|You might favor this bill if:
► You believe large American corporations, with annual revenues higher than $1 billion, should have an obligation to consider the interests of all corporate stakeholders, including their workers. These companies should have 40% of their boards elected by their workers, should restrict the sales of company shares by their directors, and should be prohibited from making political contributions without a 75% approval of their stakeholders.
|You might oppose this bill if:
► You believe that dictating companies and added regulatory power can translate to a stagnant economy. Creating a new set of rules can take a toll, not only on the corporation, but on the overall American economy.
The Accountable Capitalism Act would reverse a number of market incentive measures that have, mostly for over 30 years, benefitted the American corporation.
According to Senator Warren's statement, the bill "aims to reverse the harmful trends over the last thirty years that have led to record corporate profits and rising worker productivity but stagnant wages.
Specifically the bill would:
• Require large American corporations with an annual revenue of $1 billion or higher to obtain a federal charter as a "United States corporation," which obligates company directors to consider the interests of all corporate stakeholders;
• Empower workers of "U.S corporations" to elect at least 40% of Board members;
• Restrict the sales of company shares by the directors and officers of "U.S. corporations";
• Prohibit "U.S. corporations" from making any political expenditures without the approval of 75% of its directors and shareholders; and
• Permit the federal government to revoke the charter of a "U.S corporation" if the company has engaged in repeated and egregious illegal conduct.
In an op-ed piece in the Wall Street Journal, Warren asks herself, "what are the obligations of corporate citizenship in the U.S.?," stating that prior to the last 30 years, American corporations had a duty to not only shareholders, but to employees, bondholders, suppliers, and the community.
According to Warren, this shifted in the 1980's.
Late in the 20th century, the dynamic changed. Building on work by conservative economist Milton Friedman, a new theory emerged that corporate directors had only one obligation: to maximize shareholder returns. By 1997 the Business Roundtable declared that the “principal objective of a business enterprise is to generate economic returns to its owners,” said Warren in her op-ed.
Warren's aim with the legislation is to cut some financial incentives CEOs have that entice them to invest their company's profits only to the benefit of shareholders, therefore having them reinvest a portion of that to the business itself. Warren believes this can have a harmful effect on the U.S. economy.
As noted by vox, a study by the Institute for New Economic Thinking stated that “since the mid-1980s net equity issues for non- financial corporations have been generally negative, and since the mid-2000s massively negative," or 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."
Those who oppose the legislation argue the economy has been doing well despite wage stagnation. Having that much regulatory power over market decisions can translate to stagnation. Enacting such legislation could take a toll on the American economy.
Sponsored by: Sen. Warren, Elizabeth [D-MA].