the order directs the Office for Business and Economic Development to encourage employee ownership:
The Governor’s Office for Business and Economic Development (GO-Biz) and its Office of the Small Business Advocate (CalOSBA) shall evaluate and, where appropriate, support opportunities to expand and enhance worker ownership models to support broad-based capital growth and build wealth from productivity gain among workers, including, but not limited to, exploring any existing regulatory barriers to employee-owned company structures, as well as best practices leveraged in other states to provide direct and indirect economic support for the formation of or conversion to employee-owned companies.
Section 3 of the order also touches on stock ownership:
Within 180 days of the issuance of this Order, the Labor and Workforce Development Agency shall:
a. Submit to the Governor a review of policies and practices that provide displaced workers with a safety net, including severance and other forms of compensation such as stock or other forms of equity, and any recommendations for incorporating such policies or strengthening existing programs....This review should include, to the extent practicable, a comparative analysis of policies or common practices in other countries.
It's worth noting that in 2022 California passed the California Employee Ownership Act. The law established an employee ownership hub within the office of Small Business Development. The original language of the legislation also included funding for feasibility studies and loan support. It was deleted with instructions for the governor to evaluate ways to include it in the next California budget. The law was never funded however and the hub was never established.
The NCEO welcomes Governor Newsom's initiative and will seek to coordinate with other organizations in the field to offer assistance. To contact us regarding this, email NCEO Communications Director Tim Garbinsky at tgarbinsky@nceo.org.