Bills
| 3.23.22

Should Employees of Large U.S. Businesses Choose at Least 40% of Their Corporation's Board? (S. 3348)

Do you support or oppose this bill?

What is S. 3348?

(Updated November 28, 2018)

This bill — the Accountable Capitalism Act — would require American corporations with more than $1 billion in annual revenue to obtain a federal charter as a “United States Corporation” which would obligate company directors to consider the interests of all corporate stakeholders, including: employees, customers, shareholders, and the communities in which the company operates. It’d also give employees the power to choose at least 40% of the corporate board members, in addition to placing restrictions on sales of stock by directors and on corporate political expenditures.

Directors and officers of chartered U.S. corporations would be prohibited from selling company shares within five years of receiving their shares, or within three years of a company stock buyback.

Before making any political expenditures, chartered U.S. corporations would be required to receive the approval of at least 75% of their shareholders and 75% of their directors.

A chartered U.S. corporation that engages in repeated and egregious illegal conduct may have its charter revoked by the Office of United States Corporations. State attorneys general would be authorized to submit petitions for charter revocations to the office, and the office could revoke the charter if it finds the company engaged in the illegal conduct and hasn’t taken steps to address its problems. The company’s charter would be revoked a year after the decision is rendered in order to give the company time to make a case to Congress that it should retain its charter.

This bill would include a severability clause, which would allow portions of the bill to be struck down by courts without causing the entire bill to be struck down.

Argument in favor

Corporations have been so focused on increasing profits for shareholders that they’ve neglected investments in their other vital stakeholders — employees, consumers, and communities. This bill would give employees of major U.S. companies control of 40% of the board, which will lead to decisions that are geared toward more than profits.

Argument opposed

This is unnecessary, as corporate boards already consider more than just shareholder value in their decisions — they know that how workers, consumers, and communities perceive their actions directly impacts the company’s well-being. This bill is a classic example of government overreach into the economy.

Impact

Employees, consumers, and communities; shareholders; corporate boards; companies that would have to obtain a federal charter as a “U.S. corporation”; and the to-be created Office of United States Corporations.

Cost of S. 3348

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sen. Elizabeth Warren (D-MA) introduced this bill to “reverse the harmful trends over the last thirty years that have led to record corporate profits and rising worker productivity but stagnant wages” by requiring that employees of large U.S. corporations have more say over corporate decision-making:

“There’s a fundamental problem with our economy. For decades, American workers have helped create record corporate profits but have seen their wages hardly budge. To fix this problem we need to end the harmful corporate obsession with maximizing shareholder returns at all costs, which has sucked trillions of dollars away from workers and necessary long-term investments. My bill will help the American economy return to the era when American companies and American workers did well together.”

Black Entertainment Television co-founder Robert Johnson said in an interview on CNBC’s “Closing Bell” that Warren’s bill is a misguided attempt to “channel Robin Hood” that carries “the dangerous potential of channeling Karl Marx”, and added:

“Most companies and most boards look at all of their stakeholders, not only their shareholders. They look at their employees, they look at the community where they reside and do business, they look at even the vendors that they do business with. So I think it’s a solution in search of a problem that’s absolutely not necessary. Her intentions may be great, but putting the government in the middle of how corporations in this country are run is a slippery slope toward a socialist economy that does not, in my opinion, work in the American system.”

Harvard University economics professor Jeffrey Miron, a guest on CNBC’s “Power Lunch”, said Warren’s bill is “just a recipe for more crony capitalism, not for more productive capitalism” and added consumers and other stakeholders have other tools to express displeasure with corporate decision-making:

“They can organize boycotts. They don’t buy the product; they don’t buy the stocks. That drives down the value of the company, and then the management and remaining shareholders will respond. The market is a much better way of encouraging companies to respond to consumer wants and needs than this top-down rule that will end up just generating more insiders and less accountability.”

The bill was introduced with no cosponsors.


Media:

Summary by Eric Revell

(Photo Credit: iStock / Nikada)