January 2022

The transition to the Biden administration is expected to have a significant impact on corporate governance. This impact is due in part to specific governance related proposals that will pass through the administration, and in part to how Biden’s policies will influence state legislation, governance best practices, and board conduct. During his campaign, several proposals with a significant impact on corporate governance were brought up by progressive candidates such as the Affordable Capitalism Act, the Ending Too Big to Jail Act, and the Corporate Executive Accountability Act. Looking forward, more specific proposals will likely establish basic goals and requirements for board diversity, gender equality, and worker representation.

Biden set the tone for his approach to board governance during his campaign when he claimed the age of shareholder primacy would come to an end during his presidency: “It’s way past time we put an end to the era of shareholder capitalism. The idea the only responsibility a corporation has is with shareholders: that’s simply not true. It’s an absolute farce. They have a responsibility to their workers, their community, to their country. That isn’t a radical notion”. In accordance with this sentiment, Biden will work towards fair taxation of corporations and ensure that they put their workers and communities before their shareholders.

Biden’s approach aligns with that of Elizabeth Warren, who had the most developed set of corporate governance policies during her campaign. These policies included pledges to place workers on boards, as well as the introduction of “charter companies” which would be dedicated to stakeholder interests rather than shareholder interests.

Kamala Harris has been similarly outspoken about the need for change in corporate America, stating her commitment to restore the corporate taxation level to 35% and augment diversity in the boardroom: “When our country’s corporate leadership looks more like the rest of the country, it ensures that a wider array of perspectives are heard in meetings and board rooms and that the needs and interests of more people are considered. We must do more to hold companies accountable for living up to their own diversity goals and make sure we have reliable data about their progress”.

Kamala Harris similarly proposed a new law that would compel companies of one hundred employees or more the prove that they pay men and women equally or face a fine of one percent profit per one percent of pay disparity. In this way, Kamala looks to take the burden off of the working woman by holding corporations accountable for paying their employees fairly.

While Biden and Harris are not as radical as Bernie Sanders and Elizabeth Warren in their intentions for changes in corporate governance, advisors have begun warning companies to prepare for new regulations. These regulations will likely turn corporate attention away from their shareholders and towards their stakeholders and enforce greater boardroom diversity. Moreover, companies should be prepared for the administration to raise corporate taxes, especially for companies that shift jobs overseas, and to require the disclosure of the racial, gender, and ethnic makeup of their boards.