Sen. Elizabeth Warren (D-Mass.) this week introduced a controversial legislative proposal known as the Accountable Capitalism Act.
It is billed as “comprehensive legislation to eliminate skewed market incentives and return to the era when American corporations and American workers did well together.” Critics, however, are blasting the plan as alternately “socialism” or “communism” due to its concerns about public companies.
The legislation aims to “reverse the harmful trends over the last 30 years that have led to record corporate profits and rising worker productivity but stagnant wages.”
In Warren’s view, for most of the country’s history corporations balanced their responsibilities to all stakeholders in corporate decisions, including employees, shareholders, and the communities they call home.
“It worked: profits went up, productivity went up, wages went up, and America built a thriving middle class,” Warren said in a statement.
In the 1980s, according to her version of history, a new idea emerged, “that corporations should focus only on maximizing returns to their shareholders.”
“That had a seismic impact on the American economy,” Warren says. “In the early 1980s, America's biggest companies dedicated less than half of their profits to shareholders and reinvested the rest in the company. But over the last decade, big American companies have dedicated 93 percent of earnings to shareholders, redirecting trillions of dollars that could have gone to workers or long-term investments. The result is that booming corporate profits and rising worker productivity have not led to rising wages.”
Warren added that because the wealthiest top 10 percent of U.S. households own 84 percent of all domestically-held shares, compared to 50 percent of households that own no stock at all, the dedication to "maximizing shareholder value" means that “the multitrillion-dollar American corporate system is focused explicitly on making the richest Americans even richer.”
"There’s a fundamental problem with our economy,” Warren said. “For decades, American workers have helped create record corporate profits but have seen their wages hardly budge. To fix this problem we need to end the harmful corporate obsession with maximizing shareholder returns at all costs, which has sucked trillions of dollars away from workers and necessary long-term investments.”
The Accountable Capitalism Act requires that:
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;
U.S. corporations must ensure that no fewer than 40 percent of its directors are selected by the corporation's employees;
directors and officers are prohibited from selling company shares within five years of receiving them or within three years of a company stock buyback; and
corporations must receive the approval of at least 75 percent of their shareholders and 75 percent of their directors before engaging in political expenditures.
The new federal charter, from the proposed Office of United States Corporations, obligates company directors to consider the interests of all corporate stakeholders (including employees, customers, shareholders, and the communities in which the company operates).
State Attorneys General are authorized to submit petitions to the agency to revoke a 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, they may grant the petition. The company’s charter would then be revoked a year later, giving it time before its charter is revoked to argue its case before Congress that it should retain its charter in the same or a modified form.