Senator Warren Rails Against Corporations

Senator Elizabeth Warren has come out swinging against U.S. corporations with a new proposal that would force the owners of successful companies to give “at least” 40 percent of their ownership rights to employees.

“American corporations exist only because the American people grant them charters,” Senator Warren wrote in an Op-Ed published by the Wall Street Journal. “Those charters confer valuable privileges — such as limited legal liability for their owners — that enable businesses to turn a profit. What do Americans get in return? What are the obligations of corporate citizenship in the U.S.?”

The proposed legislation would require corporations with more than $1 billion in annual revenue to get a federal corporate charter, as well as consider the interests of all major corporate stakeholders — not only shareholders — in company decisions. In addition, shareholders could sue if directors fail to fulfill those obligations.

The idea, which Warren explained follows the “benefit corporation” model, is already followed by 34 states, as well as companies such as Patagonia and Kickstarter.

Warren also aims to give more power to these companies' workers. Her proposal calls for employees to elect at least 40 percent of directors. And those directors and officers would not be allowed to sell company shares within five years of receiving them — or within three years of a company stock buyback.

“For the past 30 years we have put the American stamp of approval on giant corporations, even as they have ignored the interests of all but a tiny slice of Americans. We should insist on a new deal,” wrote Warren.

It’s not surprising that not everyone is on board for the Senator’s plan, and some have even questioned her logic.

“Sen. Warren states, ‘In the early 1980s, large American companies sent less than half their earnings to shareholders, spending the rest on their employees and other priorities,’” said Professor Lawrence A. Cunningham of George Washington University, according to WSJ. “Well, no. They spent zero of their earnings on employees, since earnings is revenues minus expenses. Furthermore, if a company with earnings of $100 million spent half of that amount on dividends to shareholders and the other half on incremental wages as Ms. Warren prefers, its earnings would have been $50 million, of which 100% would have been sent to shareholders, the very thing that Ms. Warren is complaining about.”



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