Elizabeth Warren’s Accountable Capitalism Act
By Eve Tahmincioglu

Delaware’s supreme court chief justice sees merit in calling for employee representation in the boardroom and ESG disclosure for all large companies — public and private. 

Last year, U.S. Sen. Elizabeth Warren, D-Mass., who is also running for president, introduced the Accountable Capitalism Act, calling for a host of requirements including “substantial” employee representation on corporate boards; environmental, social and governance (ESG) disclosure; and an obligation for company directors to consider the interests of all corporate stakeholders, not just those who hold stock.

Leo Strine, Delaware supreme court chief justice, weighs in on whether Warren’s bill will help move the inequality needle.

“One of the most interesting things about the bill is that she actually deals with the power and purpose issue very explicitly by requiring that a segment of the board be elected by the workers,” he explains.

Strine says he finds it humorous when people call proposals like this “radical,” or “almost like communism” given that such systems are working in other nations, “places where really wealthy people look to buy their cars and their watches.” Germany, he points out, has labor representatives on boards and the country “has a pretty kick-butt economy. Scandinavia has one of the other better functioning economies in the world and they have a higher level of labor participation. In the U.S. whether this is realistic, that’s for others to decide.”

In the UK, he notes, the new corporate governance code is going in that direction. “You either have to have a director elected by the workers, one who is specifically charged with having the perspective of the workers and caring about their best interest, or you have to form a board committee focused on employee welfare.”

That concept may be less fundamental than Warren’s bill, he says, “but you could see that being achievable in the U.S.”

All these options should be part of a larger transatlantic conversation, he continues, “because the same concerns about whether the market system is working for all, in some ways, led to the election result here and are behind things like Brexit. There has been a real change in gain-sharing between the haves and the workers and that’s pushing these pressures for changes.”

Warren’s focus on social-responsibility disclosure is also useful, Strine explains, but he believes it should extend to institutional investors.

“It’s unrealistic to just focus on the directors. We shouldn’t just have the directors in the companies talking about social responsibility. The institutional investors should be talking about how they take these factors into account.”

Another worthwhile component of her bill, he adds, is that ESG disclosure is focused on the size of the company, not whether the firm is publicly traded.

Given that the ultimate goal is to encourage companies not to pollute, mistreat employees, use child labor or thwart consumer rights, he says, whether a company is publicly traded or not shouldn’t matter.

“If we’re going to go to ESG disclosure, we don’t want to create another incentive for companies to go private and not be public,” he stresses.

The growing trend by companies to bypass the public route, he maintains, may be narrowing the window into the U.S. economy, “because when you don’t have as many public companies as a percentage of your economy, what you actually know about what’s going on in your economy is less.”


2019 Second Quarter

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