What is Corporate Governance and What Effect Can Joe Biden’s Infrastructure Funding Plan Have on It?

Posted: July 28, 2020

Corporate governance is the system of processes by which a company is directed and controlled. It can be seen as a set of rules and practices that steer the company to long-term growth and success. Boards of directors represent key players in corporate governance, and are responsible for selecting Chief Executive Officers and approving corporate strategies that align with long-term value, and oversee their implementation. Corporate governance can be separated from the daily operations of a company. It more so represents the overall values and strategies of a company and the way that it operates as a whole. Good corporate governance is not always looked at in purely financial terms either. An extremely profitable company may not necessarily balance ethical or legal practices in a way that implies good corporate governance. Corporate governance is important in creating a cohesive approach to business operations and providing a positive outward presentation of a company’s values and strategies. Joe Biden, former Vice President of the United States and current Democratic nominee for President, has proposed a $2-trillion plan to create economic opportunities, strengthen infrastructure, and tackle climate-change simultaneously. This plan leaves a lot to unpack. In addition, Biden promises to address racial justice and connected pollution issues with communities of color. To fund infrastructure bolstering, he is proposing a tax increase on corporations and wealthy Americans. This would counteract a sweeping tax cut imposed during Donald Trump’s presidency which mostly benefited wealthy investors and corporations. Cutting fossil fuel emissions, stimulating American infrastructure, supporting domestic businesses in the wake of Covid-19, and addressing systemic racism are all foundations of Biden’s campaign. How might any of his proposals affect corporate governance? If elected, Joe Biden plans to “jolt new life into our economy”. How will that affect the future of corporate governance? He has already made it clear that corporations may be footing some of the bill to strengthen American infrastructure as a whole. Biden announced that, should he be elected, he plans to increase corporate income taxation. He has proposed an increase from 21 percent to 28 percent in an effort to make America’s wealthiest more accountable. Corporate governance involves budget oversight and capital allocation, both of which could be hugely impacted if Biden were to be elected and push his corporate tax increase. Also, new corporate strategies would be required in order to balance the interests of all players in a company and keep it on track to succeed in the wake of a tax increase. Another vital piece of corporate governance that may be affected involves the overseeing of compliance programs. Biden has proposed a goal of an emissions-free power sector by 2035. In the wake of new environmental sanctions placed by the presidential nominee, new compliance measures may need to be put in place. Part of corporate governance is ensuring that a company is meeting legal requirements and operating in a way that complies with governmental regulations. There may be new regulations for boards of directors to address if Joe Biden is elected. When it comes to corporate governance, new sets of rules and policies will likely need to be designed if any of Biden’s proposals come into fruition in 2021 and beyond. To learn more about corporate governance and how the upcoming US election could affect your business, visit our Contact Page, or contact us directly by email at fglassner@veritasecc.com or by phone at 415-618-6060.