Emmanuel Faber is the CEO of a multinational corporation with clients in 130 countries and annual revenues of $28 billion as of last year. He also believes that a “revolution” is near and that we are getting close to the end of capitalism as we know it. Upon first glance, Mr. Faber might seem foolish for his frankness about the future of his own enterprise. But Danone, the French food company he runs, has held such views for decades while maintaining profitability. Its former boss, Antoine Riboud, gave a speech in 1972, describing his conception of a firm as an entity that should provide both economic and social benefits. To millennials and their younger counterparts, who have grown up watching the world descend into the throes of climate change, such an idea does not sound so foolish. After all, can economic models that call for infinite growth really be sustainable on a planet with finite resources?
Ecological concerns are just the tip of the (melting) iceberg. Corporations, legally and socially, are treated like people. At least in the United States, robust legal precedent exists for corporate personhood, from the ability to enter into contracts, freely exercise religion and donate to political candidates anonymously.
Yet while corporations are afforded many of the privileges of personhood, they are rarely held up to the same standards in terms of responsibility. Elizabeth Warren’s new bill, the Accountable Capitalism Act, seeks to change the current lack of corporate accountability. But she does not directly call for a mass overhaul of current institutions. She believes that capitalism in its current form is designed to benefit only one party -- shareholders. Thus, with corporate governance reforms, we can begin to distribute the gains from capitalism more equitably and ensure that employees, customers and communities benefit -- not just managers and executives.
The bill offers a number of proposals for reform, but one major point is the creation of a federal corporate citizenship charter for any company with revenue over $1 billion that would expand the obligations of company directors from merely serving shareholders to serving all stakeholders in the decision-making process. The bill would also require companies to allow workers to elect 40 percent of their corporate boards, limit executives’ ability to sell shares of stock they receive as compensation (thus disincentivizing buybacks as a money-making tactic) and ensure that any corporate political activity be authorized by both 75 percent of board members and shareholders. Traditional economists have long held that the primary aim of capitalism should be to maximize profit on behalf of shareholders, within the framework of the law. Complications in this theory arise, though, when one considers the outsize influence of corporations in making those laws in the first place, as well as the fact that 80 percent of the value of the American stock market is owned by around 10 percent of the population.
Whether the general public is ready to accept a model that deviates from the accepted norm of shareholder-focused capitalism is yet to be determined. But companies like Danone, Patagonia and even Nike will continue to bet on strategies that seek to maximize overall welfare as long as consumers keep rewarding them for doing so. As stakeholders in society, I believe it’s our job.
Anita's Angle: Hold capitalism accountable
