Ask the Chamber of Commerce: Why Is Too Much Not Enough? (Guest Voice)
Ask the Chamber of Commerce: Why Is Too Much Not Enough?
by Bill Moyers and Michael Winship
Living in these United States, there comes a point at which you throw your hands up in exasperation and despair and ask a fundamental question or two: how much excess profit does corporate America really need? How much bigger do executive salaries and bonuses have to be, how many houses or jets or artworks can be crammed into a life?
After all, as billionaire movie director Steven Spielberg is reported to have said, when all is said and done, “How much better can lunch get?” But since greed is not self-governing, hardly anyone raking in the dough ever stops to say, “That’s it. Enough’s enough! How do we prevent it from sweeping up everything in its path, including us?”
Look at the health care industry saying to hell with consumers and then hiking premiums – by as much as 39% in the case of Anthem Blue Cross in California.
According to congressional investigators, over a two-year period Anthem’s parent company WellPoint spent more than $27 million dollars for executive retreats at luxury resorts. And in 2008, WellPoint paid 39 of its executives more than a million dollars each. Profit before patients.
This week, America’s Health Insurance Plans (AHIP), the health insurance industry’s lobby, announced they’d be spending more than a million dollars on new television ads justifying their costs. Speaking at their annual policy meeting in Washington – and without a trace of irony – AHIP’s president and CEO Karen Ignagni declared, “The current debate about rising premiums has demonstrated that, in fact, we have a health care cost crisis in this country. Unfortunately, the path
that has been followed is one of vilification rather than problem solving.”
Beg pardon? You’re lamenting a health care cost crisis and raising your premiums? Isn’t that like the guy complaining there’s an obesity epidemic in America while ordering a double Big Mac with extra fries? Of course, a million is a mere bagatelle in the shadow of the $544 million that was spent on lobbying by the health sector last year, plus more than $200 million in advocacy ads. And a million’s just the curtain raiser to what will be spent in these final weeks of health care reform
debate.
Two weeks ago, The Washington Post reported, “Washington interest groups have burst back into action in hopes of bolstering or defeating a new Democratic push on health-care reform legislation, sparking another wave of rallies, lobbying efforts and costly advertising campaigns.” This in spite of the projection that over ten years the Obama plan would plop an additional $336 billion into the insurance companies’ pockets – in the form of subsidies given to those who can’t afford to buy health insurance on their own.
Okay, this is getting weird: We’re going to help the poor by enriching their exploiters?
But apparently even that won’t satisfy big business’ voracious appetite for more. On Tuesday, Employers for a Healthy Economy, a coalition of 248 business groups, led by the U.S Chamber of Commerce, and including construction and manufacturing interests, as well as health insurance
companies, said that over ten days they will spend up to $10 million on ads aimed at putting the screws on members of Congress to vote against health care reform.
Goodness knows, it isn’t just because their profit margins may dwindle.
No, according to Neil Trautwein, vice president of the National Retail Federation, one of the trade associations involved, “These bills are job killers. Retail simply cannot afford any higher benefit costs or burdensome mandates.” (Never mind that extrapolating from baseline forecasts made by the U.S. Department of Labor’s Employment Projections Program, the Center for American Progress, a liberal think tank, projects that health care reform possibly could create an average of as many as 400,000 new jobs a year.)
But beyond the health care fight, and perhaps far more significant in the long run, this effort is just one more example of life, Pandora-style. The Company has arrived, only it’s called the U.S. Chamber of Commerce, and it’s got its sights on anything that moves, damn the natives, full speed ahead. During 2008, 86% of contributions from the chamber’s political action committee went to GOP candidates.
The conservatives have found their Avatar, AKA Frankenstein.
Of course there is not actually a Chamber of Commerce, at least the way we might imagine it. This is no confederation of congenial, small town business groups that pass out maps of Main Street and souvenir key rings. The chamber in question is a front group. Yes, yes, it reports a membership of three million businesses, but tax records indicate that in 2008 a third of its contributions came from 19 companies paying between $1 million and $15.3 million. Don’t hold your breath: the chamber is not required to reveal who those 19 are.
The March 8 edition of the Los Angeles Times reports that “internal documents suggest the organization’s treasury is filled in substantial part by contributions from a couple dozen major corporations most affected by Washington policymakers.”
Got it? Predators who prey together stick together.
With all that cash, the Times notes, “The chamber spent more than $144 million on lobbying and grass-roots organizing last year, a 60% increase over 2008, and well beyond the spending of individual labor unions or the Democratic or Republican national committees. The chamber is expected to substantially exceed that spending level in 2010.”
This elite organization of oligarchs has been emboldened by the Supreme Court decision in the Citizens United case, which now allows corporations to spend freely on political campaigns right up until Election Day, and by the chamber’s recent success contributing a million dollars for ads supporting Republican Senator Scott Brown in Massachusetts.
What’s more, writes the Los Angeles Times, “Using trade associations such as the chamber as the vehicle for spending corporate money on politics has an extra appeal: These groups can take large contributions from companies and wealthy individuals in ways that will probably avoid public disclosure requirements.”
So with the spring comes anonymous greed run rampant. “In the past a lot of companies and wealthy individuals stood on the sidelines” of politics, a corporate lawyer at Washington’s influential law firm Covington & Burling told the Times.
“That cloud has been lifted,” he said.
As the sun sets on democracy.
No wonder demonstrators outside that health insurance meeting in Washington this week surrounded the hotel with yellow crime scene tape.
The entire country is being mugged.
Bill Moyers is managing editor and Michael Winship is senior writer of the weekly public affairs program Bill Moyers Journal, which airs Friday night on PBS. Check local airtimes or comment at The Moyers Blog at www.pbs.org/moyers.
23 Responses to “Ask the Chamber of Commerce: Why Is Too Much Not Enough? (Guest Voice)”
Moyers is just predictable far-left stuff. Nothing interesting.
Is there a problem with greed and excess? Yes. Americans don't want ham-handed government interference, or interference as the start of more, worse. But the financial sector has led the way in demonstrating excess, the executive pay issue does involve mutual back-scratching among members of a club, and we all know of executives who have set US business-world examples of Marcos's notoriety for having reputedly looted the Phillippines. (“Marcos style” or “the Marcos model” is how I refer to it.)
Is there a problem with greed and excess? Yes. We need to go back to the old way when the top earners were taxed at a rate of 90%. After the first Billion, one shouldn't need much more.
The Chamber of Commerce is like the National Rifle Assoc. All they want is to have all politicians kot-tow to them.
Scumbags.
One thing I've often wondered is why there hasn't been more backlash on excessive executive compensation from the stockholders of individual companies. Once upon a time, when a company had excess profits, the shareholders (being the owners of the company) would get dividends which would often be reinvested into the company. Every dollar of excess executive compensation is a dollar taken from the shareholders since their compensation is factored in prior to any profits/dividends. Granted, most executives in a company have some stock in the company but then they can get their dividends for it just like any other shareholder, perhaps collect some of it or…perhaps reinvest it as well.
“One thing I've often wondered is why there hasn't been more backlash on excessive executive compensation from the stockholders of individual companies.”
I don't know, because for a while “shareholder activism” was something of a rage, and large institutional investors even began enagaging in left-wing activism, demanding “social responsibility,” and making other, similar demands. (CALPERS's leaderhip was notorious for this.) I'm no fan of that nonense, but certainly the shareholders ought to be more critical than they are, and given some of the excesses, perhaps some leftist activism might even be welcome now.
I've been reading a book that while not left-wing, is critical of an unregulated free market and even demands pay limits and other controls on the financial industry, and the author doesn't neglect discussing the divergence of executive pay from the rest of the employees, and recites the usual problem of the pay being set typically by people who effectively form a “club” as I have called it. They're rewarding each other, in practice.
The book I've been reading is this one (exerpts available on Google Books). I've found it well worth the money I spent to get it. It actually made me find Keynes intriguing as well as present a finely composed critique of the unregulated “free market,” which I found even more interesting than criticism of the financial industry and arguments for limiting pay in that industry as well as other constraints on harmful or useless activities. (Also discusses more than his second book — this is his third in the trilogy — about getting out of the slump, repairing the banks as well as financial sector and preventing them from causing similar kinds of problems again.)
http://www.capitaleconomics.com/rogerbootle/boo…
http://books.google.com/books?id=uMCrq3OhPQAC&p…
I don't like the idea of the federal government getting truly totalitarian and trying to control executive pay and all kinds of other things, but the Dems look like they're not going to stop overreaching and now that we know Dodd is going independently of the Republicans on the financial “reform” bill (see below), I wouldn't be surprised if more widespread corporate reforms get attempted. (Who knows, it may even include the favored fascist device of Ralph Nader and other far lefties, the federal corporate charter, with or without any federal officials installed in the corporations as directors or managers, and if these charters were created, not only “social responsibility” could be forced on the corporations, but — it might give libs and Dems the tool they need to constrain corporate involvement in elections, more powerful than merely censoring their campaign advertising, which is illegal. Fully controlling corporations through charters may be preferred, anyway.)
Dodd's financial bill to be introduced shortly
http://online.wsj.com/article/SB200014240527487…
I wasn't even speaking of blow-back from shareholders due to “social responsibility” but purely from a personal profit standpoint. If I'm a shareholder in Company XYZ and Executive A is doing a good job but receiving $60 million in compensation when his stewardship is really worth $35 million, that's $25 million dollars that should be going to the shareholders and I, being a shareholder, am being deprived of my portion of that $25 million (based on number of shares, of course).
Shareholder activism's biggest example: CalPERS
http://www.straightfromthelab.com/articles/sample/ad-1...
special.pacificresearch.org/pub/sab/entrep/2005/pension_brief.pdf
http://www.pensionsatwork.ca/english/pdfs/scholarly_wo...
Background to federal corporate charters
fas.org/sgp/crs/misc/RS22230.pdf
http://www.corporatepolicy.org/pdf/charters.pdf
and
http://www.celdf.org/ProgramAreas/CorporationsD…
“I was even speaking of blow-back from shareholders due to 'social responsibility' but purely from a personal profit standpoint.”
“Social responsibility” ought to inspire or generate blow-back. While I've referred to a work about the problems with an unregulated free market (if you see the book on-line, Chapter 4 is the one about the truth regarding capitalism that evades many; I told someone else it's a great piece of work), it doesn't mean the solution is extensive state control and substitution of other (political) goals for business. The book ironically quotes (as part of the free-market excess the author decries) Milton Friedman, whose 1962 “Capitalism and Freedom” passage remains correct: the responsibility of the business is to earn the biggest profits it can while keeping within the rules and harming nobody through force or fraud.
You're right about conventional concerns shareholders should have. What about profits? If there's nothing better to do putting money back into the company (rather than paying execs excessively), where are the dividends? Etc.
Once upon a time, when a company had excess profits, the shareholders (being the owners of the company) would get dividends which would often be reinvested into the company.
Shareholders can do whatever they want with the dividends and I'm guessing most did not reinvest them into the company. I know when I had dividends from individual stocks they went into the money market fund on my account, and I re-invested them into wherever I thought was appropriate. High-dividend stocks used to be popular with older investors who just took the dividend checks as income to buy groceries or whatever.
Remember profits are calculated after the executives are paid as they are an expense, therefore high executive salaries reduce the amount of profit available to distribute to shareholders or re-invest in the company. Ostensibly the Board of Directors is supposed to oversee the executive salaries but they seem to have become a rubber-stamping committee instead of providing oversight.
The last time I remember shareholders rising up against a CEO was Cristos Cotsakos of ETrade, who was making a ridiculously high salary while his stock was tanking in the dot-com bubble. There may be other examples but generally shareholders won't raise a fuss unless the stock is doing poorly.
Anna,
Your question is well taken. Most individual investors, however, “invest” through various funds, in turn controlled by fund managers who are part of the financial industry infrastructure. The individual really has little or no say in how the fund “votes” the shares and is not positioned to demand salary or bonus reduction in order to increase dividends.
DLS makes some excellent points about the club atmosphere in the world of major corporate boards of directors. I would go a step further and call it an incestuous, mutual back scratching fraternity. You serve on my board and I'll serve on yours…you approve my compensation package and I'll approve yours.
This is a world in which individual investors have been marginalized in terms of corporate policy…except for a few big fund players like the California Public Employee Retirement System (CalPERS) who may or may not represent the interests of their employee/retirees.
To be clear, I oppose government intervention in compensation packages. A more appropriate approach would be to tighten conflict of interest rules to diminish mutual back scratching fraternities on coporate boards and/or provide more access to shareholder decision making among investors who enter the market through various manager controlled funds.
On the Moyers/Winship article itself, again we have an a article that is mixing apples and oranges. Essentially what they are saying is because some large companies and their executives have made a lot of money, the government should force almost all companies to provide health insurance. The problem is the mandate will affect even the companies that aren't making huge profits – basically the “confederation of congenial, small town business groups that pass out maps of Main Street and souvenir key rings” that make up the smaller chambers of commerce.
The US Chamber of Commerce is correct that an employer mandate will hurt businesses and jobs, especially on the smaller businesses not mentioned in this editorial.
As far as the title goes, in general the government has no place deciding how much is too much. The exception would be companies that have accepted bailout money or other direct benefits.
1. “Essentially what they are saying is because some large companies and their executives have made a lot of money, the government should force almost all companies to provide health insurance.”
That's just an eye-roller. They're really stooping low — that's how desperate they are currently.
2. “the club atmosphere in the world of major corporate boards of directors”
This is hardly new, by the way (though most of us would say it's gotten worse in recent years). Also not new is seeking to curb corporate power (not limited to corruption, but including that as a problem related to corporate power). Such reforms have been sought since the Progressive Era (late 1800s-early 1900s).
Here is a New York Times article about federal corporate charters as a control mechanism — from 1911.
(There is also an early version of the “managed cartel” in this plan, described in this 1911 article.)
http://query.nytimes.com/gst/abstract.html?res=…
I've got a better idea!
Limite bonuses to XX% of a person's salary, and mandate if executives get a bonus, then they must also give the SAME percentage bonus to every employee in the company.
That way, you'd get to keep the profit margins, satisfy the stockholders, and give ALL employees an equal stake in the profits. Why should executives be the only ones getting bonuses? The REAL work comes on the back of the workers.
Ok, question for the smart guys here……let's say $1M for 39 people can be worked down, but you're in California so are you ever going to get any experienced exec for anything less than 500K? So, let's say you can save $18M. And let's run the national meetings on a more austere budget…save another 15M.
So, you now just took $33M out of the income statement you show to Katherine Sebelus……how much does your rate increase go down?
Now for the really smart guys, let's say your average policy size runs to a $2,500 deductible and healthcare inflation runs at 10%. How much of a premium increase do you need to offset the deductible leveraging?
Exactly my point!
Perhaps it's time for this to change? Shareholder gains are hit hard enough (particularly 401k funds, for example) by the normal ups & downs of the market and being further eroded by executives reducing value that should be going back to the shareholders and keeping it for themselves.
Also, I may not often agree with JD, but I do agree with his point re: bonus percentages. I also think that tidbits point re: conflict of interest rules and increasing shareholder say-so is extremely valid and even something that a classical Republican could support if they weren't already in the pocket of the excessively compensated executives (I know, I know…the Dems are too) but this whole attitude of “if X does it, it's OK for Y to do it too” has gotten beyond juvenile.
CO,
First off, I don't pretend to have the knowledge necessary to do your math. But, honestly I don't think it's about math, and you I suspect understand.
For most people it has more to do with a sense of loss of control, that their world is spinning in ways they don't comprehend and can't manage, that others are making decisions they cannot influence but that fundamentally impact their lives. And, yes you're right that I can't speak for everyone and that I have no empirical evidence, just a “sense of the room”.
To many, the same folks who want to raise their health insurance premiums by 39% are kissing cousins of the same geniuses who brought us the tech bubble, followed by the real estate bubble, followed by the financial crisis. They don't want numbers, they want their lives to be under control, with their retirement accounts intact, their mortgage payments paying for a house that has value and a healthcare system that will allow them to live without fear of bankruptcy. To them, a 39% premium increase is pricing them out of the market or dramatically undercutting their disposable income.
They're angry and they want it fixed, from their kitchen table perspective, not justified with mathematical formulas and actuarial calculations. Just my perspective.
One of the major flaws of US regulatory history is that instead of regulating problem firms that were usually large to cause an issue to be addressed in the first place they regulate everyone which instead of levelling the playing field invariably stacks it in the favour of those already at the top of the food chain. This is how they stifle innovation, not by regulation but regulating out small business while trying to effect large ones. Of course in reality they are saying they want to hurt large ones when in reality they wish to benefit them for their campaign donations but that's kind of a bi-partisan game going back a long time.
Yes, tidbits, I do understand the frame of reference you are speaking from. But, then again, I'm not prone to emotionally-driven solutions.
Yes, it is always poor executive mgmt to spend dollars on something that doesn't seem to fit the times (e.g.retreat costs). But it is also bad journalism to suggest that reigning in some salary and retreat costs is going to solve the problem of increasing health care cost (by something other than a fraction of a percent).
And here is the math behind the example……the policies that drive the real costs through the company's system are the employer provided plans. Most have deductibles, if not largely self-insured……which REDUCE the premium that would otherwise be charged……..however, you still have very justifiable admin costs to cover. So, if a 10% cost inflation occurs, and the deductible is not raised, the company now has to cover that all the new pure loss cost on a premium base that was discounted before. As a percentage of the existing premium base, the formula at 2,500 deductible produces an increase on discounted premium of about 16.9%……….without salaries or any other admin cost increasing at all. That is largely what is happening in the Wellpoint rate case.
It seems to me that investigating where the costs increases came from wouldn't be all that difficult. Trace the money from a few of those bills and see where it landed. Then compare that to bills in the past and see whose income has gone up, and by how much.
Yet, how many politicians have talked about that approach? Too complicated?
$72,000
Holy cow, that's outrageous! This calls for immediate scapegoating!
“[H]ow many politicians have talked about that approach? Too complicated?”
No. On the other hand (and many a single-payer advocate will agree), it might prove to be scandalous:
“Trace the money from a few of those bills and see where it landed.”
Is there any thing wrong with a mandate of bonuses to be shared by ALL employees of a corporation? The CEO can have as big a bonus as they wish to pay him, but the REST of the employees must get the same bonus.
Any takers on this?
JD I would be against such a rule since it rewards everyone regardless of merit. The concept of CEO bonuses is theoretically a good one – if the company thrives from his leadership, shareholders profit and the CEO should be rewarded. Similarly if lower level employees do a good job, they should be rewarded. the two don't necessarily go together, though.
The problem is that CEO bonuses seem to be rewarded even when the CEO has done a bad job, or have become so high they are out of proportion to his performance. This is where the boards of directors have failed, and I don't have a solution for that problem.
“JD I would be against such a rule since it rewards everyone regardless of merit.”
I agree, DaGoat. However, since the abuses and out of proportion (as you mentioned), why not?
If the CEO's leadership is THAT good that his intellect, instinct, and charisma makes the company money, then reward him. But you have to admit that HE ALONE cannot make that happen.
Let me give you a military analogy:
I lead my men into battle and, through my leadership ability, we take out the entire enemy division and save over 1000 American lives. My leadership may be rewarded with a Silver Star. My soldiers would also be rewarded accordingly – Bronze Star, etc.
My point? My leadership was crucial to the mission. Likewise, the work of the rest of my TEAM was crucial to the success of the mission.
I simply wish we'd apply the same concept to the private sector. I'm not suggesting we eliminate or even regulate how much bonuses to give executives. I'm suggesting that we mandate a proportionate bonus to those below.