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The
Corporate Reform Weekly
Vol
V, #26, July 3, 2006
In
this Issue…
Money
in Politics
1.
Supreme Court rejects campaign spending limits as unconstitutional
2.
Clean Money Initiative is on the November ballot for California
Executive
Pay
3.
Average CEO pay is now 821 times bigger than minimum wage
4.
Berkshire Hathaway’s Munger criticizes CEO pay, hedge fund investors
Securities
and Exchange Commission
5.
SEC can’t regulate hedge funds, court rules
6.
Fired SEC exec says he was pushed out
Food
and Drug Administration
7.
Study finds FDA enforcements, record-keeping have declined under Bush
Scandal
8.
HealthSouth’s Scrushy convicted on bribery charges
This
Week’s Action Item
Support
public funding of elections
Money
in Politics
1.
Supreme Court rejects campaign spending limits as unconstitutional
Striking a
major blow to the possibility of regulating campaign expenditures directly, the
Supreme Court last week struck down a Vermont law that limited both campaign
contributions and campaign spending limits and upheld the 1976 Buckley v. Valeo precedent that essentially argues that
campaign spending is a protected form of speech.
Vermont’s 1998
law was designed in part as a challenge to Buckley v. Valeo. It limited spending limits on statewide races from $2,000
for state representative to $300,000 for governor per two-year cycle. It also
limited contributions to $400 per candidate per two-year cycle.
Justice
Stephen Breyer, in the controlling opinion in Randall v. Sorrell, joined by Chief Justice John G.
Roberts Jr. and Justice Samuel A.
Alito Jr., wrote that the Vermont statute violated the First
Amendment. But his decision did leave open the possibility that higher limits
could be constitutional. "We must recognize the existence of some lower
bound," he wrote. "At some point the constitutional risks to the
democratic electoral process become too great."
In a dissent,
Justice Stevens wrote that: “When campaign costs are so high that only the rich
have the reach to throw their hats into the ring, we fail 'to protect the
political process from undue influence of large aggregations of capital and to
promote individual responsibility for democratic government' . . . . I am
firmly persuaded that the Framers would have been appalled by the impact of
modern fundraising practices on the ability of elected officials to perform
their public responsibilities."
The decision
also drew criticism from pro-democracy advocacy groups.
Common Cause
President Chellie Pingree had this to say: “This court is out of step with
the vast majority of Americans who want to take back their democracy from
wealthy special interests and strongly support spending limits. This decision
makes clear that the one avenue we have for addressing the problem of the
corrupting influence of money in politics is to enact public financing of
campaigns on the federal and state levels. Seventy-five percent of the public
supports voluntary public financing, and seven states and municipalities have
already enacted some form of it.”
To see the
full opinion: http://www.nvri.org/campaignspending/cs_supremecourt.html
See also:
“Justices Reject Campaign Limits in Vermont Case,” By LINDA
GREENHOUSE of the New York Times:
http://www.nytimes.com/2006/06/27/washington/27campaign.html
“NARROW
MAJORITY LIMITS STATES' AUTHORITY TO FIGHT CORRUPTING INFLUENCE OF MONEY ON
ELECTIONS,” National Voting Rights Institute Press Release: http://www.nvri.org/updates/e-updates/update_supreme_court_mail_june_2006.html
Also check out
the new “Voter First Pledge” to build support for public funding of
congressional elections: http://www.commoncause.org/site/apps/nl/content2.asp?c=dkLNK1MQIwG&b=194883&ct=2673077
2.
Clean Money Initiative is on the November ballot for California
California
voters will be able to vote for public funding of elections this November and
send a strong message that they are fed up with the pay-for-play system of
campaign finance.
According
to the California Clean Money Campaign, the “Clean Money Initiative” will
“provide public money for legislative or statewide candidates who agree not to
accept private contributions for their campaigns. It also slashes the private
contribution limit to $500 for legislative candidates and $1,000 for those
running for statewide office. The state would give additional money to
candidates whose opponents do not accept public funding or who use their
personal money in the campaign.” The initiative is based on a bill,
AB583, which passed earlier this year in the state assembly but stalled
in the state senate.
The money
will come from a $200-million-a-year boost in the state’s corporate tax rate.
Some form
of public financing of elections has already been approved by voters in seven
states and two municipalities: Arizona; Connecticut; Maine; New Jersey; North
Carolina; New Mexico; Vermont; Albuquerque, New Mexico; and Portland, Oregon.
In Arizona; Maine; and Albuquerque, New Mexico.
Additionally,
polling shows wide support for public funding of elections. According to a
recent poll conducted by Lake Research Partners and Bellweather Research:
0.
Three-quarters
of voters support a voluntary system of publicly-funded elections (57% support
it “strongly” and only 16% are opposed).
0.
Support
crosses party lines. Eighty percent of Democrats, 78% of Independents, and 65%
of Republicans support this reform.
0.
Support is
strong across demographic and regional groups. This reform enjoys strong support across
gender lines, age groups, and regionally—garnering no less than 60% support and
in most cases around 75% support.
For
details on the initiative and to get involved: http://www.caclean.org/
To learn
about progress in other states: http://www.publicampaign.org/
Executive
Pay
3.
Average CEO pay is now 821 times bigger than minimum wage
The ratio of
average CEO pay to minimum wage for 2005 was 821-to-1, according to the
Economic Policy Institute. In other words, by the time the average CEO breaks
for lunch on the first day of work for the year, he or she has already earned
what a minimum wage worker will earn during an entire year of work. As recently
as 1978, the ratio of average CEO pay to minimum wage was 78-to-1.
"This
extreme compensation ratio reflects both the extraordinary growth of CEO pay
and also the diminishing value of the federal minimum wage that has not been
raised since 1997," said Lawrence Mishel, president of the Economic Policy
Institute. "Adjusting for inflation, the purchasing power of the minimum
wage is now at its lowest since 1955."
Recently, a
majority in Congress voted against raising minimum wage, which has stood at
$5.15 an hour since 1997.
For more, see:
http://www.epi.org/content.cfm/webfeatures_snapshots_20060627
4.
Berkshire Hathaway’s Munger criticizes CEO pay, hedge fund investors
Berkshire
Hathaway Vice Chairman Charles Munger last week delivered a rebuke of excessive
CEO pays at a keynote speech at the Stanford Law School Directors’ College,
speaking out against what he called “wretched excesses of executive
compensation.”
Munger
said that: "Corporate compensation in America is offending a lot of people
needlessly and it should be fixed. It is really dangerous to have a lot of envy
taking sway in the world.”
He also
added that CEOs "have a duty to the larger civilization to dampen some of
this envy and resentment by behaving way more noble than other people and more
generous…People should take way less than they are worth when they are favored
by life."
More broadly,
he said that “The CEO has an absolute duty to be an exemplar for the
civilization."
In Munger’s
estimation, "About half of American industry has grossly unfair
compensation systems where the top executives are paid too much.”
According to a
recent Bloomberg poll, Munger’s criticism is widely shared – more than 80% of
Americans agree that CEOs are paid “too much.”
Munger was
also very critical of hedge fund managers, who he accused of doing anything and
everything to keep fees high and profits flowing. Calling it a “ghastly
culture,” Munger predicted that, “there will be a terrible scandal in due
course.”
For more, see:
“Berkshire's
Munger Urges CEOs to Accept Less Pay,” by Reuters: http://www.latimes.com/business/la-fi-wrap27.1jun27,1,3498597.story?coll=la-headlines-business
“A call for
curbs on CEO pay,” by Kathleen
Pender of the San Francisco Chronicle:
: http://sfgate.com/cgi-bin/article.cgi?file=/c/a/2006/06/27/BUG4PJKMK81.DTL
Also, for an
excellent Fortune article that asserts that “Corporate America’s
executive-compensation system is broken,” see:
“The real CEO
pay problem: Voters are outraged. Big investors are demanding change. Even some
CEOs admit there's a crisis. But rewards that defy all economic logic don't
simply spring from greed. Corporate America's executive-compensation system is
broken. An inside look.” By Rik Kirkland,
Fortune magazine:
http://money.cnn.com/magazines/fortune/fortune_archive/2006/07/10/8380799/
Securities
and Exchange Commission
5.
SEC can’t regulate hedge funds, court rules
A three-judge
panel of the United States Court of Appeals for the District of Columbia has
ruled that the Securities and Exchange Commission doesn’t have the authority to
regulate hedge funds.
The Court said
that the SEC overstepped its bounds by treating investors as “clients” of the
fund manager. In order for the SEC to be able to regulate hedge funds, it will
need statutory authority granted by Congress. This may be difficult. When the
SEC first decided to regulate hedge funds in December 2004, it did so with a
contested 3-2 vote that has been widely challenged by industry groups.
Individual hedge funds, however, may continue to voluntarily register with the
SEC.
SEC Chairman
Christopher Cox said in a statement that: "The SEC takes seriously its
responsibility to make rules in accordance with our governing laws. The court's
finding, that despite the commission's investor protection objective its rule
is arbitrary and in violation of law, requires that going forward we
re-evaluate the agency's approach to hedge fund activity."
Cox added that
the SEC would "use the court's decision as a spur to improvement in
both our rule making process and the effectiveness of our programs to protect
investors, maintain fair and orderly markets, and promote capital
formation."
For more see:
“Court Says S.E.C. Lacks Authority on Hedge Funds,’ By FLOYD NORRIS
of the New York Times: http://www.nytimes.com/2006/06/24/business/24fund.html
6.
Fired SEC exec says he was pushed out
Gary J.
Aguire, a former Securities and Exchange Commission, last week told a Senate
Judiciary Committee panel that he was forced out of a job last summer at the
SEC after he tried to get testimony from a powerful Wall Street executive as
part of an investigation into allegedly illegal hedge fund activity.
Aguire told
the Senate panel that he was investigating Pequot Capital, a $7 billion hedge
fund overseen by Arthur J. Samberg. Aguirre wanted to know whether Morgan
Stanley CEO John J. Mack was leaking nonpublic information to Pequot about a
pending merger.
Aguire, who
had just been given a two-step merit raise after a year at the SEC, was fired
within days of trying to get Mack’s testimony. In testimony before the Senate
panel, Aguire said that he was told by superiors at the SEC that the deposition
could not be taken because Mack had “very powerful political connections.”
Aguire also
used his Senate testimony to call for fixing the SEC to better investigate
hedge funds and protect investors. "Fixing the SEC so it can protect
investors and capital markets from hedge fund abuse will not be an easy
task," Aguirre said in his testimony. "Powerful interests want the SEC
to stay just the way it is or, better yet, to become even weaker."
He also
criticized the Justice Department for failing to take a lead on prosecuting
hedge fund activity. The Justice Department "merely shadows the SEC's
meager scrutiny of hedge funds," he said.
Also
testifying was Connecticut Attorney General Richard Blumenthal, who urged the
Senate to pass new hedge fund regulations. "Federal action is profoundly
preferable ... but the states must fill the void if Congress fails to
act," he said.
For more, see:
“Panel Is Told S.E.C. Stopped a Hedge Fund Inquiry,”
By WALT
BOGDANICH, New York Times: http://www.nytimes.com/2006/06/29/business/29hedge.html
Food
and Drug Administration
7.
Study finds FDA enforcements, record-keeping have declined under Bush
Enforcement
actions at the Food and Drug Administration have declined significantly in the
five years that President Bush has been in office, according to a study
conducted by Rep. Henry Waxman (D-Calif.). Additionally, career field staff
recommendations have been ignored, and the agency has not kept adequate
records.
According to
the Waxman report:
-- “FDA
enforcement actions have declined under the Bush Administration. The number of
warning letters issued by the agency for violations of federal requirements has
fallen by over 50%, from 1,154 in 2000 to 535 in 2005, a 15-year low. During
the same period, the number of seizures of mislabeled, defective, and dangerous
products has declined by 44%.”
-- “FDA
headquarters officials have routinely rejected the enforcement recommendations
of career field staff. Internal agency documents show that in at least 138
cases over the last five years involving drugs and biological products, FDA
failed to take enforcement actions despite receiving recommendations from
agency field inspectors describing violations of FDA requirements.”
--
“FDA’s recordkeeping and case tracking practices are inadequate. Although the
Federal Records Act and internal agency procedures require FDA to keep records
that document agency enforcement decisions, FDA does not appear to comply with
these requirements. FDA’s response to Committee requests for relevant
enforcement documents was haphazard, incomplete, and untimely. FDA officials
explained that FDA could not provide prompt and complete responses because the
agency lacks a system that enables it to track enforcement recommendations from
field offices.”
"Americans
have relied on F.D.A. to ensure the safety of their food and drugs for 100
years," Mr. Waxman said in a statement. "But under the Bush administration,
enforcement efforts have plummeted and serious violations are ignored."
Dr. Sidney M.
Wolfe, director of Public Citizen’s Health Research Group has noted that the
agency now received about $380 million a year in fees from drug makers.
"The
public," Dr. Wolfe told reporters, "is getting the kind of F.D.A.
that the industry is paying for them to get."
To see the
whole report: http://www.democrats.reform.house.gov/story.asp?ID=1074
See also: “Top
Democrat Finds F.D.A.'s Efforts Have Plunged,”
By GARDINER
HARRIS of the New York Times: http://www.nytimes.com/2006/06/27/health/policy/27fda.html
Scandal
8.
HealthSouth’s Scrushy convicted on bribery charges
A year after
he was found innocent of leading a $2.7 billion accounting fraud, former
HealthSouth CEO Richard Scrushy last week was convicted of paying $500,000 to
former governor Don Siegelman in order to win a seat on the state’s health-care
board.
Prosecutors,
led by Assistant U.S. Attorney Louis V. Franklin Sr., claimed that they had
overwhelming "overwhelming" evidence of bribes. "It could not
have been anything but a bribe," Franklin told reporters.
Scrushy’s
attorneys tried to compare Scrushy’s troubles to discrimination against blacks
and urged the jurors to “make Dr. King’s dream come true,” by acquitting
Scrushy. Scrushy could face up to 10 years in prison.
The jury also
convicted Siegelman of seven bribery, conspiracy, and fraud charges, but
Siegelman was acquitted on racketeering and 25 other charges.
For
more, see:
“Jury Convicts
HealthSouth Founder in Bribery Trial: Scrushy Paid Ala. Politician For Board
Seat, Panel Finds,” By Carrie Johnson of the Washington Post: http://www.washingtonpost.com/wp-dyn/content/article/2006/06/29/AR2006062901912.html
This
Week’s Action Item
Support
public funding of elections
Now that the
Supreme Court has reaffirmed that spending limits are an unconstitutional
infringement on the First Amendment, the importance of public funding of
elections has become even more important as the best way to limit the polluting
influence of corporate money in politics.
As This Week’s
Action Item, we encourage you to check the new “Voters First” pledge unveiled
by Common Cause, Public Campaign Action Fund, Public Citizen, and the U.S.
Public Interest Research Group (US PIRG)
The “Voters
First” pledge, which the groups will ask all congressional candidates to sign,
includes “specific policies to make elections fair for all, restore
congressional accountability, and protect voters’ right-to-know. Activists will
use the pledge in congressional districts across the country to press
candidates for federal office to support a comprehensive agenda to clean up
Congress.”
Specifically,
The Voters First Pledge calls on candidates to put voters ahead of lobbyists by
supporting legislation to:
1. Make
Elections Fair. Establish and enforce campaign spending limits by providing a
set amount of public funding for all candidates who agree to take no private
contributions.
2. Restore
Accountability. Pass and enforce meaningful new restrictions on gifts and
travel from lobbyists and other powerful interests for members of Congress.
3. Protect
Voters’ Right-To-Know. Require full disclosure on the internet of all
lobbyists’ contributions and any fundraising help members of Congress get from
lobbyists.
To find out
how you can get involved see: http://www.commoncause.org/site/apps/nl/content2.asp?c=dkLNK1MQIwG&b=194883&ct=2673077
Help
spread the word about The People's Business
We encourage
you to tell everyone you know about the Citizen Works book, The People's
Business and to distribute promotional flyers locally. Flyers are available
online, or if you would like to have some flyers mailed to you, please e-mail news@citizenworks.org.
The People's
Business, which is available in stores everywhere, examines the very nature of
corporate power, presenting a range of strategies to curtail it, explaining how
ordinary people can restore citizen control. Bringing together the
recommendations of the Citizen Works Corporate Reform Commission—a coalition of
leading authors, activists, scholars, and professionals—The People's Business
is a vital, clearheaded plan for strengthening individual rights, transforming
corporations into engines of public prosperity, and creating a sustainable,
life-respecting society where the people have the power.
Bolstered with
relevant history and examples, The People's Business is a lively book that will
appeal both to deeply-committed long-time activists looking for a coherent approach
in the struggle for corporate accountability as well as thoughtful citizens
everywhere who may be looking for immediate measures that serve as effective
means of corporate reform.
It is our hope
that The People's Business will serve as an important tool in educating people
about what they can do to challenge corporate power. But it will only be an
important tool if people actually read it. That's why we need your help in
spreading the word!
Why not pick
up your copy at a bookstore today if you haven't already?
MAKE YOUR
VOICE HEARD
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*
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