Since 2000, the portion of total national income going to American workers has dropped farther than in other rich nations. A steadily larger portion has gone into corporate profits, which have been reflected in higher share prices. But a buoyant stock market doesn’t help most Americans. The richest 1 percent now own half the value of all shares of stock; the richest 10 percent, 92 percent.
Those higher share prices have come out of the pockets of workers. Daniel Greenwald at M.I.T.’s Sloan School of Management, Martin Lettau at the University of California’s Haas School of Business and Sydney Ludvigson at N.Y.U. found that from 1952 to 1988, economic growth accounted for all the rise in stock values, but from 1989 to 2017, growth accounted for just 24 percent. Most came from “reallocated rents to shareholders and away from labor compensation” — that is, from workers.
Also on CEO pay: One step in that direction would be quick action on legislation that leading House and Senate progressives introduced this past fall. The Tax Excessive CEO Pay Act — introduced by representatives Barbara Lee and Rashida Tlaib and senators Bernie Sanders and Elizabeth Warren — would raise the corporate tax rate on corporations that pay their top over 50 times what they pay their workers. In 2018, 50 major U.S. corporations paid their top execs over 1,000 times what they paid their most typical workers. We could do bolder still. We could deny government contracts and subsidies to corporations with wide gaps between executive and worker pay. Our tax dollars should not subsidize — in any way — the exploitation of working people. Or as an excellent New York Times analysis has just put it: “For the voices of workers to be heard, the influence of the wealthy must be curbed.”
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When Bosses Shared Their Profits Since the 1980s, profit-sharing has declined. It deserves to make a comeback.
By Robert B. Reich. a professor of public policy at the University of California Berkeley and a former U.S. secretary of labor. June 25, 2020, NYTimes
After the bruising crises we’re now going through, it would be wonderful if we could somehow emerge a fairer nation. One possibility is to revive an old idea: sharing the profits.
The original idea for businesses to share profits with workers emerged from the tumultuous period when America shifted from farm to factory. In December 1916, the Bureau of Labor Statistics issued a report on profit-sharing, suggesting it as a way to reduce the “frequent and often violent disputes” between employers and workers, thereby “fostering the development of a larger spirit of harmony and cooperation, and resulting, incidentally, in greater efficiency and larger gains.”
That same year, Sears, Roebuck and Co., one of America’s largest corporations, with 30,000 to 40,000 employees, announced a major experiment in profit-sharing. The company would contribute 5 percent of net earnings, without deduction of dividends to shareholders, into a profit-sharing fund. (Eventually the company earmarked 10 percent of pretax earnings for the plan.) Employees who wished to participate would contribute 5 percent of their salaries. All would be invested in shares of Sears stock. The plan’s purpose, according to The New York Times, was to “to engender loyalty and harmony between employer and employee.” In reviewing its first three years, The Timesnoted that92 percent of Sears’s employees had joined up and that “the participating employee not only found an ever-increasing sum of money to his credit, but eventually discovered he was a shareholder in the corporation, with a steadily growing amount of stock to his name.”
Sears’s plan was admirably egalitarian. Distributions of shares were based on years of service, not rank, and the longest-serving workers received nearly $3 for every dollar they contributed. By the 1950s, Sears workers owned a quarter of the company. By 1968, the typical Sears salesman could retire with a nest egg worth well over $1 million in today’s dollars. Other companies that joined the profit-sharing movement included Procter & Gamble, Pillsbury, Kodak, S.C. Johnson, Hallmark Cards and U.S. Steel — some because it seemed morally right, others because it seemed a means to higher productivity.
Profit-sharing did give workers an incentive to be more productive. It also reduced the need for layoffs during recessions, because payroll costs dropped as profits did. But it subjected workers to the risk that when profits were down, their paychecks would shrink. And if a company went bankrupt, they’d lose all their investments in it. (Sears phased out its profit-sharing plan in the 1970s and filed for bankruptcy protection in 2018.) The best profit-sharing plans came in the form of cash bonuses that employees could invest however they wished, on top of predictable base wages.
Profit-sharing fit perfectly with the evolution of the American corporation. By the 1950s, most employees of large companies had spent their entire working lives with the company. Companies and their employees were rooted in the same communities. C.E.O.s typically worked their way up, and once at the top rarely earned more than 20 times the average wage of their employees (now they’re often paid more than 300 times more). Over a third of private-sector workers were unionized. In 1958 the United Auto Workers demanded that the nation’s automakers share their profits with their workers.
Some remnants of profit-sharing remain today. Both Steelcase Inc., an office-furniture maker in Grand Rapids, Mich., and the Lincoln Electric Company, a Cleveland-based manufacturer of welding equipment, tie major portions of annual wages to profits. Publix Super Markets, which operates in the Southeast, and W.L. Gore, the maker of Gore-Tex, are owned by employee stock ownership plans. America still harbors small worker cooperatives owned and operated by their employees, such as the Cheese Board Collective in my hometown Berkeley, Calif.
But since the 1980s, profit-sharing has almost disappeared from large corporations. That’s largely because of a change in the American corporation that began with a wave of hostile takeovers and corporate restructurings in the 1980s. Raiders like Carl Icahn, Ivan Boesky and Michael Milken targeted companies they thought could deliver higher returns if their costs were cut. Since payrolls were the highest cost, raiders set about firing workers, cutting pay, automating as many jobs as possible, fighting unions, moving jobs to states with lower labor costs and outsourcing jobs abroad. To prevent being taken over, C.E.O.s began doing the same.
This marked the end of most profit-sharing with workers. Paradoxically, it was the beginning of profit-sharing with top executives and “talent.” Big Wall Street banks, hedge funds and private-equity funds began doling out bonuses, stock and stock options to lure and keep the people they wanted. They were soon followed by high-tech companies, movie studios and start-ups of all kinds.More from “The America We Need”The Black-White Wage Gap Is as Big as It Was in 1950By David LeonhardtAre You Willing to Give Up Your Privilege?By Darren WalkerThe Jobs We NeedBy The Editorial Board
Even before tens of millions of Americans lost their jobs and incomes in the current pandemic, the pay of the typical worker had barely risen since the mid-1970s, adjusted for inflation. Meanwhile, ever-greater wealth continues to concentrate at the very top.
Since 2000, the portion of total national income going to American workers has dropped farther than in other rich nations. A steadily larger portion has gone into corporate profits, which have been reflected in higher share prices. But a buoyant stock market doesn’t help most Americans. The richest 1 percent now own half the value of all shares of stock; the richest 10 percent, 92 percent.
Those higher share prices have come out of the pockets of workers. Daniel Greenwald at M.I.T.’s Sloan School of Management, Martin Lettau at the University of California’s Haas School of Business and Sydney Ludvigson at N.Y.U. found that from 1952 to 1988, economic growth accounted for all the rise in stock values, but from 1989 to 2017, growth accounted for just 24 percent. Most came from “reallocated rents to shareholders and away from labor compensation” — that is, from workers.
Jeff Bezos, who now owns 11.1 percent of Amazon’s shares of stock, is worth $165 billion overall. Other top Amazon executives hold hundreds of millions of dollars of Amazon shares. But most of Amazon’s employees, including warehouse workers, don’t share in the same bounty.
If Amazon’s 840,000 employees owned the same proportion of their employer’s stock as Sears workers did in the 1950s — a quarter of the company — each would now own shares worth an average of about $386,904.
There are many ways to encourage profit-sharing. During this pandemic, for example, Congress should prohibit the Treasury or the Federal Reserve from bailing out any corporation that doesn’t share its profits with its employees.
It’s impossible to predict what kind of America will emerge from the crises we’re now experiencing, but the four-decade trend toward higher profits and lower wages is unsustainable, economically and politically. Sharing the profits with all workers is a logical and necessary first step to making capitalism work for the many, not the few.
Mr. Reich is a professor of public policy at Berkeley, a former U.S. secretary of labor and the author most recently of “The System: Who Rigged It, How We Fix It.”
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Victor J. Blue/BloombergAmerica’s business leaders once bragged
about how well they looked after their employees, and how
much they contributed to society in taxes.But in recent decades— as the U.S.
economy expanded and C.E.O. salaries skyrocketed—
workers have been left behind.
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The Jobs We Need by The Editorial Board, The New York Times, June 24, 2020
Over the past four decades, American workers have suffered a devastating loss of economic power, manifest in their wages, benefits and working conditions. The annual economic output of the United States has almost tripled, but, with the help of policymakers from both political parties, the wealthy hoarded the fruits.
In the nation’s slaughterhouses, the average worker in 1982 made $24 an hour in inflation-adjusted dollars, or $50,000 a year. Today the average meatpacker processes significantly more meat — and makes less than $14 an hour.
The hundreds of thousands of home health care aides, often female, often minorities, who care for a nation of aging baby boomers rarely receive paid time to care for their own families.
Even in the high-flying technology sector, companies have found ways to leave their workers behind. More than half of the people who work for Google do not actually work for Google. They are classified as contractors, which means they do not need to be treated as employees.
Picture the nation as a pirate crew: In recent decades, the owners of the ship have gradually claimed a larger share of booty at the expense of the crew. The annual sum that has shifted from workers to owners now tops $1 trillion.
Or consider the power shift from the perspective of an individual worker. If income had kept pace with overall economic growth since 1970, Americans in the bottom 90 percent of the income distribution would be making an extra $12,000 per year, on average. In effect, every American worker in the bottom 90 percent of the income distribution is sending an annual check for $12,000 to a richer person in the top 10 percent.
American workers need a raise. But it is not enough to transfer wealth from the rich to the desperate. In confronting the Great Depression, President Franklin Delano Roosevelt understood that a sustainable improvement in the quality of most American lives required an overhaul of the institutions of government.
“These economic royalists complain that we seek to overthrow the institutions of America,” Roosevelt said in 1936. “What they really complain of is that we seek to take away their power.”
Now as then, the profound inequities of American life are the result of laws written at the behest of the wealthy and public institutions managed in their interest. Now as then, the nation’s economic problems are rooted in political problems. And now as then, the revival of broad prosperity — and the stability of American democracy — require the imposition of limits on the political influence of the wealthy. It requires the government to serve the interests of the governed.
Americans especially need to confront the fact that minorities are disproportionately the victims of economic inequality — the people most often denied the dignity of a decent wage. That inequity is the result of historic and continuing racism, and it should be addressed with the same sense of fierce urgency that has motivated the wave of protests against overt displays of racism.
The Rev. Dr. William Barber II, a civil-rights leader who emphasizes the foundational importance of economic justice, has pointed to the constitution that North Carolina adopted after the Civil War. The document affirms the rights of life, liberty and the pursuit of happiness. But African-Americans were among the state’s legislators for the first time, and the former slaves got another principle enshrined as well: that workers are entitled to “the fruits of their own labor.” They understood that economic security makes other freedoms meaningful.
It is time to ensure that all Americans can share in the nation’s prosperity.
In February 1970, student protesters broke into a Bank of America branch near the University of California, Santa Barbara. They scattered the bank’s files and pushed a burning dumpster into the lobby, setting the building on fire.
One protester explained, “It was the biggest capitalist thing around.”
California’s governor, Ronald Reagan, condemning the protesters as “cowardly little bums,” sent in the National Guard. For Reagan and others, the bank fire was more than an isolated act of vandalism. Lewis F. Powell, a prominent corporate lawyer, described it as part of a larger assault on the business of America in a 1971 memo for the U.S. Chamber of Commerce.
Powell listed threats including Ralph Nader’s campaign for consumer safety regulations, the rise of the environmental movement and the expansion of social welfare programs. Warning that “business and the enterprise system are in deep trouble, and the hour is late,” he urged businesses to fight.
Corporations began to invest in politics on an unprecedented scale. The beer magnate Joseph Coors said Powell’s memo prompted him to create the Heritage Foundation, a conservative think tank that greatly influenced Reagan’s presidential policy agenda. The National Association of Manufacturers moved to Washington from New York. Blue chips including General Electric, Exxon and IBM funded a “boot camp” where economists lectured federal judges on free enterprise. By 1990, 40 percent of the judiciary had been re-educated.
Powell continued his corporate advocacy as a member of the Supreme Court, which he joined in 1972, writing important decisions removing restraints on corporate concentration and campaign spending.
The counterrevolutionaries embraced a radical view of the role of corporations: “The social responsibility of business is to increase its profits,” as the economist Milton Friedman wrote in an influential 1970 essay in The New York Times Magazine.
Workers leaving a General Electric plant in the 1940s.
A turbine for a ship being built by General Electric at its plant in Lynn, Mass. in August 1954. FPG/GETTY IMAGES
A worker at the General Electric plant in Hudson Falls, N.Y., in 1973.THE NEW YORK TIMES
Images of Jack Welch on screens above the trading floor of the New York Stock Exchange in March. RICHARD DREW/ASSOCIATED PRESS
General Electric, the quintessential American industrial conglomerate, had boasted in a 1953 report that it paid a lot of money in federal taxes.
It also boasted about its payments to suppliers, its spending on wages and benefits and its investments in long-term research.
The report was explicit: The company’s income was shared among “those whose services of various kinds made this output possible.” GE understood its success as intertwined with the health of the government, the prosperity of its workforce and the growth of the U.S. economy.
Under Jack Welch, GE’s chairman from 1981 to 2001,the company’s primary objective shifted from making light bulbs to making money. There was no more boasting about paying taxes.
During the first three years of Mr. Welch’s tenure, G.E. recorded $6.5 billion in profits and didn’t pay the federal government a single penny in corporate income taxes. Instead of boasting about paying workers, Mr. Welch boasted about layoffs.
This unapologetic pursuit of profit reached new heights with the deregulation of financial markets.
Lending surged as the federal government lifted strict limits on interest rates and on foreign investment in the United States. Investors bought companies and squeezed them like lemons, while surviving firms scrambled to keep shareholders happy. In 1982, the Securities and Exchange Commission — led by a Wall Street banker for the first time since the Great Depression — provided a new way for corporations to shovel money to shareholders by voting to let companies buy back shares of their own stock.
Companies also began to compensate executives primarily with options to purchase stock. The chief executives of large American corporations made about 20 times more than the median worker at those companies in the mid-1960s. By 2018, the gap was some 278 times.
Meanwhile, the union movement declined, removing an important counterweight to corporate power. Unions lost traction partly under the weight of their own shortcomings, including endemic corruption and a focus on preserving employment in declining industries rather than expanding membership in growing industries.
Companies also became more militant in their opposition to unions. Kate Bronfenbrenner, a professor at Cornell University, surveyed workers who had participated in unionization drives between 1999 and 2003 and found 57 percent of their employers had threatened to close the business if a union was formed; 47 percent threatened to cut wages or benefits; and 34 percent fired workers who supported unionization.
To sustain the goals of the private sector at the expense of the public interest, corporations poured money into lobbying. They told policymakers that the decline in the fortunes of American workers was the tough-but-fair result of market forces.
“People will get paid on how valuable they are to the enterprise,” John Snow, an economist then serving as Treasury secretary under President George W. Bush, explained in 2006. On this theory, thanks to new technologies and increased foreign competition, most Americans just weren’t worth what they used to be.More from “The America We Need”
When Bosses Shared Their ProfitsBy Robert B. Reich
The Black-White Wage Gap Is as Big as It Was in 1950 By David Leonhardt
Are You Willing to Give Up Your Privilege?By Darren Walker
Politicians didn’t pay much attention to the flaws in that logic: that U.S. workers have fared more poorly than those in other nations, and that wage growth also has lagged far behind the rising value of the average worker’s output. In a recent study, the Harvard economists Anna Stansbury and Lawrence Summers tied those trends to the shift in political power from workers to employers.
Wages are substantially determined by a tug of war between workers and employers and, with the help of government, employers have been winning. The hostility of the Republican Party was nothing new, but Democrats also parted ways with workers. As Americans moved from thinking of themselves primarily as workers to thinking of themselves primarily as consumers, the Democratic Party recast itself.
“I’d love the Teamsters to be worse off,” said Alfred Kahn, an economic adviser to President Jimmy Carter. “I’d love the automobile workers to be worse off.”
Kahn and other economists insisted that reducing union wages would benefit everyone else. And as unions faded, the government demurred from championing the rights of workers. The purchasing power of the federal minimum wage peaked in 1968; it’s been falling ever since. The Economic Policy Institute estimates that employers illegally deprive workers of more than $50 billion in wages each year by underpaying them or requiring unpaid work; violators are rarely punished.
Workers could track the loss of power in their paychecks: Weekly wages have stagnated since the late 1970s. Newer employers, like mobile phone companies, simply refused to treat workers in the same way as older employers like the landline telephone companies. And old-line companies that survived, like the heavy equipment maker Caterpillar, gradually forced workers to accept less compensation.
“Working on the railroad is a mentally taxing and challenging job; I would say it has gotten harder and the compensation is now less than it once was,” said Daniel Lyon, a 63-year-old locomotive engineer from Cheyenne, Wyo. “And the cost of everything has gone up all these years.”
Employers also took advantage of the growing number of women in the work force. As the share of female workers in a given industry increased, wages fell for employees of both sexes.
Over the past decade, as the gilded class enjoyed the longest period of uninterrupted economic growth in American history, many middle- and lower-income Americans borrowed to maintain their standard of living. Household debt as a share of the economy has roughly doubled since 1980. Many less affluent Americans effectively are paying wealthier Americans for the money that they once were paid in wages.
In recent months, the government has reinforced those patterns, responding to the coronavirus pandemic by pumping into the economy trillions of dollars aimed mostly at preserving wealth rather than jobs. The government has backstopped corporate borrowing while allowing companies to lay off millions of workers. As a result, stock prices have soared even as people stand in long lines at unemployment offices and food pantries.
And those who waited longest for new opportunities after the 2008 financial crisis have often been among the first to lose their jobs. Black people and women have been especially hard-hit. Astonishingly, just 54 percent of black men in America were employed in May, up slightly from a modern low of 53 percent in April.
The coronavirus recession has driven unemployment in America to the highest levels since the Great Depression. For many workers, for many years to come, the limits of the political horizon may seem to be defined by the bitter truth that a poorly paid job is better than none.
Yet this is the moment to insist that workers deserve more.
The nation has ample resources to ensure that every worker is paid enough to afford housing, food and other necessities of daily life. Anything less is intolerable. Yet in 2017, more than 17 million workers — disproportionately minorities and women — labored for wages too meager to lift their households above the federal poverty line.
Nina Pavlovskaya waits in line for groceries at a food bank in Brooklyn.TODD HEISLER/THE NEW YORK TIMES
Trabon Dale, 12, and his dad, Ismail Dale, in Brooklyn in March. Ismail rearranged his schedule and lost work because of school closures related to the virus.HILARY SWIFT FOR THE NEW YORK TIMES
Many workers similarly are deprived of benefits that federal law ought to guarantee. Millions lack affordable health insurance.
Many large employers, particularly in the restaurant and retail sectors, do not provide paid sick leave to all their workers, a refusal that is not only callous, but has endangered workers and customers during the pandemic.
The United States is the only developed democracy that does not require companies to provide paid time off for workers to care for a baby or a dying parent.
When people are deprived of means and opportunity, society is deprived of their potential contributions.
In June 1933, President Roosevelt called on employers to embrace an “industrial covenant” — a commitment to provide “living wages and sustained employment.” He argued this was greatly in the interest of industry, because well-paid workers would become customers, too.
Almost a century later, employers continue to resist that basic logic, seeking short-term savings at the expense of their own long-term prosperity.
Change is possible. A government more inclined to help workers would have ample opportunity. But as in the early 1930s, political change must proceed economic change. For the voices of workers to be heard, the influence of the wealthy must be curbed.
The power of the wealthy also has been amplified by the willingness of many Americans to accept cheap goods as a substitute for good jobs. A more equitable society requires a willingness to pay a little more for the burger or the bicycle — and for the welfare of the Americans who make and sell those products.
Americans need robust minimum standards for employee compensation and benefits, and the revitalization of institutions to safeguard those guarantees. The federal minimum wage needs to be raised to $15 an hour, with regular adjustments for inflation. Corporations have long warned that raising the minimum, now $7.25 an hour, will force companies to get rid of workers.
But a growing number of state and local governments have made the leap, with no evidence of dire consequences. If McDonald’s can turn a profit in Denmark, where even the most junior workers earn the equivalent of more than $20 an hour, it can turn a profit paying $15 an hour in America.
Lyndon Johnson fought for the creation of a federal minimum wage as a first-term congressman in 1938. Three decades later, as president, he signed an increase in the minimum wage to what remains the highest level on record, after adjusting for inflation. The purpose, Johnson said, was “to bring a larger piece of this country’s prosperity, and a greater share of personal dignity, to millions of our workers, their wives and their children. And for me, frankly, that is what being president is all about.”
Americans also need the government to restrain the power of corporations. The dominance of a few large companies in a growing number of industries limits wage growth because workers have fewer alternatives, a problem that could be checked by a revival of antitrust enforcement. Companies also have made a mockery of legal protections for employees by classifying a growing share of workers as contractors, a farce embodied by Uber’s fierce insistence that Uber drivers are not Uber drivers.
The government can also make it easier for workers to switch jobs, which is often the best route upward. Ensuring that workers are not dependent on employers for affordable health insurance would make a big difference.
The government also should prohibit noncompete clauses, which impose contractual limitations on job-hopping. Once reserved for executives and other highly paid employees, the practice has become widespread, binding an estimated 30 million workers. One measure of the madness: A recent survey found 30 percent of the nation’s hair salons require noncompete clauses.
There are signs that some corporate leaders recognize the need for change. The Business Roundtable, a trade group for some of the nation’s largest companies, issued a new version of its mission statement last year acknowledging that corporations have responsibilities beyond making money. It is a purely symbolic gesture, but it points in the necessary direction.
Policymakers can encourage that new direction, for example by reversing the legalization of share buybacks and policing the classification of workers as independent contractors. And workers who want to join unions should be able to do so without the fear of reprisals.
The jobs that Americans do will continue to change as technology improves and tastes drift. But the need to work will not change, nor will the basic imperative to ensure that workers are compensated fairly and treated with dignity.
We live in an era of profits without broad prosperity, but the power to rewrite the rules of the market is in our hands. In 2016, Dr. Barber was arrested in Durham, N.C., while protesting for a $15 minimum wage. He said that he was pursuing the fulfillment of the language written into the state’s constitution by freed slaves more than 150 years ago.
The injustice remains. So does the opportunity.
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CEO Pay
Still More Reasons to Defund Our CEOs
Their relentless rush to hit the pay jackpot is fueling the calamities that confront us.
BLOGGING OUR GREAT DIVIDE
JUNE 26, 2020
America’s dirtiest three-letter word may now be “CEO,” and our ongoing economic meltdown is only making that tag even dirtier. Chef executives the nation over have spent this past spring scheming to keep their pockets stuffed while their workers suffer wage cuts, layoffs, and even death by Covid-19.
Not all CEOs, of course. Flacks for Corporate America would be overjoyed if we kept our focus on top execs like the Texas Roadhouse restaurant chain’s Kent Taylor, a big-hearted boss with a gushing profile in the latest People magazine. Taylor has outfitted workers at his 600 outlets with a full complement of protective gear, avoided pay cuts and layoffs, and donated his annual pay and $5 million of his personal fortune to helping employees with their rent, mortgages, and more.
But you won’t find many Kent Taylors out across the corporate landscape. Much more typical have been execs like Kenneth Martindale, the CEO at GNC, the vitamin and nutrition store chain. GNC filed for bankruptcy June 23. Five days earlier, the company generously handed Martindale a $2.2-million cash bonus. Nearly $2 million more in cash bonuses went to other top GNC execs.
Not a bad haul for an executive team that had been borrowing big bucks to buy back GNC shares of stock on the open market, a maneuver designed to shore up sagging share prices — and pump up the value of the executives’ own stock-based compensation.
This spring, with the pandemic crashing store sales, GNC suddenly found itself unable to pay off the loans that bankrolled the share buybacks. Bankruptcy became unavoidable. The company’s execs now plan to wipe out jobs at 1,200 of its U.S. stores as they search for a new buyer of the mess they’ve created.
The GNC story is repeating all over. Workers in companies tottering on the brink of bankruptcy see pink slips and pension cuts in their future. CEOs at these same firms see a shot at making lots of high-pay hay while the sun still shines.
“Corporate boards are handing out millions to top executives before their companies seek bankruptcy protection,” sums up a New York Times analysis, “and courts can’t do much about it.”FOR MINIMUM DECENCYwe need a maximum wage
The pre-bankruptcy bonuses involve some of America’s most familiar corporate brands. J.C. Penny’s chief exec, for instance, pocketed $4.5 million in bonus just before the company entered bankruptcy proceedings that are going to leave at least 154 stores shut down.
Top execs at companies not knocking on bankruptcy’s door are playing self-aggrandizing games of a different sort. Their challenge: grabbing the lavish “performance-based” rewards they’ve negotiated into their executive pay deals at a time when a down economy has the vast majority of corporate enterprises struggling to meet their sales and profit targets.
Most executive pay deals at major corporations reward executives with shares of stock — or options to buy stock at a below-market price — if the execs meet various “performance” benchmarks. In a growing economy, with sales and share prices swelling, execs have little problem meeting these performance benchmarks. Their resulting rewards can often swell into the tens of millions.
But these same benchmarks become unreachable when economies turn sour. Executives suddenly see their promised windfalls seeming certain to evaporate — unless the execs can get their corporate boards to exercise a little “discretion,” the corporate codeword for dumbing down performance goals so execs can reap the windfalls they expected and still feel they fully deserve.
Analysts at Willis Towers Watson, a management consulting firm, have recently released a guidance on the “implications of adjusting plan targets.” Corporate decision makers, the guidance warns, need to understand that “mid-course changes will tend to bring added scrutiny from investors, proxy advisors and the press, not all of it favorable.”
But Willis Towers Watson has found — via a “flash survey” of nearly 700 companies — that a number of firms are considering “using discretion” anyway. Reporters at Reuters have identified at least 81 companies now in that category, a list includes corporate giants like Delta air lines, Hilton, and Uber.FOR A RACISM-FREE 22ND CENTURYwe need a billionaire-free 21st
A Delta filing, Reuters notes, claims that its performance measures no longer suit the “current reality.” The value of executive incentive pay, Delta insists, has declined by over half since the pandemic hit.
In Corporate America today, can’t have that. “Discretion” to the rescue!
This “discretion” works — for top execs. At Sonic Automotive, a national chain of auto dealerships, a pay deal with CEO David Smith guaranteed him grants of company stock if the company met a set of specific performance targets. Those targets became unreachable after the pandemic pummeled car sales and cost about a third of the company’s workers either lost their jobs or work hours.
CEO Smith lost nothing. Sonic’s board replaced his performance-based stock awards with options to buy Sonic shares at the company’s depressed share price. Those options now have a value of $5.2 million, over four times the value of the performance-based rewards Smith grabbed last year.
Many CEOs have pay deals that do not permit discretionary moves to make “mid-course” pay incentive changes. For worried CEOs, not a problem. Companies can simply put in place new “incentives” that enable execs to recoup whatever windfalls they may have lost when they failed to reach the original incentives. In other words: Heads CEOs win, tails they don’t lose.
All this avaricious corporate boardroom behavior most certainly merits our disgust and condemnation. But does executive pay excess, amid everything else going on right now, also merit our attention?
We have, after all, seldom entered into a summer in such a tumultuous state. We have Covid-19 cases rising. We have the worst jobless rates since the 1930s. We have police brutality finally outraging the nation into a real reckoning on racial oppression.
Not to mention a presidential election that could end in chaos.
So why should we bother paying much attention to still more corporate executive greed?
We really have no choice. We can’t afford to see CEO compensation as merely a distraction from more pressing concerns. CEO pay excess — the continuing corporate executive chase after grand fortune — is fueling the calamities that confront us.
The decades of corporate outsourcing and downsizing that have hollowed out the American middle class — and created an angry constituency for racist demagogues like Donald Trump to exploit — didn’t just happen. Corporate execs plotted that outsourcing and downsizing. They profited royally from it.
The personal fortunes these execs have pocketed have corrupted our politics and turned our legislatures into dysfunctional chambers that can seldom accomplish anything that doesn’t involve enhancing the financial well-being of already wealthy people.
Wealthy execs, in their haste to become ever wealthier, are even privileging their own financial futures over our health. The factories and plants they run are forcing workers to labor without adequate protections or social distancing. The pharmaceutical firms they manage are refusing to share research clues on possible coronavirus cures for fear of losing out on incredibly lucrative patents for vaccines and treatments.
And none of this should surprise us. The outrageous rewards baked into our current executive pay systems give execs an incentive to behave outrageously. The more they exploit, the more they can pocket. We need to thrust upon Corporate America a new pay incentive structure.
One step in that direction would be quick action on legislation that leading House and Senate progressives introduced this past fall. The Tax Excessive CEO Pay Act — introduced by representatives Barbara Lee and Rashida Tlaib and senators Bernie Sanders and Elizabeth Warren — would raise the corporate tax rate on corporations that pay their top over 50 times what they pay their workers. In 2018, 50 major U.S. corporations paid their top execs over 1,000 times what they paid their most typical workers. We could do bolder still. We could deny government contracts and subsidies to corporations with wide gaps between executive and worker pay. Our tax dollars should not subsidize — in any way — the exploitation of working people. Or as an excellent New York Times analysis has just put it: “For the voices of workers to be heard, the influence of the wealthy must be curbed.”
Sam Pizzigati co-edits Inequality.org. His recent books include The Case for a Maximum Wage and The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970. Follow him at @Too_Much_Online.
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Protesters against police brutality and racism have gathered to demand systemic change since the end of May, holding events in all 50 U.S. states and around the world. Impelled by the police murder of George Floyd on May 25, the protests amplify a long-standing call by social justice organizations, Black civil rights leaders like Angela Davis and many others for decades: dismantle, defund and/or abolish America’s racist and heavily militarized policing systems—and replace them with community-led safety programs and public health initiatives.
The movement’s leadership has made it clear that the protests, many of which have been non-violent due to community participation, are calling for more than updates to existing police training programs or reforms within existing police departments. Rather, they are calling for America to rethink the response to crime and safety overall. They are calling for cities to reallocate funding away from police and begin the steps to gradually dismantle the policing system altogether, as Eric Levitz writes in a recent New York Magazine article.
The police response to the protests against police brutality in many cities has been markedly, and ironically, brutal, as is discussed in detail in a recent article by Adam Gabbatt in the Guardian. Many videos and reports from recent protests show police using violent force against peaceful protesters. Dounya Zayer spoke with Democracy Now! about the police officer who violently pushed her to the ground when she was peacefully protesting, which she said resulted in a concussion and a trip to the hospital. Across the U.S., police have arrested more than 10,000 protesters and have repeatedly attacked journalists covering the protests, including Linda Tirado, who has been partially blinded after the police shot her with a foam bullet in the eye.
Meanwhile, the protests are successfully pushing officials across the country to respond in some tangible ways. Cities, counties, states and some police precincts across the nation are implementing changes, small and large, and the moment has brought the deep-seated problems of the policing systems into the mainstream conversation.
On June 12, amid the mass protests against police killings, police in Atlanta shot and killed a 27-year-old Black man named Rayshard Brooks. Atlanta police chief Erika Shields immediately fired the officer after the fatal shooting of Brooks, and the officer is now facing murder charges. The autopsy report listed Brooks’ manner of death as a homicide. Atlanta’s Mayor Keisha Lance Bottoms has ordered changes to the police use-of-force policy following the incident. The immediate firing of the officer and response of the mayor—while small steps—both speak to the work of the protests. In the past, many police killings of Black men and boys have gone undisciplined or resulted in a period of paid leave or slight demotion of the officers responsible. Since the death of Brooks, protesters have been filling the streets of Atlanta to demand more far-reaching justice and systemic changes.
The protests are beginning to push public dialogue to question long-held assumptions about what the safety of the future can look like. The U.S. is starting to reckon with its systemic racism in an unprecedented way. Boston’s Mayor Marty Walsh recently declared racism a public health crisis. Because of the protests, several U.S. cities have also started to defund their police programs and reallocate those funds for other public services.
Following public pressure after the wrongful police killing of Breonna Taylor, in which police stormed the house of the 26-year-old medical worker in the middle of the night on March 13 and shot her to death, Louisville has passed Breonna’s Law to ban no-knock police warrants in the city (though the officers responsible have not been charged for Taylor’s murder yet).
There is some concern among protest organizers that changes enacted now could be short-lived, and eventually lead back to the same old cycles of oppression and inequity. Alicia Garza, the principal of Black Futures Lab, the director of strategy and partnerships for the National Domestic Workers Alliance and a co-founder of the women’s activist group Supermajority, said in a New York Times Q&A discussion recently that “political will over the long term” will be necessary in order for real change.
“I think there is a danger now that when protests start to die down, which they always do, when the blue-ribbon panel is dismantled, which it always is, Black communities won’t necessarily be in a more powerful place than where we started,” she said in the New York Times interview. “The country has to deeply invest in the ability of Black communities to shape the laws that govern us.”
Which policy changes and actions can actually restructure the U.S.’s problematic policing and justice systems? Here are a few of the concrete changes that leading organizers are calling for, with the potential to shift how policing, safety and justice systems operate in the future.
- Defund and demilitarize the police and reallocate those funds into community-based programs like safe housing, social care programs and public health.
Many police budgets in the U.S. are disproportionately bloated when compared with other tax-supported social services. The nationwide trend over recent decades has been to gradually increase police budgets, while schools, welfare programs and other public services have encountered widespread budget cuts. As the original Black Lives Matter protests that began in Ferguson in 2014brought to light, police in this country—even in smaller precincts—are heavily militarized. Angela Davis pointed this out in a recent interview, in which she discussed how America’s “police departments are the most dramatic expression of structural racism.”
Calls by organizers to defund the police make it clear that defunding is just the first in a multistep movement to dismantle policing as we know it. But it’s an important starting point, as it has the capability to free up needed resources for community-based social services and public health services.
Several cities—some of them for the first time—have started to take that first step and reduce their police budgets, to varying degrees. For example, in Austin, the city council on June 11 voted to reinvest police funds and restrict use of force after recent police violence against protesters sent at least 31 people to the hospital. San Francisco’s Mayor London N. Breed also announced a new plan on June 11 under which the city will redirect some of its police funds into organizations that serve communities that have been harmed by systematic racism, and police will no longer respond to non-criminal calls or use military-grade weapons and gear. New York’s Mayor Bill de Blasio has promised for the first time to cut funding for the NYPD. Portland plans to decrease its police budget by $15 million.
It’s notable that many cities are now cutting police funding, especially since prior to the protests many of those same cities were set to increase police budgets this year. That said, defunding is just a small first step to rein in a long-militarized, violent and racist system. Brie McLemore outlines the need to do more than defund the police, in a recent Truthout article in which she argues for the abolition of police.
A stronger shift that comes closer to the changes protests are calling for is coming out of Minneapolis, Minnesota, where George Floyd’s murder led to the first of the recent protests against police brutality. The Minneapolis City Council has vowed to eliminate its current police department and replace it with a new model of community-led safety programs. The city is also working with the Minnesota Department of Human Rights on an investigation into the Minneapolis Police Department over the last decade. The department has received numerous complaints about the racially targeted and brutal treatment of citizens, and has repeatedly failed to hold cops accountable for their actions. Meanwhile, community organizers in the city are already implementing programs led by community members that rethink safety, as outlined in a Truthout op-ed by Jae Hyun Shim.
Aqeela Sherrills is an organizer who has been working to shift the conversation around safety and violence in America for more than three decades. He has been working with cities on the ground to replace over-policing with community-led safety programs. He is a senior adviser to the Alliance for Safety and Justice (ASJ), which works with several states to replace over-incarceration with crime prevention, community health, rehabilitation and crime survivor support programs. He is also the co-founder of Crime Survivors for Safety and Justice (CSSJ), which is a project of ASJ and a national nonprofit network of crime survivors, working to replace criminal justice and prison system waste with community-based initiatives. Sherrills has been working for six years with the city of Newark, New Jersey, to implement many of the systemic changes protesters are currently calling for. The implementation of community-led strategies has meant notable drops in crime rates throughout Newark, which is historically high in crime.
Sherrills was at the helm of a groundbreaking peace treaty between the Bloods and the Crips in Watts, Los Angeles, in 1992. He says to successfully bring about crime reduction and safety, it’s essential to rethink the way people view and speak about criminality. What his experience has taught him is that the best approach is to treat violence as a public health issue, and work with actual community leaders on safety programs—and in high-crime areas, those leaders can be ex-convicts or gang members, as he details in a recent interview with the Independent Media Institute.
Sherrills says in the interview that urban street gang wars are what many social justice activists call, “the longest-running war in the history of this country.” But, he says, the survivors and victims of that war have been criminalized rather than met with supportive services to heal the traumas and impacts of violence.
“We didn’t give ourselves that label [of gang]. That label was meant to dehumanize the person behind it, and desensitize the public to the plight of these youth and young adults who were growing up in these war zones. Instead of providing healing services, they provided a criminal justice solution to what was a public health challenge,” Sherrills said. “My whole adult life, I’ve been committed to shifting narratives around victimization and redefining public safety with the idea that we have to put the public back into public safety… Today, we’re at an inflection point. We have a real opportunity that’s ahead of us. There’s a national campaign to defund police.”
While Sherrills is not an advocate of completely getting rid of the police, he has long worked toward reallocating significant portions of police funding into community programs. And the programs he has helped to build offer real-life proof of how community-based safety can be more effective than police in reducing crime. During recent protests, for example, the city of Newark has kept its police to the sidelines, away from people protesting, and it demilitarized the police by prohibiting riot gear and military-grade attire and weapons. The city deployed its organized and trained community groups to help keep things safe and civil. As a result, Newark has not had reports of police brutality seen in many other American cities, and they’ve had weeks of peaceful protests without looting or serious property damage.
“We deployed the [Newark Community Street Team], the West Ward Victims Outreach [Services], the Newark Anti-Violence Coalition, the mayor’s Brick City Peace Collective—these are all residents of the city,” Sherrills said. “We weaved ourselves through every single portion of the march.”
- Remove all police from schools. Reinvest in counseling and education instead.
In Portland, Oregon, Superintendent Guadalupe Guerrero recently vowed to remove all school resource officers—police officers deployed to work at schools—from the district’s schools. This is something the city council’s only Black member, Jo Ann Hardesty, has been urging for years, as in-school officers disproportionately arrest Black students. Portland is not alone. Superintendents in Seattle, Minneapolis and Denver have vowed to end their school officer programs for similar reasons, and the disproportionate arrests of Black students in schools is a nationwide issue. Public pressure around the topic continues to build in many cities.
Many civil rights groups and organizers—including prominent teachers unions in Los Angeles, Chicago and elsewhere—have been calling throughout the recent protests to remove police from schools. While most programs to bring police into schools were enacted in response to school shootings, there is a lack of evidence to show that they actually increase safety. There is, however, ample evidence that they make life harder for Black kids, as discussed in a recent New York Times article.
Many of the teachers’ groups and civil rights groups now calling to remove cops from schools have been doing so for years. The civil rights groups Advancement Project and the Alliance for Educational Justice released a joint report in 2018 that outlines the reasons removing police from schools is a step to improve school safety. As the report authors note in the introduction, the report “centers the voices of young people from around the country who describe the everyday indignities that they experience at the hands of school police. It also, for the first time, catalogues known assaults of young people by school police officers.”
The report explores the impacts of school police on students of color and Black communities in particular, and notes that in the two decades following the 1999 Columbine High School shooting, school discipline has grown increasingly punitive and has failed to increase safety in schools, especially for students of color.
“Safety does not exist when Black and Brown young people are forced to interact with a system of policing that views them as a threat and not as students,” the report authors write. “The report calls for the removal of police from schools and envisions schools where Black and Brown students are afforded the presumption of childhood that they deserve.”
While police budgets have been steadily rising for the last decade across the nation, education budgets have been slashed across the nation. The powerful union United Teachers Los Angeles (UTLA) has come out vocally in favor of the movement to eliminate police in the city’s schools, as the LA Times reports. Cecily Myart-Cruz, the incoming president of UTLA, reportedly told the Times, “We have to dismantle white supremacy. We must… defund the police and bring in the mental health services that our students need.”
The American Civil Liberties Union (ACLU) has been outspoken against police programs in schools for years due to the many racial disparities inherent in those programs. The ACLU’s website shows the negative impacts of these programs on Black and Brown students in particular. The website states:
“Though these police are often referred to as ‘school resource officers,’ their legal power and attending actions reveal that this designation only serves to mask that their presence has transformed schools into another site of concentrated policing. Such policing marks the start of the school-to-prison pipeline—the entry point to the criminal justice system for too many kids—and fuels mass incarceration.”
- Decriminalize people for surviving.
In addition to calling for changes to policing itself, many activists seeking to end the problems associated with police brutality are also advocating for other reforms that decriminalize people for surviving. This means legally decriminalizing sex work, drug use and possession, homelessness and asylum-seeking immigrants. Organizers are also calling to change the way survivors of violent crimes are often themselves criminalized because of the way the systems are set up.
A report released this year by Nina Luo, a fellow for Data for Progress, details the necessity to decriminalize sex work as a first step toward protecting sex workers, and a “part of effective anti-trafficking policy. … Decriminalization includes amending penal codes and divesting from the criminal legal system (both police and prosecutors).”
Sex work is a relevant and mandatory part of the conversation around race and policing because entire police units, special undercover operations and significant resources are dedicated to policing sex work in the U.S. And, as the report notes, most often people who enter the sex trades do so out of economic desperation, in order to pay for their basic needs. Those sex workers are “often undocumented, women of color and/or young LGBTQ+ people who have little to no access to the justice system.” When these people are criminalized for attempting to survive via sex work, the “‘criminality’ as a result of engaging in sex work entirely discredits them as ‘victims’ when they report rape or violence to police.”
A national poll conducted by Data for Progress, published in January, found that “an outright majority of… [U.S.] voters support decriminalizing sex work.” In the report, Luo explains how criminalizing sex work forces the trade underground, which ultimately endangers sex workers who might have been coerced into the trade, as they themselves could face charges if they speak about their work. The report also explains that sex workers enter the trade for a number of reasons—from choice to circumstance to coercion. And, again, most of them enter because of circumstance.
“Most sex workers trade sex out of circumstance to meet economic needs such as healthcare, housing or childcare,” the report says. “They may experience explicit discrimination in the formal economy because of disability, gender identity or immigration status and rely on sex work to meet basic needs. They may find parts of the sex industry to have low barriers of entry, allowing them to immediately access income for a short period of time in the industry before exiting. They may find that the freelance or independent nature of the work allows them more time flexibility to caretake families or pursue other interests.”
The report concludes with a reminder that criminalization has never effectively ended the sex trade, and that decriminalizing sex work is just a first step toward safety for people who do that work—and it’s the “only legal model that immediately reduces the harms of policing, incarceration, deportation, and criminal records in the lives of sex workers and trafficking survivors.”
As the U.S. reckons with its long-standing racism and policies that enforce systemic inequalities, sex work and the criminalization of sex workers have to be part of the discussion. As Luo writes:
“Sex work is an issue of controversy because it forces us to reckon with the realities of economic, racial, and gender injustice. People trade sex for many reasons, but most often to meet basic needs, and until this economy affords everyone a home, a living wage job, healthcare, and education, many people will continue to trade sex for survival.”
As with sex work, the criminalization of drugs has been overtly ineffective and problematic. The four decades of the failed and innately racist U.S. war on drugs are a systemic colossus responsible for over-policing, primarily in non-white neighborhoods, and the mass incarceration that has disproportionately locked up Black and Brown people for decades. As the Drug Policy Alliance (DPA) wrote in a 2017 report calling for the decriminalization of drug use and possession:
“By any measure and every metric, the U.S. war on drugs—a constellation of laws and policies that seeks to prevent and control the use and sale of drugs primarily through punishment and coercion—has been a colossal failure with tragic results. Indeed, federal and state policies that are designed to be ‘tough’ on people who use and sell drugs have helped over-fill our jails and prisons, permanently branded millions of people as ‘criminals’, and exacerbated drug-related death, disease and suffering—all while failing at their stated goal of reducing problematic drug use.”
Drug use is a public health issue, and it should be treated that way, as the DPA and many others have argued for years. Since Portugal, for example, made the groundbreaking decision to decriminalize all drugs in 2001 and turn drug use into a public health issue rather than a criminal one, the results have been overwhelmingly positive. Portugal’s opioid crisis, which was once among the worst in the world, quickly stabilized, and problematic drug use dropped significantly over the next several years. Hepatitis and HIV infection rates, overdose deaths, drug-related crime and incarceration rates also plummeted.
From the start, the war on drugs has targeted Black people, and other people of color, as author Michelle Alexander details in her book The New Jim Crow: Mass Incarceration in the Age of Colorblindness. In a 2014 interview, with the beginning of state-by-state cannabis legalization, Alexander discussed a trend in the emerging cannabis industry in which white men were getting rich, but many Black men remained in prison—and they still do. Several petitions to free people who are still serving life sentences for minimal cannabis charges have gained steam in recent years.
Homeless people are also criminalized in America for trying to survive. As the National Coalition for the Homeless explains, “The criminalization of homelessness refers to measures that prohibit life-sustaining activities such as sleeping/camping, eating, sitting, and/or asking for money/resources in public spaces. These ordinances include criminal penalties for violations of these acts.”
In the U.S., more than half a million people are homeless, and protesters are calling for an end of the criminalization of homelessness, and reallocation of police and justice system funding into safe housing programs to help people living on the streets.
And, among the conversations gaining some steam throughout the protests is the call to abolish U.S. Immigration and Customs Enforcement (ICE). Currently, the U.S. is still holding asylum seekers who came to the U.S. hoping to escape dangerous situations, in horrific, overcrowded and illegal detention camps along the U.S.-Mexico border. Children have been separated from their parents, and thousands of them have reportedly been misplaced. Detainees, including children, are living in squalor, treated inhumanely, locked in cages and dying in detention centers. ICE is the policing agency responsible for the operation. Throughout the recent protests, a petition has been circulating to stop reported spraying of ICE detainees with a powerful and toxic disinfectant, which is reportedly a practice being enacted in detention centers due to the COVID-19 pandemic. Protests are calling to do away with ICE and decriminalize asylum-seeking immigrants, and all people who come to America looking for work and a better life.
In addition to decriminalizing the above sectors, protests are calling for the release of those currently incarcerated for these crimes. Some protesters are calling to take this further and begin to abolish the prison systems along with the police in order to bring about racial justice. The 2016 documentary film “13th” by director Ava DuVernay offers an in-depth breakdown of the racial disparities of prison systems, their ties to slavery and the continued oppression of Black Americans.
As a Reuters article reports, 40 percent of the almost 2.3 million prisoners in the U.S. are Black, while just 13 percent of the U.S. population is Black, according to the nonprofit Prison Policy Initiative. University of Ottawa associate professor of criminology Justin Piché told Reuters, “Something feels different this time,” in regard to the general response to recent protesters’ calls for racial justice. “Whether or not that actually translates into police defunding and more gains for prison abolition, that remains to be seen.”
This article was produced by Local Peace Economy, a project of the Independent Media Institute.
April M. Short is an editor, journalist and documentary editor and producer. She is a writing fellow at Local Peace Economy, a project of the Independent Media Institute. Previously, she served as a managing editor at AlterNet as well as an award-winning senior staff writer for Santa Cruz, California’s weekly newspaper. Her work has been published with the San Francisco Chronicle, In These Times, Salon and many others.
