Outten & Golden: Empowering Employees in the Workplace

Posts Tagged ‘TARP’

Unfinished business of executive pay reform

Thursday, September 2nd, 2010

Sarah AndersonMost analysts of the high-finance meltdown that ushered in the Great Recession have concluded that excessive compensation was a key causal factor. Outrageously high rewards gave executives an incentive to behave outrageously, to take the sorts of reckless risks that would eventually endanger our entire economy. Our nation’s leading political players have sought, sometimes with grand fanfare, to confront this reality. The financial reform package enacted this July, for instance, codifies several long-term goals of executive pay reformers, most notably a “say on pay” provision that hands shareholders the right to take nonbinding advisory votes on executive compensation.

This reform could become a valuable tool for shareholder activists, particularly if such votes are required on an annual basis. However, there is little evidence that “say on pay” has had an impact on overall compensation levels in nations where it has already been in practice.

To bring executive pay back down to mid-20th century levels, we need reforms that cut to the quick, which recognize the dangers banks and major corporations create when they dangle oversized rewards for executive “performance.” Some reforms that would move us in this direction are now pending in Congress.

One of the most promising would eliminate a perverse incentive for excessive pay in our tax code. Under current rules, there are no meaningful limits on how much a firm can deduct for the expense of executive comp. Thus, the more a firm pays its CEO, the more that firm can deduct from its taxes. The rest of us bear the brunt of this loophole, either through increased taxes needed to fill the revenue gaps or through cutbacks in public spending.

The Income Equity Act, introduced by Rep. Barbara Lee (D-Calif.), would deny all firms tax deductions on any executive pay (including stock options) that runs over 25 times the pay of a firm’s lowest-paid employee or $500,000, whichever is higher.

The Troubled Asset Relief Program (TARP) and the 2010 health care reform bill set important precedents for this reform by applying $500,000 deductibility caps on pay for bailout recipients and health insurance firms. Treasury Secretary Timothy Geithner has said he would consider extending the tax deductibility cap in TARP to U.S. companies generally.

Another practical proposal would use the power of the public purse to encourage more rational pay levels. Rep. Jan Schakowsky (D-Illin.) has introduced the Patriot Corporations Act to extend tax breaks and federal contracting preferences to companies that meet benchmarks for good corporate behavior. Among the benchmarks: not compensating any executive at more than 100 times the income of the company’s lowest-paid worker.

By law, the U.S. government denies contracts to companies that discriminate in their employment practices, by race or gender. This reflects clear public policy that our tax dollars should not subsidize racial or gender inequality. In a similar way, this reform would discourage extreme economic inequality.

Congress should also revisit the proposal that passed the Senate last year which would’ve capped total pay for employees of bailout companies at no more than $400,000, the salary of the U.S. President. Such a restriction could be enacted today for application in the event of future bailouts. Given a clear warning about the consequences for their own paychecks, executives might think twice about taking actions that endanger their future – and ours.

Congress should not shy away from bolder action on executive pay. Lawmakers mandate limits on other types of corporate behavior all the time. They limit how much pollution corporations can spew out. They limit the chemicals companies can sneak into their products. They limit the hours they can force employees to labor. They set these limits because they recognize that irresponsible corporate behaviors threaten our communities.

Excessive executive pay, the Wall Street meltdown has demonstrated ever so vividly, endangers our public well-being as surely as any other pollutants.

Sarah Anderson is a co-author of the new Institute for Policy Studies report, Executive Excess 2010: CEO Pay and the Great Recession.

About The Author: Sarah Anderson is the Institute for Policy Studies Global Economy Project Director. He work  includes research, writing, and networking on issues related to the impact of international trade, finance, and investment policies on inequality, sustainability, and human rights. Sarah is also a well-known expert on executive compensation, as the lead author of 16 annual “Executive Excess” reports that have received extensive media coverage.

Senate Passes Jobs Bill, Obama Signature Next

Thursday, March 18th, 2010

Image: Mike HallThe U.S. Senate today passed a jobs bill that AFL-CIO President Richard Trumka calls a ”good start” in helping the nation’s workers climb out of the 11-million-deep jobs hole dug by the Wall Street greed that propelled the economy’s nosedive.

But he says the bill—which is on its way to the White House for President Obama’s signature—must be the first step of a broad and intensive effort to rebuild the economy.

Much more needs to be done. We need to restore the jobs that were lost to the financial debacle, and Wall Street should pay to create them. We must invest in rebuilding our crumbling infrastructure and in the green jobs of the future. We have to maintain funding for vital services by state and local governments and prevent destructive cuts in education, police and fire protection and more.

We must take the additional steps needed to extend unemployment insurance and health care lifelines to the unemployed. We must increase funding for neglected communities to match people who want to work with jobs that need to be done. And we should move right now to use leftover TARP money to get credit flowing to Main Street.

The $17.6 billion bill includes a one-year extension of the federal highway program, an extension of the Build America Bonds program that helps states finance certain infrastructure projects and tax incentives for employers to hire workers.

The Senate first passed the legislation in February, but minor changes by the House forced a second vote on the legislation.

Other pending jobs legislation includes a December-passed House bill that is a more extensive jobs bill with an emphasis on jobs-creating infrastructure projects. The next step for the bill is uncertain—Senate leaders have promised to move further jobs-related legislation, but no time table has been set. Also this month, Rep. George Miller (D-Calif.) introduced the Local Jobs for America Act, which would create or save up to 1 million public- and private-sector jobs. Jobs saved would include those such as the firefighters, the police and teachers and others whose jobs are in jeopardy because of local government budget cuts.

*This article originally appeared in AFL-CIO blog on March 17, 2009. Reprinted with permission from the author.

About the Author: Mike Hall is a former West Virginia newspaper reporter, staff writer for the United Mine Workers Journal and managing editor of the Seafarers Log. I came to the AFL- CIO in 1989 and have written for several federation publications, focusing on legislation and politics, especially grassroots mobilization and workplace safety. When my collar was still blue, I carried union cards from the Oil, Chemical and Atomic Workers, American Flint Glass Workers and Teamsters for jobs in a chemical plant, a mining equipment manufacturing plant and a warehouse. I’ve also worked as roadie for a small-time country-rock band, sold my blood plasma and played an occasional game of poker to help pay the rent. You may have seen me at one of several hundred Grateful Dead shows. I was the one with longhair and the tie-dye. Still have the shirts, lost the hair.

Young Workers: Hit Hard, Hitting Back

Wednesday, December 16th, 2009

Image: Liz ShulerAs newly elected secretary-treasurer of the AFL-CIO, I traveled the country this fall, talking with workers and hearing their concerns. The economic crisis is causing a lot of pain. So many people have no jobs, no health care–and many are losing their homes. And as I looked into the faces of young workers, the reality hit home that these young people are part of the first generation in recent history likely to be worse off than their parents.

This is a tragedy.

The AFL-CIO and our community affiliate, Working America, recently surveyed young workers–and I’m not talking about 17- and 18-year-olds. I’m talking about 18- to 34-year-olds. In the past 10 years, young workers have suffered disproportionately from the downturn in the economy:

  • One in three young workers is worried about being able to find a job–let alone a full-time job with benefits.
  • Only 31 percent make enough money to cover their bills and put some aside–that is 22 percentage points worse than it was 10 years ago.
  • Nearly half worry about having more debt than they can handle.
  • One in three still lives at home with parents.

Young workers are living the effects of a 30-year campaign to create a low-wage workforce. It has succeeded.

For decades, the far right led an anti-government, anti-investment, feed-the-rich-and-starve-the-poor drive that gave us an era of deregulation, privatization and job exporting.

At the same time, corporations and government attacked unions and workers’ freedom to form unions and bargain for decent wages and benefits. When unions are strong, paychecks grow and workers have benefits like health care and pensions.

When unions are under attack, paychecks shrink. Pensions vanish. Health care becomes the emergency room.

What’s left is not working for young people–or for any of us. It will take a broadly shared sense of wartime urgency to replace today’s low-wage economy with a high-wage, high-skills economy. The first step must be immediate action to address the nation’s jobs crisis, with five essential steps:

  1. Extend the lifeline for jobless workers.
  2. Rebuild America’s schools, roads and energy systems and invest in green technology and green jobs.
  3. Increase aid to state and local governments to maintain vital services.
  4. Fund jobs in our communities.
  5. Put TARP funds to work for Main Street with job-creating loans to small businesses.

We took these initiatives to the White House Summit on Jobs on Dec. 3 and are pushing Congress to take action now. The first reports from the Jobs Summit are encouraging, and we look forward to working with the Obama administration and Congress to carry on this momentum.

It’s time to rebuild an economy that works–an economy based on prosperity, an economy we can be proud to pass on to our children and their children. And we need young people to lead the way. That survey I mentioned earlier shows they are ready.

· Young workers have a whole new level of civic engagement, with the surge of new voters in the 2008 election.
· They are well-informed and following government and policy news.
· They believe in collective action and understand the power of having a union.
· They have hope for the future and the vision of a savvy, diverse movement to bring about progressive change.

We’re planning a major summit for young workers after the first of the year to bring all our ideas and voices together. When crises hit, it’s young people who drive change.

Martin Luther King Jr. was 26 when he led the Montgomery bus boycott. At 25, César Chávez was registering Mexican Americans to vote. Walter Reuther headed strikes demanding GM recognize its workers’ rights starting when he was 30. Elizabeth Cady Stanton was 33 when she drafted the declaration of women’s rights.

Young people are being hard in this jobs crisis. But I believe they provide much of the fuel we need to get out of it.

*This article originally appeared in The Huffington Post on December 7, 2009. Reprinted with permission by the author.

**Photo credt: © 2009 Jay Mallin.  All rights reserved. Licensed soley for use in publications, both electronic and print, websites, and public relations of the AFL-CIO.  All other uses, publication, or distribution strictly prohibited. Licensing is contingent on payment in full of our invoice. For more information, contact: jay@JayMallinPhotos.com 202-363-2756

About the Author: Liz Shuler was elected AFL-CIO Secretary-Treasurer in September 2009, the youngest person ever to become an officer of the AFL-CIO. Shuler previously was the highest-ranking women in the Electrical Workers (IBEW) union, serving as the top assistant to the IBEW president since 2004. In 1993, she joined IBEW Local 125 in Portland, Ore., where she worked as an organizer and state legislative and political director. In
1998, she was part of the IBEW’s international staff in Washington, D.C., as a legislative and political representative.

The CEO Patriot Pledge: Just Say 'No' to More Layoffs

Wednesday, February 11th, 2009

CEO PATRIOT PLEDGE: As an executive my primary motivation is to act for the good of my company, not just my own financial gain. No one at our company will earn a guaranteed base salary more than 40 times of our lowest paid worker and we will offer the same health care and 401(K) matches to employees as we do for executives. We support pay for performance, so when our company’s performance serves investors and employees, we’ll share in the gains. When our company’s performance does not adequately serve our investors and employees, we’ll share in the sacrifice.

These are M.A.D. economic times. That’s M.A.D. as in Mutually Assured Destruction, the old Cold War strategy where no one would be left standing after that first nuke was launched. Economic experts, who agree on little else, agree on this: if our current vicious cycle of “layoffs-driving-down-purchasing-which-increases-layoffs” continues, no one will be left standing.

There is an exit strategy here that no one is talking about; billions of dollars that could be used to address the layoff cycle immediately. This is not a plea for legislation or government funds. In fact, not a penny would come from taxpayers. It’s simple, voluntary, and dare I say, patriotic. The “Chief Executive Officer Patriot Pledge,” see above, is a 95-word call to action for all corporate leaders, not just those in financial services, to rein in their own wretched excesses and voluntarily re-invest part of their lofty salaries and perks to keep employees on the payroll.

Entitlement and greed are the only words I can find to describe $18 billion in bonuses given during the last two months of 2008. At the same time that one million people were being laid off, including at these very firms that were giving bonuses to a select few. Who paid the bill that allowed these corporations to party like it was 1999? U.S. taxpayers, courtesy of former Treasury Secretary Paulson’s inability to ask for any accountability from the corporations receiving $350 billion in TARP funds. Who knew the “free market” could be so expensive? Heckuva job, Paulie!

I’m sure some will scream “socialism,” but socialism isn’t voluntary. No, the CEO Patriot Pledge is pure capitalism, rewarding people when they do well and refusing to grossly enrich failure any longer. I’m not disparaging wealth or begrudging anybody for achieving success, just asking for bonuses that are tied to real achievement.

The Corporate Library examined the paychecks of just the CEOs of the Russell 3000 (the 3,000 largest U.S. companies based on market capitalization) and calculated these executives were overpaid by $14.7 billion annually. This does not include the huge paychecks of COOs, CFOs, etc. It also doesn’t include tens of thousands of executives at smaller firms. My estimate is that up to $40 billion could be found to reduce layoffs just from excess executive pay.

Of course, some executives consider themselves worthy of any compensation, no matter how disproportionate or unwarranted. Just ask John Thain, former CEO of Merrill Lynch, who in a recent interview told CNBC that it was important, even in troubled times, to give top talent over-the-top paychecks.

Well, if these top executives at Merrill Lynch and thousands of other firms are so talented, then how did we end up with 626,000 new unemployment claims filed just last week…with half of our 401(K)’s gone…and with, my personal favorite, a $35,000 executive commode funded from the public trough. Do these corporate “leaders” have no sense of decency?

Fortunately, there are some executives who get it. For example, Thomas A. James, CEO of Raymond James. Sound familiar? They are the sponsors of the stadium of the most recent Super Bowl. Raymond James had almost $3 billion in revenue last year. Yet, Tom James’ guaranteed base salary was only $325,000, less than 20 times the amount of the lowest paid worker at his company. As compared with the average CEO salary, which is 262 times that of the lowest paid worker. [Please note: for every “average” salaried CEO who cuts back his or her base salary to a ratio of even 40 times the salary of the lowest paid worker, almost 200 workers would keep their jobs.]

While the S&P sank 22%, Raymond James had a positive return for its investors. With the bonus he earned, Tom James’ total compensation was slightly over $3 million. But the key word here is “earned.” It is no accident that Raymond James has a conservative compensation philosophy and the company also did well despite the carnage in the rest of the market.

Compare Tom James to Robert Iger, CEO of Disney. According to Graef Crystal, compensation guru, Iger received $51 million during a year when his company suffered losses and layoffs. Or to put it in Disney language, Iger received a king’s ransom for a pauper’s performance.

What is the CEO Patriot Pledge? It’s a plea to encourage American businesses to do what they have always done: lead the way with vision and creativity. Only this time the goal is not to just create a profit, but to keep people employed so there will be a market for our products and services.

In short, our turbulent times require a reversal of a famous quote: today “what is good for the country is good for G.M.”

You can call this initiative naïve, but remember that a similar pledge, the Sullivan Principles, played a key role in ending apartheid in South Africa.

Greed isn’t good, it’s a symptom of poor impulse control and leads us down the path to more Lehman Brothers-style implosions. David beat Goliath and we can put an end to this fat-cat behavior. My single voice can be easily dismissed, but all of our voices can’t. Put the pledge on the bulletin boards of your company, send it to the companies that you own stock in and ask your friends and colleagues to do the same. Also pass on link to the CEO Patriot Pledge video on YouTube. We need to all share in the sacrifice, but isn’t it time that our leaders actually led during tough times?

There is a saying, “To save one life is as if you have saved the world.” Executives, you hold the world in your hands. We can keep people employed and get our economy working again, but only if we work together to stop the madness.

About the Author: Bob Rosner is a best-selling author, award-winning journalist and contributor to On The Money. He has been called “Dilbert with a solution.” Check out the free resources available at workplace911.com. You can contact Bob via bob@workplace911.com.

Your Rights Job Survival The Issues Features Resources About This Blog