Rep. Alexandria Ocasio-Cortez is proposing a mandate that corporations receiving federal aid related to COVID-19 distribute shares in the company to rank-and-file workers until they repay the government.
The New York Democrat’s bill would require certain companies receiving relief funds to make annual stock grants to employees, according to text of the legislation provided by spokeswoman Lauren Hitt.
Ocasio-Cortez' proposal follows enactment of a roughly $2 trillion rescue package in March that included $500 billion in loans and loan guarantees for mid- or large-sized companies to address the pandemic’s impact, including $46 billion earmarked for direct loans to the aviation industry.
Some Democrats had called for the law to include restrictions on companies receiving bailouts, and the final version included limits on stock buybacks, an idea that President Donald Trump said he supported, and on executive pay.
Democrats and Republicans are largely at odds over a next round of relief. House Democrats passed a bill on May 15 that Senate Republicans say won't pass their chamber.
Ocasio-Cortez’s bill would require that if corporations receive federal aid related to COVID-19, they must grant equity to employees each year until the loan or loan guarantee is no longer outstanding. It would bar companies from conditioning the shares on any performance evaluation or on workers buying company stock.
The total shares given to workers would have to be a larger percentage of total company stock than what was distributed through equity plans or stock options during the three years before Jan. 1, 2020, on average. That's compensation that was likely to have been given to executives.
Companies would have to determine how much stock each eligible employee received through a formula accounting for salary adjusted for tenure. Workers that make up to $137,700 in wages each year could receive stock.
The bill would apply to full-time or part-time workers on the date a company receives federal aid. It would exclude executive officers, any management employee that received pay in stock before the company received federal relief funds and any worker who owns more than 5 percent of the company’s voting shares.
While the shares would be a financial perk for workers, they’d also give them a greater voice, with the ability to vote in board elections, on executive pay packages and other resolutions.
Workers have recently used their status as shareholders to seek changes from leadership, particularly at technology companies where employees are often paid in part in equity early on. Amazon.com Inc. paid certain employees company stock that some eventually used to file shareholder proposals for the 2019 and 2020 shareholder meetings.
Ocasio-Cortez’s legislation also would stipulate that stock the workers receive must have the same voting and dividend rights as existing shares with the greatest rights. For companies with multi-class stock structures, that might mean giving workers shares akin to more powerful stock typically used to give founders control.
The legislation would apply to companies with securities traded on a national securities exchange, certain accelerated filers and those registered with the Securities and Exchange Commission under sections 12(g) or 15(d) of the Securities Exchange Act of 1934.
Ocasio-Cortez introduced the bill on May 13, and it was sent to the House Financial Services Committee for consideration.