In her Op-Ed in this Wednesday's Wall Street Journal, Senator Elizabeth Warren proposed The Accountable Capitalism Act – new federal legislation requiring corporations to consider the interests of employees and other stakeholders as well as shareholders.
In principle, Warren's ideas sound good, but they are based on a flawed premise. She contends that CEOs and boards are following Nobel-Prize winning economist Milton Friedman's philosophy of maximizing shareholder value.
Warren's proposed legislation would require corporations to be federally chartered and consider the interests of all major stakeholders.
Furthermore, employees would elect at least 40 percent of directors, companies would limit political expenditures, and officers and directors would face a requirement to hold stock for a minimum of five years. She amplified her arguments on CNBC's "Mad Money" with Jim Cramer this week.
Her arguments are filled with so many flaws that it is hard to know where to start. Listening to her, I could not help but wonder how many CEOs she spoke to before launching her bill, or whether she has ever been in a corporate board meeting?