Some Thoughts About Senator Warren’s Accountable Capitalism Act

Last week, Democratic Senator Elizabeth Warren introduced the Accountable Capitalism Act. While it obviously would never pass a Republican Congress, here’s what the bill proposes (boldface mine):

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.

Overall, it’s good. That said, even though the first item has received the most attention, I’m not sure what to make of it. States already charter corporations, and how federal charters would interact or supersede state charters (or replace them entirely?) is unclear. And when rub points #1 and #5 together, it’s not clear what revocation of the federal charter would mean: obviously, things like making them ineligible for government contracts could be a start, but, if state charters are still allowed, it’s not clear what the other consequences would be. And all of this, as we’ve learned with the CFPB and other regulatory mechanisms, is dependent on an administration that actually wants to regulateā€“Republicans are very good at using the ‘power of non-governance.’

On the other hand, requiring worker representation, limiting political donations (though the regulations will have to be well written to prevent ‘educational’ donations that are essentially backdoor contributions), and restricting share buybacks are all very good proposals. Importantly, they can’t be hamstrung administratively.

It’s a little overblown to call this a New New Deal (though, again, these are good and important proposals). At the same time, despite conservative bleatings to the contrary, this is hardly a worker’s soviet either.

So doing this, Medicare for All, and fixing all of the broken shit would be a really good start for Democrats in 2021.

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2 Responses to Some Thoughts About Senator Warren’s Accountable Capitalism Act

  1. sglover says:

    Maybe the most encouraging facet of Warren’s proposal is how it attempts to grapple with real, structural foundations of power. I didn’t think Dems were even capable of thinking in those terms, any more. If this keeps up we might start seeing an actual Democratic Party, offering lucid candidates who can speak candidly and represent a real political philosophy. Of course, a necessary precondition is that the current Dem “leadership” has to go away. Whether it happens by ballot or by the actuary tables, they need to go the way of the other dinosaurs.

  2. kaleberg says:

    The federal government could revoke their limited liability in Federal Court. That’s the whole point of a corporation over a partnership, trust or other such entity. If the shareholders, wealthy individuals, investment corporations, insurance corporations and so on, were to find themselves potentially liable for the company’s debts or legal actions against the company, they’d bail. I wouldn’t blame them either.

    They’d still have immunity at the state level, depending on how state laws are rewritten, but losing that federal exemption would be serious.

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