Senator Sherrod Brown of Ohio wants his Democratic colleagues running for president to plagiarize his favorite line.
“I want our presidential candidates to talk more about the dignity of work,” he said at a press conference Wednesday to announce a new bill to force public companies to pay workers a special “dividend” whenever they increase the amounts returned to shareholders.
“Some of them are doing it well. Some use that term, some don’t, I don’t care if they use the term, but [that they] are talking about governing through the eyes of workers.”
Brown, who is ranking member of the Senate Banking Committee, is introducing a bill that would require public companies to pay each worker $1 for every $1 million in increased returns to shareholders. The proposal would include all non-executive workers — including independent contractors, foreign employees, workers at subsidiary firms, and part-time employees on a prorated basis — and would include stock buybacks, increases in dividend payments and special dividends.
While the bill would impact how all corporate profits are returned to shareholders, Brown focused his opprobrium on stock buybacks, which have been held up by Democrats as a primary example of how the 2017 tax cut benefited the wealthy over workers.
U.S. public companies collectively announced more than $1 trillion in stock buybacks in 2018, an amount equal to about 2 percent of all shares. Meanwhile, real weekly earnings for workers only grew 1.2 percent over inflation last year.
Apple Inc. alone bought back $74.2 billion in shares — that would be $74,200 per worker under Brown’s proposal — and critics quickly honed in on stock repurchases as an avatar of corporate greed: Sen. Tammy Baldwin, D-Wis., introduced a bill to ban them and Sen. Marco Rubio, R-Fla., floated the idea of changing how buybacks are taxed.
Corporate financiers prefer stock buybacks to dividends because it allows shareholders who want to cash out to do so and increasing the ownership stakes for the remaining investors. There are also tax benefits: Dividends are taxed as regular income to the shareholder, but buybacks are taxed at the lower capital gains rate.
The bill is about more than just curbing stock buybacks — it’s an attempt to realign corporate governance structures to benefit employees. By making share repurchases and dividend increases essentially more expensive, the bill would incentivize corporations to reinvest profits rather than returning them to shareholders.
Brown argued that would benefit workers.
In this way, it’s more like Massachusetts Democratic Sen. Elizabeth Warren’s co-determinism bill, which would require large public companies to give employees representation on their governing boards, or proposals from Sen. Bernie Sanders, I-Vt., and Kirsten Gillibrand, D-N.Y., to encourage employee stock ownership plans.
Brown admitted that the proposal has little chance of passage out of a GOP-controlled Senate, but argued it was the start of a multi-year campaign to center Democratic economic policies around employees.
“My message is not anti-corporate, it’s pro worker,” he said. “When you talk about the dignity of work, it’s not just a slogan: It’s how our candidates for president will be elected, it’s how we campaign, it’s who we are and it’s how we should govern.”
Brown spoke the morning after health care proposals dominated the Democratic presidential debate stage in Detroit. Many Democrats believe focusing on healthcare offers the best path to the White House.
But Brown, who flirted with the idea of joining the large presidential candidate field, has argued that this worker-centric message will resonate with blue collar swing voters in the electorally critical states like Pennsylvania, Wisconsin, and Michigan.
After all, it worked for him in the demographically similar state of Ohio, which re-elected Brown in 2018 by six points just two years after it backed Donald Trump by eight points.
The proposal would only affect public companies, making it more expensive for them to return profits to equity holders. The number of public companies in the U.S. has dropped in half in recent years, from a peak of 7,322 in 1996 to 3,671 in 2017.
Republicans often blame onerous listing requirements that keep firms from deciding to go public, which limits the ability of mom and pop investors to purchase shares and reduces market transparency.
But Brown argued his bill wouldn’t discourage IPOs.
“I don’t know why this means fewer companies will go public,” he said. “There are so many considerations. I can’t imagine this would be a major consideration to go public or not.”