Executive Greed
Stop the Madness
by Gonzalo Baeza
Our nation’s economic crisis is not the result of random events and a handful of wrongheaded decisions. It is the outcome of a 30-year drive to boost corporate profits at the expense of American workers. Faced with this troubling scenario, AFSCME is at the forefront of the fight to restore sanity to our broken system.
Every day, more Americans are losing their financial grip. Unemployment stands at 8.5 percent—a 30-year high of 13.2 million jobless Americans. In March, the number of jobless workers increased by 663,000. That’s nearly 30,000 jobs lost for each workday. If the underemployed and those who gave up looking for a job are counted, the national unemployment rate stands at 15.6 percent, or nearly 25 million Americans.
Meanwhile, benefits and pay are being sliced to the bone, jobs are disappearing, health care costs are skyrocketing and home foreclosures have reached an all-time high. Banks have lost $3 trillion in assets to the meltdown, while American families have had $11 trillion in wealth destroyed.
According to the U.S. Bureau of Labor Statistics, the recession started in December 2007. Nonetheless, the causes of our financial and economic meltdown can be traced further back, revealing a troubling pattern of corporate greed and mischief.
The Crisis: Three Decades in the Making
America’s financial picture didn’t go dark overnight. For three decades corporations and Wall Street banks led a successful effort to weaken laws and regulations governing consumer and corporate borrowing. Over time, they convinced federal regulatory agencies, many U.S. judges and past majorities in Congress that provisions designed to make corporations behave with fairness and responsibility were un-necessary. Corporations called it a frivolous interference with their ability to remain competitive and earn a profit.
Freed from rigorous federal and shareholder oversight, corporations and financial entities were able to hide their more reckless activities from the public and investors. Using money borrowed from individual investors, public and private pension funds and others, corporations irresponsibly bought, packaged and sold risky investments. Their poor judgment was the pin that popped the financial bubble.
Shareholders Should Have “Say on Pay”
Even before the bubble burst, AFSCME was fighting for reform. We’ve called for more shareholder participation and demanded restoration of the legal rights that investors have lost over the past two decades.
At present, shareowners have little say in selecting the directors who are supposed to represent their interests. This is why AFSCME created a network of institutional and individual investors that fight to give shareholders a voice on executive compensation packages and the selection of boards of directors.
CEOs are paid an average of 344 times more than average workers. Their salaries are padded with generous benefits and bonuses regardless of performance. Just look at the giant insurance and financial services firm AIG which, after receiving some $180 billion in taxpayer-financed bailout funds, continued to reward some of the very executives whose recklessness led the company to ruin.
All of this is why President Obama called granting excessive pay and bonuses in times of crisis “the height of irresponsibility.” According to Obama, “We all need to take responsibility and this includes executives at major financial firms who turned to the American people, hat in hand, when they were in trouble, even as they paid themselves their customary lavish bonuses.”
This madness has to stop. We must demand an end to compensation policies that encourage short-term risk-taking at the expense of long-term corporate health. AFSCME is pushing for legislation that would allow shareowners to vote on executive compensation packages. This way, shareholders of many of these companies—which now include U.S. taxpayers—would ensure managers have a stake in long-term growth and will help build real economic prosperity.
Shareholder “say on pay” votes are established practice in the United Kingdom and are currently in place at 74 publicly traded corporations in the U.S. “Say on pay” legislation was introduced in Congress two years ago by then-Illinois Sen. Barack Obama. Now is the time for legislators to reconsider the initiative and include it in the much-needed reforms to our financial system. We need bold action to bring these rampant abuses to an end.
For more information on AFSCME’s efforts to hold shareholders accountable, visit www.afscme.org/issues and click on “Pension Security.”
