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

Former Bank of England Governor Mervyn King provides his deep substantive analysis of the Global Financial Crisis of 2008-2009.

Monica McNeil

2023-03-07 11:29:00 Tuesday ET

Former Bank of England Governor Mervyn King provides his deep substantive analysis of the Global Financial Crisis of 2008-2009.

Former Bank of England Governor Mervyn King provides his deep substantive analysis of the Global Financial Crisis of 2008-2009. Mervyn King (2017) &nb

+See More

Joel Mokyr suggests that economic growth arises from a change in cultural beliefs toward technological progress.

John Fourier

2023-11-07 11:31:00 Tuesday ET

Joel Mokyr suggests that economic growth arises from a change in cultural beliefs toward technological progress.

Joel Mokyr suggests that economic growth arises from a change in cultural beliefs toward technological progress. Joel Mokyr (2018)   A culture

+See More

McKinsey Global Institute analyzes 315 U.S. cities in terms of how tech automation affects their workers in the next 10 years.

Dan Rochefort

2019-08-10 21:44:00 Saturday ET

McKinsey Global Institute analyzes 315 U.S. cities in terms of how tech automation affects their workers in the next 10 years.

McKinsey Global Institute analyzes 315 U.S. cities and 3,000 counties in terms of how tech automation affects their workers in the next 5 to 10 years. This

+See More

Sprint and T-Mobile propose a major merger in order to better compete with AT&T and Verizon.

Joseph Corr

2018-05-03 07:34:00 Thursday ET

Sprint and T-Mobile propose a major merger in order to better compete with AT&T and Verizon.

Sprint and T-Mobile propose a major merger in order to better compete with AT&T and Verizon. This mega merger is worth $26.5 billion and involves an all

+See More

Addendum on USPTO fintech patent protection and accreditation

Andy Yeh Alpha

2023-01-11 09:26:00 Wednesday ET

Addendum on USPTO fintech patent protection and accreditation

Addendum on USPTO fintech patent protection and accreditation As of early-January 2023, the U.S. Patent and Trademark Office (USPTO) has approved our U.S

+See More

Warren Buffett approves Berkshire Hathaway to implement new meaningful stock repurchases.

Dan Rochefort

2018-11-15 12:35:00 Thursday ET

Warren Buffett approves Berkshire Hathaway to implement new meaningful stock repurchases.

Warren Buffett approves Berkshire Hathaway to implement new meaningful stock repurchases. Buffett sends a positive signal to the stock market with the Berks

+See More