⚡Bernie
Good morning! If you missed yesterday’s, read it here. Let’s get into it,
Corporate Democracy
Bernie’s still swinging! On Monday, his team revealed the Corporate Accountability and Democracy plan, aimed at significantly shifting power to workers in the American economy. This is huge. Let’s break down the different components, and we’ll provide our takes on each:
Worker ownership. The plan would require large companies - those that are publicly traded or with at least $100 million in annual revenue - to come under partial employee-ownership. These companies will be required to “contribute 2 percent of their stocks annually to an employee-controlled fund until workers control 20 percent of the company, and then pay out the dividends to these workers.” Each fund would be controlled by an employee-elected board of trustees who would have the same voting rights as any other shareholder. Overall, Bernie’s plan would result in an average dividend payment of $5,000 per year for 56 million people at over 22,000 companies.
Our take. We love this. By providing workers more ownership and more representation, this plan has the potential to fundamentally transform the corporate power dynamic. Moves like this aren’t unprecedented - earlier this year, Chobani gave all its full-time employees ownership in the company worth an average of $150,000. Also, we’re really curious to see how the Business Roundtable will react - while this is fundamentally in line with the principles they laid out, it will definitely have an impact on a CEO’s pay. We’ll keep you posted as the story unfolds!
Reversing mergers. Bernie wants to retroactively break up companies. Since the early 1980s, the FTC has made it easier for major companies to merge - it is less strict on the size of the combined market share and have even allowed for monopolies to form. This shift in policy has been driven by a nonsensical consumer welfare standard, one that says a merger would bring prices down for consumers. Many multinational companies will aggressively fight against this plan, but according to Matt Stoller, an antitrust expert with Open Markets Institute, smaller firms may welcome it to maintain their competitive footing.
Our take. This is unbelievably ambitious, and frankly, we think it’s nearly impossible. Large corporations are incredibly complex - both from a business process and people perspective. Cutting them up isn’t as simple as cutting a slice of cake. There’s definitely societal value in breaking up monopolies, but it’s definitely not going to be easy.
Tax reform. Sanders wants to undo Trump’s tax plan and restore the corporate tax rate to 35 percent for both overseas and domestic income.
Our take. Trump’s tax plan is terrible. However, we honestly aren’t sure if a complete reversal is the right move. At 35 percent, the US tax rate would be ~11 percent higher than the average among OECD countries. This will likely encourage companies to relocate to other countries or to pay lower taxes through corporate inversion. While we don’t advocate for Trump’s plan, we don’t have an exact answer here. If you have thoughts, please let us know!
California’s Robinhood Plan
The word “redistribution” usually gets people fidgety when discussing solutions to inequality and poverty. But, what about “pre-distribution?” How can we better prevent inequalities occurring in the first place rather than ameliorate them via tax and benefits once they’ve occurred? What if we shared the wealth of companies that benefit from taxpayer-funded research or seed investment with a broader group of constituents?
The idea. Create a national sovereign wealth fund that would address the imbalance of economic power between rich companies, individuals, and the public sector.
What it could look like. Imagine if a sovereign fund took stakes in companies that profit from public investment or public data. FB, Google, Apple, and Amazon would fall into that category. The companies are built on technology funded by the government such as the internet, GPS, touchscreens, and the use of personal data. In other cases abroad, where state-run wealth funds hold stakes in large companies, these profits are used to benefit the public interest.
California is leading by example. In 2016, the state created an investment fund for all citizens, including those whose employers do not offer retirement plans. It makes sense that California, where much of the productivity-enhancing and yet job-displacing technology was created, is also leading the way to find solutions towards more equality.
The limitations. California’s fund requires individual contributions. It isn’t fully built to shift value from wealth companies to individuals just yet. How can we fund a state plan beyond individual contributions? One possible approach is California starting its own sovereign wealth fund using the penalties it imposes on companies that are violating its new digital privacy rules. It’s going to happen; some of the rules are even stricter than those in the EU.
The new fund’s value. If this fund was created, it could be used to support infrastructure improvements and / or be given to ordinary citizens via individual plans that could be used for everything from education to healthcare.
Our take. There’s this scene in Billions where Bobby Axelrod asks Chuck Rhoades:
And these fines you're always going after... Where do they go? Who gets them? The poor? No. The Treasury, the government.
A fund built up of fees of corporate wrongdoing that then supports high growth sectors and finally pays out returns to the people… doesn’t that sound like a dream?
Short Takes
Poland’s loss of democracy. A few weeks ago we provided some background around the state of democracy around the world. Yesterday, democracy was on the ballot in Poland and suffered a defeat - the far-right populist party, Law and Justice, just won their biggest mandate. For decades, Poland was considered a great success story of the transition from communism to democracy, but the image started to break when Law and Justice came into power in 2015. Jaroslaw Kaczyniski, the party leader, immediately started to attack the rule of law. He forced independent judges into retirement and gave government ministers more control over criminal investigations.
We lose $400 billion of food before it reaches the stores. Around 14% of all food produced is lost annually, with Central and Southern Asia, North America, and Europe accounting for the biggest shares. Better cold storage and infrastructure could help reduce losses, but there isn’t enough data about the supply chain. When more than 820 million people go hungry every day, how is this happening? It’s unacceptable. Not only is it insulting to those going hungry, it means we’ve used resources for no reason and contributed to emissions for no purpose.
Norway’s tax system drove up inequality. Income inequality has increased after the country decreased its tax rates. It seems like this is the pattern everywhere.
The UN launches an innovation hub. The UNHCR and World Food Programme have unveiled plans for an innovative digital solutions center. They aim to use cutting-edge technologies to address common operational challenges faced by both agencies and the wider UN.
Jose Manuel Moller, Founder of Algramo
Continuation of yesterday’s conversation on corporate recycling.
Algramo is a Chilean-company focused on making it easier for people to use reusable containers for household needs. Today, low-income shoppers can’t afford to buy products packaged in the largest sizes and end up paying more for smaller packages. This not only isn’t fair, but it also results in more packaging waste. To respond, Algramo has set up over 2,000 bodegas in Santiago where customers can buy as much or as little of products like rice and lentils in reusable packaging. To date, the reuse rates have risen from around 10 percent to over 80 percent.
Big companies are starting to pay attention. Unilever partnered with Algramo to create a refill system on electric tricycles, making it easier for consumers to access their needs at home. Plus, major brands around the world have been testing packaging that’s designed to be returned, cleaned, and reused.
WEDNESDAY, OCTOBER 16
Feeding Our Future: Perspectives Across the Value Chain in Food Sustainability
Join the NY + Acumen Impact Circle on World Food Day for a discussion on the future of food sustainability. They will explore different perspectives across the various parts of the value chain, including investment, production, distribution, and waste/renewability.
THURSDAY, OCTOBER 17
War Stories from the Trenches - Fundraising for Startups Solving the World’s Greatest Challenges: Early-stage fundraising can be very challenging, and this is even further the case for social enterprises. Check out this event for a discussion on best practices for opening and closing a round to solve the world’s greatest challenges.
MONDAY OCTOBER 28
Conversations on Plant-based Entrepreneurship: Vegpreneur is a global entrepreneurs community that is made up of innovators who are building a plant-based future and they’re hosting an evening panel on the state of plant-based entrepreneurship at General Assembly. Light snacks and refreshments will be served.
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