With apologies to Johnny Paycheck, Elizabeth Warren’s campaign theme song could well be “Take This Corporation and Shove It.” Some may discount the Warren-Luján legislation as yet more “socialism,” but it’s actually the kind of progressive proposal with deep populist roots sure to flower to her political advantage in rust-belt states. Although “accountable” capitalism goes farther than the “stakeholder” capitalism endorsed by the Business Roundtable, there’s a little-noticed corporate charter on offer – the public-benefit corporation – that could make it easier for all sides to advance an even better idea: equitable capitalism.
The public-benefit corporation (PBC) is alive and well in at least thirty-five states and the District of Columbia. As a draft law-review article states, “PBC directors are required under their fiduciary duties to consider purposes other than profits in decision-making.” Otherwise, a PBC is a regular corporation under most provisions of law, although some states also offer tax and certain regulatory breaks. Many believe that it isn’t necessary for a company to be a PBC to consider purpose as well as profit – this is indeed the stakeholder capitalism construct. However, a clear charter aligns a desire to serve a purpose with shareholder profit incentives in a legal framework each party knows up front, offering a strong platform for equitable capitalism.
A PBC is not, though, the same as accountable capitalism even though Sen. Warren’s statement says it is. The legislation does dictate that large corporations receive a federal charter that is in some ways akin to a PBC, but it goes on then to stipulate purpose by Sen. Warren’s lights, not those a company might choose for itself. For example, the legislation bars political expenditures no matter how purposeful and stipulates employee governance no matter how closely-held the venture.
In part because the PBC charter allows each corporation to set its own purpose, it establishes important ground for considering equitable capitalism whether a PBC is a freestanding venture or used for subsidiaries within the broader corporate whole to create a strong, transparent base for purposeful, equitable commerce. Doing so is a particularly urgent priority for large financial institutions often demonized as emblematic of purposeless capitalism profiting principally by financialization and predatory products, not purpose. PBCs are a ready-made charter for the Equality Banks I have separately suggested. A few small banks now have PBC charters, but questions remain about their status, especially with the OCC. This should change, and change fast.
As the Financial Times observed, “The public at large increasingly views corporations as sociopathic.” Many Americans – particularly younger ones – now are so convinced that nothing will fix the American economy that they prefer socialism to traditional capitalism. In the current election, moderate voters may not agree with Sen. Warren on Medicare-for-all, open borders, and even a wealth tax. Still, the vast majority of Americans don’t like their jobs all that much and would happily support legislation that forces corporations to be better employers, committed local citizens, and more purposeful enterprises. If we don’t come up with a meaningful model of equitable capitalism, we could shortly get prescriptive socialism.