Corporations Owe Americans More

Leo W. Gerard

Leo W. Gerard USW International President

The stock market is effervescent. Unemployment seems inexorably descendent. On financial news shows, someone always is singing, “Happy Days are Here Again.”

But the chorus isn’t so cheery on factory floors. There are no Happy Days at the Harley plant to be shuttered in Kansas City, destroying 800 jobs as the corporation spends its big fat tax break on stock buy-backs instead. There’s no joy at a Kimberly-Clark plant in Wisconsin where hundreds learned in January that the corporation would use its tax break to cover the cost of closing their factory – and eight others.

In fact, there’s bitterness among blue collar workers whose wages have flat-lined for decades, then declined in May and June, even as CEO compensation skyrocketed 17.6 percent last year.

Happy Days? Only for the already rich – for stockholders and CEOs and trust fund babies. For the rest, every day still is a struggle. That’s the way it has worked in the United States for the past several decades. But it didn’t before that. And it doesn’t have to now. Citizens have the right, and arguably the responsibility, to change the rules under which corporations operate. Doing that would alter outcomes for American workers, give them more say in corporate governance, raise their pay and reduce offshoring.

It works in Germany. There, half of the members of boards of directors for large corporations are chosen by workers. It’s unsurprising that the priorities of workers often differ from those of CEOs and wealthy shareholders – the people who typically populate American corporate boards. If half of the Harley board were workers who assembled motorcycles, it’s unlikely that they’d have approved closing the Kansas City plant. They would have respected the corporation’s obligations to its workers, communities and customers, not just its shareholders.

Perhaps, as is more typical in Germany, they’d have voted to move some low-skill, low-value production offshore. But they’d have preserved high-skill jobs and the Kansas City tax base instead of spending their federal tax break on making rich shareholders richer with stock buy-backs.

In Germany, populating corporate boards with workers works well. Germany maintains a positive trade balance, unlike the United States, which suffers a sustained and massive trade deficit. German manufacturing workers make about $10 an hour more than their U.S. counterparts. And manufacturing accounts for about a quarter of the German economy, while in the United States, it has declined to less than half of that.

American corporations weren’t always shareholder-centered. For about three decades after World War II, worker wages rose in tandem with productivity. This was a time during which corporations subscribed to the philosophy that they were obligated to serve their customers, communities, workers and shareholders.

Over the past 30 years, however, U.S. corporations embraced a new notion, which is that they had only one responsibility, to fill the pockets of shareholders.

That is the same 30 years during which workers’ wages stagnated and CEO pay rose no matter how badly the executive performed. That is the same 30 years in which private equity firms bought manufacturers, loaded them up with debt, sold them off at massive profit then shrugged when a stumble threw the firm into bankruptcy, closed factories and killed good, family-supporting American jobs. That is the same 30 years when American corporations moved manufacturing from the United States to low-wage, high-pollution countries like Mexico and China.

The lawmakers who supposedly represent American workers have acted like they’re helpless to stop this destruction. Often they blame the workers, saying they should have accepted massive wage and benefit cuts to prevent a corporation from offshoring a factory. Carrier suggested its workers accept the poverty wages of Mexican workers – pay below U.S. minimum wage – to keep high-skill jobs in Indiana.

Those lawmakers contend workers have no right to demand a reasonable share of the profits their labor creates.

And those lawmakers are wrong. Workers need more representatives like U.S. Sen. Elizabeth Warren, who introduced legislation last week to mend the broken relationship between corporations and their workers and communities.

In the Accountable Capitalism Act, Warren would require that 40 percent of a large corporation’s board of directors be elected by its workers. She would mandate that 75 percent of directors and shareholders vote to approve any political expenditure by the corporation. And she would forbid directors and corporate officers from selling shares within five years of receiving them or within three years of a stock buy-back.

These changes promote the benefit corporation model, under which the welfare of shareholders isn’t the only focus. That is, shareholders aren’t corporations’ only beneficiaries. Customers, workers and communities also must be considered.

This isn’t some kind of wacky concept. Thirty-four states already authorize benefit corporations. And these aren’t obscure, weirdo companies either. More than 500 operate in the United States, including Patagonia, the apparel manufacturer, and Seventh Generation, the household products company.

Corporations are not people. They are legal constructs. Americans grant them charters under which they receive special perks and privileges. This includes limited legal liability for shareholders when the corporation screws up. Americans are hardly demanding too much in return when they insist that corporations pay family-supporting wages and benefits to workers, carefully handle toxic substances to prevent poisoning communities, and never even consider jacking up prices on vital commodities just because they can. 

 

Leo W. Gerard also is a member of the AFL-CIO Executive Committee and chairs the labor federation’s Public Policy Committee. President Barack Obama appointed him to the President’s Advisory Committee on Trade Policy and Negotiation and the President's Advanced Manufacturing Partnership Steering Committee 2.0. He serves as co-chairman of the BlueGreen Alliance and on the boards of Campaign for America’s Future and the Economic Policy Institute.  He is a member of the executive committee for IndustriALL Global Labor federation and was instrumental in creating Workers Uniting, the first global union. Follow @USWBlogger

Posted In: From the USW International President

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