Toward Fair and Sustainable Capitalism A Comprehensive Proposal

Toward Fair and Sustainable Capitalism

A Comprehensive Proposal to Help American Workers, Restore Fair

Gainsharing Between Employees and Shareholders, and Increase

American Competitiveness by Reorienting Our Corporate Governance

System Toward Sustainable Long-Term Growth and Encouraging

Investments in America’s Future

Leo E. Strine, Jr.

A New Deal For This New Century:

Making Our Economy Work For All

October 3-4, 2019

New York University’s

Constance Milstein and Family Global Academic Center

Washington, D.C.

Chief Justice, Delaware Supreme Court; Adjunct Professor of Law, University of Pennsylvania

Law School; Austin Wakeman Scott Lecturer in Law, Harvard Law School; Senior Fellow,

Harvard Program on Corporate Governance; and Henry Crown Fellow, Aspen Institute.

The author is grateful to Kirby Smith and Reilly Steel for their excellent research and thoughts.

This proposal would not have been possible to prepare without their diligence. Thank you also to

Christine Balaguer and Margaret Pfeiffer for their excellent help, and to David Berger, Jill Fisch,

David Katz, Ted Mirvis, Damon Silvers and Antonio Weiss for helpful discussions and comments

that influenced the Proposal. All errors are on my own.

University of Pennsylvania Law School

ILE

INSTITUTE FOR LAW AND ECONOMICS

A Joint Research Center of the Law School, the Wharton School, and the

Department of Economics in the School of Arts and Sciences

at the University of Pennsylvania

RESEARCH PAPER NO. 19-39

Toward Fair and Sustainable Capitalism

A Comprehensive Proposal to Help American

Workers, Restore Fair Gainsharing Between

Employees and Shareholders, and Increase

American Competitiveness by Reorienting Our

Corporate Governance System

Toward Sustainable Long-Term Growth

and Encouraging Investments in

America’s Future

Leo E. Strine, Jr.

GOVERNMENT OF THE STATE OF DELAWARE - SUPREME COURT OF DELAWARE;

HARVARD LAW SCHOOL; UNIVERSITY OF PENNSYLVANIA LAW SCHOOL

This paper can be downloaded without charge from the

Social

Science Research Network Electronic Paper Collection:

https://ssrn.com/abstract=3461924

ISSN 1936-5349 (print)

ISSN 1936-5357 (online)

HARVARD

JOHN M. OLIN CENTER FOR LAW, ECONOMICS, AND BUSINESS

TOWARD FAIR AND SUSTAINABLE CAPITALISM

A COMPREHENSIVE PROPOSAL TO HELP AMERICAN WORKERS, RESTORE FAIR GAINSHARING BETWEEN

EMPLOYEES AND SHAREHOLDERS, AND INCREASE AMERICAN COMPETITIVENESS BY REORIENTING OUR

CORPORATE GOVERNANCE SYSTEM TOWARD SUSTAINABLE LONG-TERM GROWTH AND ENCOURAGING

INVESTMENTS IN AMERICA’S FUTURE

Leo E. Strine, Jr.

Discussion Paper No. 1018

09/2019

Harvard Law School

Cambridge, MA 02138

This paper can be downloaded without charge from:

The Harvard John M. Olin Discussion Paper Series:

http://www.law.harvard.edu/programs/olin_center

The Social Science Research Network Electronic Paper Collection:

https://ssrn.com/abstract=3461924

This paper is also Discussion Paper 2019-11 of the

Harvard Law School Program on Corporate Governance

Fair and Sustainable Capitalism Proposal

The incentive system for the governance of American corporations has failed in recent

decades to adequately encourage long-term investment, sustainable business practices, and

most importantly, fair gainsharing between shareholders and workers. That should not be

so. This state of affairs exists in no small part because we have made public companies

more and more responsive to the desires of the stock market, as represented by institutional

investors with a demand for immediate returns. This has resulted in declines in gainsharing

of corporate profits with workers, a large increase in stock buybacks, skyrocketing CEO

pay, and growing inequality.

When looking for the causes of growing inequality and a corporate governance system that

does not work for all, the usual subjects of criticism are the CEOs and boards of large

companies, but very little is said about those who wield over 75% of shareholder voting

power: institutional investors. Most stock today is owned not by mom-and-pop investors

who directly hold stock in individual companies, but by institutional investors who control

human investors’ capital. The majority of middle-class Americans fortunate enough to be

invested in the stock market are in a real way forced capitalists. These worker-investors

must save for retirement through 401(k) and other tax-advantaged investments that require

workers to turn over a portion of every paycheck to a family of mutual funds chosen by

their employer. The institutional investors, not these worker-investors, get to vote the

public company stock that mutual funds buy with human investors’ capital.

Corporations will not give more thoughtful consideration to their employees and social

responsibility—that is, our corporate governance system and economy will not change—

unless the institutional investors who elect corporate boards also support doing so.

Institutional investors have the most influence on corporations, and the imbalance in our

corporate governance system can be fixed only by aligning institutional investors’

incentives with the interests of their end investors: human beings saving for retirement and

their children’s college education. Even more important, human beings who most of all

need American corporations to pay good wages and create good jobs.

The investment horizon of the ultimate source of most companies’ funding—human beings

saving for retirement and education—is long. That long-term horizon is much more

aligned with what it takes to run a real business than the horizon of companies’ direct

shareholders, who are money managers under strong pressure to deliver immediate returns

at all times. As diversified investors whose holdings track the overall economy, human

investors do not benefit when companies offload the costs of their activities, such as carbon

emissions and other pollution, onto others. And as human beings who breathe air, consume

products, and depend on a good job for most of their income, human investors suffer as

citizens when companies take shortcuts that harm the environment, defraud or injure

consumers, or offshore jobs to countries with low wages and few worker protections.

Human investors owe most of their wealth to their job. This is true not only for the poorer

half of Americans; it is true of 99% of Americans. On average, Americans get 64% of

their income from wages and another 15% from either retirement payments or other

transfer payments. For the middle and upper-middle class, jobs are even more important,

with wages comprising 70% or more of income. But the importance of work does not stop

there. Those in the 80th to 90th percentiles get 75% of their income from working, and

those in the 95th to 99th percentiles still get over 60% from their labor. As a result, human

investors need companies to do business in a way that provides Americans with access to

good jobs, sustainable wage growth, and a fair share of the wealth that businesses generate.

In short, human investors benefit from sustainable, long-term economic growth and

gainsharing between shareholders and workers, but companies have increasingly failed to

deliver on that promise. For about two and a half decades starting in the late 1940s, workers

and investors shared in the wealth generated by a strong, growing economy. In the early

1970s, accelerating in the 1980s, and continuing since, that social compact has frayed.

Since then, worker productivity has risen by about 70%, but hourly pay has grown by only

12%. Meanwhile, corporate profits have hit record highs. In other words, American

workers are more educated than ever, more skilled, and doing more to create corporate

profits than ever, but they have shared far less in the fruits of that labor.

To help redress this problem, workers must be given more voice within the corporate

boardroom, and top managers and directors must give greater thought to how they treat

their employees. Companies should have board-level committees that ensure quality

wages and fair worker treatment. Labor law reforms should make it easier for employees

to join a union and bargain over wages. Likewise, to hold companies accountable for how

they treat their workers, how they treat their consumers, and whether they operate in an

ethical, sustainable, environmentally responsible manner, the public and investors deserve

better information from companies about their performance on these critical dimensions.

In addressing the decline in fair gainsharing with workers, we also cannot ignore the role

of institutional investors in pushing for immediate returns and the poor incentives that

pressure put on companies to take shortcuts that offload companies’ costs onto others, harm

consumers, and undercut Americans’ access to quality jobs. In no small part because of

retirement policy decisions by U.S. lawmakers, institutional investors have come to

dominate the governance of large U.S. corporations. In the mid-20th century, individuals

held the vast majority of U.S. public companies’ stock; today, institutional investors own

about 78%. And an increasingly small number of those institutional investors, which

commentators have referred to as the “Big Three” or “Big Four,” are especially dominant.

These institutional investors effectively dictate U.S. corporate policy by voting in corporate

elections and on management and shareholder proposals at annual meetings. Institutional

investors elect companies’ boards of directors. Institutional investors vote on whether to

sell the company, back activist proposals, and support company executives’ compensation

levels. The power they exercise cannot be ignored as a factor in producing the decline in

fair gainsharing between workers and corporate shareholders. Ultimately, operating

companies will not act in a more responsible manner unless the institutional investors who

control them support them in doing so.

To ensure that operating companies act more responsibly toward their workers and other

stakeholders, the institutional investors who are responsible for managing most human

investors’ money must vote with their investors’ needs in mind. And for index funds

especially, they should have to tailor their voting policies and recommendations to the fact

that they cannot sell their shares and are invested for the long haul. To be fair, some

institutional investors have started to consider environmental, social, and governance, or

“ESG,” factors. But if we want companies to operate in a socially responsible manner that

creates sustainable profits, then all institutional investors who manage human investors’

money need to factor EESG considerations into their investing and voting decisions, and

emphasize the vital missing “E”—the interests of companies’ employees. That is,

institutional investors must align their voting policies with the interests of their worker-

investors who need not just sustainable corporate profits, but also good jobs, clean air, and

safe products.

If companies are spending too much on stock buybacks, taking environmental shortcuts, or

failing to adequately compensate and invest in their workforce, that is likely because their

stockholders—i.e., institutional investors—have exerted pressures on companies that

encouraged this state of affairs. If the goal is to increase the gainsharing among

corporations and their other stakeholders—workers, consumers, and society—that can be

achieved only through aligning those doing the voting—institutional investors—with the

interests of the flesh and blood human beings whose money the institutional investors

manage and control. Creating this alignment is achievable, and can be done through

modest changes to current laws and regulations that govern institutional investors.

Other complementary measures would also help to align incentives and promote

sustainable, long-term economic growth that benefits all. To start, we must consider tax

and accounting policy. That is, we must recognize the role of tax and accounting rules in

creating incentives that encourage speculation and rapid portfolio turnover, rather than

productive, sound long-term investing. As important, our nation has long-term economic

challenges that must be addressed by public investment and incentives that can be

implemented only if we have the funds to pay for them. Most notably, we have a huge

infrastructure and basic research gap that is eroding our competitiveness and diminishing

our quality of life. We also cannot be blind to the reality that we need to supercharge our

efforts to address climate change and to set an example for the world. With real

investments in basic research, cleaner, more efficient infrastructure, and worker training,

we can create jobs in the United States, tackle climate change, help workers in carbon-

intensive industries transition to jobs in emerging clean energy companies, spark

innovation, and enhance the long-term international competitiveness of American

companies. At the same time, by implementing good tax policy that addresses behavior

we want to have less of, we can use the savings to finance these investments in the future

that create good jobs that cannot be sent overseas.

Finally, we must address legal changes that have given corporate elites an unfair advantage

over working Americans and human investors, including Supreme Court and regulatory

decisions that have undercut the effectiveness of labor unions, deprived Americans of their

day in court and fueled a massive growth in unchecked corporate political spending.

* * *

The bottom line is that America’s corporations are not playthings. They create jobs,

produce goods and services that consumers depend on, affect the environment we live in,

and build wealth for human investors to save for retirement and their kids’ education. That

is, corporations are societally chartered institutions of enormous importance and value.

Those who govern them ought to be accountable for the generation of durable wealth for

workers, consumers, and human investors. A new accountability system that supports

wealth creation within a system of enlightened capitalism—one that aligns the interests of

institutional investors and corporations with those of the human beings whose capital they

control—is needed. With some modest sacrifice by every interest that wields economic

power, we can make our economy work better for all Americans. This Proposal to promote

Fair and Sustainable Capitalism would take several steps to make that goal a reality.

Enhancing Disclosure for Operating Companies on Employee, Environmental,

Social, and Governance Matters to Promote Sustainable, Long-Term Growth and

Gainsharing with Workers

Reforming our corporate governance system starts with the operating companies that make

products and create jobs. If companies do not focus on making sustainable profits by

selling useful products and services, and treat their workforce well, our economy will not

work fairly for everyone. And if institutional investors are going to support and expect

companies to behave in a socially responsible manner—one that serves the interests of

human investors as workers, consumers, and citizens, not just as investors concerned with

short-term changes in the value of their stock portfolio—then they need the right

information to hold companies accountable. As important, EESG disclosure is not just

relevant for investors. It is vital for Americans as human beings who are workers,

consumers of products, and breathers of air. Citizens deserve to have quality information

about how the nation’s most influential businesses are treating their workers and

consumers, and respecting our environment, laws, and ethical standards. The Fair and

Sustainable Capitalism Proposal therefore would:

 Require large, socially important companies to annually report on their

businesses’ impact on workers, consumers, communities, the environment, and

our nation.

o Before institutional investors can hold corporations responsible for providing

long-term growth in a sustainable way that benefits employees, consumers,

and the environment, institutional investors need quality information. The

first step is thus to require companies to disclose more information about

their businesses’ impact on employee, environmental, social, and governance

matters (“EESG,” with an extra “E” for employees). To ensure that more

disclosure requirements do not discourage companies from going public or

encourage them to go private, any reporting requirement should not be based

on whether the firm is publicly traded.

o Under the Proposal, any company with more than $1 billion in annual sales

would be required to annually report information about its business’s impact

on workers, consumers, communities in which the company operates, other

stakeholders, and the environment (including climate change). The

Securities and Exchange Commission would develop rules, in consultation

with the Department of Labor, the Department of Commerce, the Department

of Justice, and the Environmental Protection Agency, to standardize

disclosure so that it is useful to investors, workers, consumers, and other

stakeholders, as well as regulators who protect the public. Reporting

obligations would not be conditioned on whether the company’s stock is

publicly traded, avoiding the perverse effect of encouraging companies to go

private or discouraging emerging companies from going public. These

workable disclosure requirements would help both institutional investors and

the public hold companies accountable for the impact of their businesses on

stakeholders and society as a whole.

 Require the boards of large, socially important companies to create workforce

committees to address workforce issues at the board level.

o Union membership has drastically declined from its peak of around 28% of

the workforce in the 1950s to less than 11% today. With this decline, it has

become harder for workers to collectively bargain for fair wages, training

that assures them continued employment, and a safe and hospitable

workplace. Meanwhile, in some other countries, such as Germany, workers

have the right to be represented on the company’s board of directors through

so-called “codetermination,” but foreign workers typically do not get the vote

and it is not clear that codetermination fits with our economy. But many

capitalist nations without codetermination require that each company has a

workers’ council or some other mechanism requiring ongoing consultation

with workers. The U.S. system stands out for its lack of corporate

governance rules or other policies and practices that ensure companies will

consider worker concerns. Combined with the drop in union representation,

this failure may explain some of the decline in fair gainsharing between

workers and companies that has occurred over the past several decades.

o To make sure that companies give careful consideration to worker concerns

at the board level, the Proposal requires the Securities and Exchange

Commission, the Department of Labor, and the National Labor Relations

Board to jointly develop rules that would require the boards of companies

with more than $1 billion in annual sales to create and maintain a committee

focused on workforce concerns. By requiring these committees at all large

corporations, not just public corporations, more accountability would be

imposed on large private companies, such as those owned by private equity

firms, to treat their workforce fairly. These workforce committees would be

focused on addressing fair gainsharing between workers and investors, the

workers’ interest in training that assures continued employment, and the

workers’ interest in a safe and tolerant workplace. These workforce

committees would also consider whether the company uses substitute forms

of labor—such as contractors—to fulfill important corporate needs, and

whether those contractors pay their workers fairly, provide safe working

conditions, and are operating in an ethical way, and are not simply being used

to inflate corporate profits at the expense of continuing employment and fair

compensation for direct company employees. Offering a middle-ground

between the current system and “codetermination”-style worker

representation, the committees would be required to develop and disclose a

plan for consulting directly with the company’s workers about important

worker matters such as compensation and benefits, opportunities for

advancement, and training. Finally, the National Labor Relations Act would

be amended to ensure that companies can use dedicated committees to

consult with their workers without running afoul of the Act’s prohibition on

“dominating” labor organizations, provided that the company doesn’t

interfere with, restrain, or coerce employees in the exercise of their rights to

collective bargaining and self-organization. In essence, this would allow for

European-style “works councils” without impeding union formation and

representation.

 Change accounting rules to treat investments in human capital like other long-

term investments and require companies to disclose more information in

narrative form about their human capital investments.

o Accounting rules currently treat human capital investments as a cost that is

expensed immediately instead of a long-term investment that is expensed

over time. Given financial markets’ focus on short-term results, this can lead

corporate managers to underinvest in human capital. But investment in

human capital is just as important as other long-term investments in plant and

equipment and should be treated as such when being accounted for on a

firm’s income statement and balance sheet. Providing similar accounting

treatment to human capital investments as other long-term corporate

investments would encourage companies to invest in their workforces and

diminish the incentive for activist hedge funds to campaign to reduce

companies’ spending on their workers just to increase short-term returns.

o To fix this problem, the Proposal would require the Securities and Exchange

Commission to instruct the Financial Accounting Standards Board to revise

generally accepted accounting principles to treat investments in human

capital as capital expenditures like investments in plants, property, and

equipment, and the Commission would develop rules requiring public

companies to disclose in narrative form additional information about their

investments in human capital.

 Require companies releasing quarterly earnings guidance to make other

necessary and appropriate disclosures.

o No rational person believes that corporations can deliver consistent, quarter-

to-quarter earnings growth nor that corporations should be managed with that

objective in mind, especially in light of the fact that most of their capital

comes from human investors who are saving for the long run and therefore

need sustainable growth, not bubble returns. Forward-looking quarterly

earnings estimates provide little value to investors but continue to contribute

to managing to the market in an unproductive way. And isolated issuer

restraint is of little utility as competitive realities lead to a collective lack of

discipline and wisdom because CEOs fear the loss of analyst coverage if they

refuse to feed the market beast and their competitors continue to do so.

o The Proposal would have the SEC promulgate rules requiring companies to

disclose more information or adhere to other standards if companies are

going to release forward-looking quarterly earnings estimates. Under the

Proposal, the SEC must require any company that issues quarterly guidance

to maintain, make public, and keep current a long-term plan for earnings

growth and situate any quarterly guidance within the context of that long-

term plan. By requiring companies to disclose long-term plans along with

their forward-looking quarterly estimates, managers would be able to focus

more on sustainable, long-term corporate growth and less on meeting the

market’s short-term expectations, and institutional investors would have a

roadmap to hold corporations accountable for sustainable performance.

 Make it easier for large corporations to become benefit corporations and

commit to fair treatment of their workers, consumers, society, and the

environment.

o Recently, the Business Roundtable made a promising statement recognizing

that businesses have a responsibility to treat all their stakeholders well and

to be socially responsible citizens. Skepticism exists about whether that

statement is just talk. One concrete way business leaders can move from

rhetoric to fairer treatment for workers, consumers, and the communities that

their businesses affect is for the Business Roundtable to support having their

corporations adopt the Benefit Corporation model. This model, which has

been adopted by the leading corporate state of Delaware, requires, by use of

the word “shall” and other means, that the corporation treat all stakeholders

fairly, even in a sale of the corporation. The model is conservative in that

the only constituency with a vote remains the stockholders, and thus their

support for social responsibility is what keeps the board accountable. To

move toward this sensible model, however, unreasonable barriers must be

removed that require a supermajority vote or create a right to appraisal if a

corporation is to opt into the Benefit Corporation model or if a corporation

merges into an existing Benefit Corporation. There is no principled basis for

this discrimination against Benefit Corporations, as the Benefit Corporation

model contains all the strong fiduciary and statutory protections against self-

dealing and unfair treatment available under corporate laws like Delaware’s.

A majority vote of stockholders to move to Benefit Corporation model

should be enough. And, if the Business Roundtable, institutional investors,

and policy makers get behind this principled approach, entrepreneurs would

have far less reason to argue for giving themselves stock with special voting

power to protect other stakeholders, because a one-share, one vote model

would exist that requires fair treatment of stakeholders.

Strengthening Institutional Investors’ Obligations to Promote Sustainable, Long-

Term Growth and Serve the Interests of Human Investors

Requiring operating companies to make EESG disclosures is a good start, but inadequate

step. We cannot expect companies to focus on creating long-term sustainable value for

workers, investors, and other stakeholders if those who elect the board and vote on

management’s compensation are more focused on the next quarter than the company’s

ability to generate durable returns. Because Americans must give their retirement and

college savings to institutional investors, institutional investors now dominate the

governance of public corporations. These institutional investors should be required to use

their voting power in a way that is aligned with the interests of the worker-investors whose

retirement and college savings money they control. Institutional investors should be

expected to consider the need these worker-investors have for sustainable wealth creation,

and their interests as human beings who need our economy to produce good jobs that pay

good wages and to generate wealth in a way that does not harm the environment or

consumers.

But requiring institutional investors to account for the investment objectives and human

realities of their worker-investors is not enough if they do not have information about the

other investors—typically activist investors—making proposals to change a company’s

strategic direction. Requiring these activist investors to disclose more information about

their positions and the nature of their capital is therefore necessary for the corporate

electorate to make an informed vote on these significant decisions. And finally, attention

should also be paid to so-called “private funds,” such as hedge funds and private equity

funds, which are often able to escape giving full disclosure to investors, despite taking

money from pension funds that many Americans rely on for retirement and from

universities and charities that advance important, publicly subsidized purposes.

The Fair and Sustainable Capitalism Proposal would:

 Require institutional investors to consider their ultimate beneficiaries’ specific

investment objectives and horizons, such as saving for retirement or education,

as part of their fiduciary duties, and empower institutional investors to

consider their ultimate beneficiaries’ economic and human interest in having

companies create quality jobs, and act ethically and responsibly toward their

consumers and the environment.

o To start, institutional investors’ fiduciary duties must be modified to both

impose additional accountability and free institutions to consider their

beneficiaries’ interests as human beings who are not just investors, but

workers, parents, breathers of air, and citizens. Currently, the funds that

Americans are invested in do not have to vote in a way that is tailored to the

specific investment objectives of the funds and their investors. That is,

instead of considering the particular investment horizon or financial needs of

the investors in each fund, the funds in the same fund family (e.g.,

BlackRock, Vanguard, Fidelity, etc.) all tend to vote the same way. But most

worker-investors are rational index fund investors. And, an index fund will

not exit until the portfolio stock leaves the index because its investment

strategy requires it to hold all stocks in the index. Too often, index funds do

not vote this unique stuck-in perspective. Rather, the index fund will vote

the same way as the actively traded funds in the fund complex, regardless of

the fact that the active funds do not hold their investments for the long-term,

and regardless of key factors such as whether the issue on the table is a stock-

for-stock merger in which the index fund holds both the acquirer and the

target. This situation must change if corporations are to be responsive to the

flesh and blood human beings who provide their capital. Requiring

institutional investors to consider the investment horizons and objectives of

their ultimate beneficiaries will align institutional investors’ voting behavior

with the interest of the human investors whose capital they manage.

o Not only that, but proxy advisors remain highly influential in our corporate

governance system. If institutional investors are going to vote with the

interests of their ultimate beneficiaries in mind, then institutional investors

must not rely on proxy advisory firm recommendations unless the proxy

advisor’s recommendations are tailored to the fund’s investment style and

horizon. This requirement would create incentives for proxy advisory firms

to do better; and in particular, encourage them to develop voting

recommendations and policies tailored to index investors, who are uniquely

long-term and committed to sustainable wealth creation.

o Under the Proposal, large institutional investors who take human investors’

money, including mutual funds and pension funds, would be required to

consider the specific investment objectives and horizons of their ultimate

beneficiaries, such as saving for retirement, saving for their children’s

education, or investing in a socially responsible manner, when making voting

and other stewardship decisions. Specific obligations would be imposed on

index and pension funds that would have to consider their investors’ interests

in sustainable, long-term growth and the diversified nature of their portfolios.

o As important, any covered institutional investor would be authorized to

consider their ultimate beneficiaries’ overall economic and human welfare,

including their interests as workers, taxpayers, consumers, and human beings

who live in the environment, in determining how to prudently invest their

funds for sustainable, ethical portfolio growth. This plain and simple

authorization for investment funds to consider EESG factors will eliminate

any fear that institutional investors cannot take into account the moral and

ethical factors that human investors can consider. This will help align

institutional investors’ voting and stewardship practices with the interests of

the human investors who give these institutions money every paycheck.

 Require institutional investors to explain how their voting policies and other

stewardship practices ensure the faithful discharge of their new fiduciary

duties and take into account the new information reported by large companies

on employee, environmental, social, and governance matters.

o To ensure investors and regulators that institutional investors are voting and

engaging with operating companies in a way that serves the interests of the

human investors whose money they manage, the new fiduciary obligations

imposed on institutional investors should be accompanied by parallel

disclosure requirements.

o Accordingly, the Proposal would require the Securities and Exchange

Commission and the Department of Labor, in consultation with the

Department of Commerce, the Department of Justice, and the Environmental

Protection Agency, to develop rules requiring covered institutional investors

to make annual disclosures explaining how their voting policies and other

stewardship practices (i) address the Proposal’s newly imposed fiduciary

duties; (ii) account for the information that the Proposal requires large

companies to disclose about their worker, environmental, social, and

governance impact; and (iii) address the specific objectives of the

institutional investors’ ultimate beneficiaries. This required disclosure

would also have parallels with the disclosure obligations imposed on

operating companies.

 Close loopholes so that activist hedge funds have to make a full and timely

disclosure of their economic interests in the companies they seek to influence.

o If institutional investors are to effectively represent their beneficiaries’ long-

term interests, they need up-to-date information about those making

proposals affecting corporations’ business plans and corporate governance

rules. Over the last two decades, the model of shareholder engagement has

changed profoundly. In the past, shareholders commonly did not seek to

pressure companies to take actions that changed fundamental corporate

business plans and strategies in a way that affected other shareholders and,

most important, employees. But today, shareholders—typically activist

hedge funds—often seek influence to do just that. These shareholders pose

substantial risks for other shareholders, especially long-term capital

providers like the institutional investors who hold the retirement savings of

worker-investors. These activists also affect the interest of company

employees, whose livelihood can be put in danger by risky proposals to pump

up immediate profits in an unsustainable way. It is up to the entire corporate

electorate to consider the proposals of activists, but because the electorate

cannot do so effectively without accurate and up-to-date information on

activist investors’ incentives, economic interests in the companies they invest

in, capital position, and holding periods.

o Under current law, activist investors who seek to influence management—

such as activist hedge funds—are already required to make a special

“Schedule 13D” filing with the Securities and Exchange Commission once

they acquire 5% of the company’s stock so that their interest in the company

is known to other investors. But various loopholes have allowed activist

investors to avoid making full and timely disclosure of their interests. If

institutional investors are going to rationally consider activist investors’

proposed changes to a company’s strategic direction, more information about

the activists’ economic interests and how they align with the interests of the

company’s long-term human investors is needed. If, for example, an activist

is arguing for a company to cut its capital expenditures and pay a special

dividend, but the activist is contractually required to sell its stock in three

years because its fund must liquidate, the other shareholders are entitled to

know about that. And because the current disclosure regime dates from the

1960s and was not designed to address the market developments that have

allowed—through techniques such as derivatives and all-day trading—the

aggregation of influential blocks of stock before the public markets know

what is going on, the SEC’s current rule must be changed to prevent activists

from gaining creeping control without paying a control premium before

disclosing their proposal to management and other investors. This will bring

the United States current with other markets such as the European Union.

o To close the existing loopholes, the Proposal would require the Securities

and Exchange Commission to revise its rules governing Schedule 13D

disclosures so that: (i) the definition of beneficial ownership would include

ownership of any derivative instrument that provides the opportunity to profit

from an increase in the value of the subject security and any contract or

device that allows the person to control the voting power of the equity

security; (ii) any activist investor required to file a Schedule 13D would also

be required to disclose any short interest or ownership of a derivative

instrument that allows the investor to profit from a decrease in the security’s

value; (iii) any 13D filer would be prohibited from acquiring additional

shares (or derivatives) once the investor crosses the 5% threshold (for large-

cap companies) or a 10% threshold (for smaller companies) until a 13D has

been filed and available to the public for 24 hours; and (iv) any 13D filer

would be required to disclose any contractual or other arrangement that

relates to the filer’s commitment or ability to hold the subject security,

including the ability of the filer’s investors, if any, to redeem or withdrawal

their capital. Additionally, the “investment-only” exception to the Hart–

Scott–Rodino filing requirements would be revised for Schedule 13D and

13G filers so that Hart–Scott–Rodino filings do not function as a substitute

for 13D and 13G filings for transactions that do not pose meaningful antitrust

concerns.

 Require an SEC study on the investor protection risks from private funds that

are subject to only limited disclosure requirements.

o Under current law, hedge funds and private equity funds may solicit the

investment of any “accredited investor” without providing meaningful or

standardized disclosure about the fund’s or manager’s past performance or

other risks. This accredited investor exception was originally intended as a

sort of “Thurston Howell” exception, because that iconic figure from

Gilligan’s Island comes to mind as the sort of rich person policymakers

believed could proceed at his own risk. Put simply, the idea was that if

hugely rich people wanted to risk their wealth, they could. That exception

was never intended to allow funds on which ordinary Americans depend for

their pensions, universities that educate our children, or key charitable

institutions like the Red Cross and Boys & Girls Clubs of America to be able

to put money at risk in investments not backed up by appropriate disclosures

and standards of integrity. But today, pension funds, university endowments,

and charities can qualify as accredited investors (and “qualified purchasers,”

which are effectively “super” accredited investors, under the laws governing

investment funds), thus ultimately exposing human investors to the risks that

come with hedge fund and private equity fund investing. Nothing is

intrinsically wrong with the private equity or hedge fund business model, but

problems have arisen when pension funds that workers rely on for their

retirement or charitable institutions endowed to provide critical social

services invest in opaque private funds without adequate disclosure. These

losses hurt workers and society and can require taxpayers to fill the resulting

holes. Absent appropriate and reliable disclosure around past performance,

the fees charged to all the funds’ investors, and the basic strategy and

holdings of the fund, pension funds and charities too often entrust their

beneficiaries’ hard-earned capital without enough information to prudently

assess whether the investment is appropriate for their portfolio on both a risk-

return basis and on a cost basis. Of course, disclosure should be tailored to

the fund’s investments, e.g., hedge funds should not be required to disclose

proprietary information about their trading strategies to the public. But

pension funds and large charity endowments need enough reliable

information to make informed investment decisions.

o Under the Proposal, the Securities and Exchange Commission would be

required to submit a study to Congress on the investor protection risks and

benefits of private funds that are subject to only limited disclosure

requirements, such as hedge funds and private equity funds. This study

would have to include (i) an assessment of the adequacy of the disclosures

that such private funds provide to their investors; (ii) an assessment of

whether fund managers are adequately and reliably disclosing their

performance history; (iii) an assessment of the fees charged by these

investment managers and whether certain classes of investors are paying

more to access these investments; (iv) an assessment of how frequently fund

managers offer superior investment terms to certain favored investors and

whether disclosure about those favorable terms is available to other

investors; and (v) an assessment of whether the universe of accredited

investors and qualified purchasers is appropriately defined to include only

sophisticated investors who can fend for themselves. The study would also

include recommendations about whether additional regulation or legal

authority is needed to address these concerns.

Reforming the Corporate Electoral System to Promote Sustainable, Long-Term

Growth

Reforms at the operating company and institutional investor level must be accompanied by

reforms to the corporate electoral system. If we want institutional investors to wisely focus

their voting decisions on sustainable corporate performance, we must reduce the continual

mini-referendums occurring each year and the huge number of votes shareholders must

cast each year, which encourages companies to manage to the changing whims of the stock

market and institutional investors to outsource voting decisions to proxy advisory firms.

With fewer but more meaningful votes, we can have a vibrant accountability system better

focused on whether corporations are producing profits in a socially responsible manner.

To that end, the Fair and Sustainable Capitalism Proposal would:

 Change the “say-on-pay” voting system to promote more thoughtful voting by

requiring companies to hold shareholder votes on executive compensation once

every four years (or sooner upon any material change in executive

compensation) and present shareholders with a four-year plan for each vote.

o One impediment to thoughtful voting is the substantial number of “say-on-

pay” votes on executive compensation—over 2,000 per year—that

institutional investors must cast at U.S. public companies every year.

Because executive compensation should be designed to provide top

executives with appropriate incentives to manage well and create sustainable

long-term increases in corporate value, it is counterproductive that

compensation arrangements should run on annual terms, with constant

tinkering and changing of key provisions. Rather, compensation committees

should bargain for and set employment contracts with a meaningful length

over which to assess the contribution of management to the corporation.

Likewise, if shareholders are going to be given voice in those arrangements,

their voice should be exercised in a mature fashion consistent with the actual

arrangements that will be binding on the corporation and with their sensible

length. No one who cares about America’s worker-investors believes that

corporate executives should be paid based on year-to-year incentives.

Rather, they should be rewarded for helping to create sustainable corporate

profits, and their pay contracts should therefore be long term in nature. But

instead of voting on long-term pay plans on a sensible schedule, say-on-pay

votes are held annually, and likely because of the overwhelming number of

these annual say-on-pay votes, academic research has found that institutional

investors often rely heavily on proxy advisory firms in their voting on these

resolutions (with less than ideal consequences). CEO pay continues to rise

faster than the pay of company employees overall, and recent research

bolsters the view that the current system of annual say-on-pay voting isn’t

working to close that gap.

o To mitigate these problems and allow more thoughtful voting by institutional

investors, the Proposal would change the “say-on-pay” requirements

imposed on public companies by the Dodd-Frank Wall Street Reform and

Consumer Protection Act so that companies would be required to hold a say-

on-pay vote every four years, or sooner if there is any material change in the

terms of the executive compensation, based on a pay plan covering at least

the next four-year period. The SEC would be required to establish a schedule

so that approximately 25% of public companies have a pay vote each year,

allowing for informed voting on a four-year track record rationally related to

sustainable performance. Ultimately, this would result in more thoughtful

voting by shareholders, helping to realize the vision that Congress originally

had for say-on-pay votes.

 Modify the SEC’s shareholder proposal rule to require proponents of economic

shareholder proposals to have a genuine stake in the company and modestly

increase resubmissions thresholds so that proposals that repeatedly fail by

large margins are left off the ballot in future years.

o Some modest changes to the rules governing shareholder proposals could

also encourage more thoughtful voting by institutional investors and increase

the benefit to cost ratio of the corporate voting process. Although the SEC’s

shareholder proposal rule likely plays a salutary role overall, some

proponents—especially small-stakes proponents making economic

proposals—have been less than thoughtful in deciding which companies to

target for proposals, which recent academic research has found burdens the

system with unnecessary and value-destroying votes. That finding is

unsurprising: how actual end-user investors or corporate performance are

aided by having hundreds of poorly targeted votes each year is difficult to

understand. But what is certain is that institutional investors cannot

rationally focus on all of them, limiting their ability to spend energy and

attention on legitimate proposals that may benefit the corporation.

o These burdensome shareholder proposals are encouraged (or at least not

discouraged) by law, which currently allows a shareholder holding as little

as $2,000 in the company’s stock to make a proposal and have the company

(and thus other shareholders and constituents like company employees) pay

for the substantial costs of including the proposal on the corporate ballot and

responding to it, generating too many proposals by shareholders with little

stake in the company’s future and thereby overwhelming the capacity of the

investors voting on those proposals to meaningfully inform themselves as to

the proposals’ merits. This should not be so. In most states, candidates for

public office are required to pay a reasonable filing fee tied to a percentage

of the salary of the office they seek. And, California requires a $2,000 filing

fee for ballot initiatives. It is reasonable and productive to ask the same of

investors who seek to change the business plans or governance of a company.

Requiring sponsors of economic proposals filed under Rule 14a-8 to pay a

reasonable filing fee to bear a tiny fraction of the much larger costs their

proposal will impose on the corporation, and therefore other shareholders

and corporate constituents like workers, is a responsible method to better

recalibrate the benefit–cost ratio of the shareholder proposal rule.

o Accordingly, the Proposal would require the Securities and Exchange

Commission to revise its shareholder proposal rule so that shareholders

seeking to make an “economic” shareholder proposal, such as a proposal

requesting the removal of takeover defenses, at company expense would

need to hold the lesser of $2 million or 1% of the company’s stock (with

proponents having the option to aggregate their shares with any other

shareholders willing to join in the proposal to satisfy the ownership

requirement). This is an achievable number that shows that the proponents

have a serious enough stake to justify the costs the proposal will have for

others. It is like the requirement in states like California to get support from

at least 5% of voters before a ballot institute goes forward, but is by

comparison far easier and less costly to achieve. Additionally, the Proposal

would require a proponent of an economic proposal to pay a $2,000 fee to

have the proposal placed on the corporate ballot. These two requirements

would not apply to environmental and social proposals; thus, for example, a

proponent of a resolution encouraging the company to take action on climate

change would be exempt from the new eligibility requirements. Finally, the

Proposal would modestly increase the thresholds at which all proposals that

fail to gain a meaningful share of the vote can be excluded in later years.

Currently, a proposal that gets as little as 3% of the vote can still be included

in later years; under the Proposal, a proposal would be excludable if it fails

to gain 5% in the first year, 10% in the second year, or 20% in the third year.

This clock would reset after five years. And this change would help investors

to focus more on assessing the merits of the proposals that are likely to

actually gain wide support, and prevent idiosyncratic shareholders from

repeatedly costing other shareholders and corporate constituents time and

money over a proposal that has not garnered any substantial level of support.

 Require shareholders attempting to change a company’s corporate

governance—either by making shareholder proposals or soliciting proxies—to

disclose their economic interest in the company.

o If institutional investors representing American worker-investors are going

to rationally consider shareholder proposals or proxy challenges, more

information is needed about those who are making these proposals. Investors

cannot fully consider an activist’s proposal if the investor does not know

whether the activist making the proposal has a genuine, long-term interest in

the company’s sustainable profitability. Activist shareholders who seek

changes in a company’s business plans or a breakup of the business have a

huge impact on company employees and other shareholders. The

institutional investors who hold the capital of working Americans should

have better information to know if the activists’ economic interests are

aligned with the interests of patient investors such as index investors and

others who hold stock for the long run.

o To that end, the Proposal would require those making shareholder proposals

or soliciting proxies to disclosure in clear and standard form their net

beneficial ownership interest in the company’s securities. Disclosure of their

beneficial ownership interest would include any short interest or ownership

of any derivative instrument or any contract or device that allows the person

to control the voting power of the equity security.

Updating Our Tax System to Reduce Speculation, Address Climate Change, and

Promote Sustainable Growth, Innovation, and Job Creation

In tandem with reforms to operating company disclosure, institutional investors, and the

proxy system, our tax system must also be reformed to provide the right incentives for

companies and investors to focus on promoting sustainable, long-term growth. Adoption

of a sensible fractional trading tax on all securities transactions, including transactions by

401(k) investors, and capital gains reform to make eligibility for the preferential long-term

rate dependent on actual long-term investment would help all investors focus more on

sustainable returns. Not only that, but taxes like these discourage unproductive and

destabilizing speculation of the kind that contributed to the financial crisis. In addition, tax

changes applicable to hedge fund managers’ compensation can place everyone on the same

playing field, ensure that the labor income produced by private equity and hedge fund

executives is taxed on the same basis as the sweat put in by other American workers, and

help ensure that Wall Street pays its fair share of taxes. Not only that, but these taxes can

help close a deficit that has widened after the passage of the Tax Cuts and Jobs Act of 2017

while also providing necessary funds for investment in infrastructure modernization,

tackling climate change, cutting-edge research and development to secure America’s

position as a global leader in innovation and the industries of the future, and workplace

training to ensure that American workers are ready to tackle this century’s technological

challenges and have quality jobs. To accomplish these goals, the Fair and Sustainable

Capitalism Proposal would:

 Change the holding period for long-term capital gains from one year to five.

o Currently, an investment needs to be held for only one year to be considered

“long term,” which allows short-term investors to take advantage of the

preferential low tax rate for genuine, long-term capital gains.

o The Proposal would change this period to five years, thereby helping to

promote long-term investment and discourage harmful speculation.

 Establish a financial transaction tax.

o The Proposal would impose a very modest tax on most financial transactions,

including the trading of stocks, mutual funds, bonds, and derivatives. This

small tax would moderate excessive speculation, curb uneconomic high-

frequency trading with no fundamental investment rationale that can

contribute to financial system instability, encourage more thoughtful long-

term investing, and discourage irrational fund-hopping by mutual fund

consumers. All these incentives will help institutional investors as well as

mutual funds better concentrate on stable investment strategies focused on

sustainable growth—the kind that allows for fair gainsharing with company

workers and provides funds for investors when they retire. Estimated to

generate over $2 trillion over 10 years, this tax should be used as a down-

payment on important, long-term investments in sustainable growth. A

financial transaction tax has been supported by leading economists such as

Nobel Prize winner Joseph Stiglitz.

o The rate for this tax would be 0.5% for equity securities, 0.1% for bonds, and

0.005% for derivatives.

 Close the carried interest loophole.

o Under current law, some of the nation’s wealthiest individuals—hedge fund

and private equity managers—pay a lower tax rate than average Americans

because the bulk of their income is taxed at the preferential 20% long-term

capital gains tax rate as so-called “carried interest,” rather than at the ordinary

income tax rate of 37%, even though they are effectively being paid for their

labor. Ensuring our system works for all also requires eliminating this unfair

tax advantage hedge funds get over other human laborers. Closing this

loophole would also diminish the ability of hedge fund managers to reap

profits not shared with their investors and their targets’ other shareholders in

the long-run, thereby shifting the activist hedge fund market directionally

toward those fund managers able to generate value by contributing

managerial expertise that creates durable value for the public companies in

its portfolio. And because the Tax Cuts and Jobs Act of 2017 gave the

majority of its tax breaks to wealthier Americans and increased the federal

deficit substantially, closing the carried interest loophole is a fairer and more

productive way to restore some equity to the Tax Code, while also helping

to reduce the deficit or provide for other important national needs.

o The Proposal would close the carried interest loophole by requiring private

equity or hedge fund managers’ compensation—in whatever form—be taxed

as income, not as capital gains.

 Create an Infrastructure, Innovation, and Human Capital Trust Fund.

o It is no secret that our nation currently lags in infrastructure and research

spending, hurting the ability of American businesses to compete globally,

and there has been bipartisan consensus that these problems need to be

addressed.

o To ensure that the funds raised by the financial transaction tax are used to

promote sustainable development, the Proposal would transfer all the

revenue raised by the financial transaction tax into a newly created

Infrastructure, Innovation, and Human Capital Trust Fund. Congress could

spend capital in the trust fund on only basic research and development,

revitalizing our nation’s infrastructure in an environmentally responsible

way that helps us redress climate change, and workplace training. In

particular, as the United States transitions to less carbon intensive energy

production, those in carbon-intensive industries will require help

transitioning their high quality skills to the evolving skills needed to work

with these new energy technologies. To that end, the funds in the

Infrastructure, Innovation, and Human Capital Trust Fund could be used to

provide training, support, and other assistance to help employees working in

carbon-intensive industries transition to quality employment in industries

generating energy in non-carbon intensive ways and to other emerging

industries. This $2 trillion investment over the next 10 years can help create

a sustainable, carbon-efficient transportation system and electrical grid, and

aid the development of next-generation energy solutions, among other long-

term, sustainable projects, while creating thousands of well-paying jobs that

cannot be shipped overseas.

Curbing Corporate Power and Leveling the Playing Field for Workers, Consumers,

and Investors

Lastly, we must address three sets of challenges created in no small part by the United

States Supreme Court, which have amplified corporate power at the expense of American

workers, consumers, and human investors. In the 2010 decision Citizens United v. Federal

Election Commission striking down the Bipartisan Campaign Reform Act (McCain-

Feingold), the Supreme Court unleashed a massive growth in unchecked corporate political

spending, which major institutional investors have so far been unwilling to address—even

though the human investors whose money they manage do not invest their money so it can

be spent by corporations on politics. And in a series of decisions blessing the increased

use of forced arbitration, the Supreme Court has allowed businesses to deny workers,

consumers, and human investors their day in court and has blocked the States from

exercising their sovereign right to decide how best to enforce their own laws. Finally, in

recent decisions such as Harris v. Quinn and Janus v. American Federation of State,

County, and Municipal Employees, Council 31, the U.S. Supreme Court has added to the

difficulties for American workers seeking to exercise in an effective way their right to form

a union and collectively bargain. These adverse decisions came on top of existing statutory

roadblocks to a majority of workers being able to seek greater gainsharing through

collective bargaining.

Other proposals, such as the Do No Harm Act, should also be enacted to address the

amplification of corporate power, and diminution in the rights of working people to receive

minimum federally guaranteed benefits of employment, condoned by Burwell v. Hobby

Lobby. But, to address the problems identified above, the Fair and Sustainable Capitalism

Proposal would:

 Prohibit public companies from spending money on politics without the

consent of at least 75% of their shareholders.

o Human investors do not invest their money for corporate executives to spend

it on politics. We know this because this is not how institutional investors

advertise to attract investors, and because human investors are as diverse as

the nation and there is no rational reason to believe they have similar views

on political issues. Corporate political spending also harms human investors

seeking long-term sustainable earnings. Businesses that have to lobby and

rent-seek to get ahead are less profitable. Not only that, but as most human

investors invest through index funds, any benefit that does accrue to one

company through political lobbying is offset by harms to another and washes

out for the index investor who holds the market. As important, worker-

investors are taxpayers, and it hits the economic bottom line if businesses can

externalize costs of ethical, sustainable ways of doing business to the public

in the form of environmental harm that must be cleaned up or injured workers

or consumers.

o To ensure that human investors’ money is not being spent on politics without

their consent, the Proposal would bar public companies from making any

disbursement for a political purpose without first obtaining the consent,

either for that specific disbursement or under a general policy allowing

disbursements of that type, of at least 75% of their shareholders. This

provision tracks a proposal by the late John Bogle, the respected founder of

the index fund giant Vanguard.

 Enhance fairness and restore State sovereignty over the enforceability of

forced arbitration clauses.

o The United States Supreme Court has interpreted the Federal Arbitration Act

to apply to a broad range of disputes to which it was not originally intended

to apply, such as disputes between workers and their employers, thereby

denying American workers and consumers their day in court by funneling

them into secretive arbitration proceedings. This is especially problematic

for consumer disputes that are important but not worth enough for a lawyer

to take on the case unless consumers are allowed to join together in a class

action. Moreover, this expansive interpretation of the Federal Arbitration

Act—which has applied to not only lawsuits arising under Federal law, but

also lawsuits arising under State law—has blocked the States from

determining how to best enforce their own laws.

o To stop the unfair application of the Federal Arbitration Act to disputes to

which Congress never intended it to apply and restore State sovereignty so

that the States can determine for themselves how their own laws should be

enforced, the Fair and Sustainable Capitalism Proposal would amend the

Federal Arbitration Act so that: (i) for employment, consumer, antitrust,

securities, internal affairs, and civil rights disputes that arise under Federal

law, forced arbitration clauses would be enforceable only if applicable

Federal law other than the Federal Arbitration Act (such as the Fair Labor

Standards Act or some other substantive law) makes them enforceable; and

(ii) for employment, consumer, antitrust, securities, internal affairs, and civil

rights disputes that arise under State law, forced arbitration clauses would be

enforceable only if applicable State law makes them enforceable.

 Reform the union election progress by permitting card check elections to make

it easier for workers to organize and collectively bargain with their employers.

o Reforming the corporate election process is a strong start on the path to

increased gainsharing between workers and corporations. But to restore

shared prosperity and create an economy that benefits all Americans,

working Americans also need the ability to collectively organize and bargain

with their employers. At least since the Reagan Administration, the ability

of American workers to use the rights guaranteed by the National Labor

Relations Act (“NLRA”) has been increasingly compromised. As a result,

the leverage of American workers to obtain fair pay has been weakened,

contributing to growing inequality and a decline in fair gain sharing between

corporations and their workers. Labor’s declining influence has only been

further eroded by recent decisions of the U.S. Supreme Court, such as Janus

v. American Federation of State, County, and Municipal Employees and

Harris v. Quinn, that treat labor unions in a disfavored manner in comparison

to corporations in the area of political spending, and that have now gone

further and denied unions the right to obtain fair payments from workers they

advocate for in pay negotiations and protect from unfair discharge or

demotions. The important reforms contained in the Protecting the Right to

Organize Act should become law to address this diminution in worker voice.

But an additional important step should be taken. Current law hinders

workers’ ability to organize because even after a majority of workers signs a

petition or authorization card supporting unionization (informally known as

“card check”), a company can still demand a formal, time-consuming

election during which the company can seek to erode the union’s support and

delay collective bargaining. That is, even after a majority of employees

support unionization, an employer can delay its formation and potentially

avoid unionization all together by pressuring workers during the secret ballot

campaign. Unsurprisingly, studies suggest that unionization rates are higher

when unions are recognized after a majority of workers sign a petition

supporting unionization, and union members enjoy higher wages and more

robust benefits packages compared to non-union workforces.

o If we are to improve the wages of American workers, the effectiveness of the

NLRA’s promise to American workers needs to be renewed by granting

unions obtaining a fair showing of majority support recognition and the right

to bargain on behalf of the workforce for fair wages and working conditions.

   
23 
 
Acknowledgements 
 
The Fair and Sustainable Capitalism Proposal was influenced by the scholarship and thinking of 
many distinguished elected officials, public servants, academics, and thought leaders.  A debt of 
gratitude is owed to all of them for their research and thinking on making our economy work better 
for all.  Among the many sources considered and consulted in the preparation of the Proposal were: 
 
  Accountable Capitalism Act, S. 3348, 115th Cong. (2018).   
  Forced Arbitration Injustice Repeal Act, S. 610, 116th Cong. (2019). 
  Brokaw Act, S. 1744, 115th Cong. (2017). 
  Do No Harm Act of 2019, S. 593, 116th Cong. (2019). 
  Employer Free Choice Act of 2016, H.R. 5000, 114th Cong. (2016). 
  Inclusive Prosperity Act of 2019, S. 1587, 116th Cong. (2019). 
  Shareholders United Act of 2019, H.R. 936, 116th Cong. (2019).   
  Wall Street Tax Act of 2019, S. 647, 116th Cong. (2019).  
  To amend the Internal Revenue Code of 1986 to treat income received by partners for 
performing  investment  management  services  as  ordinary  income  received  for  the 
performance of services, H.R. 2834, 110th Cong. (2007).  
  Frederick  H.  Alexander,  Comment  on  SEC  File  Number  S7-06-16  Concept  Release: 
Business and Financial Disclosure Required by Regulation S-K (July 14, 2016). 
  ELIZABETH ANDERSON, PRIVATE GOVERNMENT: HOW EMPLOYERS RULE OUR LIVES (AND 
WHY WE DON’T TALK ABOUT IT) (2017). 
  Tim Armour et al., Commonsense Corporate Governance Principles, Commonsense Corp. 
Governance Principles. 
  The  Aspen  Institute,  Overcoming  Short-Termism:    A  Call  for  a  More  Responsible 
Approach to Investment and Business Management (Sept. 9, 2009).   
  The Aspen Institute, American Prosperity Project:  A Nonpartisan Framework for Long-
Term Investment (Dec. 19, 2016). 
  The Aspen Institute, Toward a New Capitalism:  The Promise of Opportunity and the 
Future of Work (Jan. 12, 2017). 
  Lucian Bebchuk & Robert J. Jackson, Jr., Corporate Political Speech:  Who Decides?, 124 
HARV. L. REV. 83 (2010). 
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Spending, 101 GEORGETOWN L. J. 923 (2013). 
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Theory, Evidence, and Policy 119 COLUM. L. REV. (Forthcoming 2019). 
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A. Bebchuk, et al., The Untenable Case for Keeping Investors in the Dark, 10 HARV. BUS. 
L. REV. (Forthcoming 2020).  
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Mandate Disclosure of Corporate Political Activity (Working Paper, Sept. 8, 2011). 
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United, 9 J. EMPIRICAL LEGAL STUD. 657 (2012). 
  John  C.  Coates  IV,  Corporate  Speech  &  The  First  Amendment:    History,  Data  and 
Implications, 30 CONST. COMM. 223 (2015). 

   
24 
 
  John C. Coates, IV, The Future of Corporate Governance Part I:  The Problem of Twelve, 
Harv. Pub. L. Working Paper No. 19-07 (Mar. 14, 2019).   
  Madison Condon,  Externalities  and the  Common Owner, Wash.  L.  Rev. (forthcoming 
2020). 
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3 HARV. BUS. L. REV. 135 (2013). 
  Jan Fichtner, Eelke M. Heemskerk & Javier Garcia-Bernardo, Hidden Power of the Big 
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Financial Risk, 19 BUS. & POL. 298 (2017).  
  Financial Reporting Council, The UK Corporate Governance Code (July 2018). 
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1, 2018) 
  G20/OECD High-Level Principles of Long-Term Investment Financing by Institutional 
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  Angela Hanks, et al., Workers or Waste?  How Companies Disclose—or Do Not Disclose—
Human Capital Investment and What to Do About It, CTR. AM. PROGRESS (June 2016).   
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Investors and the Revaluation of Governance Rights, 113 COLUM. L. REV. 863 (2013). 
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Interest, CTR. AM. PROGRESS (Oct. 2018). 
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Governance, 117 COLUM. L. REV. 767 (2017). 
  Ann Lipton, Not Everything Is About Investors:  The Case for Mandatory Stakeholder 
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Governance  Partnership  Between  Corporations  and  Investors  to  Achieve  Sustainable 
Long-Term Investment and Growth, WORLD ECON. F. (Sept. 2, 2016). 
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