Companies Shouldn’t Be Accountable Only to Shareholders

This has some ideas that are similar to what happens in Germany.

https://en.wikipedia.org/wiki/Codetermination_in_Germany

Worker representation at the board level is good for companies as well because it can encourage pay restraint when the company really can't afford a pay rise. A board of very rich people telling you the company can't afford a pay rise for you is very different from some of your fellow workers saying the company can't afford a pay rise.

The German law goes a lot further than this law does though since it applies to all companies with over 500 employees.

Considering Germany is an economic powerhouse this law probably isn't harming the economy.

>> By 1997 the Business Roundtable declared that the “principal objective of a business enterprise is to generate economic returns to its owners.”

I've never agreed with that. As a private company you can be in business for whatever reason you want. Maintaining financial viability seems to be necessary, but beyond that "profit" or return for anyone is not obviously an objective. Granted, you'll probably have trouble raising money if there's nothing in it for investors but does that mean they have to become the one and only priority?

I often think a CEO needs to state what they're doing and the investors should decide if they think the plans and objectives of the company (and those running it) are a good investment. Investors can take it or leave it - for what it is. That seems to be what Google did to some extent.

I also say that if the only goal of a company is to create returns, then every company that isn't in a higher profit industry should probably liquidate and use the money to start a hedge fund, or invest in a company that is more profitable. In other words, if your company makes small margins making some widgets, your investors would get better returns if you sell everything and invest in apple. This is a joke of course, but it makes my point. It's up to the company to define what it's objectives are, and it's up the investors to decide what they want to invest in based on those stated objectives of the companies.

Thankfully there’s no chance this bill will ever pass with the current Congress, and even if it did, the Supreme Court would likely strike it down on account of state’s rights.

It’s a bill trying to solve the wrong problem with the wrong solution. What value does workers electing their directors add for anybody? Firstly, the idea that director appointments should be political is patently absurd — a directorship is a job with well defined requirements and expectations, which the majority of workers are often completely unqualified to judge. Secondly, what right does the federal government have to dictate the internal governance of corporations? (Answer: explicitly none, as per the tenth amendment of the constitution.) This is such an awful, awful idea. One only needs to look at the government itself to see what happens when leaders are elected, not appointed. There’s a reason the private sector has a reputation for success and efficiency and the government does not... the idea of executives being elected by democratic process is so scary it’s almost comical.

Disclaimer: I am extremely skeptical of the motives of Elizabeth Warren and hope she doesn’t come anywhere close to the White House

This is a fantastic idea, and I can't see how anyone (other than the people who stand to lose directly) could oppose it.

All the same I know that they will. Consumers are anything but rational, and that is by design. The ultra-rich know well the value of hearts and minds, and that it's quite possible to spend money convincing (at least some) people of whatever you'd like them to believe.

Maybe it's just because I'm a pinko-European, but in the unlikely event of this succeeding, I think it could really be the start of the pendulum swinging in the right direction in global economics.

Yes, companies should be accountable to their owners, who in many cases are shareholders. Property ownership is what aligns incentives toward the maintenance and improvement of infrastructure, which in the end benefits us all. There's no sin in profit.

When you strip property owners of control over their property and give control to people with no skin in the game, you misalign incentives and contribute to bad decision making and eventual decay arising from the accumulated consequences of bad decion making.

If you think companies make bad decisions now, just wait until they're legally obligated to obey people who don't give a damn about the company's survival and who want to hijack the effort for stupid ideological and status signaling games.

Utopian projects that amount to taking stuff from property owners and giving it to ideologues never work. They usually end up generating nothing but heaps of bodies.

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

I get what she's saying here but it's not exactly the cause. A counter-argument to this premise could take this line and re-write it as "American corporations exist only because shareholders/VC firms invested capital in them."

And while I don't disagree that CEO pay is nutso today I'm not convinced that employee-elected directors is the way to go. My initial reaction is I don't want to work under populist execs vying for employee votes; I think we get enough political speak from them as it is.

Considering how this would decimate the market and cause large amounts of frivolous lawsuits, I can't imagine this passes even pared down.

She's announcing this merely to pad her resume before running in 2020. It doesn't have to be feasible, just needs to sound good.

Sounds a bit like the German works council system [1] that gives workers some representation in management.

[1] https://en.m.wikipedia.org/wiki/Works_council

I am not a fan of Warren or Bernie would do have some practical questions for how this might function for someone who believes this is a good idea. I am skeptical but open-minded.

- Does every employee get an equal vote? Is it weighted at all by seniority, hours worked, salary? In a company like Starbucks where most employees are baristas what would stop them from joining forces with a small number of investors and looting the company's assets?

-Do employees get a vote if they are contractors? Could a company simply set up hundreds of shell corporations and hire those corporations to prevent employee votes? If not, would you get a vote at every company you contract for?

-Is there any concern that this could lead to a slowdown of new hiring? Right now a company may make 1B in income in a year and decide to invest the majority of it to open new locations or expand business. Do we think this would ever happen under this system - or would that money be given as short term profit? Would employees not want expansion which could possible benefit "the corporation" in the long run because it would cut into their bonus that year.

We already have a dwindling supply of decent public companies. Regulations like this, and the CA bill mandating gender diversity hires for the Board of Directors, both would put additional downward pressure on the number and quality of public companies.

Make it cheaper for companies to grant stock to their rank-and-file employees if you want employees to have more skin in the game. Leave the prescriptive governance out of it.