Corporate Citizens, Not Sociopaths

Matt Yglesias has a long post at Vox about a bill Elizabeth Warren is introducing in the US Senate today: the Accountable Capitalism Act. We talked about it briefly in the morning thread, but it deserves its own post, IMO.

Basically, the bill seeks to overturn large corporations’ ($1B+) exclusive focus on generating shareholder value and make them accountable to other stakeholders, including workers and the communities in which they operate. From the Vox article:

Warren wants to eliminate the huge financial incentives that entice CEOs to flush cash out to shareholders rather than reinvest in businesses. She wants to curb corporations’ political activities. And for the biggest corporations, she’s proposing a dramatic step that would ensure workers and not just shareholders get a voice on big strategic decisions.

Warren hopes this will spur a return to greater corporate responsibility, and bring back some other aspects of the more egalitarian era of American capitalism post-World War II — more business investment, more meaningful career ladders for workers, more financial stability, and higher pay…

The conceit tying together Warren’s ideas is that if corporations are going to have the legal rights of persons, they should be expected to act like decent citizens who uphold their fair share of the social contract and not act like sociopaths whose sole obligation is profitability — as is currently conventional in American business thinking.

The article has a lot more details about the plan and the history behind it. Warren published an op-ed in the WSJ about the bill yesterday, but it’s behind their paywall.

Now, there are potted zinnias that are more conversant in economics than I am, but this sounds like a damn good idea to me. It has no chance of passing in the circle of hell that is the Trump administration and GOP-controlled US Congress, but maybe it has potential as an idea Democrats could get behind in the midterms and 2020.

What do y’all think?

170 replies
  1. 1
    Corner Stone says:

    What do y’all think?

    I think it will make a ton of money for lobbyists who will be paid to defeat or defang it if it ever actually sees the light of day.

  2. 2
    dmsilev says:

    Warren published an op-ed in the WSJ about the bill yesterday, but it’s behind their paywall.

    Ironic.

    That aside, it’s a good idea even if it doesn’t have a prayer of becoming law until Democrats control both houses and the Presidency. It’s well worth putting it out now though, as a statement of beliefs and intent.

  3. 3

    She is right. What I want to know is when did this change take place and what regulations were bypassed to make this happen? (Relentless focus on shareholder value).

  4. 4
    Geoboy says:

    Wow is this long overdue! You go, Elizabeth!

  5. 5
    germy says:

    Basically, the bill seeks to overturn large corporations’ ($1B+) exclusive focus on generating shareholder value and make them accountable to other stakeholders

    I predict the GOP will portray this (in campaign ads, etc.) as an “attack on small Mom & Pop businesses”

  6. 6
    comrade scotts agenda of rage says:

    One of the most succinct critiques of the fallacy of “maximizing shareholder value” (thank you Milt Fucking Friedman):

    https://www.washingtonpost.com/news/wonk/wp/2013/09/09/how-the-cult-of-shareholder-value-wrecked-american-business/?utm_term=.415b7069306f

    The good Senator from MA simply wants to take us back to the 1950s…in a good way.

    Another good read on the issue:
    https://www.washingtonpost.com/opinions/harold-meyerson-the-myth-of-maximizing-shareholder-value/2014/02/11/00cdfb14-9336-11e3-84e1-27626c5ef5fb_story.html?utm_term=.31ce1509e737

  7. 7
    Le Comte de Monte Cristo, fka Edmund Dantes says:

    Two other things:

    1. Corporations are pure creatures of government. They don’t exist without explicit statutory authority, and their political excesses can and should be curbed at the state level and with regard to tax policy. I’d like to see that addressed.

    2. One of the biggest elephants in the room – the thing that degrades both commercial and political speech – is our national tendency to coddle bullshit. There’s an opinion of SCOTUS approving merchandising claims as “mere puffery” that shouldn’t be subject to restraint or action. I’d love to see there be a change on that.

  8. 8
    WereBear says:

    I think it is made of awesomeness.

  9. 9
    Anonymous At Work says:

    The bill could be called, “How to be a Corporate Mensch”. The biggest impediment, as someone taught from SPW’s law school textbooks on the subject, is that corporations have a statutory duty (with stockholder lawsuits to enforce it) to make as much money as possible for stockholders only. Matt-Y correctly identifies it as a crutch.
    This is a good bill to show why expertise in legislating and governance is an important skill (and why term limits are a crappy idea).

  10. 10
    dp says:

    It is a brilliant idea and something I’ve thought about for a long time. Corporate executives have a fiduciary duty to shareholders, which tends to blind them. If you extend that duty to other stakeholders — and, as importantly, MAKE IT ENFORCEABLE and not just lip service — that would solve a great many ills.

  11. 11
    tobie says:

    Interesting topic. Thanks for the link. I’ve always wondered if it was Reagan who ushered in the “tax reforms” that made it easier for businesses to turn their profits over to shareholders rather than reinvesting in the business (be in equipment, fringe benefits, pension funds, raises, etc.), which used to be the thing you would do to avoid paying taxes. Need to read Warren’s piece.

  12. 12
    mr gravity says:

    Maybe Wells Fargo could go back to being a bank. Contradiction in terms?

  13. 13

    Quick: why did De Gaulle resign? It was not because he was demoralized by the events of 1968; he didn’t leave until a year after that. It was because his own party (notably the Prime Minister and heir-apparent, Pompidou) would not back him in a referendum on “participation”, i.e. the kind of worker-input scheme that Warren is dabbling with. All respect to the Senator, who is a formidable lady in every way, but I don’t think she is up on her history on this one. Not only will Republicans oppose it, but also (if it appears to be heading towards taking an effective form) all but a tiny handful of Democrats. On the other hand, it is exactly the kind of thing that Steve Bannon ought to support — if he ever spoke truth.

  14. 14
    chris says:

    A companion piece posted by Kay in the morning thread. “Filthy rich” (his own words) Nick Hanauer makes the case for “far left” policies by defining the actual political centre.

    The Democratic Party must reclaim the political center. And the only way to do that is by boldly moving toward the so-called “radical” left.

  15. 15
    les says:

    Germany has long done this; VW tried it in (I think) a planned plant in Tennessee, the state leg said if you try it, get out. It’s pure common sense, so impossible in the U.S.

  16. 16
    Belafon says:

    I’ve often wondered why Democrats haven’t tried to overturn the Supreme Court ruling that the job of a company is to maximize shareholder value.

  17. 17
    Jeffro says:

    I like the idea that corporations would have to curb or possibly even eliminate donations to PACs and candidates (NOTHEY’RENOT‘PEOPLETOO’MITTROMNEY!!! They’re supposed to be vehicles of convenience, not engines for escaping accountability!) Warren is going the wrong way, though – how does society (and who in society) will definite a ‘responsible’ corporation? What does a CEO have to do to prove she’s “considering” the views of the community, or working towards goals other than profit? Just quit pretending they’re people, and take away some of those made-up “rights” that damage our society.

    This part is unworkable, too:

    Warren wants to create an Office of United States Corporations inside the Department of Commerce and require any corporation with revenue over $1 billion — only a few thousand companies, but a large share of overall employment and economic activity — to obtain a federal charter of corporate citizenship.

    The charter tells company directors to consider the interests of all relevant stakeholders — shareholders, but also customers, employees, and the communities in which the company operates — when making decisions. That could concretely shift the outcome of some shareholder lawsuits but is aimed more broadly at shifting American business culture out of its current shareholders-first framework and back toward something more like the broad ethic of social responsibility that took hold during WWII and continued for several decades.

    Business executives, like everyone else, want to have good reputations and be regarded as good people but, when pressed about topics of social concern, frequently fall back on the idea that their first obligation is to do what’s right for shareholders. A new charter would remove that crutch, and leave executives accountable as human beings for the rights and wrongs of their own decisions.

    So…right intent, wrong way to do it. Just fight back against the Rs’ and CEOs’ framing that corporations are “people” in full, regulate activities/products, and tax them accordingly. Only individuals should be able to make political donations, and even then, the annual total limit should be indexed to some small % of what a full-time minimum wage earner makes. Money Is Not Free Speech, and Corporations Don’t Vote, People Do.

  18. 18

    @Le Comte de Monte Cristo, fka Edmund Dantes:
    1. The last American economy (1941 — some time between 2000 and today) was based on Government procurement. The next American economy will be based upon food export, full stop.
    2. There is nothing to be gained by regulating commercial “speech”. The problem with marketing is that it works. As long as this is true, no good outcome is attainable.

  19. 19
    eric says:

    @Belafon: Allow me to give it a try. The more stakeholder classes you create, the more competing interests a Board (and officers) must weigh. The more classes to whom you owe duties, the more constituencies that can sue you for breach of fiduciary duty. You would have to create a more robust “business judgment rule” to stop litigation earlier. The problem then becomes what if the Board favors shareholders over other stakeholders in a particular instance. As someone who represents fiduciaries, this makes me nervous; as someone who believes that shareholder value is far too narrow a metric for corporate governance, I am pleased. I just think it might be trickier in practice than in theory (notwithstanding what the Germans do).

  20. 20
    gene108 says:

    @schrodingers_cat:

    What I want to know is when did this change take place and what regulations were bypassed to make this happen? (Relentless focus on shareholder value).

    The rise in popularity of Agency Theory as means to align executives actions with the interests of ownership (i.e. shareholders). My understanding is what this ended up doing is getting executives paid with stock options. There wasn’t any real regulatory change in this regard that triggered this. Just research from business school professors being applied to businesses.

    The second big thing to trigger change, was a regulatory shift, in the 1980’s that opened the door for a lot of M&A activity, which in the past would have not been greenlighted by regulators. This lead to corporate raiders, junk bonds used to buy companies, etc. that basically changed how companies operated. They went from some concern for workers to just maximizing value to avoid takeover attempts.Den of Thieves is a good read into the shift in Wall Street culture that occurred during the Reagan years.

  21. 21
    kindness says:

    Of course most all of us are going to support Senator (Professor) Warren on this bill. The problem is that until a Democrat is running the Senate again this bill will never be scheduled for a floor vote.

    That doesn’t mean Senator Warren shouldn’t do this. It means we all get this is a Democratic position point and that nothing will come of it until new elections create new facts on the ground in the Senate, House & Executive.

  22. 22
    Betty Cracker says:

    @Jeffro: While I agree with your framing (corporations aren’t people, and money isn’t speech), I’m not convinced Warren is misguided. Seems like she’s trying to work within the legal framing we’re stuck with, at least for the foreseeable future.

  23. 23

    @gene108: I know about Jensen’s Agency theory, what I want to know is what laws and regulations were changed to make this a reality.

  24. 24
    MattF says:

    I think there was a turning point when upper-level managers were given stocks or stock options as part of their compensation. The theory was that they’d then be motivated to make the company grow and be more profitable. What actually happened is that they were motivated to make the stock go up. Oops.

    It occurs to me, fwiw, that I may be confusing cause and effect here.

  25. 25

    @schrodingers_cat: “…what laws and regulations were changed^H^H^H^H^Hdisregarded…”

    TIFIFY

  26. 26
    Droppy says:

    If corporations are people, then I’m all for backing the death penalty and knocking off the biggest murderers and terrorists. Isn’t the death penalty supposed to be a deterrent? Let’s test that theory, beginning with private equity firms, gun manufacturers, and Wells Fargo.

  27. 27
    Anonymous At Work says:

    @chris: He aims to be the world’s last billionaire in case the revolution comes. Not doing a bad job.

  28. 28
    chopper says:

    so basically this bill aims to take the ‘douche’ out of ‘fiduciary’.

  29. 29
    ByRookorbyCrook says:

    This is a scaffold to build the future on. Yes, the Repugs are going to call this soshulizm and never speak of it while they hold the Senate, but it creates a platform to talk about legislation to better the American economy to be a more fair and balanced entity. Corporate citizenship, anti-corruption and equality for all, sounds like a pretty good platform.

  30. 30

    Warren has identified the problem correctly of what ails the economy, as for her solution, since I cannot read the op-ed, I have no way to judge whether it is feasible or not.

  31. 31

    @schrodingers_cat: Zoom out. The problem is unaccountability, NOT any particular manifestation (or combination thereof) of unaccountability.

  32. 32
    trollhattan says:

    Release it into the public discourse and see if it captures peoples’ imaginations and takes hold. Dems have damn few “simple” ideas to champion–instead spending vast amounts of energy in defining and describing every branchlet in a vast politics bush–while Republicans merely chant “lower taxes, less gummint, kick out furriners, buy moar jets” because it’s good enough for the tiny Republican voter brain.

    “Corporate fiscal accountability” sounds as achievable as “singlepayer healthcare” to me. And it will scare Republicans and corporate drones.

  33. 33
    Ramalama says:

    A long time ago, I took a course called “Persons and Things” by Barbara Johnson where discussion of corporations as persons was delved into. It was an English class. I wonder if there was / is a lot of cross pollination between various depts at Harvard, and whether or not Johnson influenced Warren.

    Johnson was one of the mothers of deconstructionism. Which sets everyone’s tiny hairs on fire.

    Here’s to more burnt hair smell with Warren’s bill.

  34. 34

    @Frank Wilhoit: Can you clarify your response? Who is being unaccountable and to whom? Do you speak of government agencies or corporations. It is not clear. Or you can answer this, what would accountability look like?

  35. 35
    NonyNony says:

    @MattF:

    The theory was that they’d then be motivated to make the company grow and be more profitable. What actually happened is that they were motivated to make the stock go up. Oops.

    No oops – it was intentional. You make the stock price go up, current shareholders win. Current shareholders sell out, make a ton of money, and are happy. You make sure that upper management are in that group and everyone is happy.

    Except for the folks who bought high and find themselves selling low after a crash, of course. But those folks are suckers so who cares?

    Our current “shareholder value” model is just the “bigger sucker theory” as a market model.

  36. 36
    TenguPhule says:

    What do y’all think?

    Even if we could get into law, legal precedent doesn’t work in our favor here. The legal standard that all corporate officers must do everything possible to make more money for the shareholders was defined by the courts in the first place.

    Supreme Court will throw it out, 5 to 4.

  37. 37
    🇺🇸🌎 Goku (aka Amerikan Baka)  🗳🌷 says:

    @TenguPhule:
    This will probably happen a lot. Doesn’t mean we shouldn’t try anyway. Is there any prohibition on passing and signing into law again a bill that has already been declared unconstitutional, thereby making it “law” again? The new lawsuits would have wind their way through the courts again.

    ETA: I’m guessing this isn’t possible or else it would have been used already.

  38. 38
    TenguPhule says:

    @schrodingers_cat:

    What I want to know is when did this change take place and what regulations were bypassed to make this happen? (Relentless focus on shareholder value).

    Dodge vs. Ford Motor Company.

    Later rulings went against this decision in the 1960s, unfortunately the damage was already done and this case is still the most well known excuse used for corporate dickishness in pursuit of profit.

  39. 39
    Ruckus says:

    This is what I’m talking about.
    Most corps exist to make a profit and protect the owners/employees from lawsuits of a frivolous nature. The US has given them too much freedom and ability to do this. The system is out of balance. This bill sounds like an answer to start the process of rebalancing the people – corp balance, because the needs/desires of both are opposite.

  40. 40
    Jeffro says:

    @chopper: win.

    Wait, no…WIN

  41. 41
  42. 42
    VincentN says:

    @TenguPhule: If we could get this into law, doesn’t that by definition overrule legal precedent? I mean, yeah, the Supremes could overturn it anyway but your first sentence doesn’t make sense as a principle. Because the current legal standard for corporations is not a constitutional requirement so it can be overruled by statute.

    ETA: I don’t know the caselaw on this so maybe I’m missing something.

  43. 43

    @NonyNony: I think you’ve identified the problem correctly, it’s short term shareholder value. Long term shareholder value would tend to take into account for other stakeholders. I’m not sure Senator Warren’s proposal is the best solution, I think tax policy(transaction tax and more preferential treatment for long term stock ownership) would be a better fit.

  44. 44
    TenguPhule says:

    @🇺🇸🌎 Goku (aka Amerikan Baka)  🗳🌷:

    Is there any prohibition on passing and signing into law again a bill that has already been declared unconstitutional, there by making it “law again?

    Depends. How do you like your Constitutional Crisis? Hard boiled or over easy?

  45. 45
    rikyrah says:

    they won’t leave our children alone!

    This is absolutely infuriating.

    This sharp young Black boy, clean as ever, gets kicked out of school because he has dreads.

    His father rightfully struggles to maintain his emotions at the disappointment of it all. pic.twitter.com/WOpUGLqg8l

    — Shaun King (@shaunking) August 15, 2018

  46. 46
    🇺🇸🌎 Goku (aka Amerikan Baka)  🗳🌷 says:

    @rikyrah:

    This sharp young Black boy, clean as ever, gets kicked out of school because he has dreads.

    Were the dreads against school dress code policy?

  47. 47
    lollipopguild says:

    I do not see this as ever passing or being enforceable but a lot more talk in the public square by Democrats about how corporations Should act in the public interest and less like pirates could really changes voters minds, which is how you get real change.

  48. 48
    TenguPhule says:

    @VincentN: Original case was in 1919. The cases that made the standard more broad were in the 1950-60s. Between them. the “profit above all else” mythos for business pretty much entrenched and solidified into public perception. You’d have to ask the lawyers here, but for laypersons, the Dodge case is still the default belief about corporate responsibility.

    Shlensky v Wrigley

    AP Smith Manufacturing Co v Barlow

    Also, the basic standard “maximize shareholder value” is still there, the later cases simply broadened the definition of how that could be done.

  49. 49
    TenguPhule says:

    @🐾BillinGlendaleCA:

    I think tax policy(transaction tax and more preferential treatment for long term stock ownership) would be a better fit.

    I think we’d need to execute a few corporations to get the rest to fall in line.

  50. 50
    Elizabelle says:

    How long until the WSJ article is beyond the paywall? A few days? Can’t pull it up with the usual tricks.

    Might read it at the library.

    Problematic to have a paywall for an important article, because the “narrative” will be set before we get to read it ourselves and judge the writing and arguments.

    Recall how we used to watch an MSNBC Obama speech, in full, and then there was Andrea Fucking Greenspan with the view from Mars right after. Her didn’t listen to the same speech, apparently, and her didn’t care. But was paid for it.

  51. 51
    TenguPhule says:

    @VincentN:

    Because the current legal standard for corporations is not a constitutional requirement so it can be overruled by statute.

    Have you seen the five Republicans on the Supreme Court? Of course they’ll make shit up in the Constitution to justify it.

  52. 52
    Adam L Silverman says:

    @Betty Cracker: Unless Warren’s bill get’s rid of LLCs, and prevents large corporations from registering as S Corp small businesses, which many do, her bill won’t work. It also will never pass in the Senate no matter how few GOP members are in the Senate.

  53. 53
    LAO says:

    I see that this is O/T — I’m sort of fuming here. It looks to me like the AUSAs made a classic mistake today at closing by only reserving “17 minutes” for their rebuttal summation. According to the post —

    Ellis said Andres had saved 17 minutes for rebuttal, but the judge added that he would not be “draconian” about the time limit.

    Grr! he should have saved 30 minutes.

    Other than that — legal people on the twitter seem to have like his closing. (NB — I really, really dislike Andres).

  54. 54
    rikyrah says:

    Gates may have answers to Trump inauguration money mystery

    Rachel Maddow shares an observation by the AP about questions that came up in the trial of Paul Manafort about whether Manafort’s assistant Rick Gates stole money from the Trump inauguration fund may be a clue to where that money went.

  55. 55
    TenguPhule says:

    @Betty Cracker:

    Seems like she’s trying to work within the legal framing we’re stuck with, at least for the foreseeable future.

    The problem is that shareholders who benefit from the current set of laws will sue for breach of duty under Warren’s proposed law. They won’t have a choice about it. And that will lead to a bucket of worms over which set of shareholders is more equal then others.

  56. 56
    Doug R says:

    I’m sensing a wedge here with the proper framing. Obviously bad corporate governance interferes with our rights-this is just ensuring corporations don’t violate our rights.

  57. 57
    TenguPhule says:

    @schrodingers_cat: You’re welcome.

  58. 58
    TenguPhule says:

    @rikyrah:

    Rick Gates stole money from the Trump inauguration fund may be a clue to where that money went.

    There is no way he stole all of the money. But he probably knows where it was siphoned off to.

    “Looks at big neon sign pointing at Trump LLC”

  59. 59
    rikyrah says:

    Mueller’s prosecutors push back against judge in Manafort trial

    Josh Gerstein, senior reporter for Politico, talks with Rachel Maddow about a tense exchange between the prosecution and the judge in the Paul Manafort trial, and some questions that remain unanswered as the trial comes to a close.

  60. 60
    rikyrah says:

    Manafort trial exposes corrupt workings of Trump transition

    On the day the defense rested in the trial of Donald Trump’s former campaign chairman Paul Manafort, Rachel Maddow looks at how evidence in the trial also offered a window into how the Trump transition gathered names for jobs in the new administration.

  61. 61
    Elizabelle says:

    Maybe we can have this discussion again in a day or two, whenever the full text is available for us to read?

  62. 62
    rikyrah says:

    @TenguPhule:

    I can’t believe that Maddow is the only one pointing this out.

    Told you that it was nothing but a big slush fund.

    MILLIONS are unaccounted for – and that’s after the $26 million given to the Party Planner for Birther Trophy Wife.

  63. 63
    Starfish says:

    Thank you for posting something that was not the Berner’s trying to beat up on Tom Perez yet again.

    Adam, the rules would only apply to corporations that have $1 billion or more.

  64. 64
    Zelma says:

    I haven’t read the details of Warren’s proposal, but I think that there is one relatively simple change that could be made. (Or maybe two.) The second is a small tax on shares sold. The first is a tax system that taxes profits from the sale of shares based on the time a stock is held. Keep it under a year, taxed as regular income. And then a sliding scale starting at the old capital gains rate down to the new one for shares held over five years.

    The current stock market no longer performs its supposed task of providing capital for a business. It’s a casino and a rigged one at that.

  65. 65
    TenguPhule says:

    @rikyrah:

    I can’t believe that Maddow is the only one pointing this out.

    Told you that it was nothing but a big slush fund.

    MILLIONS are unaccounted for – and that’s after the $26 million given to the Party Planner for Birther Trophy Wife.

    For what its worth, I agreed with you at the time, still do.

    Too many scandals in such a small amount of time.

    I mean shit, we still have to talk about the crowd size lies because that stupid fucker Trump still keeps bringing it up.

  66. 66
    TenguPhule says:

    @Starfish:

    the rules would only apply to corporations that have $1 billion or more.

    Corporations can have other businesses like LLCs as a unitary company, which technically are considered separate companies of their own except for certain taxes. Very easy to move the money around so there are a bunch of $999 million dollar companies on paper.

  67. 67
    different-church-lady says:

    Well, in the context of sociopaths, I’m beginning to doubt the wisdom of people having the legal rights of persons.

  68. 68
    Betty Cracker says:

    @Elizabelle: Wouldn’t be surprised if Anne Laurie posts about it — I know she follows Senator Warren closely.

    @Starfish: I must’ve missed that kerfluffle. Not gonna look for it either!

  69. 69
    Aleta says:

    At least for the moment, you can read Warren’s op ed by going to her twitter and clicking on the link she gives to the article.
    https://twitter.com/SenWarren/status/1029726225873477632
    Or if that fails, click it from her main twitter page.

    (I’m not using correct vocab in this question)
    Recently I noticed Balloon Juice is using a kind of storage (storage location or cookies –not sure of what term) that I haven’t seen it use before. Before this, only a few big commercial sites –real estate or big news orgs — have put tracking devices on my computer in the Indexed Databases. (In Safari, you can find what is stored there by going to Finder and then going to ~/Library/Safari/Databases ) Until now I’ve only seen Balloon Juice’s use of local storage, cache or cookies. Is this something new, or being used for diagnostics or the site redesign? Or required by new advertisers?

    I don’t have that type of understanding that’s called “accurate” : ) — the only thing I understood before now is that that db location is used by other sites for tracking and perhaps data collection.

  70. 70
  71. 71
    SRW1 says:

    @Adam L Silverman:

    Arriving at the conclusion ‘Eigentum verpflichtet’ (Ownership comes with obligations) took Germans experiencing Nazism and losing WW II. I suspect the hurdle in the US Senate is somewhat comparable in height.

  72. 72
    piratedan says:

    given the myriad problems with how “business” is being performed in this country, I’m all for Warren putting this out there. Sure, we can pick it apart and say that this won’t work or that could be modified or whatnot, what’s important is to start to have the conversation that maybe, just maybe, we shouldn’t be bestowing upon businesses a certain corporate personhood without outlining what the ever loving hell that means. As adults, we’re compelled to follow certain rules to live in a supposedly civilized society, I see no reason not to expect the same of businesses. Gotta start somewhere…

  73. 73

    Then again, we could just wait for the meteor.

    ETA: …or two.

  74. 74
    WhatsMyNym says:

    @Frank Wilhoit: Do you mean the 1969 French constitutional referendum for government decentralization and reform of the Senate?
    What does that have to do with business accountability?

  75. 75
    Cacti says:

    I think it would be a fustercluck.

    Different stakeholders have disparate and often materially adverse interests to one another. Mandating an equal fiduciary duty to all of them puts the fiduciary in an impossible situation and would invite an endless torrent of conflict of interest litigation.

    On a smaller scale, imagine one lawyer trying to represent both the husband and the wife in a contested divorce. It just doesn’t work.

    Frankly, I’m surprised that a trained lawyer like Warren would think it was workable.

  76. 76
    burnspbesq says:

    No issues with most of the substance. Given that corporation law has been the exclusive province of state legislatures for a very long time, might as well start preparing for the Commerce Clause challenges now.

  77. 77
    Mnemosyne says:

    @🇺🇸🌎 Goku (aka Amerikan Baka)  🗳🌷:

    Ethnic hairstyles are frequently against a school’s dress code policy. But they insist that it’s race-blind — any white student with dreads or braids would be totally kicked out, too. 😒

  78. 78
    Betty Cracker says:

    @Aleta: In addition to claiming abject ignorance of the fundamental principles of law, math and economics, I also plead clueless about how cookies operate on this or any other site. But there’s a link to contact Alain in the sidebar — he would know!

  79. 79
    Mnemosyne says:

    @piratedan:

    Republicans have an entire thinktank (ALEC) that writes their preferred legislation and has it ready to go as soon as they get into power.

    We need to be doing the same thing, and this bill of Warren’s is a step in the right direction.

  80. 80
    WhatsMyNym says:

    @Zelma:

    The current stock market no longer performs its supposed task of providing capital for a business. It’s a casino and a rigged one at that.

    Actually it’s easier and safer than it has ever been to make a small profit with our stock and bond markets. Thanks to the internet and indexed funds, it’s cheaper to trade and you have better access to realtime info.
    If you think you’ll make a fortune overnight, you will get burned.

  81. 81

    @schrodingers_cat: The immediate problem is that [big] business has been placed effectively above the law. This problem is urgent as it leads to the discredit of institutions.

    The larger problem is the structural perversity of business incentives.

    These two problems are not separated in the public discourse, as is shown by the strand of thinking that says, it would be all very well for business to pursue shareholder value if they could somehow be constrained to do it within the law. In the first place the authority of the law has been so degraded by disuse that it cannot be incrementally restored. In the second place there is no possible overlap between the interests of shareholders on the one hand and those of customers and employees on the other hand. These interests are in total structural conflict and that is why capitalism has no potential validity even within a (hypothetical!) environment in which sovereign institutions were able to enforce the law.

    But there is no understanding of these latter points and will not be for a long time, at best. The immediate need is to sweep away failed institutions and replace them with new ones that could start out with some credibility and effectiveness.

  82. 82
    TenguPhule says:

    @piratedan:

    we’re compelled to follow certain rules to live in a supposedly civilized society

    First, we’re probably going to have to make sure this is once again true. The rule breakers have gotten out of hand and their example is hurting everyone.

  83. 83
    Elizabelle says:

    I still can’t read the WSJ article no way, no how. But when I see that the yucks at Reason have come up with this title for a blogpost on her ideas

    Elizabeth Warren Plans To Destroy Capitalism By Pretending To ‘Save’ It
    Warren’s plan would overrule corporate leaders’ control over their own businesses. This is also known as “socialism.”

    She must have some good ones. LOL.

    You know, I think it’s great to come up with ideas to restart and reframe the conversation. I don’t appreciate the naysayers out in full, on this blog too. Cool your jets.

    Regulated capitalism can be good. Predatory capitalism, which we have now, is an evil. I appreciate Professor/Senator Warren coming up with what might be a good and workable idea. She is solid in her grasp of how our system actually works.

    When we are finally able to access the article on the WSJ site, it will be fascinating to see their reader comments. Most will be trolls and dreck, but there might be some good points made too.

  84. 84
    The Dangerman says:

    i’ll have to read more but, on limited caffeine this AM, this screams “path to Hell” and “good intentions”. Back to the drawing (and quartering) board.

  85. 85
    Formerly disgruntled in Oregon says:

    @Zelma: Those are good proposals, and I think they would be more politically palatable than Warren’s grand vision. And “tax the rich” is a simple, winning message, IMHO.

  86. 86

    This blatant attempt to make capitalism work for everyone will not play well with rose twitter.

  87. 87
    Spanky says:

    @Cacti:

    Frankly, I’m surprised that a trained lawyer like Warren would think it was workable.

    There’s zero chance this bill will see the light of day in a Republican-controlled Senate, let alone be signed by the shitgibbon. She’s putting it out now to get the conversation started in the public sphere at a time when Democratic ideas are ascendant.

    Where it goes from here is very much in question, but the fact that it’s being kicked around is what’s important right now.

  88. 88

    @WhatsMyNym: De Gaulle’s original plan was to hold a referendum on participation. Pompidou scotched that. Lacouture, De Gaulle: The Ruler, 1945-1970, p. 561. The referendum that was eventually held on a different topic was a continuous postponement of the one originally proposed for 1968; in De Gaulle’s mind, it was the same popular vote-of-confidence that it would have been if held earlier — and really on any topic of his choosing.

  89. 89
    Mike J says:

    @Zelma:

    Keep it under a year, taxed as regular income. And then a sliding scale starting at the old capital gains rate down to the new one for shares held over five years.

    You could start the clock at 15 minutes instead of a year and solve a lot pf problems. You could probably start it at 5 seconds.

  90. 90

    @TenguPhule: There is no “once again”. When something like that has been degraded, it cnanot be incrementally repaired. There must be a fresh start, a complete break of continuity.

  91. 91
    Another Scott says:

    @Elizabelle: Go to her tweet, then click on the wsj.com link at the bottom of it. You’ll be able to read the whole thing that way.

    At least that worked for me.

    Good luck!

    Cheers,
    Scott.

  92. 92
    terraformer says:

    To me, the single most important – and effective – legislation is campaign finance reform. Everything touches on campaign cash to politicians at one level or another. A big part of that is overturning Citizens United, but there’s more to it.

    I like how New Zealand (and a lot of other first-world countries) does it: publicly financed elections, where political ads are only allowed to run one month prior to an election. No other contributions (monetary or otherwise) can be made to politicians. (Imagine how they could focus their time on the issues facing their constituents instead of spending most of it fund-raising.)

    Just about every problem we have today can be traced to private money going to politicians. Remove that, and we just might be able to save ourselves before it’s too late…

  93. 93
    TenguPhule says:

    @Elizabelle:

    I don’t appreciate the naysayers out in full, on this blog too. Cool your jets.

    Regulated capitalism can be good. Predatory capitalism, which we have now, is an evil. I appreciate Professor/Senator Warren coming up with what might be a good and workable idea. She is solid in her grasp of how our system actually works.

    Right idea, wrong tool. Easier and probably more legal to pass a “Just don’t be an asshole” bill requiring Corporations to just not be assholes.

    As I and others have mentioned, what Warren is currently proposing is a nice thought experiment, but its not serious legislation.

  94. 94
    TenguPhule says:

    @terraformer:

    Just about every problem we have today can be traced to private money going to politicians. Remove that, and we just might be able to save ourselves before it’s too late…

    And who will bell the fat cats?

  95. 95
    Elizabelle says:

    @Another Scott: Thanks, but does not work for me. Appreciate the assist, though.

    Suspect I’d have to clear some cookies, but don’t want to do that just now …

  96. 96
    Booger says:

    @comrade scotts agenda of rage: Yes, this BS about “Stockholders now, Stockholders tomorrow, Stockholders FOREVER” which got traction in the ’70 played a large part in the decline of the U.S. as a society.

  97. 97

    @TenguPhule: Ah, beat me to it.

    I’ll accept corporations as people when Texas executes one.

  98. 98
    Corner Stone says:

    We are a total Banana Republic at this point. Trump has revoked the security clearance for ex CIA Dir John Brennan.

  99. 99
    James from Nashville says:

    @schrodingers_cat: I blame Regan

  100. 100
    Mike J says:

    @Elizabelle: (quoting “Reason” (sic))

    Warren’s plan would overrule corporate leaders’ control over their own businesses. This is also known as “socialism.”

    Since the 50s Republicans have said that anything that makes people’s lives better is socialism. Now they wonder why people have an increasingly good opinion of socialism.

    They believe you.

  101. 101

    @Elizabelle: Capitalism cannot be regulated, except perhaps under a hypothetical political system utterly different from ours in its motivations and its manifestations. Capitalism is inherently and purely transgressive: that is why it “works” insofar as it does, and simultaneously why it does not work, insofar as it does not. It is also, crucially, the emotional driver of its participants. Make capitalism accountable, as a thought experiment, and all of its current participants would walk away disgruntled, looking for something unaccountable to do.

  102. 102
    LAO says:

    @Corner Stone: This is a profound hissy fit.

    Trump also is reviewing security clearances of James Clapper, James Comey, Michael Hayden, Sally Yates, Susan Rice, Andrew McCabe, Peter Strzok and Lisa Page. What do they have in common? They're political critics of Trump. Looks like a Trump blacklist.— Philip Rucker (@PhilipRucker) August 15, 2018

    Also, sort of meaningless in reality since none of the parties are currently receiving intelligence briefings.

  103. 103
    Corner Stone says:

    @BruceFromOhio: We already did. I recently peed on the grave of Arthur Andersen. Of course, Phil Mickelson then walked past wearing an Accenture cap so some of the joy was removed. But not all.

  104. 104
    Elizabelle says:

    @Mike J: Americans are traveling a bit more too. Seeing that Europe is not the overtaxed hellholes that we are told …. uh yeah, why is it we can’t have nice things again? Maybe you folks don’t actually know what you are talking about?

  105. 105
    LAO says:

    @Corner Stone:

    Not on the list: Gen Michael Flynn, who pleaded guilty to making false statements to the FBIhttps://t.co/1mJsR0YCZA— Jake Tapper (@jaketapper) August 15, 2018

  106. 106
    tobie says:

    @Corner Stone: The headline should be: Trump has revoked the security clearance of a patriot, so he can continue to destroy this nation from without with the aid of Putin and from within with the aid of greedy, unscrupulous bastards like himself. I guess all this means is that they’re scared shitless by Omarosa and trying any publicity stunt to change the media narrative.

  107. 107
    Elizabelle says:

    @LAO: It’s theatre. Anything to get Omarosa and the N-word off the top of the twitterverse.

    PS: Hello to Maggie dog. Hope all is well. Weren’t you recovering from something too? I might have my commenters mixed up …

  108. 108
    WhatsMyNym says:

    @Frank Wilhoit: Sooo he never held a Referendum on corporate accountabilty, which is the subject that Sen. Warren’s Bill would cover. And we have no idea how the French would have voted on it.

    In 1969, De Gaulle was 79 and he died the next year.

  109. 109
    Another Scott says:

    @Elizabelle: You could try a “private browsing” tab/window to get rid of the cookie issue.

    Cheers,
    Scott.

  110. 110
    Mnemosyne says:

    @Frank Wilhoit:

    Capitalism cannot be regulated, except perhaps under a hypothetical political system utterly different from ours in its motivations and its manifestations.

    You mean, like, Sweden? Or France? Or Germany? Or Switzerland? They all have capitalist systems that are not nearly as fucked-up as ours, because they regulate their companies and don’t let them run hog-wild. The US used to do the same, until Reagan took charge.

    Laissez-faire capitalism is not the only form of capitalism possible. Pretending that it is only plays into the hands of the bad actors.

  111. 111
    LAO says:

    @Elizabelle: erratic conduct and behavior. If only that were the standard for impeachment.

    BREAKING: @POTUS revokes security clearance of former @CIA Dir @JohnBrennan "Any benefits that senior officials might glean from consultations w/Mr. Brennan are now outweighed by the risks posed by his erratic conduct & behavior" per statement read by @PressSec pic.twitter.com/zQmh5sU5YA— Jeff Seldin (@jseldin) August 15, 2018

  112. 112
    Mike J says:

    @LAO: There is a non-zero chance that he thought he was revoking Jake Tapper’s security clearance when he revoked Clapper.

  113. 113
    LAO says:

    I’m in moderation. Not sure why?

  114. 114
    Matt says:

    Historically, there was a simple mechanism keeping “shareholder value” and “workers’ interests” aligned: unions. Not much value gets generated if a strike happens.

  115. 115
    eric says:

    @LAO: Oh, I think you know.

  116. 116
    Corner Stone says:

    @tobie: I’m not a big fan of Brennan but this just reeks of petty.

  117. 117
    dww44 says:

    @Elizabelle: Fettered Capitalism is far better than unfettered capitalism and we’ve been moving towards the latter for some time. I worked in the local office of a national brokerage firm for almost 30 years and saw many a market correction, almost always precipitated by one or more segments of the economy and/or Wall Street run amuck, largely thanks to the insatiable greed of corporations and investors alike.

    Wise and prudent regulations are a necessary tool to protect the larger economy and the little guy who has little leverage in our capitalist system. We don’t need to let the other side get away with the framing that regulation in and of itself is evil. It isn’t and it never has been. All they have is verbiage and we need to regularly deploy some in support of regulation.

  118. 118
    Corner Stone says:

    @eric: She knows what she did.

  119. 119
    tobie says:

    @Elizabelle: Wikipedia has a table of comparative global tax rates. The US is actually a high tax nation. Granted, it’s the middle class who don’t have tax shelters and unreported income who pay through the nose. And if you live in New Jersey or New York or a city like Baltimore, you’re hit not only with state tax but also high property tax, which is minimal throughout the EU. (My friends in Ireland, France, and Germany pay about 300 Euros in property tax annually.) The treasury spends our money on a bloated military. That’s why we can’t have nice things, as far as I can tell.

  120. 120
    TriassicSands says:

    @Mike J:

    Since the 50s Republicans have said that anything that makes people’s lives better is socialism.

    A small, but significant correction:

    Since the 50s Republicans have said that anything that makes middle-class and poor people’s lives better is socialism. (Which is just another name for communism.)

    Anything that improves the weath of the already rich is good, even if it is socialism, but the GOP will never call it that if it benefits the wealthy. As for the whether the Republican action improves the lives of the wealthy, well, that is up to the wealthy people. If a third home or 100 foot yacht doesn’t improve their lives, that is their fault and they’ll just have to do better when the next round of tax cuts for the weatlth are passed. But they always deserve another chance to get things right.

    As for the middle class and poor? Who?

  121. 121

    @Corner Stone: I was thinking something along the lines of Lehman Brothers, or the break-up of AT&T, but none comes close to an out and out needle in the arm while the priest gives last rites. And no peeing, please, it’s undignified.

  122. 122
    LAO says:

    @eric: Had I realized that my pedestrian comment would never see the light of day, I’d of spiced it up with salty language. I’m a bit disappointed in myself, to be honest.

  123. 123
    TriassicSands says:

    Damn that Elizabeth Warren! Is there no end to her concern for and pandering to the “takers?” Where is her compassion for the beleaguered corporations? What about the struggling wealthy people?

  124. 124
    jl says:

    @Mike J: Limited liability of ownership is a very important reason why corporations exist. That is part of every intro econ and business course.

    I remember reading survey results that show US corporations are, unlike other countries, focused almost solely on maximizing something called ‘shareholder value’, which surprisingly, or maybe not, is a very vague ill-defined concept in economics. These results were in a corporate finance text in the chapter on corporate governance. UK was next most focused. Probably, for the managers, ‘shareholder value’ means high share value, or exceeding quarterly return targets.

    Seems to me that if corporations get privilege of limited liability, and they see it as a right they can take for granted while maniacally driving for returns and high share value at all costs, then the cost-benefit calculation of corporate governance is out of whack in the US.

    The country has been brainwashed by corporate and high finance propaganda for so long, a lot of people believe crazy things. I remember when the insane slogan ‘The shareholders take all the risk!” was popular. This is just false, and as mentioned above, contradicts what you learn in intro. econ and B courses in the first week.

    So, ignore the propaganda. Though I expect the corporate media celeb news divas to furrow their brow and mouth rich person’s propaganda, express deep concern. If this bill gets news coverage, and anyone sees absurd and false corporate propaganda being spread as truth, should contact them and explain things too them.

  125. 125
    dww44 says:

    @Corner Stone: I may not have always been a fan, but I am now. He’s standing up when so many others are not. He’s a true patriot.

  126. 126
    Elizabelle says:

    @Another Scott: Brilliant! It worked. Here is the text of Warren’s article:

    Corporate profits are booming, but average wages haven’t budged over the past year. The U.S. economy has run this way for decades, partly because of a fundamental change in business practices dating back to the 1980s. On Wednesday I’m introducing legislation to fix it.

    American corporations exist only because the American people grant them charters. 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.?

    For much of U.S. history, the answers were clear. Corporations sought to succeed in the marketplace, but they also recognized their obligations to employees, customers and the community. As recently as 1981, the Business Roundtable—which represents large U.S. companies—stated that corporations “have a responsibility, first of all, to make available to the public quality goods and services at fair prices, thereby earning a profit that attracts investment to continue and enhance the enterprise, provide jobs, and build the economy.” This approach worked. American companies and workers thrived.

    Late in the 20th century, the dynamic changed. Building on work by conservative economist Milton Friedman, a new theory emerged that corporate directors had only one obligation: to maximize shareholder returns. By 1997 the Business Roundtable declared that the “principal objective of a business enterprise is to generate economic returns to its owners.”

    That shift has had a tremendous effect on the economy. In the early 1980s, large American companies sent less than half their earnings to shareholders, spending the rest on their employees and other priorities. But between 2007 and 2016, large American companies dedicated 93% of their earnings to shareholders. Because the wealthiest 10% of U.S. households own 84% of American-held shares, the obsession with maximizing shareholder returns effectively means America’s biggest companies have dedicated themselves to making the rich even richer.

    In the four decades after World War II, shareholders on net contributed more than $250 billion to U.S. companies. But since 1985 they have extracted almost $7 trillion. That’s trillions of dollars in profits that might otherwise have been reinvested in the workers who helped produce them.

    Before “shareholder value maximization” ideology took hold, wages and productivity grew at roughly the same rate. But since the early 1980s, 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. Retained earnings were once the foundation for long-term investments. But from 1990 to 2015, nonfinancial U.S. companies invested trillions less than projected, funneling earnings to shareholders instead. This underinvestment handcuffs U.S. enterprise and bestows an advantage on foreign competitors.

    The problem may get worse, because executives have a strong financial incentive to prioritize shareholder returns. Before 1980, top CEOs were rarely compensated in equity. Today it accounts for 62% of their pay. Many executives receive additional company shares as a reward for producing short-term share-price increases. This feedback loop has sent CEO pay skyrocketing. The average CEO of a big company now makes 361 times what the average worker makes, up from 42 times in 1980.

    Corporate charters, which define the structure and obligations of U.S. companies, are an obvious tool for addressing these skewed incentives. But companies are chartered at the state level. Most states don’t want to demand more of companies, lest they incorporate elsewhere.

    That’s where my bill comes in. The Accountable Capitalism Act restores the idea that giant American corporations should look out for American interests. Corporations with more than $1 billion in annual revenue would be required to get a federal corporate charter. The new charter requires corporate directors to consider the interests of all major corporate stakeholders—not only shareholders—in company decisions. Shareholders could sue if they believed directors weren’t fulfilling those obligations.

    This approach follows the “benefit corporation” model, which gives businesses fiduciary responsibilities beyond their shareholders. Thirty-four states already authorize benefit corporations. And successful companies such as Patagonia and Kickstarter have embraced this role.

    My bill also would give workers a stronger voice in corporate decision-making at large companies. Employees would elect at least 40% of directors. At least 75% of directors and shareholders would need to approve before a corporation could make any political expenditures. To address self-serving financial incentives in corporate management, 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.

  127. 127
    dww44 says:

    Appropriate to this thread is this article in my today’s newsletter from the Pew Trusts:

    For most U.S. workers, real wages have barely budged in decades

  128. 128
    rikyrah says:

    Citizenship service conspired with ICE to ‘trap’ immigrants at visa interviews, ACLU says
    By Meagan Flynn
    August 15 at 9:37 AM

    Lilian Calderon told her daughter not to worry, that she would be coming right back. Calderon and her husband, Luis, had an interview they couldn’t miss at U.S. Citizenship and Immigration Services in Rhode Island Jan. 17.

    All they had to do was prove their marriage was legitimate, the first step on a long path toward a green card. They brought family photographs, their children’s birth certificates and their marriage documents. Luis was a U.S. citizen. Calderon was undocumented. She had been brought to the United States illegally from Guatemala when she was 3.

    The interviews were quick and painless. Calderon’s included “football banter,” she said.

    But then ICE showed up — and it was quickly clear to Calderon that she would not be returning home to her daughter.

    The 30-year-old mother of two wound up handcuffed and then detained by U.S. Immigration and Customs Enforcement for nearly a month, capturing the attention of the ACLU and leading to a class-action lawsuit over what attorneys have described as a “cruel bait and switch” arrest operation. According to emails between federal officials unsealed in federal court documents this week, U.S. Citizenship and Immigration Services had been coordinating with ICE to alert the agency when certain immigrants eligible for deportation showed up at the CIS office for routine interviews.

    The ACLU of Massachusetts is accusing the agencies of conspiring to “trap” unsuspecting immigrants on a path toward legal permanent residency by inviting them to these interviews only for ICE to arrest them there. This happened to at least 17 people in 2018 including Calderon, although only 13 qualify as members of the class, according to the lawsuit. The ACLU argues this violates their rights to due process and the Immigration Nationality Act, among other things, for detaining the immigrants before they’ve had a chance to complete the process for seeking legal status.

    “The government created this path for them to seek a green card,” Matthew Segal, legal director of the ACLU of Massachusetts, told the Associated Press. “The government can’t create that path and then arrest folks for following that path.”

  129. 129
    TenguPhule says:

    . The new charter requires corporate directors to consider the interests of all major corporate stakeholders—not only shareholders—in company decisions. Shareholders could sue if they believed directors weren’t fulfilling those obligations.

    And we come to the root of the problem.

  130. 130
    Elizabelle says:

    @TenguPhule: Could you give it a rest? Who needs the jerks at Reason, when you’re monfocally taking Warren’s ideas apart here? STFU. Enough already.

  131. 131
    Betty Cracker says:

    @Elizabelle: Thanks for posting the text. It makes a lot of sense to me. Warren does have a knack for explaining complex economic issues in simple terms.

  132. 132
    Elizabelle says:

    WaPost just put this up. Patti Davis: My father, Ronald Reagan, would never have stood for this

    …. I’ve tried to imagine what my father would have done if people attending a political speech of his had turned to the press and raised their middle fingers, hurled obscenities or physically menaced the reporters who were there doing their jobs. I found it difficult to conjure the image, and then I realized why. It simply wouldn’t have happened. The person on the podium, the person everyone has gathered to see, sets the tone.

    President Trump has quite successfully set today’s tone. He expertly stirred up the anger that was already simmering in the people who support him, and then he lit a match to it. He gave them an enemy — always a useful tactic. And naming the press as the enemy has precedents: Many tyrants have employed it to their advantage. Trump may not read much, but I’ll bet he knows that.

    Those of us who are horrified by the vilification of the news media, those of us who cringe at the sight of angry mobs jeering at the cordoned-off journalists at Trump rallies, far outnumber those who are swept up by this ugly passion. We are still in the majority. But if we are silent, if we don’t speak up, if we don’t raise our voices and say, “This is not America,” it won’t matter that we are in the majority. Silence didn’t create this country; brazen, unwavering commitment did. And one of those commitments was to a free press — one not controlled or hampered by a demagogue who has a good day only when he’s being flattered.

  133. 133
    TenguPhule says:

    @Elizabelle: Look at what I highlighted. Do you not see the basic problem there?

    Different stakeholders have different priorities.

  134. 134
    Elizabelle says:

    @TenguPhule: All I know is that you tear everything to bits and inform us that nothing will ever change, as if from on high. I tire of your schtick, even while I appreciate the wit of some of your comments. You pretty much just take the contrarian approach to throw water on just about anything that comes up here. It is fucking tiresome.

  135. 135
    Calouste says:

    @TenguPhule: Different stakeholders having different priorities is the most basic challenge in project management.

  136. 136
    jl says:

    @Elizabelle: @TenguPhule: Corporate governance in the US is screwed up. Warren’s proposal has to tackle that problem someplace, though it is way down in the weeds. The US media is saturated with pro-corporate propaganda, that says the US approach to corporate governance is somehow dictated by God, or the market, for the free enterprise system. But it is not. There are lots of choices. The US needs to make different choices.

    The outlines of the issue are not hard. There is a long chapter about the role of corporate governance in any intro corporate finance text. The people running corporations have read a chapter like that and know they are shoveling self-serving BS. The rest of the country goes along with the BS they are shoveling.

    Like health care, there are at least a dozen high income industrialized countries that have made difference choices, some slightly different, some very different. These include socialist hellholes like Germany, Japan, Sweden, Denmark, Australia, and others. The approaches of some socialist hellholes like Switzerland have big ups and big downs, as in, you can be a ruthless pig outside the country, but you will ‘keep the place nice’ at home.
    Right now in the US, lawsuits are the way issues are handled of some corporate stakeholder is pissed, and that could create a confused mess, so it has to be ironed out one way or another. In the US, corporations have a fiduciary duty to shareholders, though whether management has subverted that legal framework to its and high finance operators’ (who can essentially bribe management to do what ever someone with a big wad of cash wants them to do) benefit is a big debate.

    I think Warren is doing a good thing by tackling this issue.

  137. 137
    Corner Stone says:

    @Calouste:

    Different stakeholders having different priorities is the most basic challenge in project management.

    Hmmm. I find your ideas interesting and strangely compelling. Newsletter subscription info?

  138. 138
    Gelfling 545 says:

    @Frank Wilhoit: I’m not sure unaccountability can actually be addresses apart from its manifestations.

  139. 139
    Gelfling 545 says:

    @TenguPhule: And maybe it’s time that bucketful was disentangled on a legal badis.

  140. 140
    Elizabelle says:

    Good column by Paul Waldman in the WaPost, on Elizabeth Warren’s plan. He takes the Fuck the Fucking NY Times to task, too — they were tut-tutting about Democrats have no message with one of their whack political articles earlier today.

    Waldman: Democrats do have an agenda, and even some big ideas. Here’s one of them.

    On Wednesday the New York Times published the latest in a long line of inane articles chastising Democrats for Doing It Wrong, saying they’re “discarding the lessons of successful midterms past and pressing only a bare-bones national agenda.” Nobody knows what they want to do! Except that when you read down, you find that the complaint isn’t that Democrats don’t have an agenda, it’s that they don’t have a pithy message, ….

    There’s no mystery about what Democrats stand for — they want expanded health coverage, a higher minimum wage, higher taxes on the wealthy, stronger environmental protections, action on climate change and, yes, restraining President Trump and investigating the tsunami of corruption emanating from his administration — but the reason the criticism is so common is that they’re the party that actually cares about policy. They’re expected not only to have a lengthy agenda but also to be constantly coming up with new ideas.

    ,,, Warren’s bill is similar to a bill introduced by Sen. Tammy Baldwin (which Warren co-sponsored) called the Reward Work Act. That one would require that one-third of the seats on a corporation’s board be chosen by workers. While in America this is a radical idea, it’s built on the system in Germany, where it has been successful in both fostering economic growth and keeping corporations from focusing on the ruthless pursuit of short-term profits for a tiny few at the expense of everyone and everything else. (Susan Holmberg of the Roosevelt Institute explains here.)

    …. The GOP would recoil in horror at the idea of changing how corporations work, since their theory of the corporation is that it should have all the rights of an individual but none of the responsibilities. But this is a good example of Democrats coming up with an idea that’s ambitious, meant to address a deep and pressing problem, in line with their values, and compelling to voters.

    Now if they can just come up with a jazzy slogan, maybe they’ll get some credit for it.

    Article’s worth a click; has some good links embedded within.

  141. 141
    mattH says:

    @schrodingers_cat:
    Steve Demming reviewed a book in Forbes called Fixing the Game by Rodger L. Martin that had three suggestions: repeal of 1995 Private Securities Litigation Reform Act,elimination of regulation FASB 142 which forces the real write-downs of real assets based on the company’s share price in the expectations market, and eliminating the use of stock-based compensation as an incentive.

  142. 142
    Elizabelle says:

    @jl: Agreed.

  143. 143
    Corner Stone says:

    I need some root beer. I’m not going to question it, just go and get some damn root beer.

  144. 144
    Betty Cracker says:

    @Elizabelle: Rain cloud’s gotta rain! But seriously, TenguPhule, Warren’s entire fucking point is that there are in reality multiple stakeholders, but only one group’s interests are being served under the current economic model. It’s not some profound revelation that WidgetCo shareholders will have different priorities than widget makers, Widgetville, et al, and that reconciling them all will be a challenge, yet you whip that point out as if that vaporizes Warren’s idea. That’s what’s annoying. (For me, at least; I don’t presume to speak for Elizabelle.)

  145. 145
    TenguPhule says:

    @Elizabelle:

    All I know is that you tear everything to bits and inform us that nothing will ever change, as if from on high.

    What part of right idea, wrong approach did you miss?

    You want to change the system, target the structural issues that reward bad behavior. Forget the “only over $1 billion in revenue”, $100,000 in revenue or more. Define fiduciary duty in federal law to literally have “do not be an asshole” as part of the duty. Reduce the legal protections corporations afford to corporate officers so when they do evil shit, they can’t hide behind the corporation’s veil.

    Place the burden of proof on the defense to show they are entitled to any limited immunity from prosecution.

    Reigning in bad behavior is hard in white collar crime because the legal requirements are set so high.

  146. 146
    Elizabelle says:

    @Betty Cracker: You did a great job!

  147. 147
    TenguPhule says:

    @Betty Cracker:

    and that reconciling them all will be a challenge, yet you whip that point out as if that vaporizes Warren’s idea.

    Reconciling them via lawsuits. Or threat of lawsuits. This is a barrel of worms we don’t want to open. This is asking for a GRIEFER’s paradise.

  148. 148
    TenguPhule says:

    @jl:

    I think Warren is doing a good thing by tackling this issue.

    I don’t disagree. I just wish some of the people here wouldn’t insist that her proposal is the be all and end all of the issue. You can’t just target a corporation as a whole, because its just a piece of legal paper which can be manipulated into a form that evades the requirements of the law until such time as the law can catch up to it again. You have to go after the corporate officers AND the board of directors, where much of the rot is. I’d throw full support behind Warren if she proposed a crack down on the zero fucking standards that the BOD cesspool has.

  149. 149
    jl says:

    @Betty Cracker: A dirty little secret of economics is that inside the supposedly ruthlessly efficient economically perfectly rational welfare maximization engine of a public corporation, is a miniature political decision making system called ‘corporate governance’ that has most of the weaknesses of any other political decision making system.
    A complex web of tradition, tax and liability laws, and corporate charter spelling out fiduciary duties determine how this plays out in terms of real world decisions, and what benefits corporations can capture and what costs they can fob off to the rest of society.

    So, the problem TenguPhule is talking about is already there, and we have a current way of doing things. If TP is just saying we have to pay attention sooner or later, to the details of how to change them, and difficulties, I agree. Otherwise, TP is just being a debbie downer.

    Anyway, maybe people interested could lay out five bucks for an old used edition of an intro corporate finance text on B&N or Amazon. Every text explains the issue. With many corporations operating in a competitive environment (edit: assuming cost and benefits of limited liability are properly balanced), the political problems inside corporate decision making become smaller and less noticeable. But if you have giant corporations with monopoly power, then things can get very weird and dysfunctional So, that is something to think about for the US today.

    But if Warren starts a real discussion and can do anything to penetrate the ridiculously thick layer of very pro-corporate propaganda the country lives behind, it is a very good thing.

  150. 150
    Gelfling 545 says:

    @Mnemosyne: Dress code policies have been under fire in a lot of places due to unfairness to ethnic and religious minorities and females in general. My granddaughter was on the barricades at her high school in this cause. There the poor foolish administration was trying to apply conservative dress codes to the Arts Academy students. Imagine it: they wanted a bunch of urban, multicultural artists, actors and musicians to dress like a bunch of Young Republicans. She’s in college now but the word from her contacts the school is that the fight continues.

  151. 151
    jl says:

    @TenguPhule: You have to start someplace. I think the country right now is brainwashed with pro-corporate BS, and that is a very bad thing for the economy and society.

  152. 152
    Gelfling 545 says:

    @TenguPhule: This is what makes it important that no stakeholders’ interests are simply ignored.

  153. 153
    TenguPhule says:

    @jl:

    I think the country right now is brainwashed with pro-corporate BS, and that is a very bad thing for the economy and society.

    And I agree. Where I disagree with Betty and Elizabelle and Warren is which levers need to be targeted for real changes to happen.

    The Board of Directors and the Corporate officers are where the reform and regulations are needed the most. Letting the corporate charters police themselves hasn’t worked.

  154. 154
    TenguPhule says:

    @Gelfling 545:

    This is what makes it important that no stakeholders’ interests are simply ignored.

    But it also invites paralysis as any actions taken or decisions made could be subject to a lawsuit by any aggrieved party. Every company would suddenly be facing a prisoner’s dilemma and it would take only one bad actor for everything to go into litigation hell.

  155. 155
    Betty Cracker says:

    @TenguPhule:

    I just wish some of the people here wouldn’t insist that her proposal is the be all and end all of the issue.

    Literally no one is insisting that. And Warren’s proposal does at least begin to address the BOD cesspool by requiring a change in its composition, setting new thresholds for political expenditures, timeframes around exercising options, etc. — see the 2nd to the last para in the text of her op-ed at #126. Your point about targeting the charter instead of the officers, lawsuits as levers, etc., is a good one, but it’s not an all or nothing situation.

    @jl: Agreed!

  156. 156
    jl says:

    @TenguPhule: OK, One thing that is interesting is that with few dominant corporations, the effects of political decision making within corporations tends to drive more short-term thinking, and more emphasis on using monopoly power to increase profits, and monopsony power to squeeze payments to inputs (which would include labor). So, lower and slower growth, lower productivity growth, lower wages. Which sounds like recent history to me.

  157. 157
    Aleta says:

    @Elizabelle:

    I’ve found for the WSJ, you can usually access the entire article if you go to the twitter page of the reporter or guest who wrote it. (In this case, Warren’s twitter.) That person can put up a link that works for at least a few days. Depending on the story, a link to the whole article is sometimes on the WSJ’s twitter page, but more often their link goes to the locked page.

    If more than one reporter is listed on the story, I’ve found that the link may only be offered on the twitter page of one. And it’s not necessarily the first person in the byline, so you would search for each reporter til you find it.

    Once you access the full article, if you want to send or copy the link to others, you have to copy the link to the writer’s twitter page, not the link at the top of the article page.

    It’s not required to sign into twitter to read Warren’s page or a reporter’s page.

    That’s a little bit more information than i needed Vince.

  158. 158
    Elizabelle says:

    @Aleta: Thanks Aleta. Scott (?) suggested using a private browsing window, and that worked for this article.

    Will try your method with the next paywall article I attempt.

  159. 159
    J R in WV says:

    @🐾BillinGlendaleCA:

    I think you’ve identified the problem correctly, it’s short term shareholder value.

    I agree. One step towards fixing this would be to require buyers of an equity/stock to hold it for some period of time, that to be longer than a fiscal quarter. Like a year. This would also stop the instant computerized traders buying and selling stocks on a millisecond trending model. Which is terrible for real markets.

    Also, I think half of corporate boards should belong to the workers, as without labor, there is no corporation. That’s the German model, and there union reps are on the Board of Directors.

  160. 160
    Martin says:

    Warren’s proposal used to be the norm. The ‘maximizing shareholder value’ bullshit only showed up in the 70s. Before that, serving all stakeholders was the expectation.

    In the mid-20th Century, the conventional wisdom on running a corporation was something called “managerial capitalism.” As expounded in the 1932 management classic, The Modern Corporation and Private Property by Adolf A. Berle and Gardiner C. Means, the idea was that public firms should have professional managers who would balance the claims of different stakeholders, taking into account public policy.

    The confusion they speak of is valid as to who they’re supposed to serve, but there were lots of ways to address that.

    In 1954, Peter Drucker offered one such solution in his book, The Practice of Management, (HarperCollins). “There is only one valid definition of business purpose,” he wrote unequivocally: “to create a customer.” It is the customer,” Drucker wrote, “who determines what a business is. For it is the customer, and he alone, who through being willing to pay for a good or for a service, converts economic resources into wealth, things into goods. What the business thinks it produces is not of first importance—especially not to the future of the business and to its success. What the customer thinks he is buying, what he considers ‘value’, is decisive—it determines what a business is, what it produces and whether it will prosper.”

    Personally, I’m a fan of Drucker’s approach. It’s fairly democratic, for one. One of our complaints here isn’t just against executives that funnel all of their energy toward a limited number of shareholders, but also those that channel corporate money toward other causes. Should Chick Fil A put money behind anti-gay efforts? That’s not a shareholder action, but it’s a public policy one. The problem here then isn’t whether companies should consider other stakeholders, but who gets to decide what other stakeholders are included. If that resides in the boardroom, that too is problematic. But if you put that with the customers, well, that’s a different matter. And that’s how we play it – that’s what boycotts really are – customers shaping what stakeholders should and shouldn’t be included. And I think that’s fine. It provides direction for the executives. They may disagree with that direction, but too bad.

    So I like the effort here to do something, but I’m not sure about her specific proposal – I’ll have to read more. I’ll note that situations like net neutrality arise due to a shift in who the customer is. It’s not the subscriber to the ISP, because there are too many local monopolies to see the subscriber as a customer to be won or lost. Instead, it shifts to the content producer – Netflix, etc. who have much more freedom than the subscriber and therefore get turned into the customer instead. So that’s not even a shareholder move, but an inversion of who the ISP feels they need to appeal to. That reflects a problem in how the marketplace works.

  161. 161
    Martin says:

    @J R in WV: I’m very strongly of the view that cap gains rates should be inversely proportional to how long you hold the asset. Hold it for a day and you pay 90% on gains. Hold it for decades and pay 10% or something, and scale it accordingly. Not only does it help with the short term prioritization, it also pretty seriously destroys flash trading and scenarios where those with sufficient infrastructure can exploit others on the market. You actually then start to undermine the need for special investment vehicles for retirement, college, etc. which are all long term investment scenarios.

  162. 162
    Panurge says:

    @Gelfling 545:

    conservative dress codes

    I’m sorry–are there other kinds?

  163. 163
    J R in WV says:

    @rikyrah:

    I was a senior in high school in 1968. It was the era of short hair, and many people tried to make that a requirement. My cousin Dan was a 4.00 gpa student, the max back then, straight As. Then he stopped getting haircuts. Shortly after that, they expelled him for having long hair. One visit by Uncle and lawyer later, he was back in school, and that “policy” was so much dust in the wind.

    Kid needs a lawyer and a law suit against the schools. How you style your hair and dress is a free speech issue, and they don’t have freedom to walk over students based upon appearance, as long as you are clean and don’t have vermin.

    Although I’m sure many racists think dreads are formed by vermin, as opposed to hair dressers.

  164. 164
    Martin says:

    I’ll point out another key problem. The changes in the Clinton tax code that limited salary deductions to $1M per year per employee, but removed deduction limits for performance pay. In short, rather than paying salary, companies switch to stock options, which created the perverse act of making the shareholders and the executives have the same interests. Goodharts law applies here: “When a measure becomes a target, it ceases to be a good measure”. Share price was seen as the measure of the executives performance, but then it became the only thing that mattered. Enron and Worldcom had great share prices shortly before they self-destructed. I fail to see how share price was a good measure of performance there. If anything it served as a way to mask poor performance.

  165. 165
    J R in WV says:

    @TenguPhule:

    Don’t I recall a newly founded corporation owned by a bestie of Melania First Lady receiving something like $50,000,000 for “planning” some of the inaugural events? That would have been half of the loose change rolling around the fundraising, wouldn’t it? Her share of the loot…?

    OK, I see others have named a number more like $26,000,000… still a lot of money in my book.

  166. 166
    TenguPhule says:

    @J R in WV: only accounts for about 25% of the total. Assuming Gates stole another 5%-10% to avoid detection and most of that money is still unaccounted for, I’m betting it went to a Trump LLC. Or the Russians.

  167. 167
    Ruckus says:

    @Zelma:
    Has it ever really been anything other than legalized gambling? Not the given ideal, but how it actually works.

  168. 168
    trnc says:

    @Frank Wilhoit:

    Make capitalism accountable, as a thought experiment, and all of its current participants would walk away disgruntled, looking for something unaccountable to do.

    Sure, but accountability necessarily includes a system of punishment, so many of those people would wind up in some kind of trouble. Most people will work (mostly, at least) within the authorized parameters because they don’t want to go to jail, pay fines, etc. Almost zero accountability for business owners and corporations don’t seem to be working out too well.

  169. 169

    @TenguPhule: @Elizabelle: lol you are so busted, she sees right through you.

    @Calouste: Gaia save us all, this, thank you. The really fun part is getting them in a room together when it’s already too late, and only then discovering it would have been constructive to have met earlier, much earlier.

    “You did… what?”

  170. 170
    dp says:

    @Adam L Silverman: I feel confident that can be worked around.

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