Judging by the suite of bills Elizabeth Warren has introduced in the U.S. Senate over the past year, many of which have already been woven into the issue statements on her campaign website, the senior senator from Massachusetts is set to have one of the most creative and ambitious policy platforms of any contender for the Democratic presidential nomination in 2020. This is not necessarily saying much, since a good number of the eventual candidates are likely not to have any platform whatsoever beyond anti-Trump rhetoric. In Warren’s case, however, her legislative portfolio is in fact genuinely audacious.
Perhaps the most audacious item in that portfolio is the ACA: this time not the Affordable Care Act, but the “Accountable Capitalism Act,” which seeks to radically overhaul corporate governance in the United States and reorient big business away from its single-minded focus on maximizing returns for shareholders even when doing so comes at society’s expense. The audacity of the ACA lies not only in the magnitude of the legal and economic transformation it would bring about, but in what it says about Warren’s views on the ideological debates currently roiling the Democratic Party.
At a time when a resurgent socialist left is slowly but steadily gaining influence in American politics, Warren has gone out of her way to define her legislative goals and political identity in opposition to that movement. This despite the fact that she has advanced policy ideas, like the public manufacture of generic prescription drugs, that go just as far or farther than what many democratic socialists have called for. She made this explicit in front of one audience last year when she declared that “I’m a capitalist to my bones.” (Happily, she has refrained from trying to substantiate that claim with biopsy results.)
In reality, what the ACA seeks to do is not really “capitalist” or “socialist.” To understand why neither term quite captures the radicalism of Warren’s proposal, it helps to understand both what it would actually accomplish as well as its intellectual genealogy.
The core of the ACA is its stipulation that all domestic corporations with annual revenues of over $1 billion obtain a federal charter. These so-called “United States Corporations” would then be subject to a variety of requirements, including a legal duty to take account of the impact that their decisions have not only on shareholder value, but also on workers, local communities, and the environment. They would also be compelled to follow a rule that any corporate expenditures on political advertising be approved by a three-fourths supermajority of a board of directors.
Federal chartering of corporations would represent a significant departure from the status quo, under which incorporation is a matter left to the states. What Warren aims to do is disrupt the “race to the bottom” dynamic that has made it difficult for any one state to make incorporation conditional on an enforceable promise to meet standards of good corporate citizenship. As it is now, the state of Delaware’s relatively lenient incorporation statutes are a magnet for business: despite being the smallest state by area, more than half of all publicly traded companies are legally headquartered there.
Enactment of such reforms would certainly be a significant achievement, but none of them would be truly unprecedented. A number of states already allow for the creation of so-called benefit corporations, or “B-corps,” that permit firms to take into account the interests of a broader array of stakeholders than just their own investors. In theory, this allows managers to pursue objectives like environmental sustainability without having to worry about legal action from investors miffed that profits would have been higher if management hadn’t been such a bunch of tree-huggers. Regulation of corporate spending on “electioneering communications” is nothing new either: federal law explicitly restricted such spending prior to the Supreme Court’s notorious 2010 ruling in Citizens United, which claimed that these restraints violated the First Amendment.
The provision of the ACA that would be truly revolutionary is its mandate that 40 percent of the membership of a United States Corporation’s board of directors be elected representatives of the corporation’s own employees. At present, virtually all directors are elected by shareholders in mostly noncompetitive elections, with the candidates nominated by the incumbent board. These are less elections than de facto coronations.
Such a policy of requiring worker representation on corporate boards is known as “codetermination” because it creates a structure under which decisions are jointly hashed out by representatives of labor and capital. It is most often associated with Germany, which has some of the most extensive codetermination laws in the industrialized world, though similar policies are in effect across Europe and elsewhere. German law requires that corporations with more than two thousand workers have half of the members of their “supervisory boards” (the analogue of our boards of directors) elected by their employees, while those with between five hundred and two thousand workers have a third of their board members chosen by the same. In addition, German workers may also elect members of “works councils” to lobby employers about issues that arise in the workplace. (Trade unions in Germany tend to operate at the sectoral level rather than at the level of the individual company, as in the United States.)