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Responding to the Abramoff scandal, House and Senate Republican leaders last week embraced the idea of developing a set of reforms to make federal lobbying more transparent and to reduce the ability of lobbyists to do favors for lawmakers.
Senate Majority Bill Frist (R-Tenn.) said that the Senate would consider changes to lobbying laws by the end of February.
On the House side, meanwhile, lawmakers are already beginning to float a wide range of ideas. House Rules Committee Chairman David Dreier (R-Calif.), who will draft the House bill, said he wanted a ban on privately-funded travel for lawmakers. He also said he would focus on improving lobbying disclosure, which would include disclosure of lobbyist campaign contributions and fundraising activities.
"Greater transparency, greater disclosure...that is first and foremost," Dreier said. "We need to expand the respect that the American people have for the institution, which is not all that high right now." Under current law, lobbyists have to disclose their lobbying activities every six months. This, however, does not cover campaign contributions and fundraising activities.
Increased disclosure seems to be the most popular idea floating around Washington right now. Other ideas on the table include: banning lobbyist gifts (which are currently capped at $100 per year), expanding the definition of lobbying to also include grassroots lobbying (which is defined as issuing "calls to action" or action alerts), doubling fines, and increasing the time former legislators have to wait to lobby after leaving Congress from one to two years.
One Rep., Mark Kennedy (R-Minn.) has even proposed banning former lawmakers from working as lobbyists altogether.
"Having a starker separation between serving and lobbying is something that I think would contribute to the quality of work we do in Congress," said Kennedy.
For a helpful overview of the two leading proposals from OMB Watch, see Abramoff Plea Brings New Lobby Reform Bills. For a simpler chart, see USA Today's Jim Drinkard's Lawmakers move to cut lobbyists' influence.
One problem, however, could be enforcement. According to the Center, the Senate Office of Public Records employs only 11 people and the House office has less than 35 employees currently monitoring lobbying. By comparison, the Federal Elections Commission has 391 employees and a $52 million budget to monitor campaign finance laws. Additionally, Congressional ethics committees have been notably ineffective in recent years.
"The House ethics committee is dead, and the Senate committee is not known to be effective," said Larry Noble, director of the non-partisan Center for Responsive Politics. "No matter what rules they put in, if they don't get a working enforcement mechanism, it's going to be meaningless."
One proposal, suggested by Common Cause, would be to develop an Independent Ethics Commission to handle Congressional ethics investigations. Common cause is planning to convene a panel of ethics to discuss this idea on January 23.
Another question is how sincere Republican leaders of Congress actually are about reform. For example, consider Rep. John Boehner (R-Ohio), who is currently campaigning to be House Majority Leader.
Ohio Republican Rep. John Boehner called for outlawing the earmarking of federal funds for special-interest projects sought by lobbyists, which do not go through the regular oversight process in Congress. Boehner, who has served in the House for 16 years, said he was calling for "a ban on unauthorized earmarks for private entities that serve private interests at the expense of the public interest…We all need to acknowledge that the system is spinning out of control and that it's time to do something about it."
Yet Boehner, who is the chairman of the House Education and Workforce Committee, also runs the Freedom Project, a political action committee which has raised $5.94 million over 10 years and has contributed $3.26 million to fellow Republicans. The PAC is lobbyist financed, has a lobbyist as treasurer, and the board is entirely comprised of lobbyists. Since 1998, lobbyists have served as treasurers of 79 lawmakers' campaign committees and leadership PACs, according to the Center for Public Integrity.
Another problem is that powerful lobbying organizations, like the United States Chamber of Commerce, are lining up to oppose potential reforms. "Requiring us to write down every meeting we have with staff and members—what will the public get from that? Nothing," said Paul A. Miller, president of the American League of Lobbyists.
Public opinion, however, is strongly on the side of lobbying reform. Nine in ten Americans think it should be illegal for members of Congress to receive any gifts or trips from lobbyists. And two out of three think that lobbyists should not be allowed to make campaign contributions. Additionally 54 percent think it should be illegal for lobbyists to organize fundraisers for members of Congress. A separate poll, meanwhile, found that 58 percent of Americans think that there is "widespread corruption in Washington," while only a third (34 percent), think corruption is limited to a few bad apples.
For more, see:
Brett M. Pfeffer, a former aide to Rep. William J. Jefferson (D-La.) who left to become the president of a Virginia investment firm, pleaded guilty last week to bribing Rep. Jefferson to promote business ventures in Africa. Pfeffer, who pleaded guilty to conspiracy to commit bribery of a public official and aiding and abetting the bribery of a public official in 2004 and 2005, worked as Jefferson's legislative aide from 1995 to 1998. He could face up to 20 years in prison.
Pfeffer testified that Jefferson agreed to use his influence to help Pfeffer's high-tech ventures in Africa in exchange for a 5 to 7 percent stake in one of the companies, which were providing Cable TV and Internet in Ghana and Nigeria.
Jefferson, a senior member of the Ways and Means Committee and the co-chairman of the congressional Africa Trade and Investment Caucus and the caucuses on Brazil and Nigeria, also asked that two of his family members be put the on the companies' payrolls, according to Pfeffer's court testimony.
Pfeffer recounted in court how his former Capitol Hill boss, in exchange for using his congressional influence in Africa, demanded a 5 to 7 percent stake in one of two new companies Pfeffer's firm was investing in. The companies were to provide high-speed Internet and cable TV service in Ghana and Nigeria.
According to court documents, "Pfeffer understood that [Jefferson] was soliciting a bribe in exchange for [his] official assistance."
Jefferson, meanwhile, claims that he has done nothing wrong and that he was perplexed by Pfeffer's guilty plea.
For more, see:
In what could be the first of many laws like it across the country, the Maryland legislature last week approved a law that requires employers with at least 10,00 employees in the state to spend at least 8 percent of their payroll on health insurance. Otherwise, they will be forced to pay the remainder into a state Medicaid fund.
The bill is designed large to apply to Wal-Mart, one of four employees in the state of Maryland with at least 10,000 employers and the only one not to meet the threshold for healthcare spending (the other four are: Johns Hopkins University, the grocery chain Giant Food and the military contractor Northrop Grumman). Wal-Mart is notorious for having its workers rely on Medicaid for health care instead of providing adequate coverage for its workers."This is not a Wal-Mart bill, it's a Medicaid bill," said State Senator Gloria G. Lawlah (D), who sponsored the legislation, called the Fare Share Health Care bill. "This bill says to the conglomerates, 'Don't dump the employees that you refuse to insure into our Medicaid systems.'"
Because Wal-Mart abuses Medicaid systems in all states, many believe this will spur similar legislation across the country.
"You're going to see similar legislation being introduced," said Ronald Pollack, executive director of Families USA, a nonprofit health advocacy organization, "and debated in at least three dozen more states, and at least some of those states will end up also requiring large employers to provide health care coverage."
The AFL-CIO said it would push similar legislation in more than 30 states this year. "An explicit part of the program is to put pressure on organizations nationally to do national reform,' said Gerald Shea, government-affairs adviser to AFL-CIO President John Sweeney. 'If people can't manage the political will to do something nationally to solve this problem, then would they like to deal with us in 50 different ways in 50 different states?'"
Wal-Mart, however, may challenge the Maryland law in court. Meanwhile, the Maryland Chamber of Commerce has argued that the law conflicts with the federal Employee Retirement Income Security Act.
For more, see
The Securities and Exchange Commission last week released a proposal to require companies to clearly disclose the total compensation package for the top five executives in one "total pay" number, potentially ending the currently confusing way that companies account for executive compensation.
Many companies list one number for salary, but that doesn't include other forms of compensation, such as corporate jets and apartments, club memberships, stock options, and other sundry perks.
SEC Chairman Christopher Cox has argued that more disclosure will help shareholders discipline excessive compensation.
"The prevalent forms of compensation have migrated away from what is transparent to what is opaque," Cox said. "The market is capable of disciplining excessive compensation, provided that the market has adequate information. Too often in recent days, however, shareholders have been surprised to learn after the fact what their executives are being paid."
In addition to providing a "total pay" number, companies would also have to provide statistical tables with retirement plans and also provide language that justifies compensation packages. Companies would also have to list the precise value of stock options given to executives.
According to the Corporate Library, compensation for chief executives at 2,000 of the biggest companies was up 30 percent in 2004, even more than the 15 percent jump in 2003, which was even more than the 9.5 percent jump in 2002.
According to Business Week, average pay in 2004 was up another 15%—to $9.6 million—and nearly 40 executives took home more than $20 million (and that was without windfall stock options). Average worker pay, however, only rose 2.9%, to $33,176 in 2004. Meanwhile the percentage of corporate profits going directly into the pockets of the five executives more than doubled between 1993 and 2003, growing from 4.8 percent to 10.3 percent.
And according to Lucian A. Bebchuk of Harvard and Yaniv Grinstein of Cornell, ten percent of all corporate earnings went to the top five executives in 2003, up from 1993.
The question remains as to whether investors will be able to make use of these numbers. For years now, investors have been complaining about runaway executive pay. But salaries continue to rise.
The problem remains that because CEOs pretty much hand-select their board of directors, directors are often personal friends. At the very least, the directors owe their lucrative positions on the board to the CEO, who also serves as the chairman of the board at 75 percent of U.S. companies. Virtually all shareholder board elections are run Soviet-style, with one and only one slate of directors, and shareholders who want to nominate somebody else have to wage an incredibly costly and virtually impossible campaign.
Cox seems to recognize this in principle.
"The shareholders own the company," Cox told reporters. "They have a right to ensure that their money is being wisely spent. And that's just as true when it comes to how much executives are paid as it is to how much they're paying for their raw materials and their inventory."
However, he has yet to support any proposal that would give shareholders any rights in nominating candidates to the board of directors, as his predecessor, William Donaldson had proposed to do.
Total board pay rose 20 percent last year, bringing median total board compensation to $801,500, according to a Corporate Library survey for the 2,000 largest public companies. Individual directors, meanwhile, saw their compensation rise 16.5 percent.
Paul Hodgson, senior research associate at the Corporate Library, said the increased compensation reflected increased hours board directors were putting in.
According to an NACD survey, outside directors spent 190.9 total hours in 2005 on board duties for each board they serve on, up from 155.8 hours in 2003.
For more, see:
Last week, the Securities and Exchange Commission announced that it would require companies to disclose a total figure for executive compensation (See item 4). This disclosure is helpful. It is a welcome step to disciplining CEO pay.
But it is not enough. Shareholders have known for years that CEOs are making too much money. Yet salaries keep going up and up, despite shareholder cries for reform.
The reason is simple. Because CEOs pretty much hand-select their board of directors, directors are often personal friends. At the very least, the directors owe their lucrative positions on the board to the CEO, who also serves as the chairman of the board at 75 percent of U.S. companies. Virtually all shareholder board elections are run Soviet-style, with one and only one slate of directors, and shareholders who want to nominate somebody else have to wage an incredibly costly and virtually impossible campaign.
Cox seems to recognize this in principle. "The shareholders own the company," Cox told reporters. "They have a right to ensure that their money is being wisely spent. And that's just as true when it comes to how much executives are paid as it is to how much they're paying for their raw materials and their inventory."
However, he has yet to support any proposal that would give shareholders any rights in nominating candidates to the board of directors, as his predecessor, William Donaldson had proposed to do.
As this week's action, please let Mr. Cox know that if he's serious about executive pay, he needs to give shareholders more rights to actually hold directors accountable for runaway executive pay. One solution is to give shareholders improved rights to nominate candidates for the board of directors. Another is to allow shareholders to vote directly on executive compensation.
To contact Mr. Cox, e-mail chairmanoffice@sec.gov, or call (202) 551-5400.
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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.
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