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Wake Up America: Elizabeth Warren has a plan to save capitalism.

October 7, 2018

equaljustice-2

 

For the last several years, I have argued that, for public policy, historical reasons and to eliminate many of the political and social ills affecting American Society today, large American corporations engaged in interstate commerce should be required to obtain a federal charter (Here) (Here ). Not too long ago much to my surprise, Senator Elizabeth Warren introduced legislation entitled the Accountable Capitalism Act. It provides just for that. As Matthew Yglesias describes it:

“As much as Warren’s proposal is about ending inequality, it’s also about saving capitalism…. The conceit tying together Warren’s ideas is that if corporations are going to have the legal rights of persons, they should be expected to act like decent citizens who uphold their fair share of the social contract and not act like sociopaths…. Require any corporation with revenue over $1 billion… to obtain a federal charter of corporate citizenship. The charter tells company directors to consider the interests of all relevant stakeholders — shareholders, but also customers, employees, and the communities in which the company operates — when making decisions…”
Matthew Yglesias, Elizabeth Warren has a plan to save capitalism.

The following lists and briefly explains all the provisions of Warren’s proposed legislation:

Requires very large American corporations to obtain a federal charter as a “United States corporation,” which obligates company directors to consider the interests of all corporate stakeholders: American corporations with more than $1 billion in annual revenue must obtain a federal charter from a newly formed Office of United States Corporations at the Department of Commerce. The new federal charter obligates company directors to consider the interests of all corporate stakeholders – including employees, customers, shareholders, and the communities in which the company operates. This approach is derived from the thriving benefit corporation model that 33 states and the District of Columbia have adopted and that companies like Patagonia, Danone North America, and Kickstarter have embraced with strong results.

Empowers workers at United States corporations to elect at least 40% of Board members: Borrowing from the successful approach in Germany and other developed economies, a United States corporation must ensure that no fewer than 40% of its directors are selected by the corporation’s employees.

Restricts the sales of company shares by the directors and officers of United States corporations: Top corporate executives are now compensated mostly in company equity, which gives them huge financial incentives to focus exclusively on shareholder returns. To ensure that they are focused on the long-term interests of all corporate stakeholders, the bill prohibits directors and officers of United States corporations from selling company shares within five years of receiving them or within three years of a company stock buyback.

Prohibits United States corporations from making any political expenditures without the approval of 75% of its directors and shareholders: Drawing on a proposal from John Bogle, the founder of the investment company Vanguard, United States corporations must receive the approval of at least 75% of their shareholders and 75% of their directors before engaging in political expenditures. This ensures any political expenditures benefit all corporate stakeholders.

Permits the federal government to revoke the charter of a United States corporation if the company has engaged in repeated and egregious illegal conduct: State Attorneys General are authorized to submit petitions to the Office of United States Corporations to revoke a United States corporation’s charter. If the Director of the Office finds that the corporation has a history of egregious and repeated illegal conduct and has failed to take meaningful steps to address its problems, she may grant the petition. The company’s charter would then be revoked a year later – giving the company time before its charter is revoked to make the case to Congress that it should retain its charter in the same or in a modified form.

 

Yglesias adds a trenchant analysis as to why enacting such legislation is so important to American society:

 

[University of Massachusetts economist William] “ economist William Lazonick of the University of Massachusetts puts the thesis very squarely, arguing that “from the end of World War II until the late 1970s, a retain-and-reinvest approach to resource allocation prevailed at major U.S. corporations.” But since the Reagan era, business has followed “a downsize-and-distribute regime of reducing costs and then distributing the freed-up cash to financial interests, particularly shareholders…”

…Lazonick’s basic observation that “since the mid-1980s net equity issues for non- financial corporations have been generally negative, and since the mid-2000s massively negative.” In the modern era of shareholder supremacy, in other words, owners take more money out of the corporate sector in the form of buybacks and dividends than they put in via new investments.
Matthew Yglesias, Elizabeth Warren has a plan to save capitalism. (Cite here)

We need to understand that the mega-corporations of today have assumed many of the qualities of a State with little or no requirement to consider the welfare of their constituents whether they be the laborers who make the products or perform the services or the consumers who purchase them. More often than not their only self-perceived duty seems to be to their investors to some extent, but first and foremost to their upper management. They, these large corporations, search out the incorporation requirements of the several states in order to find one with the least restrictions on their arbitrary decision making. There they file their Articles of Incorporation, the charter that determines how they organize their business.  While this may be all well and good for small businesses and regional companies it is a threat to the nation as a whole when they become so large and powerful that their actions can place the welfare of the nation and of its citizens at risk.

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