Elizabeth Warren is the first to propose a high-profile long term solution to escalating counter-productive wealth inequality.
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How to Cure Corporate America’s Selfishness
Corporations have always been “creatures of the State,” as Teddy Roosevelt once called them. But they have become a kind of Frankenstein’s monster, unmoored from their creators to wreak havoc on the countryside. Corporations no longer consider the broad public interest in making decisions, nor do they worry that the state will ever revoke their license to operate. They only consider the desires of their shareholders, which has led to record corporate profits, stagnant wages, soaring inequality, and a shrinking middle class.
On Wednesday, Senator Elizabeth Warren proposed a counterweight to this relatively recent phenomenon in American business. Her bill, the Accountable Capitalism Act, revolves around a simple idea: The government would grant corporations the right to exist through a public charter, and could use that power to put obligations on corporations to benefit the broader public rather than a small handful of shareholders.
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There’s proven evidence that this model of corporate governance can work. “Co-determination,” the term for worker representation on corporate boards, has created a form of capitalism in Germany where workers are far more equitably compensated and decisions are made with an eye toward long-term goals.
But you don’t have to look overseas. America in the 1950s and 1960s followed a model where executives and directors had a broader view of corporate responsibility. Because of structural racism and sexism, not everyone shared in its benefits. But combining a more egalitarian society with a more egalitarian corporate governance would reduce the dissonance between a more socially equal society and a more economically divided one.
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Corporate governance is the most underrated element of the modern capitalist economy. Essentially modern corporate structure
is the reason America has far more wealth inequality in Europe. Shareholders and capital are completely unbound by responsibility to anything but their bottom line in the U.S..
Even that becomes unenforceable much of the time because the CEO is often the largest shareholder (or leads a constituency that is). So if there is anyway the CEO can enrich themselves at the cost of the company's bottom line, they usually get away with that. In these situations there is literally nothing but their personal wealth considerations.
Time to replace that with a "we're all in it together" approach. Which is clearly shown to work better than the neoliberal arrangement. If you want workers to give a shit about the corporations they work for, you better give them a steak in them. And if you don't want management running business into the ground for their own enrichment, you better not incentivize them to do so.
08-16-2018, 01:09 PM
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