The “smoking gun” is CEO pay. Compensation is an expression of concentrated power — of enterprise power concentrated in the chief executive officer and of national power concentrated in corporations. Median US CEO pay for 2010 was up 35 percent in the midst of a lingering recession, while CEO pay over the last decade has doubled as a percentage of pre-tax corporate income. Yet there has been no justification for current levels of CEO pay based on economic value added. ...
Retirement risk has been transferred to employees. During the same period that CEOs were doubling their own compensation, the “best” CEOs of the “best” companies abrogated the century-old commitment by employers to provide pensions to their workers. IBM has been the corporate leader in abolishing a “real” pension system for its employees. The 2006 elimination of on-going defined benefit plans will “save [IBM] as much as $3 billion through the next few years and provide it with a more ‘predictable cost structure’,” TK said at the time. Translation: The worker bees are on their own.
The financial power of American corporations now controls every stage of politics — legislative, executive, and ultimately judicial. With its January 2010 decision in the Citizens United case, the Supreme Court removed all legal restraints on the extent of corporate financial involvement in politics, a grotesque decision that can have only one effect: maximizing corporate – not national — value. Today’s CEOs have been granted the power to direct political payments and organize PAC programs to achieve objectives entirely in their own self-interest, and they have been quick to use it. ...
Capture has been further implemented through the extensive lobbying power of corporations. Abraham Lincoln’s warning about “corporations enthroned” and Dwight Eisenhower’s about the “unwarranted influence by the military/industrial complex” have been fully realized in our own time. Reported lobbying expenditures have risen annually, to $3.5 billion in 2010. Half of the Senators and 42 percent of House members who left Congress between 1998 and 2004 became lobbyists, as did 310 former appointees of George W. Bush and 283 of Bill Clinton. ...
Capture has placed the most powerful CEOs above the reach of the law and beyond its effective enforcement. Extensive evidence of Wall Street’s critical involvement in the financial crisis notwithstanding, not a single senior Wall Street executive has lost his job, and pay levels have been rigorously maintained even when, as noted earlier, TARP payments had to be refinanced in order to remove any possible restrictions. ...
Finally, capture has been perpetuated through the removal of property “off shore,” where it is neither regulated nor taxed. The social contract between Americans and their corporations was supposed to go roughly as follows: In exchange for limited liability and other privileges, corporations were to be held to a set of obligations that legitimatized the powers they were given. But modern corporations have assumed the right to relocate to different jurisdictions, almost at will, irrespective of where they really do business, and thus avoid the constraints of those obligations.
“We do a lot of retraining every year,” Mr. Palmisano continued, “and we still find ourselves in the situation where people can’t move up the skill ladder. That’s a lot of what’s going on. They can’t get up the skill ladder. So we have to replace them with current skills.”
""We do a lot of retraining every year," Mr. Palmisano continued, "and we still find ourselves in the situation where people can't move up the skill ladder. That's a lot of what's going on. They can't get up the skill ladder. So we have to replace them with current skills."
Training....really? Where/who/when? IBM closed the education center at my lab location years ago. They spin and spin to the point they believe this crap themselves and apparently they have Washington convinced as well. Can't wait to get off this train, hey, that's my stop up ahead. Toot toot.
Can't move/get up the skill ladder said not once but 2X. Sam unprepared for a pet answer. There is no $600M IBM education budget. If there was then at least some would be some more able to climb the skills ladder (Sam, definition please of IBM skill ladder). IBM employees are not that stupid.
The result: substantially lower payouts to employees who are changing jobs, being laid off or retiring—anywhere from 10% to 60% or more, depending on age and other factors.
Younger employees face the largest reductions. A 55-year-old employee who took early retirement or switched jobs would get about 25% less under the new legislation, while a 45-year-old would take a 50% cut, according to calculations prepared for The Wall Street Journal by Beth Pickenpaugh, a pension actuary and financial adviser at Gianola Financial Planning in Columbus, Ohio.
Cons: -Processes are poorly designed and there is a large amount of overlapping between many processes. The same information gets repeated in web portals, spreadsheets and powerpoints just to satisfy the whims of some bureaucrat. It is beyond ridiculous that I was spending 50-60% of my time filling up reports and working through bureaucracy and red tape. -Management is so detached they do not have a clue of the challenges faced by ground troops. -Compensation compares poorly with competitors and non-vendor companies. Very difficult to hold on to talented people. -Work life balance: what work life balance?
Advice to Senior Management: IBM SO management have to pull their heads out of the sand and listen to the people on the ground to find out what kind of challenges exist. Just replying : "it needs to be done" make you guys look like you don't care about people feedback or just ignorant. Either way, it's bad management, specially when you are so worried about cost control. Do a study on how much these processes cost. Stop the rhetoric during those useless town halls. They make you look even more clueless.
The legislation, pushed by Rep. Tim Bishop (D-N.Y.) and the Communications Workers of America (CWA) union, would make companies that outsource their call center work ineligible for guaranteed federal loans and grants for a period of five years. The bill, entitled "U.S. Call Center Worker and Consumer Protection Act," would also require those companies to report themselves in advance to the Labor Department, which would maintain a public list of the companies who outsource.
Home to the largest call center industries in the world, India and the Philippines would stand to lose the most if such a law succeeded in deterring American corporations from taking their customer operations out of the U.S. in order to save on labor costs.
Last week, a Filipino parliamentarian publicly urged President Benigno Aquino III to dispatch "a strong lobby team" in Washington to stop the bill in its tracks, warning that it would "kill" the industry in the Philippines. Similarly, India's ambassador to the United States has suggested that country also plans to lobby hard on the bill.
When asked about such reactions, Bishop said that the fears in India and the Philippines reinforce the argument for the legislation. "Frankly, the fact that both the Indian government and the Filipino government are reacting like this says that our bill is very badly needed," he said. Most of the call center jobs lost in the U.S. are "sent primarily to India and the Philippines. So I hope [the bill] does have an impact."
What constitutes a balance between work and life? The OECD settled on three chief variables: (1) The share of the labor force that works extreme hours; (2) leisure time; and (3) employment rates for women who have children. The United States, which leads most of the world in share of mothers who are working, lagged in leisure time and share of overworked employees. Onto the list, with some analysis below,
EPI economists Heidi Shierholz and Elise Gould report that RTW is associated with a significant reduction in private-sector pension coverage. In a study published last year, Gould and Shierholz analyzed the relationship between RTW status and wages and benefits after controlling for the demographic and job characteristics of workers, in addition to state-level economic conditions and cost-of-living differences. They found that the rate of employer-sponsored pensions is 4.8 percentage points lower in RTW states. If workers in non-RTW states were to receive pensions at this lower rate, 3.8 million fewer workers nationally would have pensions.
OPM uses two tools to help agencies reduce their staffing levels without resorting to pink slips and firings. One is the Voluntary Separation Incentive Payments (VSIP) program, which is government-speak for buyouts. Employees can get up to $25,000 to quit. The other is the Voluntary Early Retirement Authority (VERA), which allows workers to get annuities years earlier than usual.
These programs give agency officials “the flexibility to respond to the budget situation,” Berry said, allowing them to create a “glide path” to workforce reduction rather than the crash that layoffs would be.
But if the two V’s don’t get the job done, he added, “agencies do have the tool box, which we all know goes in the direction of reduction in force” or RIFs, which means pink slips.
...an American Airlines spokesman last month said the airline's pension plans are “very expensive” and that it spends more on them than competitors spend on their retirement plans. “Given American's plans to reduce its costs to a more reasonable level in line with industry norms, these costs and many other factors are considerations when deciding whether to continue the pension plans,” the spokesman said.
Mitt's monster was created by a broken political process that's allowed politicians in both parties to create an artificial, destructive and exploitative form of pseudo-capitalism -- and often to get rich from it. Romney's campaign will probably survive, but the monster will go on destroying lives and dreams.
Conservatives and self-described "centrists" speak about "Bain Capitalism" -- aka "vulture capitalism" -- as if it were the inevitable result of immutable economic laws. But it's only been around for thirty years or so, after government policies in taxation and bank regulation made it possible. That's right: Government, not free enterprise, made Bain Capitalism.
And what government has made, government can unmake.
The "Bain Bailout" They're calling it the "Bain Bailout" -- although Bain didn't receive any actual funds. But when a federal regulator took over a failing New England bank, it decided to "forgive" several million dollars for loans that Bain had received from the bank.
Why? Nobody's been asked to explain. But that decision reflects a long history of cozy relationships between regulators and the financiers who might one day pay them a hefty salary after they've left government service.
If the millions in 'forgiveness' were intended to make sure that jobs stayed in New England, it backfired. As we'll see, job creation is used a lot to justify government actions that make a few people rich without creating any jobs -- and often destroy them.
We commend Governor Cuomo's call to give all New Yorkers an equally important voice in the political process. Like the Governor, we believe that public financing of New York elections will help level the playing field for all candidates and ensure our members' votes matter and their voices are heard. Enacting reform this year will be a enormous step towards removing the many blocks keeping average citizens from participating fully in our Democracy.
Over the coming weeks and months, CWA Members in New York and nationwide will be fighting back against the money in politics that is destroying our democracy; contacting their legislators and demanding reform at the federal and state levels. Corporations are not people, and should not be afforded the opportunity to manipulate the political process in their favor against the interests of middle-class Americans. We hope other leaders will follow Governor Cuomo's bold example and propose similar measures.
I have not been able to attend a class in over 8 years since we never have money in our budget for education. Education is totally the responsibility of the employee now. There may be some exceptions but for Sam to talk about IBM retraining or re-educating employees is laughable. Up until a few years ago, our time claiming system classified education as non-productive time. While it is true, as Sam stated, the more skills you have the better off you are it does not necessarily hold true within IBM. I know many highly skilled employees, and some Distinguished Engineers, that have been let go simply because IBM could outsource their job at a lower cost. So I think it is disingenuous of Sam to suggest maintaining or increasing your skills is the answer. If IBM can outsource your job at a lower cost than it does not matter what your skills are. At IBM “employees are a cost not a resource”. -Jake-
Alliance Reply: Well stated. Thank you for saying what Alliance@IBM has been saying for many years. IBM perpetuates a lie. Just like that saying goes, "You tell a lie often enough and sooner or later, people believe it's the truth". Offshoring has ALWAYS been about cost and NOT about skills. IBM, Microsoft, and HP are just a few of the IT companies that have preached this lie over and over, in the media, enough to convince politicians and the public that IT workers are "lacking the skills to compete globally". It's a bald faced lie that has been overemphasized since the late 1990's. The truth is simply "cheap labor".
There are no pay phones out there anymore and if IBM is not footing the bill for my cell phone then I'm sure as hell not going to use it for business purposes. In fairness, we've been told they will pay for any charges over and above the normal cell phone expenses, but mine are typically just the monthly service charge and taxes and they will not pay for that.
I believe this could result in IBM violating more service level agreements and incurring monetary penalties that could exceed any cell phone expenses. I have a pretty good idea who's going to get blamed for that when it happens. This move is incredibly short sighted, impractical, and in no way a benefit to IBM customers. This is right in line with the decision a while back to no longer pay for Internet access for work at home employees. It's very frustrating and sad to watch IBM nickel and dime it's own employees like this and to have to be a part of it. And yes, I am an Alliance Member. -Gray_Hair-
Alliance Reply: As an Alliance member, what ideas do you think would help IBMers fight back over this issue? What could a large number Alliance-member IBMers in GTS Delivery Services do together that could force IBM to re-consider that policy or any other action? How many of your co-workers that you know, know about Alliance@IBM? If you would like to discuss this with us, please contact us through this email: firstname.lastname@example.org or send a message via our contact page link here: Contact Us
Alliance Reply: And I'm sure our message to organize and grow the numbers of IBMers that belong to Alliance@IBM, is getting old, too; but it's still true and still is the best way to fight back for your right to collectively bargain for a contract that protects IBM workers from the abuses that IBM is delivering and has been delivering to IBMers for several years.
I am an Alliance member because I believe we need to start standing up for ourselves - together. I pay the dues because I can - I have a job (and it's not that much money). If the time comes when I have no income and that has to change, I'll worry about that then, but we need to help get the word out and make sure people know how these companies treat their employees, and we need to get together and act as one - they keep whittling us down little by little and individually, we don't stand a chance.
Joining the union will help (note that I am not an officer, administrator, or receive any compensation from the Alliance). We can read between the lines. We all know this isn't about making good business decisions in a free market...it's about greed and a handful of people exploiting the rest of us. Treating us like ****, constantly taking away from us, and firing us to give themselves more money (and then making those who are left "do more with less" - more work, less pay and benefits. More fear of losing your job (and thus intimidating you into not speaking up), less hope for the future). Don't just shrug your shoulders and let it go....DO SOMETHING!!! -juggernaut-
Alliance Reply: Thanks Dave. The Contract Summary IS part of the "Home Front" tab, and I also posted the same list of contracts on the Front page of our web site, titled "Sample Contracts" at the top. I will add more sample contracts as I get them or find them in our archives. Yes, we agree. These contracts may be many pages; but they cover everything in strict detail and leave no open loopholes for management to circumvent the contract's intention. Incidentally, CEO's and top company executives get contracts drawn up just as air tight if not tighter, so that they are protected from the BoD, should anything 'go wrong' during their tenure. Why shouldn't the employees have a similar advantage and protection? There are no reasons I can think of.
Alliance Reply: Your comment "...without representation" is exactly what Alliance@IBM has been trying to achieve since 1999. When do the dots connect for US IBMers, and reveal that organizing a union of IBMers is an alternative to quitting a company that abuses its employees to the 'tenth' degree? I hope things work out for you; however, IBMers will still be "without representation" after you are gone...unless they decide that enough is enough, and they are willing to fight back together, to make IBM the place they would rather work for, than somewhere else.
The Affordable Care Act is putting consumers back in charge with two new rules that shine much-needed light on the health insurance market. The first requires insurers to justify premium increases of more than 10 percent and to post that information online. The second is the “80-20 rule,” which requires insurers to spend at least 80 percent of premium dollars on health care, rather than on advertising or executive pay. If they don’t, you get a rebate. Together, these changes are creating a health insurance market where premiums stay in check and Americans get their money’s worth.
Profits are up at some of the nation's largest insurers, including Aetna, WellPoint and UnitedHealth Group, according to an analysis by Bloomberg Government. That's the opposite of what the insurers themselves predicted would happen, and comes about mainly a result of the companies taking on more business through Medicare and Medicaid. ...
The Bloomberg report surveys the recent earnings of five of the country's largest insurers -- WellPoint, UnitedHealth Group, Aetna, Humana and Cigna -- and finds that their profit margins have climbed to an average of 8.24 percent in the year and a half since the health care reform package was signed into law. By contrast, in the 18-month period before health care was passed, profit margins at these five insurers averaged just 6.88 percent.
But whereas traditional insurance is subject to state laws and disputes can be tried before juries, with the potential for punitive damage awards, policies sold through employers typically fall under the 1974 federal Employee Retirement Income Security Act, or Erisa—with a federal judge ruling on disputes and no damages allowed.
In disputes over traditional policies, judges often interpret ambiguities in policy language in consumers' favor on the basis that the insurer wrote the contract, experts say.
With Erisa-governed policies, insurers often have discretion to interpret policy language, and a judge can overrule a coverage decision only if the insurer has advanced an illogical policy interpretation or acted in an "arbitrary and capricious" manner, says Mark DeBofsky, a plaintiffs' lawyer and professor at John Marshall Law School in Chicago.
"No matter how egregious the insurer's conduct, the only consequence faced by the insurance company is a ruling to make good on the denied benefit and perhaps pay attorney's fees," Mr. DeBofsky says. That gives insurers an incentive to deny more claims, he says.
“People are just buying down,” said Richard Allen, president of American Corporate Benefits Inc. Companies are opting for plans with fewer benefits, and employees are swallowing hard and accepting the changes. “It used to be that if you were going from a $5 to $15 copay, it was the scuttlebutt of the company. Now you go from $25 to $50, and no one blinks an eye.”
So to anyone familiar with other nations that rely mainly or wholly on private health insurers — e.g., Germany, the Netherlands, Switzerland — the question remains, why is it so much more difficult and expensive, in time and money, to choose among health-insurance options in America?
All residents in Switzerland, for example, are mandated to procure health-insurance coverage for a federally specified benefit package. The system relies fully on 62 private health-insurance companies that compete for enrollees on a well-organized and government-regulated, federal, electronic health-insurance exchange for individually purchased health insurance. The smallest company, the Krankenkasse of the village Zeneggen, has only 170 insured people; the largest, CSS Krankenversicherer, insures 858,000.
Premium shopping among insurers is easy, because the standard benefit package is common to all. Prospective enrollees, however, can choose from several annual deductibles ranging from a stipulated minimum of 300 Swiss francs (about $318) to a maximum of 2,500 Swiss francs (about $2,654). Furthermore, they can purchase supplemental insurance on top of the basic package, mainly for superior amenities.
It can be doubted that many people in Switzerland need to bear the high time and money costs Americans must bear in choosing health-insurance coverage in the market for individually purchased coverage. Public and private Web sites in Switzerland help prospective enrollees easily navigate the national insurance exchange with user-friendly information, including calculated premium differentials between one’s current insurer and competitors. ...
Choice among private health insurers in Germany, the Netherlands and Switzerland is straightforward and relatively inexpensive in terms of time and money, because price comparisons are based on a common benefit package. More customized coverage can be purchased, but only in the form of supplements to the common package.
Choice in the United States is expensive, because it requires prospective enrollees to do near-Talmudic studies of the fine print of each insurer’s offerings — many times multiple distinct offerings per insurer.
These phone operators working in a nondescript office park in Alameda are employed by a large health insurance plan, and they're willing to go the extra mile for their customers. They'll schedule a doctor to come to your home, a pharmacist to drop off a prescription, and they'll even help you fill out an application for food stamps.
"We do things for them that a traditional, commercial health plan doesn't do," says Ingrid Lamirault, chief executive officer of the Alameda Alliance for Health, a county-run, not-for-profit insurer.
The much celebrated, and much maligned, public option may have died in Congress, but it's alive and well in California. Unique in the nation for having public health insurance plans that are run by counties, California has plans that stretch from San Francisco to the Mexican border and cover 2.5 million residents.
The law, signed by President Obama in March 2010, set detailed federal standards for health insurance, which had for decades been regulated mainly by the states. The law calls for the annual review of “unreasonable increases in premiums.” Under rules issued last year by Ms. Sebelius, rate increases of 10 percent or more must be reviewed by state or federal officials. ...
The administration did not release details of its calculations, but said that Trustmark was seeking rate increases of 13 percent in each of the five states. Combined with other rate changes in the last 12 months, it said, these proposals would result in rate increases averaging 27 percent in Alabama, 18 percent in Arizona and 15 percent in Pennsylvania.
The offering of retiree health benefits varies widely by industry as 69.1% of companies in utilities offer them. Not-for-profit and banking and finance organizations offer retiree health benefits at a rate of 37.6% and 31.5%, respectively. Companies in healthcare offer the benefit at a rate of 15.8%, while hospitality employers offer it the least, 3.3%. On average, retirees are required to pay 65.1% of the premium for their retiree health benefits.
"But dependency on government has never been bad for the rich. The pretense of the laissez-faire people is that only the poor are dependent on government, while the rich take care of themselves. This argument manages to ignore all of modern history, which shows a consistent record of laissez-faire for the poor, but enormous government intervention for the rich." From Economic Justice: The American Class System, from the book Declarations of Independence by Howard Zinn.
But many researchers have reached a conclusion that turns conventional wisdom on its head: Americans enjoy less economic mobility than their peers in Canada and much of Western Europe. The mobility gap has been widely discussed in academic circles, but a sour season of mass unemployment and street protests has moved the discussion toward center stage. ...
John Bridgeland, a former aide to President George W. Bush who helped start Opportunity Nation, an effort to seek policy solutions, said he was “shocked” by the international comparisons. “Republicans will not feel compelled to talk about income inequality,” Mr. Bridgeland said. “But they will feel a need to talk about a lack of mobility — a lack of access to the American Dream.” ...
While Europe differs from the United States in culture and demographics, a more telling comparison may be with Canada, a neighbor with significant ethnic diversity. Miles Corak, an economist at the University of Ottawa, found that just 16 percent of Canadian men raised in the bottom tenth of incomes stayed there as adults, compared with 22 percent of Americans. Similarly, 26 percent of American men raised at the top tenth stayed there, but just 18 percent of Canadians. “Family background plays more of a role in the U.S. than in most comparable countries,” Professor Corak said in an interview.
Romney's economic plan calls on Congress to immediately lower the top corporate tax rate to 25 percent from 35 percent. He has said he would be open to additional rate cuts if they are accompanied by measures that would broaden the income base. ...
He would move the U.S. to a so-called territorial system of taxation, in which the government taxes only domestically generated corporate income. Republican leaders in Congress have shown interest in this concept. House Ways and Means Chairman Dave Camp, a Michigan Republican, introduced a proposal in October that would shield 95 percent of profits earned offshore from taxation in the U.S. ...
For individuals, Romney would lower the maximum tax rate over time, though he hasn't specified a rate target. He would eliminate the estate tax and make permanent the current 15 percent rate on dividends and capital gains. Taxpayers with an adjusted gross income of less than $200,000 wouldn't pay any taxes on capital gains or dividends.
The bottom line: if you’re very wealthy, Romney intends to stuff more money in your pockets. If you’re already struggling, Romney intends to increase your tax burden.
Or put another way, the multi-millionaire who’s hiding his tax returns, owns a few mansions (one of which he’s quadrupling in size), and who got rich orchestrating leveraged buyouts and laying off thousands of American workers, has quite a policy agenda in mind for 2013: free rein for Wall Street, taking health coverage away from millions, slashing public investments that benefit working families, more foreclosures, tax increases on those already struggling, and tax cuts for the rich.
These 15 men are leaders of what might be called Romney’s K Street army. They are key players in the mobilization of Washington’s $3.5 billion lobbying industry in support of his candidacy. Romney, more than anyone else who is running, is the favorite of the capital’s influence-wielding establishment. ...
The open participation of lobbyists in the current campaign is one more element in the collapse of campaign-finance reform. Two waves of reform — the first in the post-Watergate era of the mid-1970s and the second culminating in 2002 with the passage of the McCain-Feingold act, which sought to end the use of “soft money” in campaigns — are essentially moot.
But these reforms have been gutted by Supreme Court decisions, especially the Jan. 21, 2010 decision Citizens United v. Federal Election Commission, and by a lax Federal Election Commission. Corporate donors, labor unions and individuals willing to write big checks are free to use their money to favor certain candidates. If they want to keep the contributions secret from public view, there are many opportunities for concealment. ...
The interests represented by these particular Romney supporters run the gamut of national and international corporate powerhouses.
A very abbreviated sampling includes much of the financial sector, including the Blackstone Group, PricewaterhouseCoopers, Visa, MasterCard, JPMorgan Chase, the Mortgage Bankers Association, the American Bankers Association, most of the pharmaceutical industry including Eli Lily & Co., Pfizer, Bristol-Meyers Squibb, the Pharmaceutical Research & Manufacturers of America, and companies like Verizon, AT&T, Walmart, Coca-Cola and General Motors.
he ever-expanding role of lobbyists in politics is a major victory for corporate America. Overwhelmingly, the companies and trade associations that dominate top-dollar lobbyists’ clientele are seeking to protect their own legislated competitive advantages, including special tax breaks, favorable procurement rules and government regulations that prevent new challengers from entering the marketplace. ...
The weaponry of the special-interest community has become increasingly powerful. Lobbyists not only have ever greater resources at their disposal, they are also armed with the sophisticated technology of influence — polls, television, focus groups, computerized data banks, micro-targeting, each of them important in itself, and devastating when deployed in effective combinations. The net result is that the power of the electorate relative to the power of the Washington establishment has inexorably declined.
Bain expanded many of the companies it acquired. But like other leveraged-buyout firms, Romney and his team also maximized returns by firing workers, seeking government subsidies, and flipping companies quickly for large profits. Sometimes Bain investors gained even when companies slid into bankruptcy.
Bain managers said their mission was clear. "I never thought of what I do for a living as job creation," said Marc B. Walpow, a former managing partner at Bain who worked closely with Romney for nine years before forming his own firm. "The primary goal of private equity is to create wealth for your investors." ...
Four of the 10 companies Bain acquired declared bankruptcy within a few years, shedding thousands of jobs. The prospectus shows that Bain investors profited in eight of the 10 deals, including three of the four that ended in bankruptcy. ...
In 1999, as economic challenges mounted, GSI sought a federal loan guarantee intended to help steel companies compete internationally. The loan deal was approved, but in 2001, before it could be used, the company went bankrupt, two years after Romney left Bain. More than 700 workers were fired, losing not only their jobs but health insurance, severance and a chunk of their pension benefits. GSI retirees also lost their health insurance and other benefits. Bain partners received about $50 million on their initial investment, a 100% gain. ...
"Bain was demanding certain financial performance with no understanding of what the problems were on the ground," said David Foster, a former steelworkers union official who negotiated labor contracts with GSI management from 1994 until the bankruptcy. He said Bain "bled the company," withdrawing cash for dividends and management fees even as circumstances in the steel industry deteriorated.
"If I were looking for effective management of a project, a company or a country, this is exactly the kind of management I would not want to have," Foster said of Bain. "Bain partners think the profits they made are a sign of their brilliance. It's not brilliance. It's lurking around the corner and mugging somebody."
Few people outside the industry are shedding tears. The average Goldman Sachs employee was paid $292,397 in the first nine months of 2011, down about 21 percent from the same period in 2010, when the average payout was $370,056. That is of course, an average, and includes the salaries of those on the lower scales, like support staff.
Each Goldman partner is still expected to take home at least $3 million; in previous years, payouts twice that amount were considered common for the top echelon.
It is an odd Wall Street paradox: in down years, a higher percentage of a firm’s revenue is paid to employees. “In the tug of war between employees and shareholders, the employees are winning,” Mr. Mayo said. He pointed out that it was still often employees in the upper ranks, including those in the C.E.O. suites, who took home the largest share of the compensation. “Wall Street has its own 99 percent and 1 percent,” he said. “The 1 percent continues to win against the 99 percent.” He continued: “Is the incentive pay an incentive, or is it an entitlement?”
The number of U.S. corporations structuring their businesses in such a way that they can avoid higher taxes has skyrocketed in the past quarter century, The Wall Street Journal reports.
Advocates for the business community have expressed frustration with the country's 35 percent corporate income tax rate, calling it unreasonably high. In practice, though, it's common for big businesses to pay much less, thanks to a cornucopia of tax-code loopholes and exemptions won by lobbyists. ...
According to a recent analysis of nearly 300 Fortune 500 companies by the Citizens for Tax Justice, the average company was paying just 18.3 percent in taxes -- a little more than half the official rate. And by using techniques like industry subsidies, stock option packages, and moving assets overseas where they can't be taxed, 30 companies mentioned in the report -- including Wells Fargo, Verizon, Boeing and General Electric -- didn't pay a cent in federal taxes in 2008, 2009 or 2010, the report found.
That has put pressure on the one arm of government with the power and the flexibility to try to boost ordinary Americans’ fortunes: the Federal Reserve. But the limited policies the Fed has at its disposal mostly put money in the hands of the affluent, at least through their direct effects. The affluent, in turn, are less likely than most to spend that money in the wider economy.
That may be a key reason that a series of dramatic steps by the central bank has not done more to raise living standards for American workers. ...
A wide range of research shows that the poorer people are, the more likely they are to spend any new money they get, which keeps it circulating through the economy. Wealthier people are more likely to save it, which does little to foster economic activity. In 2010, middle-income families — those making about $46,000 a year — spent 91 percent of their after-tax income. The upper 20 percent, those who make an average of $157,000, spent 62 percent. ...
“The Fed can pump an extra $2 trillion into the economy, but it can’t control where it goes,” said Dhaval Joshi, chief European strategist at BCA Research, who has examined the effects of similar policies in Britain. “We’re not saying it didn’t help the economy, but we’re saying that if you look at who it benefits, you see that it fuels stock prices and corporate profits but isn’t having much impact on wages and employment.”
What if a certain class of capitalist makes scads of money not by building up companies but by tearing them down? What if there is a distinction between the capitalist we typically honor who comes up with a good product and hires people to make and market it; and another kind who takes over a company, pulls out all the cash he can, and then abandons it to die?
This is not the narrative of some Marxist intellectual writing in an obscure journal. It’s how Perry, who last I checked was a rather ardent conservative, described Romney’s line of work. “They’re just vultures,” Perry declared. “They’re vultures that are sitting out there on the tree limb waiting for the company to get sick, and then they swoop in, they eat the carcass, they leave with that and they leave the skeleton.” ...
But that goes to the heart of the matter: “Free” for whom and under what circumstances? Capitalists of Romney’s sort never want to acknowledge how much their ability to make money depends on what government does. How does it structure the laws related to property, taxation and debt? What rules does it write on how companies can be acquired and how power within firms is apportioned among shareholders, employees, managers and other stakeholders? These are not natural laws. They are the work of politicians and the lobbyists who influence them.
Which leads to this observation from Gingrich: “I think there’s a real difference,” he said, “between people who believed in the free market and people who go around, take financial advantage, loot companies, leave behind broken families, broken towns, people on unemployment.” Yes, there are different kinds of capitalism.
Private equity already faces scrutiny for the way it has enabled executives, including Mitt Romney, frontrunner for the Republican nomination and former chief executive of Bain Capital, to build fortunes helped by a highly favourable tax perk. ...
The primary source of income for the most successful private equity executives is carried interest, profits on investments made with money from outside investors such as pension funds. This is taxed at 15 per cent as a capital gain rather than the usual 35 per cent for income.
Selected reader comments follow:
Assuming these three individuals are sufficiently immoral to not think of setting an example by limiting their personal gain, then Carlyle is surely a perfect test case for the US government to amend the ridiculous loopholes in Private Equity. Carlyle's patriarchal underbelly and highly dubious history in Defence mark it out as the most cynical PE vehicle. Quite some achievement in itself.
One could go a step further. Assuming Obama defeats King Bain then, in what would be his final term of office, would it not be interesting to see Mr Obama corral the exemplars of socially responsible capitalism, especially Warren Buffet, and introduce a 90% tax rate on any individual earning more than $ 25m per annum - through PE vehicles, Trusts or otherwise. No offshore wheezes, no Blair like FLP's and mandatory full disclosure by all.
The prospect of not being able to afford a £30m Picasso every 3 years will no doubt make the patrician class blanche and Obama would no doubt be crucified by both Congress and the Senate. However, a radical legislative move is needed to puncture our restless tolerance of unfettered greed. Mr Obama's legacy would be that he catalysed genuine and much needed change. He would create the platform for the forthcoming generation of disenfranchised and debt laden young voters to follow through on his example and finally temper the obscene greed of the current super capitalists.
Galbraith suggests that the greedy are quickly returned to respectability once the economic cycle turns for the good but that won't happen by 2013 so if Mr Obama really wants to deliver on his promise to Change then he has that opportunity.
But like Romney’s work on all the businesses Bain invested in, the primary goal with these companies wasn’t job creation but making them more profitable and valuable. This meant embracing aspects of capitalism that have unsettled some Americans: laying off workers when necessary, expanding overseas to chase profits and paying top executives significantly more than employees on lower rungs.
Romney, the people are not jealous of your mansions or boats. They are simply tired of income inequality, and tired of course of your condescending tone.
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