by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Warren’s Accountable Capitalism Act has serious enforcement powers. It permits the federal government to revoke the charter of a U.S. company if it has engaged in “repeated and egregious illegal conduct” — as defined, of course, by the federal government.
ACA is not a small or even a giant step toward socialism. It is socialism. Senator Warren’s legislation is the most radical congressional proposal since the National Recovery Administration Act of 1933, which was declared unconstitutional by the Supreme Court just two years later.
Let us begin with a simple question: What if all the stakeholders disagree about the size of the next pay raise or the hiring of transgender workers or the construction of a new plant or how to market a new product? Who is going to resolve the impasse — the Office of United States Corporations? As the business ethicist Kenneth Goodpaster put it: Multiplying the number of stakeholders “blurs traditional goals in terms of entrepreneurial risk-taking” and “pushes decision-making towards paralysis.”
And why is it more “just” for assorted stakeholders to claim a share of the profits? The owners of a company are its shareholders who invested their money in the enterprise. If there is a loss, it is the shareholders who suffer. Other stakeholders — workers, suppliers, the community at large — do not share the direct risk that shareholders do. Warren’s plan, despite its superficial leveling philosophy, may end up benefiting wealthy stakeholders at the expense of small shareholders.
A principal problem with the Warren solution, says the Hoover Institution’s Richard Epstein, is that it’s unconstitutional.