With his Senate campaign all but launched, Joe Kennedy III is shaking up Massachusetts politics. But the congressman caused a different kind of stir last November, by embarking on a crusade for what he called “moral capitalism.”
Companies, Kennedy told the New England Council, shouldn’t focus only on shareholders. Broader societal benefits need to be important factors, too.
It sounded noble, if a little intangible. What could Congress do to make this goal a reality? Kennedy suggested few specifics at the time.
On Thursday, though, Kennedy offered something concrete: He became the lead House sponsor of a bill that would require public companies that buy back their shares to also dole out some of their profits to their workers.
Kennedy has cosponsored a number of other bills aimed at addressing income inequality in the months since that post-Thanksgiving speech in Boston. But a spokesman says this is the first time he has taken the lead in the House on one of them.
Kennedy tells me he’s upset that much of the GOP’s $1.5 trillion tax cut in late 2017 went to stock buybacks. While some of their tax-cut savings was invested in other ways, many companies used their newfound cash to gobble up their own shares. Buybacks rose to record levels in 2018, totaling more than $800 billion, according to S&P Dow Jones Indices. Apple led the way, followed by Oracle and Wells Fargo. Stock buybacks reward investors, often by driving up the price for shares that remain on the market. Guess who also benefits: top executives whose compensation packages are typically linked to stock performance.
But half of the country doesn’t own stocks, Kennedy says, and sees no direct boost.
As Kennedy researched legislation aimed at tackling this issue of moral capitalism, he came across a stock buyback bill that Senator Cory Booker of New Jersey filed last year. It’s this bill that was reintroduced, with Kennedy now leading the charge on the House side.
This “Worker Dividend Act” would require public companies that choose to buy back their shares to give a huge chunk of their profits to employees, too. The total minimum handout would equal the amount a company paid to buy back stock during a given year, or half of any US operating profit in excess of $250 million — whichever number is lower. The payouts could be divvied up as bonuses or in raises, but they would need to be equal in size for everyone, regardless of title or status.
Other Democrats have taken aim at this issue in the wake of the Great Tax Cut Bonanza. Senator Sherrod Brown, for example, unveiled a bill in July requiring companies to pay their workers $1 for every $1 million of buybacks.
Big Business, no surprise, remains adamantly opposed. The Business Roundtable argues that buybacks contribute to the retirement security of millions of Americans, and federal mandates on how companies spend their profits would stifle growth. A US Chamber of Commerce executive says these bills would harm “Mr. and Mrs. 401(k), . . . the primary beneficiaries of stock buybacks in the past.”
Kennedy knows the odds could be slim for his bill becoming law — at least as long as the GOP controls the Senate. But he views the public debate around these measures as a way to highlight inequities in the current system and to put pressure on Corporate America.
He salutes the Roundtable’s recent, much-publicized stance that companies should no longer just focus on shareholders as a top priority but also the interests of suppliers, customers, employees, communities. It sure sounded familiar: The statement mirrored the themes in that speech Kennedy made last fall to the New England Council. But moral capitalism, Kennedy says, is more than just a press release.
We will hear more from Kennedy about moral capitalism on the campaign trail, especially now that he is headed toward a Democratic primary, in an effort to unseat incumbent Ed Markey.
Kennedy says it’s just a coincidence that this bill was reintroduced two days before his big Senate announcement. If so, it should be a helpful coincidence, as he hammers away at themes of economic inequality — and hopes they resonate with voters.