By Bill Flook
Two Democratic lawmakers are demanding that the next COVID-19 relief bill include a mandate that employees are represented on corporate boards at companies that receive aid, among other points in a proposed “Essential Workers Bill of Rights.”
In a “Dear Colleague” letter, Sen. Elizabeth Warren of Massachusetts and Rep. Ro Khanna of California sought to muster support for the reforms by an April 21, 2020, deadline. The push for the corporate governance reforms comes as Congress prepares to vote on a fourth coronavirus aid bill as soon as this week.
“Congress should ensure that any taxpayer dollars handed to corporations go to help workers, not wealthy CEOs, rich shareholders, or the President’s cronies,” the two lawmakers wrote in the plea. “That means taxpayers and workers should have a stake in how funds are used and companies should be required to use funding for payroll retention, put workers on boards of directors, and remain neutral in union organizing drives. CEOs should be required to personally certify they are in compliance with worker protections, so they can face civil and criminal penalties if they break their word.”
The issue of employee representation on boards of directors has gained some traction as a Democratic priority amid the COVID-19 pandemic, in which Democrats are seeking to tie any corporate aid to a series of new requirements. Republican critics have accused Democrats of attempting to pack coronavirus relief measures with long-standing policy goals that have little to do with the crisis at hand.
Under a COVID-19 relief package championed last month by House Financial Services Committee Chair Maxine Waters and other Democrats, recipients of funding would be required to allow employees to elect at least one third of the board of directors in a “one-employee-one-vote” process.
That language echoed Sen. Tammy Baldwin’s Reward Work Act, which, in addition to prohibiting companies from buying back stock on the open market, would have also mandated one-third worker representation on boards of directors.
Baldwin in mid-March introduced the latest version of her bill as S. 3540. Joining Baldwin in sponsoring the bill are Sens. Richard Blumenthal of Connecticut, Ed Markey of Massachusetts, both Democrats, and Bernie Sanders, an Independent from Vermont.
Congress late last month ultimately passed a COVID-19 relief bill, the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES), which temporarily banned stock buybacks, dividends, and certain executive compensation practices for businesses that receive certain loans. The CARES Act did not, however, contain a mandate for worker representation on corporate boards.
Warren, who recently ended her presidential bid, had been vocal on the issue prior to the COVID-19 crisis. In January, she reintroduced S. 3215, the Accountable Capitalism Act, which would, among other provisions, establish a new process by which companies with more than $1 billion in revenue would be required to become federally chartered through a new Office of United States Corporations within the Department of Commerce.
Those chartered corporations would be required to let employees elect at least 40 percent of the board of directors, while the SEC would be directed to issue rules within a year, ensuring that director elections are “fair and democratic,” and that employee representation is “meaningful and appropriate” with race, ethnicity, gender, sexual orientation, and gender identity taken into consideration, as well as “the affiliation to historically underrepresented groups,” including veterans and individuals with disabilities.
This article originally appeared in the April 21, 2020 edition of Accounting & Compliance Alert, available on Checkpoint.
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