Shattering Myths About Business and Society

Those who believe that corporate executives are virtuous, government regulators are overreaching, and that we live in a meritocracy have been cringing every time they listened to a newscast in recent days. That’s because two major stories have been shattering myths about the way things work in the U.S. business world and the broader society.

The controversy over whether Boeing’s 737 Max aircraft should be grounded in the wake of a deadly crash in Ethiopia revealed the true nature of business regulation in the United States. Contrary to the image, depicted ad nauseum by corporate apologists, of bureaucrats crippling companies with unnecessary and arbitrary rules, we saw in the Federal Aviation Administration an agency that is essentially held captive by airlines and aircraft manufacturers.

It was only after the rest of the world ignored assurances from Boeing and took the common-sense step of grounding the planes that the FAA finally acted. The agency, its parent Department of Transportation and the Trump Administration had to be shamed into fulfilling their responsibility of protecting the public.

It remains to be seen whether the Trump Administration will temper its anti-regulatory rhetoric after this incident in which it was clear that the country needed more rather than less oversight. Unfortunately, the problem goes beyond rhetoric.

Since taking office, Trump has made it a crusade to dismantle much of the deregulatory system. Left to his own devices, Trump would continue on this path. His new budget proposes massive cuts in the budgets of regulatory agencies, including 31 percent at the EPA.

That budget was dead on arrival in the Democratic-controlled House, but the administration is undermining agencies by rolling back enforcement activity. Public Citizen has been documenting this ploy in a series of reports drawing on data from Violation Tracker. Its latest study shows a 37 percent drop in enforcement actions by the Consumer Financial Protection Bureau, the Federal Trade Commission and the Consumer Product Safety Commission during Trump’s first two years, compared to the final two years of the Obama era.

The other big myth-busting story is the admissions scandal at elite universities. The revelation that wealthy parents have been paying large sums to a fixer who bribed coaches and used other fraudulent means to get their kids into the Ivy League should cause all critics of affirmative action to hang their heads in shame.

It speaks volumes that one of the parents arrested in the case is William McGlashan, founder of The Rise Fund, an ethical investing vehicle managed by the private equity firm TPG Capital. Working with the likes of Bono and philanthropist Pierre Omidyar, the fund says it is “committed to achieving social and environmental impact alongside competitive financial returns.”

Defenders of the fund will attempt to separate its mission from McGlashan’s personal issues. Yet the scandal helps puncture the image of moral superiority projected by those who claim they can do good and get richer at the same time. It gives more ammunition to those who suspect that ethical investing may be little more than a way to ease the conscience of the wealthy with more than their share of misdeeds.

Undoubtedly, protectors of the conventional wisdom are seeking ways to restore support for the notions that regulation is bad and that the rich are good people who earned everything they have. Yet for now, let’s enjoy these moments of clarity.

Backlash of the Billionaires

Most of those who have thrown their hat in the ring for the 2020 presidential race have been met with varying mixtures of enthusiasm and indifference. Howard Schultz is another story. The former Starbucks CEO has engendered a wave of hostility based on concern that his plan to run as an independent would split the anti-Trump vote and usher in another term for the current occupant of the White House.

Schultz is making himself even more unpopular by unleashing a string of attacks on some of the key policy proposals being discussed by progressive Democrats, denouncing Medicare for All and taxes on the wealthy as un-American and ill-informed.

This could simply be an appeal to what remains of the right flank of the Democrats, but it also seems to be part of an emerging backlash among the super-wealthy and corporate elites to a progressive agenda that would affect them directly. Schultz is not the only billionaire complaining at the prospect of having to pay more to Uncle Sam. Michael Bloomberg, another potential presidential contender, has been mouthing off against Sen. Elizabeth Warren’s wealth tax idea and defending U.S.-style capitalism.

We may soon see large corporations speaking out as well. Foxconn did not explicitly link its decision to abandon plans to create 13,000 manufacturing jobs in Wisconsin to the election of progressive Tony Evers as governor, but Republican leaders in the state legislature are making the connection.

Big business has had the best of both worlds during the past two years. While a few corporations such as Foxconn have directly aligned themselves with Trump, most large companies have dissociated themselves from the president’s odious positions on immigration and nationalism. Some business figures such as Larry Fink of BlackRock have been promoting the idea that they are the true paradigms of civic virtue.

At the same time, these executives and their corporations have been making out like bandits from the tax breaks and regulatory rollbacks—including those eroding worker protections–promoted by the faux-populist Trump Administration and its Republican allies in Congress.

The time may soon be coming when large corporations and billionaires have to choose between pretending they are part of the resistance and giving up some of their economic privileges. Or maybe they will lose both.

After all, the idea that large corporations are a force for good is already a dubious notion. Take the case of Starbucks, which has cultivated an image of being a progressive employer but has had to pay more than $46 million to resolve collective-action lawsuits alleging wage and hour violations.

The big question is whether big business and the super wealthy will accept that they have to give back some of their advantages. We know that the likes of the Koch brothers and Sheldon Adelson will fight to their last breath. The Foxconn disinvestment decision could be a harbinger of a coming capital strike in some quarters.  

Yet it will be more interesting to see how far purported liberals like Schultz and Bloomberg are willing to go in resisting progressive reforms, and whether they will be joined by the corporate social responsibility crowd.  In the words of the old union song, they will have to decide which side they are on.

A Windfall for the Forbes 400 and the Fortune 500

We now know who it was Donald Trump was really addressing in his convention speech last summer when he declared “I am your voice”: the Forbes 400 and others in the upper reaches of the 1 Percent.

The one-page tax outline just released by the Trump Administration — with its pass-through scheme, its radical reduction in statutory corporate tax rates, and its elimination of the alternative minimum tax, the estate tax and taxation of overseas business profits — provides an unrestrained windfall for Trump’s own billionaire class.

In defiance of all evidence, Treasury Secretary Mnuchin is insisting that this is not a giveaway to the rich but instead is “all about jobs, jobs, jobs.” This is the same official who, harking back to the snake oil of the Reagan Administration, insists that the tax cuts will “pay for themselves.”

The claim that the corporate tax cuts will boost the economy and job creation is based on the widely promoted but largely baseless claim that U.S. business is burdened with excessively high rates. As groups such as the Institute on Taxation and Economic Policy have repeatedly shown over the years and which ITEP documents once again in a recent report, many large corporations pay effective tax rates far below the 35 percent statutory rate. And through the aggressive use of tax avoidance techniques, quite a few of those manage to bring their effective rate down to zero or less.

Even if one accepts the questionable connection between taxes and job creation, Trump’s proposal would have no effect on employment in sectors such as utilities, industrial machinery, telecommunications and oil & gas, which ITEP shows are already paying effective rates below 15 percent.

There are sectors currently paying rates well above 15 percent, but it is not clear that lower taxes would do much to create jobs — and even less so, good jobs. One of the highest effective rates can be found in the retail sector, which despite this supposed burden, has over the year added millions of jobs. Unfortunately, most of those positions are substandard. The typical retail wage is about a third lower than the average for the private sector as a whole.

Recently, retail employment has been falling, but this has nothing to do with taxes; it’s the result of the increasing number of people buying stuff online rather than from brick-and-mortar stores. Giving big tax cuts to Wal-Mart and Dollar General will not reverse the job loss nor will it improve the wages of their remaining workers.

It’s also unclear what benefits will come from reducing taxes on health care companies, which also pay effective rates close to the statutory level. Taxes have not stood in the way of massive employment growth in this sector, which on the whole pays better than retail but has a substantial number of low-wage jobs. The future of this sector depends not on taxes but instead on whether Trump and Congressional Republicans succeed in dismantling the Affordable Care Act.

Another part of the Trump outline that will do little to create good jobs is the call for the repatriation and light taxation of foreign profits that corporations have been parking overseas. Business apologists have long made extravagant claims for this policy, but previous experiments with repatriation holidays did not boost jobs or even investment and instead simply fattened profits and dividends.

Those who put together the Trump tax outline are either oblivious to the discussion in recent years about growing income and wealth inequality or they deliberately set out to make the problem much worse. In either event, the plutocrats are rejoicing.

Unequal Spoils

In his 2009 utopian novel Only the Super-Rich Can Save Us, Ralph Nader conjures up a scenario in which a group of enlightened U.S. billionaires spark a populist uprising against excessive corporate power. Calling themselves Meliorists, people such as Warren Buffett, George Soros, Ted Turner and Bill Gates Sr. use their wealth to bankroll creative efforts to undermine the stranglehold of big business and promote an agenda of universal healthcare, a living wage, sustainable energy, public financing of elections and other forms of popular democracy.

It is unlikely that Donald Trump has read the 733-page volume, but his emerging administration is well on its way to becoming an ugly variation on Nader’s theme. Rather than enlightened billionaires promoting a progressive agenda, Trump is building a government that will be run by wealthy proponents of reactionary policies. After a presidential campaign in which he railed against elites and suggested that he would shake up the system, he is filling his cabinet and other top jobs with individuals who, like himself, have exploited it to the hilt.

Trump’s pick for Treasury Secretary, Steve Mnuchin, worked for 17 years at Goldman Sachs but made his real money purchasing distressed IndyMac Bank amid the financial crisis in 2009, and after engaging in controversial foreclosure practices resold it at a hefty profit. The proposed Commerce Secretary Wilbur Ross, whose personal wealth is estimated by Forbes at $2.9 billion, has an even longer track record as a vulture investor who has turned around failing businesses but often at a high cost to employees. Betsy DeVos, Trump’s choice for Education Secretary, is a school privatization zealot who comes from a wealthy family and is married to an heir to the Amway fortune.

According to news reports, Trump is likely to name even more members of the 0.1 Percent to his administration. Plutocracy, once used as a rhetorical flourish, is increasingly a literal description of where things are heading.

Even those members of the Trump team who are not listed on the Forbes 400 are known for promoting policies that benefit the billionaire class rather than the workers who voted for the Republican ticket. Health and Human Services nominee Tom Price is a pharma-friendly, anti-Obamacare fanatic who seems to want to create a system of bare-bones coverage that is highly profitable to the insurance industry. Seema Verma, named to head the agency that oversees Medicare and Medicaid, is a pro-privatization consultant. And then there are the dozens of industry lobbyists installed on the landing teams for individual federal agencies who are helping target a wide range of regulations that protect consumers, workers and the general public.

Perhaps out of an awareness that his supporters may be starting to look askance at this power grab by corporate interests, Trump has taken pains to fulfill his campaign promise to help workers at the Carrier Corporation plant in Indianapolis whose jobs were being sent to Mexico.

The president-elect has just announced a deal in which some 800 of the 1,400 affected workers will save their jobs. This is welcome news for those workers and their families, who probably don’t care that Mike Pence used his soon-to-expire powers as governor to grant the company the kind of special “incentives” that Trump frequently denounced during the campaign.

For the rest of the country, it difficult to avoid thinking that Trump and Pence are using the Carrier situation mainly as a way to boost their popularity and distract people from the overwhelmingly pro-business bent of the rest of the transition.

We are likely to see more of this as the Trump Administration creates a new form of inequality: big and lucrative policy gains for the powerful and smaller, mainly symbolic benefits for the rest of the population. The question is: will Trump’s working class enthusiasts settle for crumbs while the powerful gorge themselves?

Uncle Sam’s Favorite Billionaires

william-erbey_416x416Inequality is becoming so pronounced that presidential hopefuls of all ideological persuasions are acknowledging that something needs to be done. One issue they should consider is the extent to which the federal government itself contributes to the problem.

It’s clear that the federal tax code is structured in a way that favors wealthy individuals and corporations. But it turns out that Uncle Sam is also providing direct financial assistance to the billionaire class. The extent of that assistance can be estimated from the data my colleagues and I at Good Jobs First assembled for Subsidy Tracker 3.0, which we released recently.

We compiled 164,000 company-specific entries for federal grants, allocated tax credits, loans, loan guarantees and bailout assistance provided through 137 programs overseen by 11 cabinet departments and six independent agencies. These were added to 277,00 state and local awards in the database. Since 2000 the grants and allocated tax credits have amounted to $68 billion; the face value of the loans and bailouts, which we tally separately, have run into the trillions.

Along with the release of Tracker 3.0, we published a report called Uncle Sam’s Favorite Corporations that described the extent to which large corporations dominate federal subsidies. Some of those companies are owned in whole or in part by the country’s wealthiest individuals and families.

I subsequently matched the big federal subsidy recipients to the companies linked to members of the Forbes 400 list of the richest Americans. This exercise was an extension of an analysis my colleagues and I performed on state and local data for our December 2014 report Tax Breaks and Inequality.

Of the 258 companies controlled by a member of the Forbes 400, 39 have received federal grants and allocated tax credits. Their awards total $1.3 billion. The richest of the billionaires linked to these firms is Warren Buffett, whose Berkshire Hathaway conglomerate accounts for $178 million of the subsidies.

Two of the other companies are worth examining more closely, because they have also been embroiled in controversies over their business practices.

At the top of the list is Ocwen Financial, which received $434 million in subsidies through a provision of the Home Affordable Modification Program (a part of the TARP bailout) that provided incentives to mortgage servicers to revamp loans to homeowners whose properties were underwater or otherwise unsustainable.

Ocwen, which made extensive use of that program, was founded by William Erbey (photo), whose net worth was estimated at $1.8 billion in the most recent Forbes list, published when he was still chairman of the company. Subsequently, Erbey had to step down as part of a settlement the company reached with New York State financial regulators to resolve allegations of improper foreclosures and other abusive practices. Ocwen also had to provide $150 million in assistance to those whose homes had been foreclosed. It is also paying a smaller amount under a settlement with California regulators.

While Erbey is no longer running Ocwen, he may still be a major shareholder. As of last year’s proxy statement, he held the largest stake in the company (15 percent); this year’s proxy is not out yet.

The second largest subsidy recipient linked to a member of the Forbes 400 is SolarCity, which has received $326 million in grants and allocated tax credits, mostly through Section 1603 of the Recovery Act, which provides cash payments to companies installing renewable energy equipment. The chairman of SolarCity is Elon Musk, better known for his role in the electric car company Tesla Motors (which, by the way, got a $465 million federal loan and later repaid it). Musk, whose cousins Lyndon and Peter Rive are the top executives at SolarCity, has a net worth estimated by Forbes at $11.6 billion. Tesla Motors has business dealings with SolarCity.

It was recently reported that SolarCity is being investigated by Oregon prosecutors in connection with allegations that it used solar panels made by federal prisoners in renewable energy projects at two state university campuses for which it received $11.8 million in state tax credits designed to promote local employment.

Assuming the allegations turn out to be accurate, it is difficult to know where to begin in stating all that is wrong with this situation. A company chaired by the 44th richest person in the country that has received hundreds of millions of dollars in federal subsidies used prisoners paid less than a dollar an hour to install solar panels so that it can collect millions more in state subsidies.

Subsidies, whether federal or state, are by no means the largest contributor to inequality, but policymakers should try to find some way to limit their use by billionaires, especially those linked to shady business practices.

Facebook’s Dubious Social Mission

The Blues Brothers claimed they were on a mission from God. Mark Zuckerberg, whose $17 billion fortune is about to become even larger thanks to the Facebook initial public offering, insists that his company is on a “social mission.”

In a letter accompanying the firm’s first substantive disclosure filing, Zuckerberg writes that “Facebook was not originally created to be a company.” Its mission, he says, is “to make the world more open and connected,” and he insists: “we don’t build services to make money; we make money to build better services.”

It’s difficult to take this high-mindedness seriously in connection with a company that may soon have a market value of $100 billion built on persuading millions of people to hand over vast amounts of personal information about themselves that Facebook— which has a total workforce of only 3,200—then sells to corporate marketers.  Data protection and privacy are generally considered good things; for Facebook, the possibility of more stringent laws in those areas is presented as a risk factor in its SEC filing.

In his social mission statement, Zuckerberg also writes: “We believe building tools to help people share can bring a more honest and transparent dialogue around government that could lead to more direct empowerment of people, more accountability for officials and better solutions to some of the biggest problems of our time.”

It’s interesting that Zuckerberg never refers to the need for more accountability on the part of Facebook or corporations in general. His letter gives the appearance of promoting corporate social responsibility but never actually does so. His attitude seems to be that Facebook’s only real obligation is to provide supposedly fabulous services, and that by itself will change the world.

It should thus come as no surprise that when it comes to dealing with governments and communities, Facebook is just as self-serving as any corporation not pretending to be on a social mission. This is demonstrated most clearly at its data centers.

These facilities, also known as server farms, are large collections of computers that power online networks. They use vast amounts of power and thus are located in rural areas with cheap electricity. Being highly automated, they create few jobs—yet Internet companies take advantage of the desperation of local officials for investment of any kind to obtain substantial economic development subsidies.

Facebook announced in January 2010 that it would build its first data center in central Oregon, choosing a location in the economically depressed town of Prineville that was part of an enterprise zone, thus making it eligible for property tax breaks for up to 15 years. The company later began expressing public concerns about how its intangible property would be taxed. In recent months it has been pressuring state legislators to restrict the ability of the state revenue department to assess data centers as utilities.

The company has even tried to intimidate the state by warning that, unless it got its way on taxes, the future of the Prineville facility—which employs about 50 people—would be in question. The revenue department now seems to have backed down. It is amazing to see how this purportedly enlightened company would throw its weight around to avoid pay a tax bill that under the worst case scenario would have cost it only $390,000 a year. (That figure, by the way, is about 1 percent of the $30.9 million that Facebook chief operating officer Sheryl Sandberg received in total compensation last year, according to the company’s new SEC filing.)

Meanwhile, Facebook has negotiated a subsidy deal for its second data center, located in North Carolina’s Rutherford County. The facility, which was expected to create about 40 jobs, was made eligible for up to $11 million in county financial assistance, on top of state tax breaks for data centers enacted in 2010. The one good thing that can be said about these subsidies is that they are a lot less costly than the ridiculous sum of $260 million that North Carolina gave to Google in 2007 for its server farm project in the state.

In 2010 Facebook also got a $1.4 million grant from Texas Gov. Rick Perry’s Texas Enterprise Fund to help pay for the creation of a sales office in Austin.

Paying its fair share of state and local taxes without taking subsidies it doesn’t need and without bullying public officials would be a good way for Facebook to start acting like it really is on a mission other than enriching Mark Zuckerberg and a small number of other members of the 1%.

Romney Bites the Government Hand that Has Fed His Fortune

Occupy Wall Street may be getting less attention in the corporate media these days, but the movement’s message about the brutal and inequitable nature of contemporary U.S. business is front and center in an unlikely arena: the debate among the Republican contenders.

In recent days, Newt Gingrich and Rick Perry have assailed the business track record of Mitt Romney, using terms such as “vulture capitalism,” “looting” and “job killing” to describe his activities at buyout firm Bain Capital in the 1980s and 1990s.

Showing how frustrated personal ambition can outweigh ideology, Gingrich and Perry are espousing views far from their usual reactionary postures. It is the hypocrisy of frontrunner Romney, however, that is of greater significance. While being attacked from the faux Left by Gingrich and Perry, Romney has been veering to the Right. In his victory speech after the New Hampshire primary, he attacked President Obama for supposedly promoting “the politics of envy” and “resentment of success.” Channeling Ronald Reagan, he vowed that “the path I lay out is not one paved with ever increasing government checks and cradle-to-grave assurances that government will always be the answer.”

Yet a look at Romney’s record at Bain shows not only Gordon Gekko-like business buccaneering, but also a willingness to embrace those very government checks and assurances he is now repudiating. Companies acquired and managed by Bain during Romney’s tenure showed no hesitation in taking taxpayer handouts in the form of state and local economic development subsidies.

A comparison of the 1999 Bain portfolio obtained by the Los Angeles Times to the information in the Subsidy Tracker database my colleagues and I at Good Jobs First created (as well as other sources), yields examples such as the following:

Steel Dynamics Inc. In 1994 this company, among whose financial backers at the time was Bain, got a $77 million subsidy package—including grants, property tax abatements, tax credits and reimbursement for training costs—for its steel mill in DeKalb County, Indiana (Fort Wayne Journal Gazette, June 23, 1994).

GS Industries. In 1996 American Iron Reduction LLC, a joint venture of GS Industries (which had been taken private by Bain in 1993) and Birmingham Steel, sought some $20 million in tax breaks in connection with its plan to build a plant in Louisiana’s St. James Parish (Baton Rouge Advocate, April 6, 1996). As the United Steelworkers union noted recently, GS Industries later applied for a federal loan guarantee, but before the deal could be implemented the company went bankrupt.

Sealy. A year after the 1997 buyout of this leading mattress company by Bain and other private equity firms, Sealy received $600,000 from state and local authorities in North Carolina to move its corporate offices, a research center and a manufacturing plant from Ohio (Greensboro News & Record, March 31, 1998). In 2004 Bain and its partners sold Sealy to another private equity group.

GT Bicycles. In 1997 GT, then owned by Bain and other investors, decided to move its manufacturing operations to an enterprise zone in Santa Ana, California. Being in the zone gave the company, which was later purchased by Schwinn, special tax credits relating to hiring and the purchase of equipment (Orange County Register, July 9, 1999).

Since Romney arranged to share in Bain’s profits after he left the firm in 1999, it is legitimate to look at cases of subsidy grabbing by Bain companies after that time. Some of these involved firms that had been acquired during Romney’s tenure but which didn’t get their subsidies until after he departed. For example:

Stream International. In 2000, this operator of call centers, then controlled by Bain, agreed to open a facility in Kalispell, Montana, but only if local officials provided $4 million in grants and tax breaks (The Missoulian, February 8, 2000). U.S. Senator Max Baucus also arranged for a $500,000 grant from the federal Economic Development Administration (AP, March 4, 2000). Later that year, Stream got Silver City, New Mexico to provide tax credits, subsidized training and subsidized rent for another call center (Albuquerque Tribune, July 12, 2000).

Alliance Laundry Systems. In 2000 this maker of washing machines, purchased by Bain in 1998, received a $560,000 grant from the state of Florida in connection with its plan to move a commercial laundry from Cincinnati. (Tallahassee Democrat, June 8, 2000). In 2004 the company received $1.25 million in assistance (including a low-cost loan of $1 million and a $250,000 grant) from the state of Wisconsin. Bain sold the company to a Canadian pension fund in 2005.

Romney’s ongoing profit participation also makes it legitimate to look at subsidies that have gone to companies acquired by Bain after Romney moved into public life:

Burger King Corporation.  In 2005—while owned by Bain, TPG and Goldman Sachs—Burger King let it be known that it was considering moving its headquarters from the Miami area to Houston. After local and state officials put together a $9 million subsidy package, the company agreed to stay in South Florida but move to a new building.  Two years later, Burger King dropped the idea of a new headquarters altogether and had to repay $3 million of the package (which came from a Quick Action Closing Fund grant) to the state as a result. Bain and its partners sold off their remaining interest in Burger King in 2010.

Quintiles Transnational Corp. When Bain and other private equity firms bought this pharmaceutical services company in 2007 they inherited a $25 million subsidy package that the company had negotiated with North Carolina officials in 2006. The package included an up-front $2 million grant from the One North Carolina Fund, a $2 million matching grant from Durham County, and the promise of up to $21.4 million over 12 years from a performance-based Job Development Investment Grant.

AMC Entertainment. After being promised more than $40 million in subsidies, this movie chain (bought in 2004 by Bain and other private equity firms) agreed to move its headquarters from downtown Kansas City, Missouri to a nearby suburb across the state line in Kansas. The deal was criticized as an egregious case of taxpayer-financed sprawl.

And finally, what about Staples, whose early backing by Bain is frequently cited by Romney as the best example of his business acumen? The chain has long been making use of economic development subsidies, including the period when Romney was still at Bain. In 1996, for example, it chose Hagerstown, Maryland as the site for a distribution center after getting a $4.2 million subsidy package (Baltimore Sun, April 16, 1996).

It’s quite possible that Romney’s recent anti-government comments, like much of what he says, are not meant to be taken too seriously. But as long as he is spouting free-market rhetoric, he needs to be reminded about the extent to which his ascent (and that of the rest of the 1% ) has been propelled by public money.

Making Corporations Disappear

From the 11-year prison term and $92 million fine imposed on convicted insider trader Raj Rajaratnam to the apparent misappropriation of hundreds of millions of dollars in client funds at failed brokerage firm MF Global to the admission by Japan’s Olympus Corp. that it has been cooking the books for years, the news is full of reminders about the criminality that pervades the corporate world.

At the same time, the ongoing Occupy movement has been bringing renewed attention to the disastrous consequences of the Supreme Court’s Citizens United ruling that enshrined corporate personhood. One of the more popular protest messages seen at Occupy encampments is: “I will believe that corporations are people when Texas executes one of them.”

As Russell Mokhiber of Corporate Crime Reporter points out, the idea is not so far-fetched. For the past two decades there has been a small but persistent campaign to promote the idea that the state-granted charters of rogue corporations could be challenged, thereby putting them out of business. The movement was pioneered by Richard Grossman, who co-authored a well-circulated 1993 pamphlet entitled Taking Care of Business, which outlined legal and historical justifications for charter revocations.

Grossman’s evangelism helped create the Community Environmental Legal Defense Fund, which helps communities fight corporate intrusions at the local level, and the Program on Corporations, Law and Democracy, which publishes materials that “contest the authority of corporations to govern.”

These groups and others were challenging corporate personhood even before Citizens United, and groups inspired by these ideas launched campaigns to challenge the charters of outlaw corporations such as Union Carbide (largely because of its role in the Bhopal disaster) and Unocal (because of its role in oil spills, frequent workplace safety and health violations, and human rights violations in its relations with repressive governments).

The idea began to catch on. In 1998, Eliot Spitzer, then a candidate for New York Attorney General, said he would not hesitate to push for the dissolution of corporations found guilty of criminal offenses. In the early 2000s, groups in California pushed for a corporate three strikes law to deal with recidivist business offenders such as Tenet Healthcare.

The charter revocation concept waned for a while but had a resurgence last year in response to the outrageous behavior of BP in the Gulf oil spill and that of Massey Energy in creating the conditions that led to the Upper Big Branch mine disaster in West Virginia. Massey ended up being taken over by another company, but BP remains in business despite the fact that its misconduct in the Gulf occurred while it was on probation for earlier federal offenses relating to a 2005 refinery explosion in Texas and 2006 oil spills in Alaska.

The Occupy movement sets the stage for a new assault on corporate recidivists. There is no shortage of offenders. For instance, the New York Times just showed that numerous investment banks have committed repeated violations of Securities and Exchange Commission anti-fraud rules. Mokhiber suggests that potential candidates for the corporate death penalty include health insurers, nuclear power plant operators, giant banks and firms engaged in hydraulic fracking.

The real challenge is to figure out what it would mean to execute a giant corporation. There are few precedents for doing so. Nearly all the major companies that have gone out of existence have done so as the result of takeovers by other large firms. In a limited number of cases such as Enron and Lehman Brothers, companies were forced to liquidate, but by the time this happened the firms were effectively worthless.

Unanswered is the question of what would happen if a large and healthy corporation had to cease operations because of a charter revocation. Selling off the company piece by piece in fire sales to other large corporations would have the undesirable effect of increasing concentration in the industry.

While it may be morally satisfying to say that such a firm should simply vanish, that would be unfair to the workers and other stakeholders who may have played no role in the criminal behavior that brought on the revocation. Besides, this too could result in higher industry concentration as other firms capture the disappearing company’s market share.

What’s needed is a set of protocols for a just transition of a de-chartered company to a new corporate form based on principles such as trust busting (splitting up business behemoths into smaller entities), worker ownership, environmental responsibility and community oversight.

A distinction would have to be made between disappearing companies in those industries that serve a legitimate need and those which need to be phased out for reasons aside from the behavior of individual firms (coal, tobacco, for-profit health insurance, etc.).

Figuring out how to dismantle large companies will be a huge and complicated task, but it is an essential undertaking if we are ever to escape from the era of corporate domination.

Tax Dodging Inc.

Given that big business provides the bulk of the money pouring into the political system, it is no surprise that members of Congress and presidential contenders alike tend to espouse the idea that large corporations are overtaxed. This myth gets repeated despite all the evidence that blue chip companies find endless ways to pay much less than the statutory rate.

It is now more difficult for the tax avoidance deniers to spread their snake oil. Citizens for Tax Justice and the Institute on Taxation and Economic Policy have just come out with a compelling study called Corporate Taxpayers & Corporate Tax Dodgers that examines the fine print of the financial statements of the country’s largest corporations and identifies scores of firms that fail to pay their fair share of the cost of government.

Looking at a universe of 280 companies, CTJ and ITEP find that over the past three years, 40 percent of them paid less than half of the statutory rate of 35 percent. Most of those paid what the study calls “ultra-low” rates of less than 10 percent. Thirty of the firms actually had negative tax rates, meaning that Uncle Sam was paying them for doing business. In dollar terms, the biggest recipients of tax subsidies over the three-year period were Wells Fargo ($18 billion), AT&T ($14.5 billion), Verizon Communications ($12.3 billion) and General Electric ($8.4 billion). The freeloaders had rates as low as minus 57.6 percent. You should read the study for yourself to get all the juicy details.

CTJ and ITEP have been putting out these bombshell reports periodically over the past three decades. The ones from the early 1980s drove the Reagan Administration crazy and paved the way for the Tax Reform Act of 1986, which reversed many of the corporate giveaways of the initial Reagan years.

It is tempting to think that this new report will subvert the current corporate tax relief movement, but that is a tall order. Part of the reason is that corporations, having bought much of the policymaking apparatus, have become much more brazen in their self-serving behavior.

Let’s take the case of Nabors Industries, the world’s largest oil and gas land drilling contractor.  Nabors was not eligible to be considered for the CTJ/ITEP study because it is headquartered in Bermuda. The company is not really Bermudan. Its principal offices are in Houston, but it re-incorporated itself in the island nation a decade ago for one simple reason: to escape paying U.S. federal income taxes (Bermuda imposes no such levies on corporations). It was part of a wave of companies that in the early 2000s underwent what were euphemistically called corporate inversions.

Critics called the moves “unpatriotic” or even “akin to treason,” but Nabors went ahead with its plan. There was an effort later in Congress to collect retroactive taxes from Nabors and a handful of other firms that had carried out inversions, but the move was blocked by New York Rep. Charles Rangel after Nabors CEO Eugene Isenberg made a $1 million contribution to a help build the Charles B. Rangel School of Public Service at the City College of New York. Rangel was subsequently charged with an ethics violation in connection with the contribution.

Nabors and Isenberg have been in the news again recently in connection with another scandal. Nabors announced that it was paying Isenberg, now 81 years old, $100 million to give up his post as chief executive. Although the payment is linked to a severance agreement, Isenberg is remaining with the company as chairman of the board. The situation was remarkable enough to merit a front-page story in the Wall Street Journal, which is normally blasé about bloated executive pay.

Isenberg’s bonanza is the culmination of a series of outsized pay packages. In 2005, for instance, he received total compensation of more than $200 million. In 2008 his bonus alone was more than $58 million. In a non-binding vote earlier this year, a majority of Nabors shareholders disapproved the company’s executive pay policies.

It used to be that executive compensation was high in relation to worker pay rates put still a relatively small amount compared to revenue and profits in large companies.  That has been changing. The payouts to Isenberg have a significant impact on the firm’s bottom line. The $100 million being collected by Isenberg to give up his CEO job more than wipes out the $74 million in profits Nabors posted for the most recent quarter. Nabors, by the way, has disclosed that it has been investigated by the Justice Department for making foreign bribes.

As the Institute for Policy Studies showed in a report a couple of months ago, it is not unusual for major companies to pay their chief executives more than they send to the Treasury in taxes. Add to that the CTJ/ITEP findings and the behavior of firms like Nabors, and it is difficult to avoid the conclusion that in many large corporations the dominant motivation is to enrich their principals, even if that means sidestepping obligations to shareholders, government and workers. In other words, big business is increasingly acting as little more than a vehicle for expanding the wealth of the 1%.

Clawing Back from the 1%

Rick Perry has admitted that his recent attempt to revive controversy over President Obama’s birth certificate was done for “fun.” This came after Herman Cain said that his call for an electrified fence to protect the U.S. border with Mexico was meant as a joke.

The question, then, is whether their economic plans should also been seen as pranks. It is indeed difficult to take the proposals of the two men and the other presidential contenders seriously. Do they really believe that the solution to the country’s job crisis lies in massive tax reductions for the wealthy and large corporations along with a rollback of federal regulations on banks, health insurance companies and polluters? These ideas sound as if they were cooked up as part of a Yes Men parody to make the 1% look ridiculous in the face of the growing Occupy movement.

One sign that the candidates are not putting forth legitimate policy prescriptions is that their plans contain no accountability provisions. Perry’s just released “Cut, Balance and Grow” scheme, for instance, has repeated references to the wave of job creation that will supposedly be generated by overhauling the tax and regulatory systems, but nowhere does it say what will happen to those companies that, in spite of being freed from federal shackles, still fail to hire significant numbers of new workers.

When it comes to foreign policy, conservatives love Ronald Reagan’s dictum of “trust, but verify.” But in the realm of domestic economic policy their approach is “take it on faith” – giving the 1% everything they want and doing nothing to make sure that the purported benefits to the economy ever materialize. Actually, it is not only conservatives who adopt this posture. Many pro-corporate Democrats are also willing to give away the store to big business without imposing any real safeguards. This can be seen, for instance, in the bi-partisan campaign to slash taxes on repatriated foreign profits without ensuring that those savings actually result in job creation.

Presidential candidates and federal policymakers have something to learn in this regard from the states, including Perry’s Texas.  Together, the states spend tens of billions of dollars each year on tax credits, grants, low-cost loans and other forms of financial assistance to corporations in an attempt to stimulate job creation and economic development.

More and more of these subsidy programs attach strings to the government largesse. Corporate recipients must commit to creating a specific number of jobs, which are often subject to wage and benefit requirements. When companies fail to live up to those obligations, the state may recoup all or some of the subsidies (or restrict future benefits) through devices known as clawbacks. These provisions vary widely in stringency from state to state and sometimes within states.

My colleagues and I at Good Jobs First are currently studying the job creation, job quality and clawback practices of the major state subsidy programs around the country. Our report will not be issued until later this year, but I can say now that among the programs that contain clawback provisions are two that are closely controlled by Perry: the Texas Enterprise Fund and the state’s Emerging Technology Fund. These funds have been criticized for cronyism and other abuses, but at least there are some mechanisms for holding recipients accountable on their commitments.

The same cannot be said at the federal level. If Perry and others proposing national solutions to the jobs crisis were serious, they would be recommending that any tax reductions or regulatory relief be contingent on the creation of significant numbers of jobs—and quality ones at that.

I don’t expect this to happen any time soon. Both branches of the national political elite have bought into the idea that large corporations and the wealthy have to be, in effect, bribed to make job-creating investments in the U.S. economy and that there is no recourse when they fail to carry out what they were paid off to do.

Even before the current crop of pro-corporate economic plans, large companies and the wealthy have, of course, benefitted from a skewed tax system, special subsidies for selected industries, lucrative federal contracts, weak regulation, one-sided labor laws, and a justice system that is soft on business crime. And we have little to show for it in the way of decent jobs and economic security.

Rather than showering even more advantages on the 1 percenters, we should be demanding that they give something back. The Occupy movement can be seen as a big clawback effort whose goal is to recoup not just a tax break here or there but control over the future of the entire U.S. economy.