GM, Jobs, and Corporate America’s Incentive to Exploit

Sam Pizzigati

Sam Pizzigati Editor, Too Much online magazine

On Monday morning, November 26, the auto giant General Motors announcedplans to shut down production at five plants in the United States and Canada and shear off 15 percent of the company’s salaried jobs. The moves will cost 14,700 GM workers their livelihood.

The communities where those workers live will lose out, too. In Lordstown, the Ohio locale that hosts one of the plants set to be shuttered, officials estimate that every GM job cut will cost seven other workers outside GM their employment.

Did the GM executives who made the shut-down decision take that spin-off devastation into account? Did they soberly conclude that they had no choice, that only massive job cuts could ensure their enterprise a stable and sustainable future? Or do the GM job cuts reflect, in the end, nothing more than naked self-interest on the part of those executives, an attempt to enrich their own future — at worker expense?

The simple answer: We can’t get into the minds of the GM execs who’ve ordered the job cuts. We can’t divine how much greed determined their decision. But we can, rather easily, see who stands to gain from GM’s massive job cutting. Certainly not GM workers. In the wake of the GM layoffs, thousands of workers and their families will be poorer. GM execs, on the other hand, will be richer.

Substantially richer. At GM, as at all major U.S. corporations, the ultimate compensation top executives take home rests either directly or indirectly on their enterprise’s share price. The more that price rises, the more they pocket. In the afternoon after the GM job-cut announcement morning, Wall Streeters bid up the company’s shares a whopping 7.9 percent. Shares ended the week almost as high.

Corporate execs at GM and elsewhere tend to fixate on their share prices. They’ll do most anything to jack them up, even have the corporations they run expend big bucks — an estimated $1 trillion this year — to buy back their own corporate shares on the open market. This maneuver has just one purpose: to heighten demand for a company’s shares and raise the price they sell for. GM execs last year spent $100 million on “buybacks.”

Sam Pizzigati edits Too Much, the online weekly on excess and inequality. He is an associate fellow at the Institute for Policy Studies in Washington, D.C. Last year, he played an active role on the team that generated The Nation magazine special issue on extreme inequality. That issue recently won the 2009 Hillman Prize for magazine journalism. Pizzigati’s latest book, Greed and Good: Understanding and Overcoming the Inequality that Limits Our Lives (Apex Press, 2004), won an “outstanding title” of the year ranking from the American Library Association’s Choice book review journal.

Posted In: Allied Approaches

Union Matters

What's Wrong with GM?

Corporations’ stranglehold on our economy was put on further display last week, when General Motors announced it was laying off up to 14,000 workers across North America.

On a special episode of “State of the Unions,” co-host Tim Schlittner talked with AFL-CIO Industrial Union Council Executive Director Brad Markell, a lifelong UAW member, about what the layoffs say about the state of the economy as a whole:

Tim Schlittner: “Reading the CEO’s statement, Mary Barra, where she says this is about making GM agile, resilient and profitable, then thinking about all the stock buybacks, thinking about some of the incentives they got in the tax law that just passed. Mary Barra made about $22 million last year—that’s 295 times more than the GM median employee—my feeling is like this is crap. That’s just a crap excuse for hoarding more at the top, at the expense of the workers that make GM go. Am I wrong to say that?”

Brad Markell: “I think there are a couple issues there from my point of view. Mary Barra makes a lot of money and executive pay is out of control in this country. Part of what’s the problem with executive pay is how is it incentivized? It’s not that Mary Barra making $22 million is going to kill the company. It’s what does she do to get there, right? What does she do to make those cuts and—and those things that Wall Street wants to see because so much of it’s stock options—so instead of playing to the real economy, you’re playing to Wall Street. That’s a problem.”

Tim Schlittner: “And the stock went up that day. So Wall Street saw this decision to close these plants and basically took that as a positive sign, which shows to me an economy that is completely out of whack.”

Take a listen to the full episode here.

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Who Really Pays for Tax Cuts?