The Call to Replace Shareholder Primacy: Reshaping Corporate Law to Promote Workers’ Interests, A Better Economy

Roosevelt Institute brief calls for decentering shareholders in corporate decision-making

NEW YORK, NY – The Roosevelt Institute today released a new issue brief, Towards ‘Accountable Capitalism’: Remaking Corporate Law Through Stakeholder Governance, which outlines how policymakers can reshape the rules of corporate governance to represent the interests of all stakeholders, including workers. With corporate stock buybacks in the billions and workers’ wages remaining stagnant, authors Lenore Palladino, Senior Economist and Policy Counsel at the Roosevelt Institute, and Kristina Karlsson, Program Associate at the Roosevelt Institute, argue against the disproportionate influence of shareholders in corporate decision-making and recommend policy solutions to hold corporations accountable to a broader set of stakeholders.

The brief suggests four specific legislative reforms to shift corporate America away from shareholder primacy: 1) boards of directors should be accountable to all stakeholders, not just shareholders; 2) corporate purpose statements should include a requirement that corporations positively benefit society; 3) multiple stakeholders should be represented on corporate boards; and, in order to enable these reforms, 4) large corporations should be required to obtain a federal charter.

These policies are reflected in the Accountable Capitalism Act, recently introduced by Senator Elizabeth Warren (D-MA). Senator Warren’s bill is the first proposal in decades to propose rewriting corporate governance at the federal level.

“In the current model, corporations’ main purpose is to maximize profits for their shareholders, often to the detriment of workers’ wages, benefits, and bargaining power. To truly challenge corporate power and address wage stagnation, progressives must prioritize reshaping corporate decision-making,” said Lenore Palladino, Senior Economist and Policy Counsel at the Roosevelt Institute. “We need a new model for corporate governance that rebalances bargaining power within our large corporations, ensuring that companies today stop putting shareholders first and instead advance other stakeholders’ interests as well as the public’s. Stakeholder corporate governance is necessary for the kind of economic future we all want—and need.”

The Roosevelt Institute has long called attention to the dominance of shareholder primacy in corporate governance. Palladino is the author of Corporate Financialization and Worker Prosperity: A Broken Link, which examines how the financialization of the corporate sector is a key driver of economic inequality. The Roosevelt Institute also released Who Are the Shareholders?, detailing the demographics, corporate role, and outsized power of corporate shareholders.

About the Roosevelt Institute

Until the rules work for every American, they’re not working. The Roosevelt Institute asks: what does a better society look like? Armed with a bold vision for the future, we push the economic and social debate forward. We believe that those at the top hold too much power and wealth, and that our economy will be stronger when that changes. Ultimately, we want our work to move the country toward a new economic and political system: one built by many for the good of all.

It takes all of us to rewrite the rules. From emerging leaders to Nobel laureate economists, we’ve built a network of thousands. At Roosevelt, we make influencers more thoughtful and thinkers more influential. We also celebrate—and are inspired by—those whose work embodies the values of both Franklin and Eleanor Roosevelt and carries their vision forward today.