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When a journalist asked the famous criminal Willie Sutton why he robbed banks, he is reputed to have said, “Because that’s where the money is.” He denies saying this, but the basic idea is true: When someone wants to take something, he or she goes to where it is easiest to get.
So it’s easy to understand why presidential candidate Sen. Elizabeth Warren (D-MA) wants a law that would allow her as president to determine which billion dollar companies live or die: Politicians need money and large companies have it. The law she wants — the Accountable Capitalism Act — would give her hypothetical administration extensive power over businesses. This is bad for retirees and business and is particularly onerous for tech. Not only are tech companies such as Apple and Alphabet cash rich but they are also flush with data and voter attention. Those are two things politicians want to control.
What is the Accountable Capitalism Act?
The Accountable Capitalism Act is Sen. Warren’s proposal for federal control of US corporations with more than $1 billion in annual revenue. Evidently non-US companies would be exempt. The federal government would have a say over how these companies weigh business options, who sits on their boards of directors, how directors and corporate officers are compensated, and the extent to which the companies engage in political activities. Any company with “a history of egregious and repeated illegal conduct and that has failed to take meaningful steps to address its problems” in the eyes of Sen. Warren’s political appointees (should she become president) could have its corporate charter yanked. That’s the death penalty.
Would Sen. Warren’s proposal make corporations more accountable than they are today?
Sen. Warren’s proposal would make corporations less accountable to their owners, customers, employees, and communities and more accountable to politicians. Today, corporate officers answer to directors, who answer to owners, who vote for new directors or sell stock if they are unhappy. The company answers to customers, who buy from someone else if they are unhappy. And employers have to keep employees happy because workers are quick to change jobs if they are unhappy.
Employees change jobs about every three years according to the Bureau of Labor Statistics. And communities can use zoning, business regulations, and taxes to ensure that companies are good citizens. Employees live in these communities and also care about their neighbors and neighborhoods.
Sen. Warren’s proposal would weaken this governance structure in several ways. The most disconcerting thing for tech is that politicians and political appointees would have great discretion when judging companies. So politicians — the least trusted people in America — and their appointees could exert additional coercive power over the companies that most people use daily for crucial, seemingly irreplaceable services. What could go wrong?
What should be done?
Tech corporate governance should be left alone. Sure, it could be tweaked here and there, but good governance always assigns decision-making authority to those who will bear the consequences of good or bad decisions and have the best information. Shareholders know more about what they want done with their dollars, customers know more about what they want to purchase and use, employees know more about their job satisfaction, and communities know more about what their citizens want than do federal politicians and their appointees. And the shareholders, customers, employees, and community leaders are the ones that suffer (or enjoy) the results of their own bad (or good) decisions. Federal political machinery tends to be less accountable, which is one reason government consistently ranks at the bottom in the American Customer Satisfaction Index.
(Disclosure statement: Mark Jamison provided consulting for Google in 2012 regarding whether Google should be considered a public utility.)
Elizabeth Warren’s proposal for federal control of US corporations with more than $1 billion in annual revenue would be bad for business and particularly onerous for tech sector.
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