Understanding the Impact of The Accountable Capitalism Act on Corporate L&D

    

Over the coming months, the level of political conversation in the U.S. will continue to intensify and Accountable Capitalism Actwe all will be subjected to endless hours of propaganda coming from candidates running for office and all sides of the political spectrum. The different perspectives will present themselves in all different shapes and forms with some of them being very explicit and some of them being subtle and unrecognizable.  It’s been interesting for me to begin to integrate some of these current geopolitical issues into our Business Acumen and Business Leadership simulation workshops. Sometimes they are purely conversations and learning opportunities to apply economics and finance to business strategy, and sometimes they are scenarios that we build into our digital business simulations. For example, last week we introduced the notion of tariffs on raw materials and finished goods into the third year of a four-year simulation to see how participants would react in the middle of a planning cycle.

After we debriefed the workshop, we engaged in a deep discussion about economic impacts related to some of the platforms being proposed by U.S. candidates.  One in particular, Senator Elizabeth Warren’s proposed Accountable Capitalism Act, raised the most interesting of discussions from both the business and learning perspectives.

In case you are unfamiliar with it, the Accountable Capitalism Act is proposed legislation that would require corporations with more than $1 billion in annual revenue to obtain a federal charter to exist. There are about 5,000 companies in the U.S. with revenues over $1 billion. The federal charter aims to mitigate the perception of inequality of wealth by obligating these companies to consider the interests of all stakeholders including employees and others in the business community where the business is based, not just those who own the stock.  Specifically, these corporation would be required to allow their workers to elect 40% of the membership of the board of directors and:

  • Limit corporate executives’ ability to sell shares of stock they receive as compensation for at least 5 years and at least 3 years after a stock buyback
  • Limit corporate involvement in political activity by requiring any contributions and or endorsements to be authorized by both 75% of shareholders and 75% of board members to ensure consensus.

There are many driving factors behind this legislation but one of the major themes that Senator Warren presents in her speeches and desire to “save capitalism” is that the entire business cycle has become so focused on proving wealth to shareholders it is forgetting what got us here.

As the author of hundreds of digital business simulations that are used to teach business acumen and business leadership it is my job to model and play out various scenarios of business and how leaders set and execute operation decisions in support of their goals and objectives.  One of my most significant observations of working with more than 100 Fortune 500 companies has been the past 25 years is this:

Great companies already do this. They understand the system of business that includes employees, customers, suppliers, and government.  They recognize that long term sustainability is an obligation they take on themselves not only because it’s the right thing to do, it’s because it’s the right thing to do for the business.  It’s also painfully obvious that the companies that don’t do this well, don’t survive.  This is proven and supported over and over again in simulation workshops.

So, will adding layers of federal bureaucracy and oversight to “ensure balance” help or hurt?

My fear is that it will hurt.  History shows that when companies experience extraneous forces such as mandated programs, changes to taxes, and increased regulations it is the discretionary budgets that are impacted immediately. In other words, no matter how good the intent, areas such as human resources, talent development, and training will suffer.  Currently, the best companies on the planet understand the perfect balance between the short term and the long term and the long term is only going to happen if there are succession plans and pools of well-trained employees ready to take over.  The dollars that will be spent on the government bureaucracy as dollars being taken away from the most important stakeholders within the system of business.

The intention of this blog is not to take a political stance but rather present the data and educated observations.  Hopefully business leaders and leaders of talent development will recognize the issues and engage in a great dialogue to make the best decisions for both the short term and long term of all stakeholders.

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Robert Brodo

About The Author

Robert Brodo is co-founder of Advantexe. He has more than 20 years of training and business simulation experience.