Senator Elizabeth Warren introduces her Accountable Capitalism Act that would require corporations to consider stakeholder interests.

Fiona Sydney

2018-08-15 14:40:00 Wed ET

Senator Elizabeth Warren advocates the alternative view that most U.S. trade deals serve corporate interests over workers, customers, and suppliers etc. She then introduces her new bill, the Accountable Capitalism Act, which would require large public corporations to consider the key interests of stakeholders in corporate decisions. If U.S. Congress passes this bill, large public corporations with more than $1 billion sales revenue would need to apply for a corporate charter from the federal government. These corporations would effectively have to become benefit corporations, or b-corps, in order to recognize the fact that their key fiduciary duties extend beyond shareholder wealth maximization.

Also, employees would be able to elect 40% of the board members (in the similar form of German co-determination), and top management would have to hold equity stakes for 5 years (or 3 years if a benign share buyback takes place). At least a 75% super-majority of both board members and shareholders would have to vote before the company make productive use of internal funds for political purposes.

In light of stark economic inequality, worker welfare, and corporate involvement in political affairs, the Accountable Capitalism Act helps address key socioeconomic issues in Corporate America. Senator Warren's provisos help tackle the complex perennial problem that many U.S. public corporations fixate on short-term stock price performance. As senior management often attempts to maximize short-term profits, obscene executive compensation reflects low performance-pay sensitivity to the detriment of stakeholders such as employees, customers, and suppliers etc.

Under the new legislation, CEOs, directors, and all other executive officers would need to fulfill their fiduciary duties of care, loyalty, and good faith in order to honor longer-term stakeholder value optimization. When push comes to shove with no perfunctory compliance exercises, it is key for these U.S. large public corporations to take into account not only shareholder interests but also the primary interests of all major stakeholders over the long run.

Jeffrey Miron, Harvard director of undergraduate studies, warns that this legislation would give the federal government excessive control over U.S. public corporations. In comparison to the top-down rule, Miron proposes relying on socially-responsible funds as a better market mechanism to tame U.S. large public corporations.

 


If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.

Blog+More
President-Elect Donald Trump wants Apple and its tech peers to consider better and greater high-tech job creation in America.
James Campbell

2017-01-03 03:26:00 Tuesday ET

President-Elect Donald Trump wants Apple and its tech peers to consider better and greater high-tech job creation in America.

President-Elect Donald Trump wants Apple and its tech peers to consider better and greater high-tech job creation in America. Apple has asked its primary

+See More
Rampant stock market fears shake investor confidence during the recent Fed Chair transition from Yellen to Powell.
Charlene Vos

2018-02-03 07:42:00 Saturday ET

Rampant stock market fears shake investor confidence during the recent Fed Chair transition from Yellen to Powell.

Quant Quake 2.0 shakes investor confidence with rampant stock market fears and doubts during the recent Fed Chair transition from Janet Yellen to Jerome Pow

+See More
CNBC stock host Jim Cramer recommends Caterpillar and Home Depot during the current U.S. stock market rally.
Charlene Vos

2019-03-15 13:36:00 Friday ET

CNBC stock host Jim Cramer recommends Caterpillar and Home Depot during the current U.S. stock market rally.

CNBC stock host Jim Cramer recommends both Caterpillar and Home Depot as the U.S. bull market is likely to continue in light of the recent Fed Chair comment

+See More
These famous quotes of self-made billionaires are inspirational words of wisdom on investment management.
Joseph Corr

2017-06-27 05:40:00 Tuesday ET

These famous quotes of self-made billionaires are inspirational words of wisdom on investment management.

These famous quotes of self-made billionaires are inspirational words of wisdom on financial management, innovation, and entrepreneurship. For financial

+See More
Tim Berners-Lee suggests that several tech titans might need to be split up in response to some recent data breach and privacy concerns.
Chanel Holden

2018-11-09 11:35:00 Friday ET

Tim Berners-Lee suggests that several tech titans might need to be split up in response to some recent data breach and privacy concerns.

The Internet inventor Tim Berners-Lee suggests that several tech titans might need to be split up in response to some recent data breach and privacy concern

+See More
U.S. senators urge the Trump administration to prevent the IMF from bailing out several countries that face predatory Chinese loans.
Chanel Holden

2018-02-01 07:38:00 Thursday ET

U.S. senators urge the Trump administration to prevent the IMF from bailing out several countries that face predatory Chinese loans.

U.S. senators urge the Trump administration with a bipartisan proposal to prevent the International Monetary Fund (IMF) from bailing out several countries t

+See More