Archive for September, 2009

Shades of Green

Friday, September 25th, 2009

NewsweekMichael Moore may be on all the talk shows these days touting his new film on the evils of capitalism, but elsewhere in the mainstream media the celebration of big business continues apace. Especially when it comes to the environment, we are meant to believe that large corporations are at the forefront of enlightened thinking.

This is the implicit message of the cover of the new issue of Newsweek, which is filled with leaves to promote its feature on “The Greenest Big Companies in America: An Exclusive Ranking.” The list itself, however, has more validity than the usual exercises of this sort, which tend to take much of corporate greenwash at face value.

The Newsweek rankings are based on what appear to be solid data from KLD Research & Analytics, producer of the reputable (but expensive) SOCRATES social investing database, along with Trucost and CorporateRegister.com. Each company in the S&P 500 is rated on its environmental impact, its environmental policies, and its reputation among corporate social responsibility professionals, academics and other environmental experts. The ratings even take in account a company’s “regulatory infractions, lawsuits and community impacts.”

Not surprisingly, those at the top of the list are high-tech companies—such as Hewlett-Packard (ranked No. 1), Dell (2), Intel (4), IBM (5) and Cisco Systems (12)—which have never had quite the same pollution problems as old-line industries and which in many cases have made themselves “cleaner” by outsourcing their production activities to overseas producers.  Dell, in particular, is on its way to becoming a hollow company by selling off its plants.

More interesting is that supposed sustainability pioneer Wal-Mart comes in at No. 59, behind old-line industrial companies such as United Technologies and Owens Corning. Whole Foods Market, purveyor of over-priced organic groceries, is a bit lower at 67. Oil giant Chevron, which urges the public to “join us” in its supposed commitment to energy efficiency, is ranked 371, not much better than long-time global warming denier ExxonMobil (395).

Since the Newsweek list covers the entirety of the S&P 500, we can also look at what is probably the most significant group: those at the very bottom. The harm that these companies—especially utilities such as American Electric Power and Southern Company with lots of fossil-fuel-fired power plants—do to the environment far outweighs any good done by those at the top of the list. Also among the laggards are agribusiness giants Monsanto (No. 485), Archer Daniels Midland (486), Bunge (493) and ConAgra Foods (497).

But special mention must be given to the absolute worst company of all: mining giant Peabody Energy. On a scale of 0 to 100, Peabody is awarded all of 1 point, presumably reflecting its single-minded dedication to climate-destroying coal and its support for groups fighting the climate bill now in Congress.

Newsweek deserves credit for undertaking a serious evaluation of corporate environmental performance. The web version even has a nice sidebar on green fakery. But the magazine could have easily turned the list upside down and headlined its feature “The Biggest Environmental Culprits of Corporate America.”

A Truly Captive Market

Thursday, September 17th, 2009

parasitesThe House of Representatives, in a rare embrace of de-privatization, has just passed legislation that would put an industry out of business. If approved by the Senate, the Student Aid and Fiscal Responsibility Act will eliminate the heavily subsidized business of bank origination of federal student loans. Students would get their loans directly from the federal government and would see a huge increase in the Pell Grant program, thanks to the tens of billions of dollars saved by eliminating the subsidies.

Unfortunately, the impulse to abolish a parasitic form of private enterprise has been missing from the official debate on healthcare reform ever since Democratic leaders and the Obama Administration shunned the idea of expanding Medicare eligibility to non-seniors. Now, given the uncertain prospects for a public insurance option (a weak substitute for single payer), we are faced with the possibility that the parasites of the private health insurance industry will not only survive but will be empowered as never before.

While support for the public option has waned, the powers that be in both major parties have never wavered from their endorsement of the individual mandate—the bizarre idea that the solution to the problem of the uninsured is to force them purchase insurance. This implies that being without insurance is a personal shortcoming rather than a social problem. It makes as much sense as saying that the way to help the homeless is to compel them to buy a house.

It is true that the proposals for an individual mandate come with provisions for subsidies, yet as the plan just issued by Senate Finance Committee Chairman Max Baucus illustrates, those subsidies would not extend to many middle-income families, who might find themselves in the absurd position of having to pay penalties to the federal government for failing to buy coverage they cannot afford.

What’s wrong with the imposition of an individual mandate without a public option is more than that of inadequate subsidies. It would amount to an unprecedented move by government to compel residents to become customers of a particular set of corporations. States currently require drivers to obtain insurance for their vehicles from private carriers, but automobile ownership is not compulsory. Adoption of an individual mandate sans public option would make it a condition of being alive for the uninsured to start paying premiums to a private insurance company.

What next? Will the federal government allow the likes of WellPoint and Cigna to put private bill collectors to work harassing “deadbeats” who don’t make their mandatory payments? Since the carriers could not drop these non-paying customers, would the companies be allowed to lock them up in healthcare debtor prisons until a relative takes care of the bill?

Maybe not. But there’s a strong possibility that the furor over unaffordable mandatory coverage would prompt Congress to bring down rates by allowing insurers to offer lower-quality plans. If the public option is jettisoned along with single payer, “reform” may turn out to be nothing more than a way of making millions of Americans pay for the dubious privilege of shifting from the ranks of the uninsured into a captive market of the woefully underinsured.

Will BusinessWeek Escape from the Vultures?

Friday, September 11th, 2009

BW2This summer it has appeared that the venerable BusinessWeek, born in 1929 at the dawn of the Great Depression, might not survive the Great Recession, at least not in its traditional form. In July it came to light that McGraw-Hill was seeking a buyer for BW, which like many other print outlets has been suffering from a sharp decline in advertising revenue.

Numerous observers have claimed that the magazine is essentially worthless, speculating that it might sell for a token price plus the assumption of liabilities. It has also been taken for granted that the new owner would sharply scale back or even eliminate the print operations and take a machete to the staff.

The potential buyers whose names surfaced over the past two months have included media industry vultures such as Platinum Equity Partners, which bought the San Diego Union-Tribune earlier this year and embarked on a frenzy of layoffs, and OpenGate Capital, which last year paid all of $1 to take over TV Guide (and its debt) and got seller Macrovision to lend it $9.5 million to boot.

So it is encouraging that the Wall Street Journal is now reporting that Bloomberg LP is considering a bid. Of all the potential buyers that have been mentioned, Bloomberg seems most likely to preserve BW’s unique position in U.S. financial journalism.

For decades, BW served as the one relatively independent voice among the major business magazines. While Fortune (after its early years) and Forbes functioned as cheerleaders and hagiographers for the business elite, BW was often willing to take an honest look at the shortcomings and outright transgressions of major corporations.

This was demonstrated most clearly in its famous (among progressives) September 2000 cover story that asked whether corporations had too much power, noting: “Part of the problem is that no one’s reining in business anymore. Most of the institutions that historically served as a counterweight to corporate power — Big Government and strong unions — have lost clout since Ronald Reagan came to town crusading for deregulation and local control.” These themes were echoed in an October 2003 cover article “Is Wal-Mart Too Powerful?”

BW’s March 1986 cover piece called “The Hollow Corporation” sounded the alarm about the way major companies were eroding the U.S. industrial base by contracting out their production activities to foreign firms. Its April 1987 article “Warning: The Standard of Living is Slipping” was one of the early reports on the reversal of upward mobility.

The magazine also diverged from its competitors on the issue of labor—both by covering unions more seriously and by declining to demonize them. In 1991 it published a commentary by its long-time labor writer Aaron Bernstein headlined “Busting Unions Can Backfire on the Bottom Line” and in 2004 it put SEIU’s Andy Stern on its cover for a piece entitled “Can This Man Save Labor?”

It is difficult to imagine the private equity firms and other bargain hunters said to be considering bids for BW supporting this kind of journalism. Bloomberg, on the other hand, has exhibited similar moxie in the editing of its Bloomberg Markets magazine. For example, as noted here, that publication recently published a hard-hitting piece on the way major U.S. corporations are contributing to the deforestation of the Amazon and thus exacerbating the problem of global warming.

In an era of continuing corporate misbehavior, we can ill afford the loss of an information source such as BusinessWeek. Let’s hope it escapes from the vultures.

Note: I recently did a thorough update of my guide to online corporate research as well as the index of information sources mentioned here in the Digest.

Will Democracy Invade the Boardroom?

Thursday, September 3rd, 2009

board meetingLife has been tough for the Securities and Exchange Commission, what with the power grab at its expense by the Federal Reserve and new revelations that its investigators acted like Keystone Kops when looking into tips about the suspicious behavior of Bernie Madoff. Now the SEC has the opportunity to do some good. The question is whether it has the nerve to stand up to powerful corporate interests.

In May the SEC voted to propose rule changes that would enable shareholders to nominate directors for corporate boards. The Commission issued a 250-page description of the proposed changes in June and asked for public comments. A decision is expected this fall.

The process of selecting board candidates makes a mockery of the idea of corporate democracy. Except in those rare instances when a takeover effort leads to a proxy fight, potential directors are chosen by management and run unopposed. This helps ensure that the ranks of outside (non-executive) directors, who are supposed to function as watchdogs, are filled with agreeable souls.

The proposed SEC rules would be a vast improvement, but they would allow shareholders to name no more than one-quarter of the candidates, and they would limit nominating rights to large shareholders (those with at least 1 percent of big companies and larger percentages in smaller ones). However, alliances of shareholders would be able to use their combined holdings to meet the threshold.

Comments flooded into the SEC over the summer. As a review of the comments conducted by the Wharton School of Business shows, the reactions have been highly polarized, with large companies warning of doom and proponents such as large pension funds predicting the changes would be a boon for shareholder rights.

The Business Roundtable weighs in with more than 150 pages of comments, posing dozens of plausible and not-so-plausible objections, including the hilarious claim that the rules would violate a corporation’s First Amendment rights by forcing it to include comments by outside candidates in its proxy statement.

Revealing a fear that the rule changes would undermine the clubbiness that characterizes the current system, comments submitted by McDonald’s Corporation fretted that shareholders might nominate someone “who may not have even met the existing members of the Board.” Another laughable objection is one made, for example, by Sara Lee Corporation claiming that the change would result in directors who represent a special interest rather than the interests of all shareholders. Sara Lee conveniently forgets that under the current system outside directors are often chosen because of their affiliation with a financial institution or other entity that has a significant relationship with the company—a suspicious practice known as corporate interlocks or interlocking directorates.

Some commenters, including a joint submission by 26 large corporations, support a compromise that, instead of imposing new proxy rules on all publicly traded companies, would make it easier for shareholders to seek changes in the nominating process on a company-by-company basis. This seems like little more than an attempt to undermine the whole idea.

But perhaps the saddest thing about the comments is the surprisingly large number of submissions by owners of small businesses—from a dog bakery called For Pampered Pooches to Dreamland Daycare—who have somehow been brainwashed by some trade association into thinking that a reform aimed at major corporations is somehow going to threaten their privately held enterprise.

Here’s hoping that the SEC ignores the preposterous arguments of both large and small companies and injects some measure of democracy into Corporate America.