In this July 23, 2015, photo, Democratic presidential hopeful Hillary Rodham Clinton speaks at a campaign event in Columbia, S.C.Stephen B. Morton/The Associated Press
Hillary Rodham Clinton wants to shift the mindset of corporate America from "quarterly capitalism" to a more long-term approach to the economy and plans to unveil proposals to hike capital gains taxes, review executive compensation rules and warn that shareholder activism can sometimes go too far.
Clinton's campaign said the Democratic presidential candidate on Friday will urge U.S. companies to break free from the "tyranny of today's earnings report" in order to drive higher income growth for everyday Americans.
Her speech at New York University's Stern School of Business is not expected to wade into more polarizing issues related to the oversight of Wall Street — Clinton is expected to address corporate accountability later this summer. But it will address the perils of "short-termism" that have led to large corporate stock buybacks and less spending on new plants and equipment.
Clinton, the Democratic front-runner, has begun outlining her economic agenda as she faces pressure on the left from Vermont Sen. Bernie Sanders and former Maryland Gov. Martin O'Malley to take a more populist approach to Wall Street. Both rivals support reinstating the Glass-Steagall Act that separated commercial and investment lending and have warned that the size of the nation's largest banks could pose risks to the economy.
Taking questions from reporters in South Carolina on Thursday, Clinton said her proposals were aimed at promoting growth "with a longer-term perspective. That's what I think is best for the country. I think it's also best for business whether they agree with it or not."
Her tax proposal would raise capital gains taxes for some investors with the new rates pegged to the duration of the investment. Short-term holdings would be taxed at a higher percentage. Gains on securities held for more than a year are currently taxed at the same rate as those held for decades.
President Barack Obama has raised capital gains rates for top earners to 23.8 per cent and proposed increasing the rate to 28 per cent for the highest earners.
Clinton is expected to say that the tax code's treatment of executive compensation can create incentives for CEOs and others to sacrifice long-term value in exchange for short-term boosts to the company's stock price. She will urge a reexamination of that and call for further reforms, her campaign said.
Clinton will also point to the negative effects of stock buybacks, which are often used by companies to boost share prices at the expense of long-term investment like research and development. Clinton will urge greater disclosure of buybacks, noting that the U.S. requires companies to disclose buybacks in aggregate on a quarterly basis while buybacks must be disclosed within a day in the United Kingdom and Hong Kong.
In a section likely to be cheered by corporate executives, her plan also involves reviewing rules on shareholder activism. Clinton is expected to say that activism can go too far and "hit and run" activists can have an unhealthy influence on corporate decision-making.
O'Malley on Thursday challenged Clinton and others to support reinstating Glass-Steagall, which was repealed during Bill Clinton's presidency. Clinton told reporters the issue is more complicated than a single piece of banking legislation.
"If you go back and look at what happened in the Great Recession, it was mortgage companies, it was insurance companies, it was non-commercial banking entities, who were as big, if not bigger contributors to the collapse," Clinton said. "So I am not interested in just saying there is one answer to the too-big-to-fail problem."