Occasionally I post an article that I have no understanding of. This is one of those articles. I am posting it because the source and headline are an indication to me that this is important information.<\/p>\n
Yesterday Forbes<\/a> posted an article detailing how Elizabeth Warren intends to change your retirement funds if she is elected. Keep in mind that she is rapidly becoming the Democrat front-runner. The dust up about Biden and the Ukraine may be the party’s effort to remove Biden (because he is not looking electable) and replace him with Warren.<\/p>\n The article reports:<\/p>\n So, as it turns out, Elizabeth Warren\u2019s Social Security expansion proposal is not the only one of her plans to affect Americans\u2019 retirement well-being. But the proposal of hers which will affect Americans\u2019 retirement savings, in their 401(k)s and their IRAs and the funded status of their pension plans (which might be irrelevant for single-employer traditional pension plans guaranteed by employers but matters considerably for multi-employer plans), is tucked away in a component of her platform with the harmless-looking title, \u201cEmpowering Workers Through Accountable Capitalism<\/a>.\u201d<\/strong><\/p>\n It\u2019s a proposal that\u2019s a repeat of legislation she proposed in 2018, the \u201cAccountable Capitalism Act<\/a>,\u201d which, as it happens, I dug into at the time on another platform<\/a>. The most nebulous part of the proposal is the notion that large corporations would be obliged to pursue the \u201cbest interests\u201d of a long list of entities, not merely shareholders but also employees, suppliers, customers, the local communities where the companies locations are based, and others, with the fundamental premise that such a corporation \u201cshall have the purpose of creating a general public benefit.\u201d But however much writers such as Kevin D. Williamson decried<\/a> this as \u201cthe wholesale expropriation of private enterprise in the United States\u201d this all appears to be aspirational and symbolic, without any enforcement mechanism included in the legislation, or administrative agency named to ensure the corporation is indeed \u201ccreating a public benefit.\u201d<\/strong><\/p>\n What is far more concrete is a requirement that such \u201cUnited States corporations,\u201d that is, those with over $1 billion in revenue, would be obliged to bring onto their boards of directors, representatives elected by employees, at a minimum ratio of 40% of the total board members. The website declares:<\/strong><\/p>\n \u201cElizabeth\u2019s plan gives workers a big voice in all corporate decisions, including those about outsourcing, wages, and investment,\u201d<\/strong><\/p>\n and references Germany as an example of a country with a similar approach.<\/strong><\/p>\n In an abstract way, of course, directors are bound to represent shareholders; if 40% of board members no longer represent the shareholders, than this is, in effect, taking away from shareholders the ownership of 40% of the company. But this is more than just an abstract impact. How much of a difference would it make?<\/strong><\/p>\n The article explains that Elizabeth Warren’s plans would reduce the value of the stocks. In the German model, only the wealthy own stocks<\/p>\n The article concludes:<\/p>\n Take a look at the estimates from Pensions & Investments<\/a>:\u00a080% of stock market equity is held by institutions:\u00a0that means, mutual funds, pension funds, 401(k)s, and the like.\u00a0In particular, 37% of stock is owned by retirement accounts<\/a>; when subtracting out foreign owners of US stock (26% of the total), 50% of US-owned US equities are owned within retirement funds.<\/em> And it should go without saying that there is no way to \u201cpunish\u201d the wealthy by causing the value of only the stock they own to go south while somehow protecting the 401(k) and other retirement accounts for the rest of us. It\u2019s cutting off your nose to spite your face and, as someone with a 401(k) account, I\u2019d really prefer not to do this.<\/strong><\/p>\n As I said, I don’t fully understand what this is all about, but I do know that as many Americans lose faith in our Social Security system, they are creating 401(k) accounts and other holdings in preparation for retirement. I have a feeling that if Ms. Warren is elected, none of us will be able to retire.<\/p>\n","protected":false},"excerpt":{"rendered":" Occasionally I post an article that I have no understanding of. This is one of those articles. I am posting it because the source and headline are an indication to me that this is important information. Yesterday Forbes posted an … Continue reading