Buried beneath the laundry pile of new left-wing regulations the Biden administration hopes to push is a previously obscure idea whose time may, regrettably, have come: the federal corporate charter. For decades, anti-capitalist legal theorists have advocated national licensing requirements for corporations — charters that government officials could revoke for alleged misbehavior. We may soon see what that idea looks like in practice.
With President-elect Biden moving quickly to staff his new administration, many observers are wondering how radical his appointees are going to be. We may not see Senators Elizabeth Warren (D., Ma.) and Bernie Sanders (I, Vt.) in the cabinet (if for no other reason than their Senate replacements would be named by Republican governors), but we will likely see many new senior federal officials in their mold. CNN reported this week that “Elizabeth Warren’s fingerprints are all over the Biden transition, much to Wall Street’s dismay.” Our friends on the Street are wise to be dismayed.
We can get a good idea of what Warren-style officials would want by looking at the senator’s own Accountable Capitalism Act, an admittedly aspirational piece of legislation introduced in August 2018 as Warren herself was preparing to run for the Democratic nomination for president. The very first item that Warren’s office listed in its press release on the bill is the provision for a federal corporate charter, which would cover any American company with more than $1 billion in annual revenue.
The Accountable Capitalism Act would require such corporations to reject the traditional obligation — and long-standing legal precedent — to maximize value for shareholders and instead embrace a “stakeholder” model that “obligates company directors to consider the interests of all corporate stakeholders,” including “communities in which the company operates.” The bill would also create the Office of United States Corporations at the Department of Commerce, which would have the authority to punish any company deemed insufficiently solicitous to stakeholder interests.
The legislation invites state attorneys general to petition the director of the Office of Corporations with the names of firms that they consider unworthy. The director would then have it in her power to revoke the charter of any corporation, giving the company in question one year until its ability to operate expires. The only escape from the verdict of the Office of Corporations would, apparently, be a direct appeal to Congress. Warren’s office describes the process by which a company would use its one-year countdown-to-destruction “to make the case to Congress that it should retain its charter.” This special act of Congress, setting aside a particular charter revocation, would be a sort of reverse Bill of Attainder for the corporation in question.
Proponents of this “corporate death penalty” assure us that it is not a radical or untested method of regulating business, pointing back to the early days of the republic, when corporate charters were more limited in issuance and duration, and throughout the 19th century, when they were much more frequently revoked by state officials. There was a time, they remind us, when being allowed to form a corporation at all was a special privilege that monarchs and legislatures extended only to enterprises that were judged to be “beneficial to the public interest,” rather than to any old group of investors seeking to pool their resources.
Read the full article at National Review.