Elizabeth Warren to introduce bill that will 'reinvent US capitalism'
US Senator Elizabeth Warren will introduce a new government bill forcing big corporations to dedicate more of their earnings to employees and other priorities rather than the recent trend to "making the rich even richer".
The Massachusetts senator, who is seen as one of the leading Democrat candidates to run for president in 2020, plans on introducing the Accountable Capitalism Act that would make big corporations divert less of their earnings to shareholders and be more accountable to wider society.
The plan would include forcing companies with over $1bn in annual revenue to obtain a corporate charter from the government that would force them to look out for their workers’ best interests.
Historically, she wrote in an op-ed for the Wall Street Journal, “corporations sought to succeed in the marketplace, but they also recognized their obligations to employees, customers and the community.”
She said in the early 1980s, this saw large American companies sending less than half their earnings to shareholders, spending the rest on "their employees and other priorities".
But between 2007 and 2016, she said large American companies dedicated 93% of their earnings to shareholder, an "obsession with maximizing shareholder returns" that Warren said effectively means America’s biggest companies "have dedicated themselves to making the rich even richer".
Warren argues big companies chase profits regardless of the negative impact it may have on their workers, customers and the cities and towns where they operate, and when pressed about social concerns often excuse themselves with the idea that their first obligation is to do what’s right for shareholders. A new charter would remove that get-out clause, and leave executives accountable for the rights and wrongs of their own decisions.
Under the proposed charter, anyone who owns shares in the company could sue the firm if they believed the directors did not meet their obligations. Workers will also be able to elect at least 40% of the board of directors and political expenditures would have to be approved by 75% of directors and shareholders.
“Real wages have stagnated even as productivity has continued to rise. Workers aren’t getting what they’ve earned. Companies also are setting themselves up to fail,” Warren said.
The bill received some criticism complaining it would imply excessive government control.
Harvard University economics professor Jeffrey Miron told CNBC he objected to the charter "will create a whole set of new rules" which will be "messy" and "complicated".
"It's just a recipe for more crony capitalism, not for more productive capitalism," he argued.