Bernie Sanders recently laid out a comprehensive plan for restricting corporate power in the United States. His new “Corporate Accountability and Democracy” plan unifies policies that are too often considered in isolation: moving corporations towards stakeholder governance and ownership; restricting market power by large corporations; and rebalancing corporate taxes.
The power of corporations to extract wealth is clear. In the United States, typical workers have seen their wages stagnate for forty years, while shareholder payments have led to growing wealth inequality. What many — even some on the left — have forgotten is that corporations are social institutions, and the rules that govern their interaction with society can be democratically determined. Corporations are businesses that are granted extraordinary privileges from the public, but with those privileges should come a clear set of responsibilities.
For decades, Americans have accepted that corporations should be run according to the ideology of ‘shareholder primacy’, which is based on the market fundamentalist notion that shareholders take the only real risks in the operation of the corporation. This means that rules that claim that shareholders – and often, share-sellers – should be the sole beneficiaries of rising profits can be remade, to recognize instead that multiple groups of stakeholders – employees, customers, suppliers, and the public – contribute to the success of a corporation alongside those who grant it capital, or purchase its shares on the open market.
Bernie’s plan strikes at market fundamentalism itself, by taking on the power of corporations within the markets, within the government, and within themselves, as a comprehensive policy package.
The first component of the plan is to ensure that workers have a clear stake in corporate profits by granting all employees a portion of corporate equity in a collective trust. Employee ownership is more common in the United States than many know, but not by typical workers in large corporations. Bernie’s policy would establish mandatory employee ownership funds that would pay workers dividends. Adopting the recent Labour Party proposal for Inclusive Ownership Funds, the plan would require large corporations to set up trusts to hold equity in perpetuity and make annual grants to each worker, without requiring workers to spend their own money to participate in the trusts.
The plan combines ownership with a clear role for workers in decision-making. Workers would have a voice inside the corporate boardroom through their equity stake and also by right of employment, by mandating that 45% of directors for large corporations will be directly elected by employees. The plan ends ‘shareholder primacy’ by explicitly mandating that decision-makers have to consider the interests of all stakeholders, requiring large companies to obtain a federal charter with this new mandate. The plan also bans stock buybacks, seeks to make workers laid off as a result of outsourcing whole through equity grants, and establishes a few other mechanisms to encourage employee ownership.
Sanders recognizes that what happens inside corporations will not be enough if the financial sector still pressures corporations to prioritize short-term returns at the expense of all else. While a bit sparse on details, the plan seeks to end the power of a small group of asset managers and restore democracy to how pension plans actually use workers’ retirement funds.
Rebalancing power inside corporations must be coupled with aggressively taking on market concentration. Bernie’s plan would “reinvigorate” the Federal Trade Commission and institute the new merger guidelines that many have called for – putting caps in place for vertical and horizontal mergers, as well as setting bright liens for total market share. The plan also calls for corporations paying a fair share of corporate taxes. Not content to simply reverse the Trump tax reform, which drastically lowered the corporate tax rate, the plan restores corporate tax rates, ends offshore tax havens, and eliminates loopholes.
There is no silver bullet that can confront the entrenched hold on wealth of a small elite. According to the latest data from the Federal Reserve’s Distributional Financial Accounts, as of the second quarter of 2019, the top 10% held 70% of total net worth, while the bottom 50% held just 2%. The importance of this set of proposals is the simple fact that it seeks to take on different facets of corporate power comprehensively, and, when coupled with his labor policy agenda, is a powerful agenda to rebalance the power in the economy between capital and labor. With multiple crises facing our country and our planet, Bernie recognizes that only true and comprehensive economic democracy can alter our fate.