Her proposal is called the Accountable Capitalism Act. It sounds nice, but it appears to be a proposal for hard core crony capitalism/socialism.
The idea is that businesses will be held “accountable” to the state. That the state is the final arbiter of what is good and right. If history shows us anything it is that this is objectively incorrect. Businesses are not angels. They can do bad. But bureaucrats are certainly not angels either and they do bad all the time. But they can’t be held accountable in the marketplace like businesses.
Under Senator Warren’s proposal, no business with more than $1 billion in revenue would be permitted to legally operate without permission from the federal government. The federal government would then dictate to these businesses the composition of their boards, the details of internal corporate governance, compensation practices, personnel policies, and much more.
The thought of commissars micromanaging (and likely plundering) businesses at every turn is a recipe for economic disfunction if there ever was one.
Still, there are others who think that Ms. Warren’s proposal is entirely reasonable. In Naked Capitalism Yves Smith writes:
“To put it another way, the notion that the US stock market is for raising funds so companies can invest has become a hoary old myth. And even back in the stone ages of my youth when companies actually believe in investing, the most important sources of corporate funding were retained earnings and borrowing.”
But Smith misses the point. It doesn’t matter if raising funds in the stock market is for “investing” or not. It is not the business of the government to inject itself into how businesses raise money. Also if a CEO is paid handsomely, and many are, so what? If you disagree with the pay package divest yourself of that company. Don’t do business with that company. Highlight the pay package in the press. Don’t buy that company’s products. That’s what many of us do. Voting with one’s dollar has an effect and it is often quick. There is a reason why Chick-fil-a’s across the country have lines wrapped around their buildings all hours of the day (even here in the Berkeley of the Blue Ridge). It’s not just good fast food. People know what the company stands for and choose to do business there. Likewise if a company and it leaders are doing wrong by customers and shareholders it is the customers and the shareholders who should respond. If they do not then the pay package isn’t that big a problem.
Senator Warren however seems to think that this mechanism is not enough. She appears to think that commissars posses some wisdom that the rest of us do not. This is not the case.