Slate Money: The Accountable Capitalism Edition
Date: August 18, 2018
Host: Felix Salmon
Guests: Anna Szymanski, Emily Peck, Justin Fox
Episode Overview
This episode of Slate Money is centered around the concept of “Accountable Capitalism” in light of Senator Elizabeth Warren’s new legislative proposal, the Accountable Capitalism Act. The panel — Felix Salmon, Anna Szymanski, Emily Peck, and special guest Justin Fox — dissects the proposal's implications for corporate governance, the history of worker representation on boards (especially in Germany), debates the ongoing tug-of-war between shareholder and stakeholder capitalism, and explores recent business news including Dollar General’s retail strategy, changing TV economics, and notable business moments of the week.
Key Discussion Points & Insights
1. Elizabeth Warren’s Accountable Capitalism Act
- Main Idea: Shift corporate governance in large companies to focus on all stakeholders (not just shareholders) by requiring employee representation on boards and more oversight on executive actions (e.g., political activities, buybacks).
- Details:
- Employee Representation: 40% of the board would be elected by employees (03:10).
- Political Activity: Any such move would require 75% board approval, giving employees more say (03:10).
- Stock Buybacks & Executive Pay: Executives and directors must hold shares for five years after a buyback (03:38).
- Modeled After: Both B Corps in the U.S. and the German system of co-determination.
Quote:
"Basically it would... reprioritize their priorities from maximizing shareholder value to making sure all the stakeholders' values are considered."
– Emily Peck (02:35)
2. German Model: Workers on Corporate Boards
- Historical Context: Originated when British forces imposed it in postwar Germany’s Ruhr Valley; later spread nationwide through Social Democrat and centrist Conservative consensus (04:24–05:27).
- Effects: Studies suggest the "sweet spot" is around one-third worker board representation for optimal performance (05:33).
Quote:
"The sweet spot seems to be around a third of the board elected by employees... best performers."
– Justin Fox (06:00)
- Comparisons to the U.S.:
- No clear evidence that worker board representation damages or supercharges the economy.
- Practical distinction: German approach seen as a compromise between state ownership and unmodified capitalism.
3. Shareholder vs. Stakeholder Debate
- Felix: Questions the absolute notion of shareholder “ownership” of companies (08:53).
- Anna: Cites Milton Friedman, arguing that market choices (by workers, suppliers, customers) act as checks on bad corporate behavior, regardless of board structure (07:15).
- Justin: Notes the legal/semantic ambiguity of share ownership; shareholders’ rights differ fundamentally from “ownership” as typically understood (09:58).
Quote:
"Formally, no... Shareholders are owners of these securities that give you certain rights with companies. They're not in a widely dispersed company really equivalent to owners."
– Justin Fox (08:56)
- Emily: Emphasizes growing societal expectations for corporations to consider broader impacts beyond shareholder profits, especially in light of climate change and social issues (11:13).
4. Feasibility & Voluntary Change
- Felix: Argues most of Warren’s proposals could be voluntarily adopted by U.S. firms (11:58).
- Panel: Skeptical companies will make such moves without legal compulsion (13:00).
- Justin: "Partly because they're slaves to fashion... they'll get a lot of criticism, probably from hedge funds." (13:03)
5. Monsanto Verdict as a Case Study in Corporate Accountability
- News: School groundskeeper won $289 million after developing cancer allegedly due to glyphosate in Monsanto’s Roundup (14:23).
- Panel View: Illustrates the long-term risks of neglecting stakeholder interests; the backlash hurts shareholders too (14:51–16:56).
- Emily: Highlights Monsanto’s alleged efforts to muddy scientific consensus (15:39).
- Felix: Suggests this could have been avoided with a more stakeholder-focused approach.
6. Dollar General’s Rise and Its Impact on Rural Communities
- Business Model: Opening at a rapid pace in small towns, often outcompeting local stores with nominally "cheaper" prices and minimal fresh food offerings (18:06–19:10).
- Debate: Whether Dollar General is preying on working poor or serving an unmet need in distressed rural economies.
- Economic Effects: Tax breaks given to chains drain local revenues; profits leave the community (23:13–24:33).
- Historical Note: U.S. once had political movements against chain stores (24:33).
Quote:
"What you get is money being dividended out of these local communities, which we all agreed have very little money to begin with."
– Felix Salmon (23:46)
- Dissent: Anna argues that prosperity is not rooted in nostalgia for small local businesses; big businesses often treat workers/customers better and spur efficiency/innovation (26:42).
7. The Future of Television & Digital Viewing
- Topic: “New TV” startup and TV’s stubborn hold on ad dollars.
- Felix: Linear TV hours watched remain strong; ad dollars remain stable at $70B/yr despite the digital boom and cord-cutting talk (29:06–31:54).
- Digital Comparison: Netflix/HBO don't offer advertising opportunities; YouTube is significant, but brand advertising on digital is not as effective as TV for CPG companies (33:13–34:29).
- Panel: Generational shifts in media use noted, but TV’s ad revenue engine keeps churning (29:25, 31:54).
8. Numbers Round—Notable Stats and Business News
- Justin: "8 to 16" - Musk’s LA Stadium electric pod idea (35:03).
- Emily: "$420" - Musk’s infamous buyout offer price and Ambien-fueled interviews (36:32); Walmart’s 4.5% sales growth (37:02).
- Felix: "51%" - Portion of all U.S. international foundation giving from Gates Foundation (38:19).
- Anna: "19%" - Tencent’s quarter-on-quarter video game sales slump, tied to Chinese regulatory policy (38:55).
Notable Quotes & Memorable Moments
On Warren’s proposal:
"I think the idea of putting employees on the board is really intriguing."
– Emily Peck (12:32)
On Dollar General’s effect on towns:
"They are not really what you'd call a reflection of healthy stakeholder capitalism. And yet they seem to be doing quite well."
– Felix Salmon (17:25)
On the Monsanto case and corporate responsibility:
"If they had been a little bit more stakeholder-friendly... you can kind of view this verdict as the pigeons coming home to roost."
– Felix Salmon (16:17)
On TV advertising:
"So long as TV has $70 billion of advertising revenue coming in every year, they're going to be just fine."
– Felix Salmon (31:54)
On nostalgia for small towns:
"I think we have this nostalgic idea of what things were like... and people don't look at the reality of what actually caused that, what people's lives were actually like..."
– Anna Szymanski (20:56)
Timestamps for Important Segments
- Elizabeth Warren’s Accountable Capitalism Act discussion: 02:18–11:58
- German model of worker board representation: 04:03–06:12
- Shareholder vs. stakeholder debate: 07:15–09:58, 11:13
- Monsanto verdict and stakeholder capitalism case study: 14:05–16:56
- Dollar General’s rural retail dominance: 17:25–26:42
- Future of TV economics and digital’s challenge: 28:49–34:29
- Numbers round & business news highlights: 35:03–40:27
Conclusion
The episode’s lively conversation offers a nuanced analysis of whether corporations in the U.S. should become more accountable to stakeholders beyond shareholders. The hosts and guest explore the history and results of similar efforts abroad, weigh the practicalities and effectiveness of legislating or voluntarily adopting such reforms, and use timely business news to illustrate the stakes. Whether it’s the cautionary tale of Monsanto, the retail upheaval of Dollar General, or the persistence of TV ad dollars, the episode grounds theoretical debates in real-world consequences — always with smart, skeptical humor, and a recognition of the complexity behind “accountable capitalism.”