We are delighted to see corporate governance become a central issue in the political debates shaping up for the next Presidential election, though we have some hesitation in endorsing some of the ideas in Senator Elizabeth Warren’s proposed Accountable Capitalism Act. We do not think of this proposal as “redistributing wealth,” however, as The Guardian describes it; the proposal is merely mitigating the current the wealth transfer that diverts corporate profits improperly to a few overpaid executives. And we endorse the proposal to require 75 percent of directors and shareholders to approve before a corporation could make political expenditures and would like to see all political campaign and lobbying expenditures clearly disclosed.
(1) “Stakeholder” laws, already in force in about half of the states and applied by courts in others, including Delaware, which governs most corporations, have never been used to benefit employees, communities, or anyone but insiders. We are not persuaded that language can be drafted to prevent this.
(2) Employees already have the opportunity to influence the election of directors via their pension funds, whether managed separately or in 401(k) or other accounts. The fund managers responsible for those accounts are in the best position as a matter of economics and fiduciary obligation to evaluate board candidates. The problem is that under Delaware law, even a 99 percent vote against a candidate for the board will not prevent him (it is usually a him from being “elected.” What we need is a federal majority vote standard, so directors can be voted out, and an enforced fiduciary obligation to make sure fund managers vote in a manner that benefits the beneficial holders, and not the clients and prospective clients.
Elizabeth Warren, the Massachusetts senator tipped as a Democratic presidential candidate in 2020, has unveiled new plans for legislation aimed at reining in big corporations, redistributing wealth, and giving workers and local communities a bigger say.
Warren will introduce the bill dubbed the Accountable Capitalism Act on Wednesday. The proposal aims to alter a model she says has caused corporations to chase profits for shareholders to the detriment of workers.
Under the legislation, corporations with more than $1 billion in annual revenue would be required to obtain a corporate charter from the federal government – and the document would mandate that companies not just consider the financial interests of shareholders.
Instead, businesses would have to consider all major corporate stakeholders – which could include workers, customers, and the cities and towns where those corporations operate.