Quick summary:
• The Accountable Capitalism Act requires corporations earning over $1 billion annually to consider all stakeholders, not just shareholders.
• Corporations would need a federal charter obligating executives to balance the interests of employees, customers, and communities.
• At least 40 percent of board seats would be elected by employees to give workers more decision-making power.
• The bill prohibits executives from selling shares within five years of receiving them or three years of stock buybacks.
• Corporate political expenditures would need approval from 75 percent of both shareholders and board members.
• Warren highlights that 93% of corporate shares are owned by the richest 10 percent, worsening inequality for workers.
• The legislation faces resistance from Republicans and business leaders but aligns with growing calls for corporate accountability.
Senator Elizabeth Warren introduced the Accountable Capitalism Act this week, aiming to shift corporate priorities from shareholder profits to equitable treatment of workers and other stakeholders. The Massachusetts Democrat’s proposed legislation would require significant changes to how large corporations operate, including mandating employee representation on boards and placing restrictions on stock buybacks.
Warren described the bill as an effort to tackle systemic inequality and ensure that corporate America works for everyone, not just the wealthiest. She pointed to the historical shift in corporate behavior during the 1980s, when many companies moved away from reinvesting profits into their businesses and employees to prioritize “maximizing shareholder value.”
Before the 1980s, Warren explained, U.S. corporations reinvested more than half of their profits back into their businesses, benefiting employees, customers, and shareholders alike. However, during that decade, corporations increasingly adopted the notion that their sole purpose was maximizing returns for shareholders. This philosophy was formalized in 1997 when the Business Roundtable, a lobbying group for CEOs, declared that generating economic returns for owners was the “principal objective” of business enterprises.
Warren argues that this shift has driven economic inequality, noting, “Around 93 percent of American-held corporate shares are owned by just 10 percent of our nation’s richest households, while more than 40 percent of American households hold no shares at all. This means that corporate America’s commitment to ‘maximizing shareholder return’ is a commitment to making the rich even richer, while leaving workers and families behind.”
This shareholder-centric focus, combined with growing stock buybacks, has left many workers behind even as their productivity has soared. Real wages for the median worker have increased only modestly over the past several decades, and the share of national income allocated to workers has significantly declined.
Proposed Reforms in the Accountable Capitalism Act
Warren’s bill targets these systemic issues by proposing several key reforms:
• Federal Charter Requirement:
Corporations earning more than $1 billion annually would be required to obtain a federal charter as a “United States corporation.” This charter would obligate executives to consider the interests of all stakeholders, including employees, consumers, and communities—not just shareholders.
• Worker Representation on Boards:
At least 40 percent of a corporation’s board members would be elected by employees. This measure is designed to give workers a stronger voice in corporate decision-making and ensure their interests are represented.
• Restrictions on Stock Sales:
Corporate directors and executives would be prohibited from selling shares within five years of receiving them or within three years of a stock buyback. This aims to discourage short-term decision-making that prioritizes shareholder profits over long-term growth.
• Approval for Political Spending:
Corporate political expenditures would require approval from at least 75% of both shareholders and the board of directors. This provision seeks to increase transparency and reduce unchecked political influence by corporations.
Additionally, the bill includes a provision to revoke the charters of corporations engaging in repeated and egregious illegal conduct.
Warren’s legislation seeks to re-balance the scales in corporate America by ensuring that profits are not disproportionately funneled to the wealthiest households. By requiring large corporations to consider all stakeholders, the bill aims to curb the practices that have exacerbated income inequality and economic disparity.
“Workers are a major reason corporate profits are surging, but their salaries have barely moved while corporations’ shareholders make out like bandits,” Warren stated. The senator highlighted that worker productivity has continued to climb, yet the financial benefits have largely bypassed employees in favor of shareholders.
The bill also responds to concerns about corporate influence in politics. Warren pointed to the 2020 election as the “most lucrative election in history for special interests,” emphasizing the need for transparency and accountability in corporate political spending.
While the Accountable Capitalism Act has garnered support from progressive lawmakers and activists, it faces significant opposition in Congress. The bill was first introduced in 2018 but did not advance amid resistance from Republican lawmakers and business leaders.
Critics argue that the proposed reforms could impose unnecessary regulatory burdens on corporations and stifle innovation. Despite this pushback, Warren has pointed to past statements by the Business Roundtable as evidence that even corporate leaders recognize the need for change. In 2019, the group called for redefining the purpose of a corporation to focus on serving all Americans, though it has since retreated from that position.
The political landscape also presents challenges for the bill, with a Republican-controlled House and a strong pro-business lobby likely to block its progress. Still, Warren and her allies continue to push for reforms that prioritize workers over wealthy shareholders.
As Warren stated, “We need to stand up for working people and hold giant companies responsible for decisions that hurt workers and consumers while lining shareholders’ pockets.”
COMMENTS