Accountable Capitalism Act
The Accountable Capitalism Act, 115th Congress (2017-2018) S. 3348 is a proposed federal bill introduced by Senator Elizabeth Warren in August 2018. It would require that employees elect 40% of a board of directors of any corporation with over $1 billion in tax receipts, and that 75% of shareholders and directors must approve any political spending. Corporations with revenue over $1 billion would be required to obtain a federal corporate charter. The Act contains a "constituency statute" that would give directors a duty of "creating a general public benefit" with regard to a corporation's stakeholders, including shareholders, employees, and the environment, and the interests of the enterprise in the long-term.
With the Reward Work Act, the Accountable Capitalism Act is the second recent proposal to give employees a right to elect representatives on a company board of directors. The United States is in a minority of countries in the Organisation for Economic Co-operation and Development that gives no representation of the workforce in corporate governance. The Bill's explanatory document states that it seeks to borrow "from the successful approach in Germany and other developed economies", by introducing that right.
For years, Senator Warren endorsed the slogan "corporations are not people," in opposition to the Citizens United Supreme Court ruling. The Accountable Capitalism Act further distinguishes rights of individuals from those of corporations. Political commentator Matthew Yglesias wrote that "Warren's plan starts from the premise that corporations that claim the legal rights of personhood should be legally required to accept the moral obligations of personhood." (Corporate social responsibility and more.) Also, "In the early 1980s, America's biggest companies dedicated less than half of their profits to shareholders and reinvested the rest in the company. But over the last decade, big American companies have dedicated 93% of earnings to shareholders - redirecting trillions of dollars that could have gone to workers or long-term investments. The result is that booming corporate profits and rising worker productivity have not led to rising wages."
Section 3 of the Act would establish an "Office of United States Corporations", with a director appointed by the President on consent of the Senate, at the Department of Commerce to grant charters to large federal corporations, and monitor compliance with the Act's requirements. Section 4 requires corporations with over $1 billion in tax receipts to obtain a federal charter.
Section 5(b)(2) requires US corporations to have the purpose of "creating a general public benefit", while section 5(c) requires that directors have a duty to consider the interests of shareholders, employees (including of subsidiaries and suppliers), customers, the community, environment, and the long-term. The section also recasts the limits of the business judgment rule, and its enforcement.
Section 6(a) requires the Securities and Exchange Commission in consultation with the National Labor Relations Board to issue rules on fair director elections. Section 6(b) requires that no less than 2/5 of the directors shall be elected by employees after one year from the introduction of the rules.
Section 8 requires that any political spending (or "electioneering communication" under the Federal Election Campaign Act of 1971 §304(f)(3)) by a federal corporation over $10,000 has approval of both 75% of shareholders and directors before the spending is made.
The Accountable Capitalism Act was endorsed on August 15, 2018 by a group of 14 academic lawyers and economists, including Robert C. Hockett and William Lazonick. In media coverage following Elizabeth Warren's Wall St Journal op-ed, the Bill was described as "a plan to save capitalism" and a "bold new plan to reshape American capitalism".
In response to similar proposals in the Reward Work Act in April 2018, a Civis poll found people in the "lean Democrat" category voted 75% in favor of placing employees on boards of directors, and just 9% opposed. Around 43% of the "lean Republican" category supported the concept, while 31% opposed, and the pure Republican category saw 4% more opposed than in favor.
- EHF18429 Accountable Capitalism Act §§3, 5, 6, and 8. warren.senate.gov
- E McGaughey, 'Votes at Work in Britain: Shareholder Monopolisation and the ‘Single Channel’' (2018) 47(1) Industrial Law Journal 76, map of countries on page 4.
- One-page explainer of the bill. See also E McGaughey, 'The Codetermination Bargains: The History of German Corporate and Labour Law' (2016) 23(1) Columbia Journal of European Law 135
- Yglesias, Matthew (August 15, 2018). "Elizabeth Warren has a plan to save capitalism". Vox. Retrieved August 15, 2018.
- Warren Introduces Accountable Capitalism Act. warren.senate.gov
- Letter to Senator Warren from Cornell University Law School, August 15, 2018. warren.senate.gov
- Warren, Elizabeth (August 14, 2018). "Companies Shouldn't Be Accountable Only to Shareholders". Wall Street Journal. ISSN 0099-9660.
- Durkin, Erin (August 15, 2018), "Elizabeth Warren unveils bold new plan to reshape American capitalism". The Guardian
- Anzilotti, Eillie (April 6, 2018), "Want Fairer Workplaces? Give Employees Seats On The Board". Fast Company
- Leonhardt, David (December 3, 2018). "Opinion – American Capitalism Isn't Working". The New York Times. ISSN 0362-4331.
- Ewan McGaughey (2019). "Democracy in America at Work: The History of Labor's Vote in Corporate Governance". 42 Seattle University Law Review.