Elizabeth Warren-- Saving Capitalism From... Itself, Of Course

Recently a guy who's writing a book about the years when Mo Ostin ran Warner Bros Records-- the glory years-- interviewed me and asked me why everyone respects and admires Mo so much and how it differed from other executives who ran other record companies. I had some experience at SONY (then CBS Records) and with post-Mo Warners chieftains. My perspective was fairly simple. Mo instilled in his vice presidents a sense of obligation to stakeholders-- our artists, our customers, our employees, our shareholders, the art itself that we were releasing, our society-- that had to be foremost in our minds. It was so much like what my grandfather, a small businessman, had taught me decades earlier that I was floored. Both also implied that by fulfilling obligations to and responsibility for this stakeholders, my own situation would be satisfactory to my own ambitions.

I never felt anything at CBS remotely like that. It was a dog-eat-dog world based on greed and selfishness. it was ugly and i couldn't wait to get out. After AOL "bought" Warner Bros, the first meet with senior staff with Steve Case, our new leader, was catastrophic. As we were walking out I told my boss that I had decided while he was speaking to leave the company. (He had too.) Case told us that all this bowing and scraping to the artists and the employees and the customers, etc was O.V.E.R. and that going forward it was all about US. We're all going to be RICH, he shouted, like some kind of cheap motivational counsellor. But everyone was rich and every was rich because we built a better company.

Let me give you an example, the same one I gave the writer who interviewed me. No one ever wanted to leave Warner Bros, unlike the constant movement between the other music companies. One of the reasons was our posture towards insurance. If the insurance industry came up with something new that would benefit our employees, we would also jump right on it-- like parental leave, for example. Case sneered at the idea. If the law called on the company spending $10 towards health insurance, we would spend $10, not $11, let alone $25. I was a dark, mean little world on the horizon. Today Warners has around a quarter of the employees, few hits and is, basically, a money laundering operation for a Russian oligarch, Leonid Blavatnik, who reports to Putin and has been a funnel for funds to Trump. Warner Bros... once the single biggest source of contributions to the Democratic Party and to socially progressive initiatives!

On Wednesday, Elizabeth Warren introduced legislation, the Accountable Capitalism Act, that seems to be trying to codify-- at least in part-- Mo's ideas about how to run a company. She described it as an effort "to help eliminate skewed market incentives and return to the era when American corporations and American workers did well together. The legislation aims to reverse the harmful trends over the last thirty years that have led to record corporate profits and rising worker productivity but stagnant wages." Take that, CBS!

For most of our country's history, American corporations balanced their responsibilities to all of their stakeholders - employees, shareholders, communities-- in corporate decisions. It worked: profits went up, productivity went up, wages went up, and America built a thriving middle class.

But in the 1980s a new idea quickly took hold: American corporations should focus only on maximizing returns to their shareholders. That had a seismic impact on the American economy. In the early 1980s, America's biggest companies dedicated less than half of their profits to shareholders and reinvested the rest in the company. But over the last decade, big American companies have dedicated 93% of earnings to shareholders-- redirecting trillions of dollars that could have gone to workers or long-term investments. The result is that booming corporate profits and rising worker productivity have not led to rising wages.

Additionally, because the wealthiest top 10% of American households own 84% of all American-- held shares-while more than 50% of American households own no stock at all-- the dedication to "maximizing shareholder value" means that the multi-trillion dollar American corporate system is focused explicitly on making the richest Americans even richer.

"There's a fundamental problem with our economy. For decades, American workers have helped create record corporate profits but have seen their wages hardly budge. To fix this problem we need to end the harmful corporate obsession with maximizing shareholder returns at all costs, which has sucked trillions of dollars away from workers and necessary long-term investments," said Senator Warren. "My bill will help the American economy return to the era when American companies and American workers did well together."

Since the passage of the Republican tax bill, American companies have already announced more than half a trillion dollars in stock buybacks this year while real wages remain flat. There is an urgent need to end the grip of shareholder value maximization and return to the era when American corporations produced broad-based growth that helped workers and shareholders alike. The Accountable Capitalism Act:

• Requires very large American corporations to obtain a federal charter as a "United States corporation," which obligates company directors to consider the interests of all corporate stakeholders: American corporations with more than $1 billion in annual revenue must obtain a federal charter from a newly formed Office of United States Corporations at the Department of Commerce. The new federal charter obligates company directors to consider the interests of all corporate stakeholders-- including employees, customers, shareholders, and the communities in which the company operates. This approach is derived from the thriving benefit corporation model that 33 states and the District of Columbia have adopted and that companies like Patagonia, Danone North America, and Kickstarter have embraced with strong results.

• Empowers workers at United States corporations to elect at least 40% of Board members: Borrowing from the successful approach in Germany and other developed economies, a United States corporation must ensure that no fewer than 40% of its directors are selected by the corporation's employees.

• Restricts the sales of company shares by the directors and officers of United States corporations: Top corporate executives are now compensated mostly in company equity, which gives them huge financial incentives to focus exclusively on shareholder returns. To ensure that they are focused on the long-term interests of all corporate stakeholders, the bill prohibits directors and officers of United States corporations from selling company shares within five years of receiving them or within three years of a company stock buyback.

• Prohibits United States corporations from making any political expenditures without the approval of 75% of its directors and shareholders: Drawing on a proposal from John Bogle, the founder of the investment company Vanguard, United States corporations must receive the approval of at least 75% of their shareholders and 75% of their directors before engaging in political expenditures. This ensures any political expenditures benefit all corporate stakeholders.

• Permits the federal government to revoke the charter of a United States corporation if the company has engaged in repeated and egregious illegal conduct: State Attorneys General are authorized to submit petitions to the Office of United States Corporations to revoke a United States corporation's charter. If the Director of the Office finds that the corporation has a history of egregious and repeated illegal conduct and has failed to take meaningful steps to address its problems, she may grant the petition. The company's charter would then be revoked a year later-- giving the company time before its charter is revoked to make the case to Congress that it should retain its charter in the same or in a modified form.

Did I mention that during the Mo years, Warner Bros was the most successful and profitable music company in history?