Robert Reich on Corporations

Former Secretary of Labor; Democratic Challenger MA Governor


1960S: CEOs earned 48X employees; now it's 325X

Thousands of families are underwater on their mortgages while global banks received a bailout--whether it was necessary or not. These families see CEOs getting golden parachutes and huge bonuses and tax cuts. According to former labor secretary Robert Reich, CEOs in the late 1960s earned 48 times what their employees were making. In 2010, they were making 325 times what their workers were earning. We have seen a huge transfer of wealth from the middle class to the wealthiest one percent. In 1980, the top one percent accounted for 12 percent of real income. As of 2014, they accounted for 20 percent.

The once famous American middle class, the bedrock of our democracy, is disappearing while the media distracts us with "reality" TV, shock jocks, and rants delivered by talking heads.

Are you ok with that? I'm not okay with that.

Source: Healing America, by Rep. Tim Ryan, p. 7 , Sep 18, 2018

Monsanto lobbies Congress to ensure agribusiness monopoly

Monsanto, [through its patents, has a near-monopoly on] corn and soybean seeds. At every stage, Monsanto's growing economic power has enhanced its political power to shift the rules to its advantage, thereby adding to its economical power.

To enforce and ensure dominance, the company has employed a phalanx of lawyers. They've sued other companies for patent infringement and sued farmers who want to save seed for replanting. You might think Monsanto's overwhelming market power would make it a target for antitrust enforcement. Think again. In 2012, it succeeded in putting an end to a two-year investigation by the antitrust division of the Justice Department into Monsanto's dominance of the seed industry.

Monsanto has the distinction of spending more on lobbying--nearly $7 million in 2013 alone--than any other big agribusiness.

Source: Saving Capitalism, by Robert Reich, p. 35 , May 3, 2016

Executive pay skyrocketed from 5% in 1993 to 15% in 2013

The share of corporate income devoted to compensating the five highest-paid executives of large public firms went from an average of 5 percent in 1993 to more than 15 percent in 2013.

So why, exactly did CEO pay skyrocket? One theory is that CEOs play large roles in appointing their corporations' directors for whom a reliable tendency toward agreeing with the CEO has become a prerequisite.

Corporate law in the United States gives shareholders at most an advisory role on CEO pay. "Say on pay" votes are required under the 2010 Dodd-Frank financial legislation, but the votes are not binding on a corporation. Such cronyism in American boardrooms has been common for decades.

Source: Saving Capitalism, by Robert Reich, p. 98-100 , May 3, 2016

Make corporate pay depend on pay of median worker

Almost all [corporate tax] incentives have resulted in lower pay for average workers and higher pay for CEOs and other top executives. The question is how those incentives can be reversed.

One possibility would be to make corporate tax rates depend on the ratio of CEO pay to the pay of the median worker in the firm. Corporations with low ratios would pay a lower tax rate and vice versa. For example, in a 2014 CA bill, if the CEO makes 25 times the pay of the typical worker, the tax rate drops to 7%. If the CEO earns 200 times that of the typical employee, the tax rate rises to 9.5%.

The Chamber of Commerce has dubbed the bill a "job killer." But CEOs do not create jobs. Their customers create jobs by buying more of what their companies sell, giving the companies cause to expand and hire. So pushing companies to put less money into the hands of their CEOs and more into the hands of their average employee creates more purchasing power among people who will buy, and therefore more jobs.

Source: Saving Capitalism, by Robert Reich, p.196-7 , May 3, 2016

Left Atlantic City before Trump Plaza folded

On the day Trump Plaza opened in Atlantic City in 1984, Donald Trump stood in a dark topcoat on the casino floor celebrating his new investment as the finest building in the city and possibly the nation. Thirty years later, the Trump Plaza folded, leaving some one thousand employees without jobs. Trump, meanwhile, was on Twitter claiming he had "nothing to do with Atlantic City" and praising himself for his "great timing" in getting out of the investment.

In America, people with lots of money can easily avoid the consequences of bad bets and big losses by cashing out at the first sign of trouble. The laws protect them through limited liability and bankruptcy. But workers who move to a place like Atlantic City for a job, invest in a home there, and build their skills have no such protection. Jobs vanish, home values plummet, and skills are suddenly irrelevant. They're stuck with the mess.

Source: Saving Capitalism, by Robert Reich, p. 59 , May 3, 2016

Almost all post-Recession gains have gone to the top 1%

Five years ago, the Wall Street giant Lehman Brothers collapsed triggering the worst financial crisis since the Great Depression. Today, the divide between the 1% and the 99% is as great as ever. According to one recent study, the top 1% has captured about 95% of the income gains since the recession ended.

"Since the recovery, almost all of the gains have gone to the very, very top. People who are in the top 1% are doing even better than they did before the Great Recession, better than they have done since 1928," says former Labor Secretary Robert Reich. "Most Americans are on a downward escalator. Median wage in the United States, adjusted for inflation, keeps on dropping."

Reich is the focus of the new film, "Inequality for All." In this interview, he also talks about Syria, the second anniversary of Occupy Wall Street on September 17, Obama's healthcare plan and Milton Friedman's connection to the Pinochet dictatorship in Chile

Source: CommonDreams.org "Democracy Now!" interview of Reich , Sep 13, 2013

Hedge-funds receive $1B each in tax loopholes

The latest tax-reform bills are far from perfect--they leave open a number of loopholes and would only recoup a very small fraction of the $100 billion that corporations and wealthy individuals are siphoning off the U.S. Treasury. But the bills would end one more egregious example of the tax policy double standard, finally forcing hedge-fund managers to pay taxes at the same rate as everybody else. As the law stands now, their income is considered "carried interest" and is accordingly taxed at the capital gain rate of 15 percent.

According to former labor secretary Robert Reich, in 2009 "the 25 most successful hedge-fund managers earned a billion dollars each." The top earner clocked in at $4 billion. Closing this outrageous loophole would bring in close to $20 billion in revenue--money desperately needed at a time when teachers and nurses and firemen are being laid off all around the country.

Source: Third World America, by Arianna Huffington, p. 58-59 , Sep 2, 2010

Supercapitalism: aggregated corporate power hurts citizens

Since the 1970s, large firms became far more competitive, global, and innovative. Something I call supercapitalism was born. In this transformation, we in our capacities as consumers and investors have done significantly better. In our capacities as citizens seeking the common good, however, we have lost ground.

Consumer power became aggregated and enlarged by mass retailers like Wal-Mart that used the collective bargaining clout of millions of consumers to get great deals from suppliers. Investor power became aggregated & enlarged by large mutual funds.

As a result, consumers & investors had access to more choices and better deals. But the institutions that had negotiated to spread the wealth and protect what citizens valued in common began to disappear. Labor unions shrank; regulatory agencies faded; CEOs could no longer be corporate statesmen. And as the intensifying competition among companies spilled over into politics, elected officials became less concerned about the Main Street

Source: Supercapitalism, by Robert Reich, p. 7 , Sep 9, 2008

Corporations have less power now than 1970s oligopolies

Large corporations have less economic power now than they had 3 decades ago. Then, the US harbored 3 giant auto companies that informally coordinated prices and investments. Now at least 6 major companies produce cars in the US, and competition among them is fierce.

Three decades ago there were only 3 major TV networks, one phone company, and a handful of movie studios. Today, thousands of businesses compete intensely where telecommunications, high-tech, and entertainment overlap. Look almost anywhere in today's economy and you find the typical company has less market power than the typical company of three decades ago.

To be sure, some corporations are very large and many have global reach. But the world economy contains far fewer oligopolies than it did decades ago, and almost no monopolies apart from those created or maintained by government. The power and impetus that once came from the giant corporation--the planning and execution of large-scale production--are gone.

Source: Supercapitalism, by Robert Reich, p. 10 , Sep 9, 2008

We can sacrifice economic benefits for social good

Just as all games require rules to define fair play, the economy relies on government to set the economic ground rules. If the government wanted to do something about the means Wal-Mart employs, it could change the current rules. In theory, it could enact laws to make it easier for all employees to unionize, require all large companies to provide their employees with health insurance and pensions, enact zoning regulations to protect Main Street retailers from the predations of big-box retailers, and raise the minimum wage high enough to give all working people a true "living" wage. All such measures would have the likely effect of causing Wal-Mart and other large companies across the board to raise their prices and reduce return to investors.

Personally, I'd be willing to sacrifice some of the benefits I get as a consumer and investor in order to achieve these social ends--as long as I knew everyone else was, too.

Source: Supercapitalism, by Robert Reich, p. 12-13 , Sep 9, 2008

Stop companies from pursuing profits that hurt public

Government must be free to stop companies from pursuing profits in ways that harm the public. Big companies that use their political muscle to prevent government from policing this line are, in effect, setting themselves up for much more intrusive forms of public vigilance. Enron is a case in point. But here's the good news--and it lies at the opposite extreme from Enron: There's growing evidence that good corporate citizenship enhances long-term profits.
Source: I'll Be Short, by Robert Reich, p. 38 , May 2, 2002

Post-9-11: Help out-of-work staff instead of airline bailout

The airline bailout was notable not only for its size (its price tag exceeded the combined market value of United, American, Delta, Northwest, US Airways, America West, and Continental), but also the speed and near unanimity with which it was granted. The sharp drop in business in the wake of September 11 surely imperiled airline balance sheets. But whatever might have happened to airline COMPANIES, America's aviation SYSTEM--aircraft, telecom equipment, pilots, and crews--wasn't about to disappear. If some companies went bankrupt, other companies would buy their equipment and hire their employees. Public funds could be put to better use helping airline employees find new jobs outside the industry, get retrained, and relocate themselves and their families.
Source: I'll Be Short, by Robert Reich, p. 31-32 , May 2, 2002

Under Clinton, executive pay ratio rose from 40:1 to 400:1

Increasingly, executive "compensation packages" are linked to share prices through generous stock options and rich bonuses if targets are met. My colleagues and I in the Clinton administration inadvertently contributed to this trend. Clinton pledged that no company should be able to deduct from its corporate income taxes executive compensation in excess of $1 million, unless the extra inducement was linked to "performance"--that is, an increase in the company's share price. Stock options and bonuses thereafter exploded. Raising the share price became paramount, whatever that required. In 1980, the typical chief executive of a large American company took home about 40 times the annual earnings of a typical worker; in 1990, the ratio rose to about 85 times. By the end of the century, total executive compensation rose from an average of $1.8 million to an average of $12 million--resulting in compensation packages that averaged 419 times the earnings of a typical production worker.
Source: The Future of Success, by Robert Reich, p. 74-75 , Jan 9, 2001

CIA "found" communist plots to help 1950s corporations

Under a World Bank controlled by Americans, development assistance could be focused precisely where America's core corporations saw the greatest opportunity. And so long as the recipients of America's foreign aid used it to buy American exports, core corporations could venture into global trade confident of receptive markets.

Nor was it mere coincidence that the CIA discovered communist plots where America's core corporations possessed, or wished to possess, substantial holdings of natural resources. When, in 1953, an anticolonial Iranian nationalist movement led by Mohammed Mossadegh challenged the power of the shah and seized the Anglo-Iranian Oil Company, the CIA secretly channeled millions of dollars to army officers dedicated to returning the shah to power; once their objective had been fulfilled, generous access to Iranian oil was granted to Gulf, Texaco, Mobil, and Standard Oil of NJ.

Source: The Work of Nations, by Robert Reich, p. 64 , Feb 4, 1992

Protectionism benefits corporations, not consumers

By the late 1960s, America's core corporations could no longer set their prices. They were now subject to fierce foreign competition. What to do? One strategy was to do precisely what they had done 100 years before: try to keep cheap foreign products out of the American market.

The protectionist strategy failed. Protectionist walls ceded the rest of the rest of the world's markets to foreign producers, who could gain vast scale efficiencies by selling their goods everywhere but the US.

Nor, finally, did protection enhance the standard of living of most Americans. To the contrary, it caused them to pay extra for what they purchased. The "voluntary" export restraints on Japanese cars that temporarily helped the Big Three automakers maintain their profits (but not their work forces) through the 1980s cost American consumers about $1 billion a year more than they would have paid for cars had the American market been open.

Source: The Work of Nations, by Robert Reich, p. 70 & 71-73 , Feb 4, 1992

US corporations push for "voluntary quotas" by competitors

[Besides American corporations arguing against "dumping"], it was argued that foreign producers were being subsidized by their governments, hardly a stinging accusation in light of all the unrestrained largess--research grants, defense contracts, outright bailouts--flowing from the US government to American corporations.

Rarely did such alleged "unfairness" prompt the US to erect unilateral quotas or tariffs, which, after all, would have violated the General Agreement on Tariffs and Trade. The more common tendency was for the foreign perpetrators to agree "voluntarily" to limit their exports to the US--voluntarily, that is, in the narrow sense that they acquiesced in the full knowledge that they would suffer a worse fate--a more severe quota, directed only at them--were they to refuse to do so.

Source: The Work of Nations, by Robert Reich, p. 71 , Feb 4, 1992

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