Corporate Governance/Citizenship (September 10)

Update 297: Corporate Governance/Citizenship
A Look at Issues and Progressive Solutions

Whether or not corporations are people, my friends, they certainly have citizenship-like functions from paying taxes, to engaging in community relations, to supporting candidates for office.  For the many progressives who believe that corporate citizenship in the U.S. can be improved, reform of rules relating to corporate governance is a high priority.

Today we take a look at the challenges facing the country regarding corporate governance rules, the solutions proposed recently in this area by leading progressives, reflecting what’s playing on this issue on the campaign trail.  

Best,

Dana

—————————

Historically, courts and legislatures have considered a corporate charter akin to a public trust.  Most corporations in the United States are chartered under state law and have thus followed the corporate governance provisions in their state’s statutes.  State corporate governance statutes have required directors of corporations to seek maximization of shareholder profits as the primary objective of the corporation they serve.  

High-profile corporate scandals, however, have called into question the doctrine of shareholder primacy with recognition that the participation of other major stakeholders, such as employees and the community at-large, could benefit and refocus the corporate decision-making process.

The Accountable Capitalism Act

On August 15, Senator Elizabeth Warren introduced the Accountable Capitalism Act (S.3348) in an attempt to challenge the status quo of corporate governance.  Sen. Warren uses the corporate personhood argument long advocated by conservatives (think Citizens United) to argue that if corporations can claim legal rights of personhood, they should also be legally required to accept the moral obligations of personhood that this status logically implies.

The bill’s primary focus is to make American corporations beholden not just to their shareholders, but also to their workers, the community, and participants in the economy at-large.  Given the fact that 84 percent of American-held shares are in the hands of the top 10 percent of earners, “maximizing shareholder value” does not maximize value for middle and working class Americans.  

The bill makes four key proposals:

  • Creates the Office of United States Corporations inside the US Department of Commerce: American corporations with over $1 billion in gross revenue would have to obtain a federal charter from the new agency, which would obligate directors to consider all stakeholder interests, replacing the doctrine of shareholder preeminence.

  • Mandates that employees elect at least 40 percent of the membership of the Board of Directors: This bold provision would return power to employees by giving them a voice over the direction of the company they work for. This idea is gaining traction among voters; a recent poll by Civis Analytics found that a majority of likely voters, and 71 percent of Democrats, support the principle of employee-elected board members.

  • Limits executives’ ability to sell stock: Stock that executives receive as part of their compensation must be held for five years, or three years after a share buyback. This provision aims at tackling the “short-termism” issue which rewards executives for taking actions that have short-term benefits rather than making more sustainable decisions that invest in the future.

  • Requires corporate political activity to be authorized by both 75 percent of shareholders and 75 percent of board members (many of whom would be worker representatives under the full bill):  An attempt to mitigate the effects of the 2010 Citizens United ruling, this provision would democratize corporate political spending and make the process more transparent.

Alternative Congressional Dem. Proposals

Sen. Warren’s bill is not sui generis in some of its provisions.  The Reward Work Act of 2018 (H.R.6096 and S.2605), introduced in the Senate in March and in the House in June, introduced the concept of codetermination into the political zeitgeist.  The bill is supported by AFL-CIO, Americans for Financial Reform, Take on Wall Street, and Public Citizen.

The bill proposes to give employees the right to elect one-third of the board of directors, a similar percentage to Sen. Warren’s proposal.  The Reward Work Act of 2018 also prohibits stock buybacks on the open market by repealing SEC “safe harbor” rule 10b-18 and shifting all buybacks to tender offers.  

The Reward Work Act of 2018, like the Accountable Capitalism Act, focuses on shifting the balance of power in corporate boardrooms and eliminating the incentives for short-term arbitrage from the corporate elite. The Senate bill has three original cosponsors: Sens. Warren, Baldwin, and Schatz, who were joined by Sen. Kirsten Gillibrand in April. The House bill has two original cosponsors: Reps. Keith Ellison and Ro Khanna.

Shareholders versus Stakeholders

Calls for changes to the corporate governance status quo have come from academia and think tanks for years.  An overriding goal of these is to alter the makeup of firms’ Boards of Directors to reflect the wishes of a broader swath of stakeholders, with a view to improving decision-making and allocating corporate surplus more fairly, and ultimately helping stem the tide of rising inequality, should changes in corporate finances practices follow:

Screen Shot 2018-09-10 at 4.51.57 PM.png
Source: Center for American Progress

The issue pits stakeholders versus shareholders.  Sen. Warren’s bill is influenced by other models of corporate governance around the world that question the ideology of shareholder primacy and considers a corporate governance structure that is run by, and therefore benefits, a wider array of stakeholders and the community at large.

The Reward Work Act of 2018 and the Accountable Capitalism Act begin to question prevailing corporate governance wisdom that has not seen a significant challenge since the 1980s. Some see Sen. Warren’s challenge as an affront to a free market, but given diminished union power, large corporate dominance, and poor wage growth, it’s beginning to look like the market-led corporate governance structure in America and its practices work for fewer and fewer.  

GOP Solution: Making a Bad Situation Worse

President Trump recently requested the U.S. Securities and Exchange Commission (SEC) to look into changes that would alter the current reporting requirements for publicly traded companies from a quarterly period to a semi-annual basis. This change makes clear that the current administration is intent on obscuring corporate disclosure, exacerbating the current problems with corporate governance, rather than seeking to improve them.

In addition, in a recent interview with Politico, SEC Commissioner Hester Peirce expressed her view that public companies should “absolutely” have the right to require arbitration, taking away the rights of shareholders to bring legal action against the companies which defraud them.  SEC Commissioners Robert Jackson and Kara Stein, ardent supporters of robust corporate governance, are likely to oppose these changes that would jeopardize corporate disclosure in a disingenuous attempt to “reduce red tape.”

Policy for the People

According to the Trump Administration and the GOP-controlled Congress, the economy is going gangbusters and the tax cuts were a huge boon for all Americans.  This is belied by the fact that the recent growth is increasingly benefiting a select few.

The theme we’ve seen play out in other policy areas this election cycle remains prominent in the fight for corporate governance.  As the House Democrats’ new slogan puts simply, “Democrats are for the people and Washington Republicans are for the special interests who are lining their pockets at the expense of everyday Americans.”

80 thoughts on “Corporate Governance/Citizenship (September 10)”

  1. Hey there just wanted to give you a brief heads up and let you know a few of
    the pictures aren’t loading correctly. I’m not sure why but I think its a linking issue.

    I’ve tried it in two different browsers and both show the same results.

  2. Heya i am for the first time here. I came across this board and I in finding It truly helpful & it
    helped me out a lot. I’m hoping to present something back and help others
    like you helped me.

    Here is my website SlimX Keto

  3. Thanks for a marvelous posting! I genuinely enjoyed reading it, you will
    be a great author.I will make sure to bookmark your
    blog and definitely will come back very soon. I want to encourage that
    you continue your great posts, have a nice weekend!

    My webpage … Cool Portable AC

  4. My spouse and I absolutely love your blog and find a lot of your post’s to be exactly what I’m looking for.
    can you offer guest writers to write content for you?
    I wouldn’t mind composing a post or elaborating on a few
    of the subjects you write related to here. Again, awesome web log!

    Check out my web page :: Man Plus Pills Review

  5. Hey There. I found your blog using msn. This is a very well written article.

    I will be sure to bookmark it and come back to read more of your useful information. Thanks for the post.
    I will certainly return.

    My web blog :: Xoth Keto

  6. Undeniably consider that which you stated. Your favourite
    justification seemed to be at the net the simplest factor to be mindful of.

    I say to you, I certainly get irked even as people consider issues
    that they plainly do not recognize about. You controlled to hit the nail upon the top as neatly as outlined out the whole thing without having
    side-effects , other folks can take a signal. Will likely be back to get more.

    Thank you!

    Feel free to visit my page – Hyper Male Force Review

  7. Do you mind if I quote a couple of your posts as long as
    I provide credit and sources back to your webpage? My blog site is in the exact same area of interest
    as yours and my visitors would definitely benefit from a lot
    of the information you present here. Please
    let me know if this ok with you. Appreciate it!

    Feel free to visit my homepage: Sabine

  8. If you wish for to increase your knowledge simply keep visiting this web page and be updated with
    the latest news update posted here.

    Feel free to surf to my blog post CoolEdge Air
    Cooler (Micheal)

  9. Hi my loved one! I wish to say that this article is awesome, nice written and come with approximately all important infos.

    I’d like to look extra posts like this.

    Here is my blog post: DFine8

  10. I would like to show my thanks to this writer just for rescuing me from this incident.
    Just after surfing through the the web and coming across concepts
    which are not helpful, I was thinking my entire life was well over.
    Being alive without the presence of solutions to the issues you
    have resolved by means of this guide is a crucial case, and
    those which might have negatively affected my career if I
    hadn’t come across your web blog. Your actual knowledge and kindness in handling all
    things was very useful. I don’t know what I
    would have done if I hadn’t encountered such a subject like this.

    I’m able to now look forward to my future. Thank you so much for the high quality and amazing help.
    I will not hesitate to recommend the sites to anybody who ought to have support about this subject.

    Check out my web-site Xtreme Shred Keto

  11. hello there and thank you for your info – I have certainly picked up anything
    new from right here. I did however expertise a few technical issues
    using this site, since I experienced to reload the web site many times previous to I could get it to load correctly.
    I had been wondering if your web hosting is OK? Not that I am complaining, but slow loading instances times will very frequently affect your placement in google and could damage your high
    quality score if ads and marketing with Adwords.
    Anyway I am adding this RSS to my email and could look out for much more of
    your respective intriguing content. Ensure that you update this again soon..

    my page continent.anapa.org

  12. I’m very happy to read this. This is the kind of manual that needs
    to be given and not the accidental misinformation that’s at the other blogs.
    Appreciate your sharing this best doc.

    Feel free to visit my site … Erorectin

  13. Good ? I should definitely pronounce, impressed with your
    web site. I had no trouble navigating through
    all the tabs as well as related info ended up being truly
    easy to do to access. I recently found what I hoped for before you know it in the least.
    Reasonably unusual. Is likely to appreciate it for those who add forums or something, web
    site theme . a tones way for your client to communicate. Excellent task.

    Feel free to visit my page Solvolt Reviews

  14. Hey there! I’ve been reading your blog for a while now and
    finally got the courage to go ahead and give you a shout out from Porter Texas!
    Just wanted to tell you keep up the great work!

    Here is my web blog; slot online

  15. Great blog right here! Also your site so much up fast!

    What web host are you the use of? Can I am getting your associate link for your host?
    I want my site loaded up as fast as yours lol.

    Feel free to surf to my website; Allura Fresh Cream Review (khoquet.com)

  16. After I originally left a comment I appear to
    have clicked on the -Notify me when new comments are added- checkbox
    and from now on each time a comment is added I get four emails with the exact same comment.
    Is there a way you can remove me from that service?

    Many thanks!

    Feel free to visit my homepage :: Alpha Extracts CBD

  17. An impressive share! I’ve just forwarded this onto a colleague
    who had been conducting a little research on this. And he actually bought
    me breakfast simply because I discovered it for him…
    lol. So let me reword this…. Thank YOU for the meal!!

    But yeah, thanks for spending some time to talk
    about this matter here on your internet site.

    my blog post – Green Earth CBD Gummies

  18. Do you mind if I quote a couple of your posts
    as long as I provide credit and sources back to your
    webpage? My blog site is in the exact same area of interest as yours and
    my users would really benefit from a lot of the information you provide
    here. Please let me know if this alright with you.
    Cheers!

    Look at my homepage; slot online

  19. Write more, thats all I have to say. Literally, it seems as though you relied on the video to make your point.
    You obviously know what youre talking about, why throw away your intelligence on just posting videos
    to your site when you could be giving us something informative to read?

    Feel free to visit my webpage: carslot88

  20. Heya are using WordPress for your site platform? I’m
    new to the blog world but I’m trying to get started and create my own.
    Do you require any html coding knowledge to make your own blog?
    Any help would be greatly appreciated!

    my blog :: carslot88

  21. certainly like your website however you need to test the spelling on quite a
    few of your posts. Many of them are rife with spelling problems and I find it very bothersome to tell the reality
    on the other hand I’ll certainly come again again.

    Here is my site Solvolt Reviews

  22. Can I simply say what a comfort to find someone who genuinely knows what they are talking about
    over the internet. You certainly realize how to bring a problem
    to light and make it important. A lot more people ought to check this out and understand this side of
    your story. I was surprised that you’re not more popular given that
    you definitely possess the gift.

    My page: Follipur Reviews

  23. That is a really good tip especially to those new to the blogosphere.
    Simple but very precise information… Thanks for sharing this one.
    A must read article!

    Have a look at my web site … carslot88

  24. I’m really impressed together with your writing skills and also with the structure on your blog.

    Is this a paid subject or did you customize it your self?
    Either way keep up the excellent high quality writing, it is uncommon to see a nice blog like this one today.

    Feel free to surf to my webpage – Rapid Keto Cut Pills

  25. Pretty nice post. I just stumbled upon your weblog and wanted
    to say that I’ve truly enjoyed surfing around your blog posts.
    In any case I will be subscribing to your feed and I hope you write
    again very soon!

    Also visit my site carslot88

  26. We stumbled over here coming from a different page
    and thought I may as well check things out. I like what I see so
    i am just following you. Look forward to going over your web
    page repeatedly.

    Feel free to surf to my homepage :: carslot88

  27. Right here is the right site for everyone who would like to find out
    about this topic. You understand a whole lot its almost hard to argue with you (not that
    I really would want to…HaHa). You certainly put a brand new spin on a topic
    that’s been written about for a long time.
    Excellent stuff, just great!

    Here is my blog; Nature Fused Cream

Leave a Comment

Your email address will not be published. Required fields are marked *