Elizabeth Warren’s Accountable Capitalism Act, Explained
By Alexis Arambul
In August, Massachusetts Senator Elizabeth Warren rolled out proposed legislation that could potentially redistribute trillions of dollars from wealthy executives back into the hands of the people who work for them. The best part? The proposed legislation wouldn’t cost a dime.
Capitalism in America has had a complicated past. Corporations used to be concerned about prioritizing people and meaningful policies that have a positive impact on society. But in today’s economy, “shareholder supremacy” is king, and billion-dollar businesses are focused more on enriching and redistributing their profits in the hands of shareholders. Warren’s Accountable Capitalism Act would redefine what American capitalism is and bring it closer to what it was initially intended to be: for the people.
Warren’s Accountable Capitalism Act would do three major things:
1) It would allow CEOs the opportunity to invest a company’s annual profit into things that benefit workers, not just shareholders who make up the top 10 percent of stock market wealth.
2) Employees, customers, and communities that are impacted by large corporations would have legitimate representation in major decisions made by the company.
3) Through this greater representation, corporate interest in the political sphere would more clearly reflect the views of the people in all sectors of the company when legislation is passed through Congress.
Let’s start with the first point. Warren’s plan would create an Office of United States Corporations inside the U.S. Department of Commerce. Any corporation that accumulates over $1 billion annually would need to obtain a federal charter. This means that they would be fully represented by both shareholders and board members who represent the people whom they employ.
Executives and shareholders would have 60 percent of the vote, and board members would have 40 percent of the vote, when making decisions that affect the company. This could lead to positive changes for a corporation’s lowest-paid workers, such as additional professional development and opportunities to move up the corporate ladder. This could also mean higher pay for workers and more financial stability — something that is lacking in our current system.
The Accountable Capitalism Act also would allow workers to elect 40 percent of a corporation’s board members. Under the current system, billion-dollar corporations pay executive salaries that may be up to 300 times those of their lowest-paid workers, finding ways to cut labor costs, pay low wages, and reduce worker benefits anywhere they can. Warren’s solution is a co-determination system, under which CEOs must provide evidence (via a public report) of the ways in which they are impacting the workers, customers, and communities from which they are profiting. Everyone who is affected by a corporation’s impact — environmentally, socially, etc. — could (appropriately) determine if the corporation is following through with its promises.
Shareholders and board members could have the chance to vote for pay increases, health benefits, paid time off, and other things. If executives of a corporation do not live up to their promises, the shareholders and board members could vote to make sure they are accountable for their actions, and allow for appropriate consequences if not up to par.
To the last major point: we cannot ignore the reality that businesses have a major impact on the development of our laws. For example, if a business uses resources that create a negative environmental impact, it will want to make sure that the law allows it to continue using those resources so that it can continue to make a profit at low cost. When lawmakers receive incentives from corporations (for example, through sponsorships), elected officials often vote to underregulate these corporations in order to be financially supported in elections. The Accountable Capitalism Act would ensure that a large corporation’s political activity is represented by 75 percent of shareholders and 75 percent of board members.
The ideas proposed in the Act may seem far-fetched, but Republicans and Democrats alike support a co-determination system. It gives equity and representation for the millions of people employed by billion-dollar corporations in the United States. If workers see and experience that executives are investing their money in things that benefit society as a whole, everyone wins.
While many people are on board with Accountable Capitalism, some believe that the decision should be left in the hands of businesses, through a voluntary “opt-in” approach. Forcing companies into something through legislative means may seem like an infringement on personal liberties. But when you consider the power, influence, and impact that a small handful of corporate executives has not just on the people who work for them, but on society as a whole, it makes good sense.
Senator Warren believes that enough is enough, and that while there’s big talk about changing Wall Street, there is no action. With everyone’s eyes on her as a possible presidential candidate for the 2020 election, the Accountable Capitalism Act could prove to be a major focal point in her campaign.
Alexis Arambul is a graduate of Washington State University with a degree in political science and a minor in fine arts. In 2019, she will pursue a Masters in Public Policy with a focus on promoting the well-being of children and families. Alexis grew up in the foster care system and is passionate about applying all she has learned to improving the lives of other children and families confronted with housing security, and all that it takes to create healthy, connected family environments.
