News & Politics

Labor Champions Reform as Big Business Squirms

The corporate world hasn't been this ripe for change since the 1930s -- and the labor movement has wisely seized the offense.
For more than a quarter century, corporate America has been on a roll, winning greater influence over both political parties, deregulating business, weakening unions, redistributing income to the elite and writing corporate-friendly rules for a more global economy. Despite protests and misgivings, there was widespread public acquiescence. Big business, or at least "the market," was good. Big government was bad.

But the tide has turned, at least in public opinion. Enron's collapse was the turning point, but the succession of scandals drove the lesson home. The opportunity -- and publicly perceived need -- for reforming the power and place of corporations in American life hasn't been as great since the 1930s. The big question is whether a social movement will emerge from this shift to turn the balance of power and make government an instrument for the public good, not the profit of the corporate elite.

Unfortunately, the current political line-up could hardly be less favorable. The country has the most pro-corporate president in history (and both the president and vice president personally profited from corporate abuses). The House is dominated by Republicans who are right-wing ideologues. The Senate is narrowly controlled by a Democratic Party that -- with some honorable exceptions -- has willingly sold its soul to corporate interests in a cynical, "me too" scramble for political gain that now leaves the party lacking both the credibility and the will to respond aggressively to popular demands to challenge corporate power and misdeeds.

As the political opportunities have opened over the past year, however, the labor movement has emerged as the single most important champion of corporate reform. Rev. Jesse Jackson and Ralph Nader, especially through his Citizen Works organization, have also played important roles, but their grassroots base of support is not as large. At the same time, there has been a burst of support for unions, even from workers who hadn't showed much interest before, and better prospects for the greatly expanded wave of organizing that unions desperately need.

The AFL-CIO has taken the lead, organizing actions to help victimized workers from Enron and WorldCom, educating union members and the public, pushing Congress and regulatory bodies for new rules, and pressing stockholder actions. Some individual unions -- like UNITE (the clothing and textile workers) -- also have been active, but responses have been uneven. To succeed with a long-term campaign, however, the labor movement needs a broader alliance with diverse constituencies, going beyond the usual suspects, and it also needs new strategies to take advantage of the new organizing opportunities.

Recent polls capture the dramatic shift in opinion. In July the Gallup Organization found that 38 percent of Americans consider big business to be the "biggest threat to the future of the country," the highest figure in 48 years of polling. In a survey for the AFL-CIO, Peter Hart Research found that 39 percent of Americans have a negative view of corporations (and 30 percent positive), compared with just a year earlier when 42 percent had a positive view (and 25 percent negative) -- a massive reversal.

At the same time, Hart found that 50 percent of nonunion workers say they would vote yes (with 43 percent voting no) in a union representation election in their workplace, a sharp increase from the 42 percent who said they would vote for a union a year ago. Even the pro-management Employment Law Alliance found that 58 percent of Americans surveyed supported unions organizing more workers, 73 percent favored mandatory representation of workers on corporate boards, and 84 percent wanted pension funds to hold corporations more accountable.

Ben Barile, 42, is part of that shifting public opinion. A middle manager at WorldCom, Barile was laid off in June, then denied his promised severance pay and health insurance when the company declared bankruptcy. He lost all of his 401(k) investment, and he was at great financial risk because of the cost of medicine for HIV. After a friend directed him to the AFL-CIO Web site, he left his e-mail address and was soon contacted and encouraged to join in legal action organized by the federation to win employee severance and health payments. He recalled how years earlier managers had told him that they had "cut away the cancer" in crushing an incipient union organizing effort. Now, recognizing that, as a group, workers are stronger and less afraid to speak up, he's ardently pro-union.

"I think the next job I'd like to get would be a union job," he says. "I'd like someone behind me and fighting for me, instead of me fighting by myself."

Earlier this summer, labor lobbying and public sentiment pushed through a first step in corporate and accounting reform sponsored by Sen. Paul Sarbanes (D-Maryland). In the weeks before its fall recess, Congress seemed likely to vote on at least two other initiatives that unions have pushed--reform of 401(k) employee savings plans and protection for workers in bankruptcy proceedings (giving priority to workers' claims for more back wages and recovering excessive executive pay, like the $100 million in "retention bonuses" given top Enron execs just before bankruptcy).

In another labor-backed bill, sponsored by Sen. Ted Kennedy (D-Massachusetts), employers who do not provide a traditional pension with defined benefits would, if they establish 401(k) plans, have to protect workers from employer pressure to load up imprudently on company stock.

Equally important, the measure would require all plans to give elected employee representatives an equal voice with management in running the funds.

Although employer groups adamantly oppose both provisions and Democrats are divided -- with Sen. Max Baucus (D-Montana) allying with Sen. Charles Grassley (R-Iowa) to promote a weaker bill -- public pressure could force Republicans to protect employee retirement. Congress also might require or encourage companies to treat executive stock options as expenses, as many corporations have decided to do already, and close the loophole that encourages companies to reincorporate in Bermuda to avoid U.S. taxes.

The labor movement also has taken its fight to the courts, stockholder meetings, the campaign trail and the streets -- including Wall Street, where AFL-CIO President John Sweeney delivered a hard-hitting attack in late July on "21st century corporate pirates ... [who] plundered our companies by replacing long-term prosperity with short-run insincerity."

Having just succeeded in helping Enron workers win $34 million in severance in bankruptcy proceedings, Sweeney then pledged to pursue a similar lawsuit on behalf of WorldCom workers. By early September, WorldCom succumbed and asked its bankruptcy court to make full severance payments to workers.

AFL-CIO leaders, joining with Machinists who protested at the headquarters of Stanley Works, forced the company to reverse its plans to reincorporate in Bermuda. Joined by UNITE President Bruce Raynor, they also demanded that Fidelity Investments (a top shareholder in Enron, WorldCom, Halliburton and other corporate scofflaws, as well as the largest provider of employee 401(k) plans) regularly disclose how it votes on shareholder proposals.

In mid-September, the labor federation also launched television ads in targeted districts. One attacked members of Congress who voted to give big corporations -- including Enron, even as it was undergoing multiple investigations -- hundreds of millions in tax credits. The other attacked legislators who voted for the 1995 Private Securities Litigation Reform Act, "kicking open the door to corporate abuse." The AFL-CIO also has planned a range of corporate accountability protests for October 19, keeping the issue alive during the elections.

The labor movement demands public accountability for corporations, says Ron Blackwell, AFL-CIO corporate affairs director, and that means proper regulation, not just pleas for responsibility. Accountability must cover ever-widening concentric circles of corporate organization.

"Right in the middle of the picture is the chief executive officer," Blackwell argues, "with enormous conflicts of interest--doing good for me or good for the company."

Corporate pay and stock options give CEOs incentives to pump up the value of the company's stock and then dump their holdings for personal gain. Besides expensing stock options, Blackwell argues, grants of options should be linked to superior performance, and executives should be forced to hold their stock as long as they have the job. Better yet, they should be required to buy an equity stake and hold it, sharing in the risk that stockholders have.

The next ring of power, the board of directors should have a majority of independent directors (which the New York Stock Exchange will now demand of companies it lists). Executives shouldn't be able to use corporate money to elect directors, while leaving shareholders to raise their own funds to campaign for their representatives.

Then come the shareholders, whose votes should be binding on executives, not just advisory. In yet other circles are the auditors and security analysts, whose conflicts of interest proved so critical in the stock crash. Congress needs to reverse deregulation and restore the New Deal-era Glass-Steagall Act, which separated different sectors of the financial services industry.

Next there is the circle of product markets and financial markets, where deregulation (of the energy markets, for example) or lack of regulation (as in the financial derivatives market) also wreaked havoc.

Finally, there is the circle encompassing workers. According to Blackwell, there are ongoing discussions within the AFL-CIO about demanding some form of direct worker role on corporate boards. "American workers, as employees, have no required role in the governance of companies," he notes, "which makes it all the more important for them to have rights to organize as employees. Reformed labor law is important not just because it's a human right, but because it would be part of corporate accountability."

But beyond their roles as employees and, quite frequently, as shareholders, workers also have a stake as citizens. A grand public debate over the power and character of corporations could prove crucial in bringing about the "emerging Democratic majority" that political analysts John B. Judis and Ruy Teixeira foresee in their valuable new book of the same name. But it could also make that majority a progressive force to tame corporations that have dominated American life for too long.
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