NEW YORK--(BUSINESS WIRE)--U.S. Sen. Elizabeth Warren’s recently proposed Accountable Capitalism Act, which would hold large U.S. corporations accountable not only to their shareholders but to all corporate stakeholders, is not the optimal path for corporate America, contends executive compensation consulting firm Pay Governance (paygovernance.com).
According to Pay Governance, the proposed legislation would abolish shareholder primacy, which asserts that shareholders have the priority interest in their corporation’s success and therefore should be given the highest consideration in its management.
Sen. Warren believes shareholder primacy has shortchanged American workers for the past 30 years, yet the practice has created trillions of dollars in economic growth, job creation and general prosperity in the United States during that time frame, concludes Pay Governance Partner John Ellerman and Managing Partner Ira Kay in their Aug. 31 Viewpoint: “A Proposed Legislative Alternative to Corporate Governance and the Theory of Shareholder Primacy” published on the firm’s website.
“The concept of shareholder primacy has been successful for many and is deeply embedded in corporate America,” said Ellerman. “A shift to stakeholder primacy would be challenging for many U.S. companies to embrace.”
Other key provisions of the Accountable Capitalism Act include federally chartering all large U.S. companies, forcing boards of directors to elect at least 40 percent of their members by company employee vote, limiting company share sales and political expenditures and more.
“U.S. companies will likely object to the proposed provisions,” said Kay. “The proposed bill runs counter to the proven success of the shareholder model and portends greater federal control of U.S. corporations.”
Pay Governance continues to monitor corporate board, corporate management and institutional investor community opinions as the proposed legislation is debated in Congress. Pay Governance’s consulting practice advises public company compensation committees both on setting pay opportunity values based on competitive market data, as well as assessing after-the-fact pay-for-performance using realizable pay and other appropriate methodologies.
Pay Governance LLC is an independent consulting firm focused on delivering advisory services to compensation committees. The consultancy also advises the management of companies in situations in which the firm does not serve as the independent committee advisor. Pay Governance has locations throughout the United States in New York, Boston, Detroit, Philadelphia, Pittsburgh, Chicago, St. Louis, Dallas, Cleveland, Charlotte, St. Petersburg, San Francisco and Los Angeles. The firm also has strategic affiliate relationships with Pay Governance Japan and Pay Governance Korea. For more information, visit www.paygovernance.com.