Proposed by Democratic Senator Elizabeth Warren, the Accountable Capitalism Act of 2018 is bound to change American corporate landscape if the Senate passes it radically and President Donald J Trump signs it into law. The bill seeks to democratize large corporations making at least a billion dollar in revenues by granting greater power to workers when it comes to critical and strategic decisions that affect the company. The bill seeks to allow workforces to vote on vital decisions, such as political funding and election of board members that these corporations make. Specifically, unlike the current practice where shareholders have the full rights to elect or appoint board members, the law seeks the transfer of 40 percent of voting powers to the employees. Shareholders will only elect 60 percent of the board members with the remainder reserved for employees’ vote(Yglesias). The bill will also require that spending related to political activities be approved by at least 75 percent of shareholders and senior management of the corporations, unlike the current practice where there is no clear-cut threshold for such decisions made by corporations.
The bill will also make a paradigm shift in corporate investment. Contrary to currently being practiced in the American corporate sector, senior executives of large corporations are beholden to shareholders. Most of the strategic decisions they make are aimed at increasing the earnings of the corporate shareholders. However, when this legislation is passed the mentioned culture will end as it will require corporate spending and decisions to be aimed at serving the interest of workers, including reinvesting in programs aimed at fostering the growth of the firm and corporate social reasonability initiatives. The regulation also proposes to dis-incentivize one of the commonest practices in corporate America: the use of share as compensation for company executives (Yglesias). The policy will require that stocks given to executives as compensation can only be resold to the company after at least five years.
Why this Bill should be Signed into Law
If Congress enacts it, President Trump should sign it into law because it will reshape the American corporate sector for the common good of all. The bill will cut down the increasing influence of shareholders in shaping the country’s politics because shareholders have used their current controlling influence in these large corporations to lobby for political positions that suit them financially. It will also tackle this problem in two tiers. First, human resources will have a controlling influence when it comes to all strategic decisions by the corporation. Political spending is one such decision that employees will influence. Additionally, workers will have a greater say in how the corporations spend their finances. They also elect 40 percent of the board of directors who are mandated in shaping how such decisions are made. Secondly, the bill also requires corporations to reinvest their finances or spend them on corporate social responsibility initiatives to reduce the number of funds available for corporations to set aside for political spending.
The bill also offers organizations a greater sense of corporate personhood by refocusing corporate efforts towards meeting the needs of stakeholders including the local communities and employees. It shifts the balance of power to the workers and other stakeholders instead of the shareholder-focused culture currently being witnessed in the American corporate sector. Indeed, it deserves a consideration given it potential benefits over costs.
Yglesias, Matthew. “Elizabeth Warren has a Plan to Save Capitalism.” Vox, 15 August 2018. https://www.vox.com/2018/8/15/17683022/elizabeth-warren-accountable-capitalism-corporations