Taking sides

Saving capitalism from itself

If American corporations are people, then they have to be—in the immortal words of Barbra Streisand—the luckiest people in the world.

Big U.S. corporations posted record profits in 2017. It’s just what they do, seemingly regardless of whether the president or Congress are Republican or Democratic, or whether or not the average working schlub is doing OK. And that’s even before Big Business reaped the billions in benefits from the new federal tax cut that’s about to explode the deficit in Washington.

The Dow Jones is still hovering near its record high thanks to a bunch of stock buybacks that are corporations’ favorite use of all those dollars lying around, since that enriches their CEOs and their wealthiest shareholders.

Very little of this remarkable windfall has trickled down to the everyday middle-class workers.

The latest evidence came recently from the

liberal-leaning Economic Policy Institute, which found that CEO pay at the biggest American corporations skyrocketed another 18 percent in 2017, to a lofty average of $18.9 million, much of that fueled by stock options and buybacks.

While CEOs have seen their salaries soar 72 percent during the comeback from the Great Recession (20092017) the average worker received a measly 2 percent raise, according to the EPI.

Some of this is all the logical end game of ideas that have become increasingly enshrined in America’s political and economic culture since the early 1970s that:

1. The only true goal of a corporation is to make the maximum amount of money for its shareholders.

2. As espoused by Mitt Romney and ratified by the U.S. Supreme

Court, corporations are people with rights that sentient human beings would love to have, with the ability to spend millions to elect a political candidate and call it free speech. Corporations may be considered “people” in 21st-century America, but that hasn’t made them good citizens, let alone the kind of person you’d like to have a beer with.

Enter Massachusetts Democratic Sen. Elizabeth Warren with the biggest and boldest idea of the 2018 midterm election season: The Accountable Capitalism Act, which essentially says that if corporations are people, those people are going to have to follow a few rules of the road so that the rest of us aren’t stuck in rush-hour traffic.

In a year where the debate between a knee-jerk defense of a kind of papal-infallibility capitalism and newish calls for a brand of democratic socialism are running second as the Big Political Story (that would be the occupant of the Whitei House), Warren’s Big Idea would split the difference. Her bill calls for new rules that would

force a return to the era of a worker-powered middle-class prosperity that benefited so many Americans in the decades after World War II.

The Accountable Capitalism Act only targets larger corporations with more than $1 billion in revenues, which would cover a few thousand companies that primarily dominate economic life in America.

Corporations covered by the bill would be required to obtain a federal charter of corporate citizenship from a new office of United States Corporations, within the Department of Commerce. That charter that would require the firm to take the interest of all stakeholders—employees, customers, and its neighbors; not exclusively the shareholders—into account.

These corporations would also be required to allow workers to elect at least 40 percent of the board of directors.

To make the kind of large political donations that have been allowed under the Supreme Court’s Citizens United ruling, the corporation would

need the approval of 75 percent of its shareholders and 75 percent of the board.

The ability of corporate executives to pay themselves handsomely through quick sales of stock would be restricted by requiring C-suite denizens to hold onto shares for at least five years and three years after a stock buyback.

This isn’t socialism. “I am a capitalist,” Warren told a CNBC interviewer. “I love what markets can do, I love what functioning economies can do. They are what make us rich, they are what create opportunity. But only fair markets, markets with rules.”

Her ideas about capitalism worked in the 1950s and ’60s for a variety of reasons, some of which can’t be replicated (the post-war weakness of Europe) and some of which shouldn’t (economic gains didn’t flow toward non-whites or promote women in the workforce). The big driver of the decline of the American middle class has been the erosion of labor unions, which once stood as a force to make sure that workers got a raise, and more equitable benefits.

There’s no way that any measure seeking to rein in the power of CEOs and corporate investors will go anywhere in the current Congress. And even if Democrats regain some measure of power in 2019 and then retake the White House in 2021, Warren’s bill is more of a conversation starter than what could ultimately emerge from the legislative meat grinder.

But it’s a conversation that needs to be had. Modern capitalism sends almost all of its benefits to shareholders even though, as Vox points out in its lengthy analysis, 80 percent of the wealth in the stock market is held by 10 percent of the population and half of Americans own no stock.

The elephant in the room is whether this is the opening salvo in a Warren campaign for the Democratic presidential nomination in 2020. A campaign should be about ideas, and this measure is a bold and worthy one.