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November 29—December 1, 2023
The Diplomat, Hollywood, FL

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September 21, 2018

Opinion—Senator Elizabeth’s Warren’s Proposal that Corporations Be Required to have “Stakeholders” on their Boards is Ill-advised

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Economic Forecasts | Ethics and Compliance | Infrastructure and Transportation | Insurance and Surety | Latest News | Litigation Strategies/Dispute Resolution | News | Risk & Contract Management | Workforce and Labor
September 21, 2018

Opinion—Senator Elizabeth’s Warren’s Proposal that Corporations Be Required to have “Stakeholders” on their Boards is Ill-advised

 

By Don Wallis

 

Senator Warren exhibits a basic misunderstanding of the realities of business.

Senator Warren has proposed an Accountable Capitalism Act that would, according to an editorial in THE WALL STREET JOURNAL by Richard A. Epstein, require all corporations with $1 billion or more of annual revenue to obtain a federal charter” that would compel them “to hold elections in which employees would fill 40% of board seats—enough to give them a blocking position on any major transaction. Similar protections could easily extend to other stakeholders.”

This would be a radical departure from “American corporate law [which] provides that boards of directors are chosen solely by shareholders, to whom the directors owe a fiduciary duty to maximize shareholder value.”

Presumably, Senator Warren’s proposal is designed to allow those who invest their labor in a company with a counterbalancing voice on boards to that of those who invest their money in the company.

But what Senator Warren is proposing is also a very large step toward socialism that would greatly increase the federal government’s ability to control large corporations. A step too far.

Mr. Epstein argues that the Accountable Capitalism Act is unnecessary because “any good management team knows that employee input and buy-in is critical for business success.”

“No one can serve two masters, so the fiduciary duties need a single focus. Other stakeholders then have their voices heard by contracting with the company. De facto nationalization of all corporations is not needed to close any communication gaps between management and labor.”

Senator Warren is a strong and principled voice for the working class. But she does not appear to have considered the unintended consequences of her proposal.

Source—

Unions Have Stakeholders, Too, Richard A. Epstein, THE WALL STREET JOURNAL, September 12, 2018.

 

Don Wallis has more than 40 years experience in residential and commercial construction, and land development. He also has a law degree and currently teaches Environmental Law at Santa Fe Community College.

Economic Forecasts•Ethics and Compliance•Infrastructure and Transportation•Insurance and Surety•Latest News•Litigation Strategies/Dispute Resolution•News•Risk & Contract Management•Workforce and Labor

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