Number losing unemployment benefits


Sunday, May 29, 2011

Let Shareholders Decide

I strongly agree with John Bogle's view that shareholders should have the final say in how corporate funds are distributed for political purposes (The Supreme Court Had Its Say, Now Let Shareholders Decide, New York Times Week in Review, May 15, 2011: 9).

But shareholders are not the only stakeholders with an interest in this issue. As a consumer, I have a vested interest in whether the Corporation delivers its largess to causes of which I approve. It is therefore essential that there be complete transparency so that I can direct my purchases to companies whose political donations are only to approved politicians.

Each consumer contributes a tiny amount to the Corporation's cash flow. A small proportion of that cash flow gets diverted to politicians rather than contributing to profit. I should be able to direct whether that proportion goes to a politician, or to profit, or to a charity; and if to a politician, it should go to those of whom I approve.

Getting that enshrined in law will be a long and Quixotic quest.

States Loosen Insurance Rules

I cannot believe that the states are encouraging irresponsible behavior by the Insurance Companies (Seeking Business, States Loosen Insurance Rules. New York Times, May 9, 2011: A1, A3).

After the catastrophic collapse of the mortgage and insurance markets of the late 2000's, I would have thought that states would ratchet up the rules rather than loosen them. It is highly risky to allow captive reinsurers to operate with high leverage. Any reverses will ricochet destructively through the economy.

I lived in Maryland when the state chartered Savings and Loan Companies failed and the State reneged on its underlying commitment to insure the deposits. Many ordinary people lost their savings.

The states should ensure that the firms they charter undertake their activities in a prudent and responsible manner.

Books: Selling and Writing

RE: Don't I know you from the Dust Jacket? New York Times Book Review, May 8, 2011: 27.

But George Orwell hated every moment of the time he worked at a Hampstead bookstore.

Business Focus

Two stories in today's New York Times discouraged me. First was the continuing and long standing complaint that the Nuclear Regulatory Commisision was a captive of that industry and that important safety precautions were not made and those failures were not punished by the NRC (Nuclear Agency Is Criticized as Too Close to Its Industry. New York Times, May 8, 2011: A1). Second was the failure of major data archives to protect the identity of the data stored therein (There's No Data Sheriff on the Wild Web. New York Times Week in Review, May 8, 2011: 2).

In both cases, essential security features were not put in place because they were "too expensive."

When was it that American Industry turned from an emphasis on technical rigor and pride in doing an excellent job to the present focus on parsimony? Parsimony, that is, when it comes to providing adequate products and services but generosity in rewarding the top echelon of the managerial team.

We have to return to that focus on a job well done despite the cost or we will suffer unimaginable problems in the years ahead. Let's start with really tightening up the safety levels of our aging Nuclear Reactors. Apropos Vermont, lying about the existence of underground pipes should be a clear basis for not issuing an operating permit for another twenty years.

Preventing the Next Flash Crash

The op-ed by Ed Kaufman and Carl Levin (Preventing the Next Flash Crash, New York Times, May 6, 2011) calls for increased regulation of the financial markets to reduce the chances of a catastrophic fall in the stock, bond, and derivative markets.

Another way of slowing the amount of speculation in those markets is to institute a financial transactions tax. Doing this with a corresponding reduction in corporate income taxes would be a boost for Main Street at a cost to Wall Street.

That would be a winning trade off.

Furloughs, but Paydays for the Brass

Your story about the management excesses at Gannett at a time when the firm was laying off staff and insisting that the survivors take furloughs shows the disconnect between the executive suite and the ordinary worker in America today (Furloughs, but Paydays for the Brass, New York Times, April 11th., 2011: B1, B3).

But it is a disconnect that will come at a price. All the research on downsizing, except that following a merger, shows that the economic benefits of downsizing are unlikely to occur unless a firm's top management share the pain -- something that Gannett claimed would happen but then failed to implement (with top team bonuses totaling $3 million). We can therefore expect that Gannett will continue its inexorable financial decline.

There is one simple way to change the situation. Let differential responsibility be reflected in basic compensation. But let every employee share the same percentage bonus (based on overall firm performance) as that of top management.

Friday, May 6, 2011

Legality 1, Reality 0

What kind of mindset inhabits the brains of the senior officials of the Justice Departments (Detainees' Lawyers Can't Click on Leaked Files. New York Times, April 27, 2011: A1, A10).

We have moved from the Orwellian world of George W. Bush where torture was given the euphemism, "enhanced interrogation" to the Kafkaesque world of Barrack Obama where unindicted suspects live in legal limbo at Guantanamo and Leavenworth.

President Obama, that is not the kind of change I voted for.

Sent to New York Times

De Leo's Plan

The only vision that Speaker DeLeo's plan will instantiate is a world enjoying a downward spiral of inferior jobs, and inferior pay, and inferior benefits (Editorial, Boston Globe, April 21, 2011).

State and local government employees are not overcompensated compared with private sector employees. The perceived differences are due to comparing public sector employees who are mainly in professional jobs with private sector employees who are in entry level jobs.

Compensation is not simply pay, it is also pensions and health-care benefits. In previous contract negotiations, public sector workers gave up larger pay increases in order to purchase health-care and pension benefits. Let us be clear. They (the employees, not the cities, towns, and states) are paying for those benefits with deferred or redirected compensation.

The reason that the citizens of the Commonwealth are balking at the increased costs is that, over the past 25 years, private sector compensation has stagnated (except for the top 1% of the earning population).

Corporations have starved most of us; the motto starve the beast was directed at government but impacted us all. Now they want the public sector to join in the race to the bottom and are using ordinary people, who are struggling to pay their bills, to achieve their goals.

Sent to Boston Globe