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The
Corporate Reform Weekly
Vol
V, #15 April 10, 2006
In
Short
Executive
Pay
1.
AFL-CIO report highlights big CEO pensions
Lobbying
Reform
2.
Even weaker lobbying reform moves forward in the House
3. Big Pharma spending big
bucks on state-level lobbying
Scandal
4.
Former Enron counsel testifies as lawyers for Skilling, Lay begin their defense
5.
Former NYSE executive says she altered documents to hide Grasso’s compensation
This
Week’s Action Item
Tell
your Representative: You want real lobbying reform
Executive
Pay
1.
AFL-CIO report highlights big CEO pensions
While
corporations across the country are slashing employee pension benefits, CEOs
are are continuing to receive generous pensions, according to a new study by
the AFL-CIO.
The report,
"CEO Golden Years: The Top 25 Largest CEO Pensions," describes pensions
that range from $2 million to $6.5 million a year. The top two ranking
executives, Pfizer CEO Hank McKinnell and recently retired ExxonMobil CEO Lee
Raymond, both have $6.5 million a year pensions. AT&T CEO Edward Whitacre
comes in third with a $5.5 million a year pension.
If McKinnell
took a lump-sum payment today, he would get $83 million. If Raymond took a
lump-sum payment today, he would get $81 million.
"As
corporate America is slashing workers' pensions left and right, we think
investors and the public should know about the huge pensions these CEOs are
raking in," said Richard Trumka, secretary-treasurer of the AFL-CIO.
While 69% of
Fortune 1,000 CEOs are covered by traditional defined-benefit plans, just 21%
of private-sector workers are covered by the plans.
"CEOs
have turned their pension plans into CEO wealth-creation devices," says
AFL-CIO investment researcher Brandon Rees. "This undermines the goal of
linking CEO pay to performance, and in fact rewards underperformance."
For more, see:
“AFL-CIO puts big CEO pensions under scope,”
By Edward
Iwata, USA TODAY
http://www.usatoday.com/money/companies/management/2006-04-06-pensions-usat_x.htm
Also see:
AFL-CIO’s Executive Paywatch website: http://www.aflcio.org/corporatewatch/paywatch/
Lobbying
Reform
2.
Even weaker lobbying reform moves forward in the House
One week after
the Senate passed a weak lobbying reform bill, even weaker versions of lobbying
reform are moving forward in various House committees.
Last
week, the House Judiciary Committee voted 18-16 (along party lines) to approve
the Lobbying Transparency and Accountability Act of 2006 (H.R. 4975). The bill
fails to restrict campaign fundraising activities by lobbyists, fails to ban
gifts from lobbyists, fails to curb revolving door abuses, fails to create an
independent oversight and compliance office, and bans privately sponsored
travel – but only until after the next election.
The
committee rejected amendments by Rep. Marty Meehan (D-Mass.) that would have
required lobbyists to disclose media ads and direct mail grassroots lobbying
activities. The Meehan amendments also would have slowed the revolving door
between careers in public service and careers in lobbying.
What the
House bill does do is require more and more frequent disclosure of lobbying
activity and more disclosure about “earmarks” in spending bills. It also would
establish criminal penalties of up to five years in prisons for lawmakers and
lobbyists who intentionally do not report meals or other gifts.
"Its
objective is to give the semblance of reform without actually doing
anything," said Rep. Henry Waxman, D-Calif., top Democrat on the
Government Reform Committee, which is also considering a reform bill.
"That's Congress at its worst."
In other
congressional ethics news, the House ethics committee decided not to launch
another investigation into the latest round of alleged ethical lapses by Tom
DeLay (R-Texas). DeLay has been reprimanded three times in recent years by the
ethics committee, but was never officially punished in any way.
However, the
committee is continuing an investigation into the behavior of outspoken
progressive Rep. Jim McDermott (D-Wash.), who admitted that he leaked a
tape-recorded cell phone conversation with a Republican colleague to reporters
in 1996.
For more, see:
“Lawmakers Could Face Jail Under Lobby Bill,”
By JIM ABRAMS
of The Associated Press: http://www.washingtonpost.com/wp-dyn/content/article/2006/04/06/AR2006040601374.html
“Two House
panels ready lobbying reform bills,” By Elana Schor: http://www.hillnews.com/thehill/export/TheHill/News/Frontpage/040606/reform.html
"House
ethics panel not investigating DeLay, other lawmakers," By Jim
Drinkard, USA TODAY
http://www.usatoday.com/news/washington/2006-04-04-house-ethics-panel_x.htm
3.
Big Pharma spending big bucks on state-level lobbying
The
Pharmaceutical industry spent $44 million lobbying state governments in 2003
and 2004, and another $8 million on candidates for state office, according to
the Center for Public Integrity.
The
Pharmaceutical Research and Manufacturers of America (PhRMA) was the most
active lobbyist, spending more than $4.5 million.. Four other major companies,
Eli Lilly and Co., GlaxoSmithKline Inc., Pfizer Inc., and Johnson &
Johnson, each spent more than $3 million.
"At the
same time that the pharmaceutical industry has been splurging millions of
dollars to influence state legislature and drug prices, they're celebrating
enormous profits," said Roberta Baskin, the Center's executive director.
According to
the National Conference of State Legislatures, 33 state legislatures have
passed at least 66 bills since 2003 that deal in some way with reducing drug
costs. States pay for 16 percent of all drugs purchased each year, either
directly or indirectly. More than 40 percent of all expenditures went to three
states: California, Texas, and New York. California by itself accounted for 20
percent of all expenditures.
Management
consulting group A.T. Kearney has estimated that if states used their full
purchasing power to get price cuts, they could save between $2 billion and $4
billion.
How effective
is this spending? The Center report cites the story of Massachusetts state
Senator Mark Montigny (D) who has for six years been trying to get bulk
purchasing for the state, introducing at least 10 different bills.
"We are
being backed up and squashed by the pharmaceutical industry money. They have
killed lots and lots and lots of legislation in Massachusetts and across the
country," Montigny told the Center.
For more, see:
“Industry Puts
$44 Million into State Lobbying,” By M. Asif Ismail
http://www.publicintegrity.org/rx/report.aspx?aid=794
Scandal
4.
Former Enron counsel testifies as lawyers for Skilling, Lay begin their defense
Last
week, the Enron trial moved into Week 9, and the lawyers for former Enron CEO
Jeffrey Skilling and Enron founder Kenneth Lay began their defense.
In the
first eight weeks, the prosecution called 22 witnesses over 32 days to try to
convince jurors that knew exactly how fraudulent Enron’s books were even as
they continued to make bold proclamations about the company’s financial health.
The first
witness for the prosecution was the company’s former counsel, James V. Derrick
Jr., who, like Lay and Skilling, also had an office on the 50th floor of the
company’s Houston headquarters.
Derrick
told jurors that company earnings reports contained no “false and misleading”
information and insisted that neither Lay nor Skilling ordered any illegal
accounting. He said that Skilling did not act like he was a man with something
to hide.
"Did you
ever hear Mr. Skilling make the dramatic admission, 'They're on to us?' when
your office was just 20 feet away from his?" defense lawyer Mark Holscher
asked. (One prosecution witness had earlier testified that Skilling had said
“they’re on to us”)
"No,"
Derrick replied, "I did not."
Later,
government prosecutor John C. Hueston asked Derrick if his knowledge about
earnings reports was limited to litigation matters. Derrick said it was.
Hueston then asked: "If there were misleading statements, you wouldn't
have a basis for knowing that if they were outside of litigation, right?"
"I think
that is a fair statement," Derrick said.
The trial
is expected to continue this week with the trial of Skilling himself.
For more,
see: “Skilling Never Meddled in Enron Earning Reports,” Witness Says, By Frank
Ahrens, Washington Post: http://www.washingtonpost.com/wp-dyn/content/article/2006/04/06/AR2006040600843.html
“Ex-Counsel at
Enron, Not Skilling, Takes Stand,” By ALEXEI BARRIONUEVO and SIMON ROMERO
http://www.nytimes.com/2006/04/07/business/businessspecial3/07enron.html
5.
Former NYSE executive says she altered documents to hide Grasso’s compensation
A human
resources executive at the New York Stock Exchange altered documents to hide
the full compensation awarded to Dick Grasso, the former head of the stock
exchange, who resigned in 2003 after his $188 million compensation become
public.
The executive,
Dale B. Bernstein, said that her boss, Frank Z. Ashen, told her that when
calculating Grasso’s compensation in an Excel spreadsheet, she should hide
columns with his bonus and total compensation.
"I
clicked 'hide column,' " she said in a deposition. The deposition is part
of a lawsuit that New York Attorney General Eliot Spitzer is bringing against
Grasso and members of the board of directors of the NYSE under New York
not-for-profit law (the NYSE is a not-for-profit institution). The lawsuit
argues that the information provided to the exchange's board was
"materially incomplete, inaccurate and misleading."
For more,
see: “N.Y.S.E. Executive Tells of Altering Documents to Hide Grasso's
Full Payout,” By JENNY ANDERSON of the New York Times: http://www.nytimes.com/2006/04/07/business/07grasso.html
This
Week’s Action Item
Tell
your Representative: You want real lobbying reform
Lobbying
reform is moving ahead in the House this week, and your representative needs to
hear from you!
One problem is
that there is far too little attention being devoted to what exactly is
provided in exchange for the favors that lobbyists bestow on members of
Congress.
Those gifts --
the campaign contributions, the airplane rides, the visits to resorts disguised
as speech opportunities -- are not really gifts as such. They are more like
investments (or quasi-bribes). And they are investments that pay back beyond
the dreams of the greediest Wall Street prospector, in the many tens of
billions of dollars of corporate welfare: grants and direct subsidies,
government giveaways, bailouts, tax subsidies, loopholes and other escapes,
below-market loans and loan guarantees, export and overseas marketing
assistance, pork for defense, transportation and other companies, regulatory
removals, immunities from civil justice liability, and a host of other
government-provided benefits.
The
goodies bestowed by Congress on their patrons are too numerous and diverse to
be addressed with any single reform approach, much less one that is mainly
about disclosure with no independent enforcement mechanism.
But good legislation could go a long
way toward reducing corporate welfare doled out in the form of giveaways,
subsidies, and inflated government contracts to big corporations.
Here’s
the real reform:
In
one sweeping bill, Congress should decree that every federal agency shall
terminate all below-market-rate sales, leasing or rental arrangements with
corporate beneficiaries, including real and intangible property; shall cease
making any below-market-rate loans or issuing any below-market-rate loan
guarantees to corporations; shall terminate all export assistance or marketing
promotion for corporations; shall cease providing any below-market-rate
insurance; shall terminate all fossil fuel or nuclear power research and
development efforts; shall eliminate all liability caps; and shall terminate
any direct grant, below-market-value technology transfer or subsidy of any
kind.
The bill
should also amend the Internal Revenue Code to eliminate all corporate
"tax expenditures" (Beltway talk for loopholes and gimmicks for
corporate taxpayers) listed in the President's annual budget.
Some
of what gets cancelled in such a bill might be good public policy. If so,
Congress should reauthorize it. But there's too much accumulated
contribution/lobbyist-driven institutionalized graft for a case-by-case review
to eliminate what's in place. What's needed is a clean slate.
Other steps should be taken to
complement a clean-sweep bill:
Citizens should be
given standing to sue in order to challenge corporate welfare abuses -- to
restrain agencies that reach beyond their statutory powers to dole out
corporate welfare.
Automatic sunsets of corporate
welfare should be established, with every corporate welfare program
automatically phasing out in four years after initial adoption, and every five
years thereafter.
Annual agency reports should be
required on corporate welfare, with each federal agency listing every program
under its purview that confers below-cost or below-market-rate goods, services
or other benefits on corporations -- and identifying the recipients. The
president's budget already does this for tax giveaways, though the specific
beneficiaries are not identified.
A ban on corporate welfare for
corporate wrongdoers. Corporations convicted of serious wrongdoing should not
be eligible to receive any of the government's largesse.
Corporate
welfare cuts to the core of political self-governance, because it is
perpetuated in large measure through campaign contributions and the subversion
of procedural and substantive democracy. The perpetuation of corporate
welfare itself misallocates public and private resources and exacerbates the
disparities of wealth, influence and power that run counter to a functioning
political system over which the people rule.
Contact your
congressional representative today: http://www.house.gov/writerep/
