Where the JOBS Act and the Mitt Romney/Bain Capital outsourcing controversy collide
Senator Charles Schumer of New York is the co-sponsor, along with Senator Sherrod Brown (Ohio) and Congressman Stephen Fincher (Tennessee), of the Outsourcing Accountability Act of 2012. The bill would require public companies to disclose to shareholders in their SEC filings how many of their workers are employed domestically versus abroad.
Technically, the bill is bipartisan: Schumer and Brown are Democrats; Fincher is a Republican. Yet it’s hard not to see in the bill a partisan swipe at Presidential candidate Mitt Romney. After all, it was introduced into Congress on July 17 — precisely when the hubbub over reports of Bain Capital’s shipping jobs overseas, and Romney’s alleged role in the private equity firm after he had officially taken a leave of absence, had just reached a fever pitch. At the very least, it seems likely that the bill’s sponsors hoped to capitalize on the wave of negative sentiment toward outsourcing that surged around that time.
President Obama’s Jumpstart Our Business Startups (JOBS) Act does not directly address outsourcing — though the law’s ultimate goal is likewise to create more job opportunities for Americans. So the JOBS Act and the Outsourcing Accountability Act have a common stated purpose. That’s why the one way in which they are explicitly connected leaves us scratching our heads.
That connection is a provision in the Outsourcing Accountability Act that exempts “Emerging Growth Companies” under the JOBS Act from the disclosure mandated by the bill. As has been well-chronicled, the creation of this new class of public company is one of the major provisions of the JOBS Act. If a company is able to claim EGC status – and the vast majority of newly public companies can – it’s subject to less stringent regulatory requirements than its non-EGC peers.
You can see a friendly, bullet-point list of the exemptions and concessions to which EGCs are entitled under the JOBS Act, in, for example, this memo by the law firm of Fulbright & Jaworski. Senator Schumer’s bill would add one more bullet point to that list.
The whole point of the EGC provision of the JOBS Act is to encourage capital formation and thus job growth by making it easier for new companies to go public. But there is nothing to dissuade EGCs from hiring abroad rather than domestically. The ostensible point of the Outsourcing Accountability Act is to offer such dissuasion. With so many companies declaring EGC status — hundreds of done so since the JOBS Act was signed into law in April — their exemption from the bill begins to look like a pretty major loophole.