Corporate Accountability

Corruption Galore

For those convinced of the depravity of large corporations and the super-wealthy, recent days have provided an abundance of vindication. Thanks to the whistleblower at Facebook and an anonymous leaker of a vast collection of confidential financial documents dubbed the Pandora Papers, we have amazing new evidence of corruption and anti-social behavior.

Frances Haugen’s release of internal research paints a picture of Facebook as prioritizing profits ahead of taking steps to address evidence that its algorithms promote social animosity and that its products such as Instagram exacerbate mental health problems among teenage users.

The financial documents revealed in the Pandora Papers depict numerous billionaires and government leaders around the world as brazen tax cheats who are accumulating immense amounts of illegal assets in the form of high-end real estate, yachts and secret bank accounts.

Of course, none of this comes as a surprise. In fact, this is not the first large-scale leak of private financial records showing misappropriation, money laundering and tax evasion among the global elite. We already knew that Facebook is basically unconcerned about the damage caused by its services.

As is always the case after major revelations like these, the main question is whether policymakers will do anything to address the problems. The odds that the Pandora Papers will prompt Congress to act are reduced somewhat by the fact that the disclosures do not include much about members of the U.S. elite. Major controversies have erupted in countries such as Jordan, Kenya and the Czech Republic, whose leaders are among those implicated in the documents. U.S. individuals consist mainly of lesser-known billionaires and art dealers.

Perhaps the most salient U.S. angle in the Pandora Papers is the increasingly important role played by states such as South Dakota as tax havens for elites seeking to shield illicit assets. To some extent this is an issue for state legislatures, though a bill has been introduced in Congress that would require trust companies and others to screen foreign clients seeking to move assets through the U.S. financial system.

There may be more policy momentum when it comes to Facebook. It and the other tech giants have been receiving criticism, for varying reasons, from members of Congress across the political spectrum. Along with the issues raised by the whistleblower, there are increasing concerns about the concentration of ownership within the tech sector. Among other things, Facebook is the subject of a new antitrust complaint by the Federal Trade Commission.

An article in the Washington Post quotes lawmakers suggesting that this may be tech’s “Big Tobacco moment,” a reference to the time in the late 1990s when the major cigarette manufacturers lost their stranglehold over public policy and ended up having to accept stronger federal regulation and paying out tens of billions of dollars in class action settlements.

It is good to hear that legislators are thinking in those terms, but they will have to turn up the heat much higher on Facebook, which so far is not admitting any culpability and whose CEO is too young to remember much about the 1990s.

Capital Punishment

Some corporate critics have argued that the only way to deter egregious misconduct by companies may be to give prosecutors the option to seek the “death penalty”—revocation of the firm’s charter and the closing of the business.

Ever since the dismantling of Arthur Andersen after its conviction on criminal charges relating to its auditing of Enron, prosecutors at the federal level have avoided seeking that harsh remedy. In fact, they moved sharply in the other direction by adopting dubious arrangements known as deferred prosecution and non-prosecution agreements that allow companies essentially to buy their way out of criminal jeopardy. A recent report from Public Citizen found that these arrangements have been a failure in deterring corporate wrongdoing.

Yet what has received less attention is the fact that the corporate death penalty is alive and well at the state level. Numerous state AGs have been using this method to deal with those firms considered unredeemable bad actors.

For example, the Delaware AG Kathy Jennings recently announced that she had filed actions in the state Court of Chancery to dissolve 15 Delaware business entities for involvement in criminal activities. Her press release stated: “State law allows the Attorney General to petition for cancellation of an entity’s Delaware formation document when its powers, privileges, or existence have been abused or misused.”

Among the firms she moved to dissolve were LOAV Ltd., Davis Manafort International LLC, DMP International LLC, BADE LLC, Jupiter Holdings Management, LLC, and Davis, Manafort & Stone, Inc. The principals of these companies, the AG noted, were Paul Manafort and Richard Gates, who pleaded guilty in 2018 to charges involving money laundering, failing to register as a foreign agent, failure to report bank transactions, and making false statements. Manafort was also convicted in 2018 by a jury of tax and bank fraud charges. The charges against the two men included allegations that they used the named businesses to illegally conceal from the United States government millions of dollars in income received from the Ukrainian government as well as evading roughly $1.4 million in personal income taxes owed to the IRS while funding lavish personal expenditures.

The AG also proposed to dissolve Essential Consultants LLC, which was used by former Trump fixer Michael Cohen to facilitate a hush-money payment of $130,000 to Stormy Daniels.

Previously, the Delaware AG was successful in forcing four LLCs linked to the now defunct website Backpage.com to relinquish their state certificates of formation in the wake of allegations that the site promoted prostitution and human trafficking.

Not all the companies forced to dissolve are quite so well known. In the course of collecting data for our recent report on state AGs, my colleagues and I came across numerous cases in which obscure firms such as home contractors or used-car dealers were forced out of business.

For example, in July 2011 the Oregon AG announced that a company called S&S Drywall Assemblies was ordered dissolved as part of the resolution of criminal racketeering and antitrust charges brought against the company and its owner.

In some cases a state AG would carry out what amounted to a partial death sentence by banning an out-of-state company from continuing to operate in the AG’s state while it may continue to function elsewhere. We found numerous cases of this in North Dakota, which rarely penalized in-state companies but did not hesitate to ban misbehaving out-of-state ones. One of these targets was a traveling asphalt paving company.

We did not include these cases in our report or the state AG data we added to Violation Tracker because the dissolutions or state bans usually did not include monetary penalties, the common denominator among the varied cases contained in our database.

Clearly, it’s much easier for state AGs to dissolve smaller firms than it would be for federal prosecutors to do the same to large corporations with thousands of employees and shareholders. States also have the advantage that corporate chartering is a function that they, not the feds, control.

There is a feeling of satisfaction that comes from seeing a rogue company shut down that does not go along with a deferred prosecution agreement and a far-from-confiscatory monetary penalty. There has to be some way to bridge the gap.

Exorcising Evil at Google

For the past two decades, Google’s Code of Conduct has included the phrase Don’t Be Evil. It used to be at the beginning of that document but now it is relegated to the end, appearing almost as an afterthought.

That turns out to be appropriate, given that Google can no longer pretend to be a paragon of virtue. The latest example of this move to the dark side is the announcement by the Federal Trade Commission and the New York State Attorney General that Google is paying $170 million to settle allegations that its subsidiary YouTube committed serious violations of the Children’s Online Privacy Protection Act. It was said to have done this by collecting personal information from under-age viewers of online videos without their parents’ consent.

Google and its parent company Alphabet Inc. will be facing more headaches. There have been recent reports that a large group of state attorneys general are getting ready to announce a major antitrust investigation of Google, whose search engine is essentially a monopoly and which has dominant positions in other areas as well.

The company has already been targeted in Europe. Last year the EU hit Google with a $5 billion fine for abusing its control over cellphone operating systems, and earlier this year the Europeans imposed a $1.6 billion penalty for abusing its control over web searches.

Google’s misconduct is not all of recent vintage. In 2012 it paid a $22 million fine to the FTC to settle allegations that it misrepresented to users of Apple’s Safari Internet browser that it would not place tracking cookies or serve targeted ads to them, violating an earlier privacy settlement between the company and the agency. The following year it had to pay $17 million to a group of three dozen state AGs to settle allegations of unauthorized placement of cookies on web browsers. Around the same time it paid $7 million to another set of AGs for the unauthorized collection of data from unsecured wireless networks across the country.

In 2014 it paid to $19 million the FTC to resolve allegations that it unfairly billed consumers for in-app charges incurred by children without their parents’ consent.

For a long time, Google promoted itself as an outstanding place to work. Yet that image has eroded as well. In 2015 it and three other tech giants had to pay $415 million to settle a lawsuit alleging that they conspired to suppress salary levels by secretly agreeing not to hire one another’s employees.

Last year Google faced an unprecedented walkout by thousands of its employees around the world who were protesting what they saw as the company’s lax treatment of sexual harassment claims.

The positive side of this is that it inspired a new form of activism among tech workers previously thought to be too individualistic to act collectively. Google employees have also been outspoken on other issues such as providing services to the repressive Chinese government.

If the evil is ever to be exorcised at Google, it will be done not by a corporate motto but by pressures brought to bear by federal regulators, state prosecutors and the company’s own workforce.

Corporate Accountability from Within

It appears that no one working for the public relations giant Edelman balked in 2006 when the firm went all-out to help then-besieged Wal-Mart by setting up a war room to plan attacks against the retailer’s critics and creating bogus front groups to create the illusion that the company had widespread public support. Nor apparently did Edelman staffers have any problem over the years when the firm took on clients such as tobacco companies, military contractors, the petroleum industry and the American Legislative Exchange Council.

Times are changing in the corporate p.r. business. The New York Times just reported that a staff revolt forced Edelman to abandon a plan to work for the private prison company GEO Group and improve its image in the face of criticism of its role in operating immigrant detention centers for the Trump Administration.

The Edelman situation is not unique. The Times noted that the marketing and p.r. firm Ogilvy has been facing staff unrest over its work for Customs and Border Protection, and employees at Deloitte and McKinsey tried to get their firms to end contracts with Immigration and Customs Enforcement. Pressure on management over work for these agencies has also been reported at tech companies such as Microsoft and Amazon as well as the online furniture retailer Wayfair.

Employees at large corporations are making their feelings known about other issues as well. Staffers at Amazon have pressed the company to do more to address the climate crisis. Perhaps the most dramatic move came last November when thousands of Google employees around the world walked off the job to protest the company’s handling of sexual harassment complaints.

These actions have come at a time when the conventional wisdom is that collective action by workers is a largely thing of the past. It is true that unions continue to struggle, as shown, for example, by the recent defeat of another organizing drive at Volkswagen’s operations in Tennessee in the face of intense opposition from management as well as public officials.

Yet what the actions at Edelman and the tech companies show is that workers – including some who may be very well paid – are finding different ways to express their dissatisfaction.

What’s particularly powerful is when employees launch campaigns that combine self-interest with altruistic goals. That’s what happened at Google, where the aim was both to change practices within the company and to support the wider MeToo Movement.

It’s also what gave such potency to the wave of teachers’ strikes that began in early 2018. Those walkouts were prompted both by the urgent need to raise salaries and the need to improve school funding to address overcrowding and other problems affecting students.

The willingness of employees to take on issues such as migrant abuse can also serve to expose the shallowness of much of what goes under the banner of corporate social responsibility. Edelman, for instance, claims that it is committed to being a “force for good.”

That somehow got forgotten when its managers initially agreed to work for GEO Group. It took a bold stance by the staff to overcome the hypocrisy.

Can Large Corporations Be Made Accountable?

Kudos to Sen. Elizabeth Warren for introducing a piece of legislation that filters out all the political noise and goes to the heart of one of the most pressing issues of the day: what can be done to change the behavior of large irresponsible corporations? Her answer: quite a lot.

The key to Warren’s newly introduced Accountable Capitalism Act is a proposal – similar to one pushed by Ralph Nader starting in the 1970s – to end the monopoly that states have had on the chartering of corporations. Beginning in the late 19^th Century, that system brought about a disastrous race to the bottom as states competed with one another for registrations by lowering their standards toward the vanishing point. Delaware won that competition and is now the chartering mecca for big business.

Warren’s bill would not eliminate state charters but would require large corporations, defined as those with $1 billion or more in gross receipts, to obtain a federal charter from a new agency created within the Department of Commerce. These “United States corporations” would be subject to a strict set of controls. First of all, they would be required to act in a way that creates “a general public benefit” and that balances the interests of shareholders with those of employees, consumers, communities and the environment.

To promote that end, employees of these corporations would get to choose two-fifths of the members of the board of directors. To discourage policymaking aimed at short-term stock gains, directors and officers would be prohibited from selling their shares for five years after obtaining them. To discourage improper involvement in the political process, these corporations would be barred from using company funds for political expenditures unless 75 percent of the board and 75 percent of shareholders approve.

Yet perhaps most important are the provisions relating to charter revocation. In theory, states have the power to revoke the charter of a corporation that engages in serious misconduct, but they almost never exercise that power. Warren’s bill would allow a state attorney general to petition the federal corporation office to revoke the charter of a company that has engaged in “repeated, egregious, and illegal misconduct” that has caused harm to customers, employees, shareholders or the communities in which the firm operates. That sounds a lot like the track record of a corporation like Wells Fargo.

Warren’s bill would go a long way to rein in large corporate miscreants. Of course, it has little chance of passage in the current Congress. Those circumstances may change, in which case Warren might want to consider some alterations to the bill to address a danger that would exist if someone like Donald Trump were in the White House.

We’ve just seen how Trump is using the power of his office to punish a critic such as former CIA director John Brennan by revoking his security clearance. If Warren’s federal chartering system were in effect, someone like Trump might try to revoke the charter of a corporation he dislikes. If Warren is going to use the federal government to restrain rogue corporations, she needs to make provisions for a rogue president as well.

Real Abuses, Sham Reforms

bosses_900 It is now a full century since the Progressive Era ended some of the worst abuses of concentrated economic power. This year is the 100^th anniversary of the Clayton Act and the Federal Trade Commission Act. It is 103 years since the dissolution of the Standard Oil trust, 108 years since the passage of the Pure Food and Drug Act.

Yet even a casual reading of the business news these days suggests that we live in an economy disturbingly similar to the age of the robber barons.

Back then, the trusts shifted their incorporation to states such as New Jersey and Delaware that were willing to rewrite their business laws to accommodate the needs of oligopolies. Today large corporations are reincorporating themselves in foreign tax havens to dodge taxes. The practice is reaching epidemic proportions in the pharmaceutical industry.

Back then, unscrupulous drug companies and meatpackers sold adulterated products that could sicken or even kill their customers. Today General Motors is caught in a growing scandal about ignition switch defects that resulted in at least 13 deaths. The news about the automaker’s recklessness grows worse by the day, with the New York Times now reporting that company withheld information from federal regulators about the cause of fatal accidents.

Back then, wheeler-dealers such as James Fisk peddled dubious securities in companies that later collapsed, impoverishing investors. Today we’re still trying to get over the impact of the toxic mortgage-backed securities that the big banks packaged and sold during the housing bubble. Just the other day, Citigroup became the latest of those banks to settle charges brought by the Justice Department. Yet the $7 billion extracted from Citi, like the amounts obtained from the other banks, will cause little pain for the mammoth institution and will thus do little to deter future misconduct. The provision in the settlement for “consumer relief” is too little, too late.

And, of course, back then, the trusts got to be trusts by eliminating their competition. Today concentration is alive and well. Recently, the second largest U.S. tobacco company, Reynolds American, proposed a takeover of Lorillard, the number three in the industry. If this deal goes through, it won’t be long before Reynolds tries to marry Altria/Philip Morris, putting virtually the entire carcinogenic industry in the hands of one player, the way it was a century ago during the reign of the American Tobacco Company, aka the Tobacco Trust.

The movement toward a Media Trust just accelerated with the revelation that Rupert Murdoch’s 21^st Century Fox, already huge, is seeking to take over Time Warner. The deal would put a mind-boggling array of entertainment properties under one roof. Murdoch offered to sell off Time Warner’s CNN – a meaningless concession given that the news network has struggled to survive against Murdoch’s despicable Fox News. Murdoch’s move comes as another media octopus, Comcast, is awaiting approval for its deal to take over Time Warner’s previously spun off cable business.

While we have all too many indications of a new Gilded Age, still scarce are signs of an effective response. We’ve got a good amount of muckraking journalism and a fair number of people (and even a few elected officials) who calls themselves progressives. Yet somehow this does not add up to a movement that can take a real bite out of corporate crime.

Part of the problem is that many of those in power professing progressive values are not serious about challenging corporate power. Some historians argue that the original Progressives were, like the New Dealers who came later, mainly concerned with saving capitalism from itself rather than changing the system. Yet they still managed to impose significant restrictions on big business through antitrust and other forms of regulation.

Today’s progressive officials often seem to want nothing more than to give the appearance of reform. That’s the story at the Justice Department, which has raised settlement levels and extracted some token guilty pleas but still allows corporations to buy their way out of serious legal jeopardy. Meanwhile, antitrust enforcement is tepid, and as the GM case increasingly shows, regulation is often a joke.

A resurgence of robber-baron behavior requires real, not sham reform.

Auto Safety Lapses Evoke the Bad Old Days

Ford_pays__17_4_million_to_settle_recall_801160000_20130801222604_640_480 The Big Three carmakers, once considered the epitome of corporate irresponsibility, have been viewed in a more favorable light in recent years.

After their near-death experience of a few years back—during which two of them, General Motors and Chrysler, went bankrupt and had to be rescued by the federal government—the consensus seems to be that they have cleaned up their act. They are also being rewarded in the marketplace, where Detroit’s sales have been booming.

It is true that the Big Three are no longer exclusively focused on gas-guzzling SUVs or death traps such as the Pinto. GM is promoting its electric Volt rather than dodging Michael Moore. Yet there have been some indications recently that the giant automakers may be slipping back into old habits.

Recently, the National Highway Traffic Safety Administration fined Ford Motor $17.35 million for taking too long to recall more than 400,000 SUVs that were susceptible to sudden acceleration, a problem that was linked to at least one death and nine injuries in crashes.

If you hadn’t heard about this case, it may have been because NHTSA decided not to issue a press release about the penalty. Word got out and the matter received modest coverage in a few newspapers. It was only the Corporate Crime Reporter that gave the story the prominence it deserved: front-page treatment.

The Ford penalty came a couple of months after Chrysler took the unusual step of refusing to acquiesce to NHTSA’s request that it recall 2.7 million Jeeps the agency contends are defective and prone to fires in the event of rear-impact collisions. Chrysler, now controlled by Italy’s Fiat, later relented but applied the recall to only 1.6 million vehicles. Moreover, its fix for the problem—installing trailer hitches on the vehicles—was dismissed as inadequate by the watchdog Center for Auto Safety, had been responsible for bringing the defect to light.

One would think that Ford, in particular, would be more diligent on safety issues, given the hard lessons of its past. This was the company, after all, that produced those ill-fated Pintos, whose unshielded fuel tanks near the back of the fragile compacts caused horrific explosions in rear-end collisions. Evidence later emerged that Ford was aware of the vulnerability of the gas tank, but went ahead with production of the car. In one civil case a jury awarded $125 million in damages (reduced by the judge to $3.5 million).

Ford was also embarrassed by reports that many of its cars with automatic transmissions produced during the 1970s had a tendency to slip from park into reverse. In 1981 federal regulators forced the company to send warning notices to purchasers of some 23 million vehicles about the problem. Ford may not have been happy about this, but it was a lot less onerous than the massive recall of the cars that had been urged by public interest groups.

In 1996 Ford gave in to public pressure and agreed to pay for replacing ignition switches on more than 8 million cars and trucks that were prone to short circuits that could cause fires. In 1998 State Farm, the largest auto insurer in the United States, sued Ford, charging that the company withheld information about the potential fire hazard from federal regulators and the public.

In 1999 NHTSA hit Ford with a $425,000 fine in the matter. An investigation later revealed evidence that Ford knew about ignition defects, which also sometimes caused vehicles to stall out while making turns, but remained silent. A California judge then ordered the recall of an additional two million vehicles—the first time a U.S. court had ever taken such an action against automaker.

In 2000 Bridgestone/Firestone announced a massive recall of tires, most of which had been installed on Ford sport-utility vehicles and light trucks. Ford alleged that the tire company had known of the defects for several years. Information later came out suggesting that Ford, as well as Bridgestone/Firestone, had known of the tire defects long before the recalls were announced.

An investigation by the New York Times found that in the 1980s Ford had taken a number of design shortcuts that raised the risk of rollover accidents in what would become its wildly popular Explorer SUV.

What a track record. Let’s hope we are not returning to those bad old days of automaker recklessness.

Note: The latest addition to my CORPORATE RAP SHEETS is a dossier on Monsanto, the bully of agricultural biotechnology. Read it here.

Who Pays for Extreme Weather?

As the northeast begins to recover from the ravages of Sandy, there are estimates that the giant storm caused some $20 billion in property damage and up to $30 billion more in lost economic activity.

The question now is who will pay that tab—as well as the cost of future disasters that climate change will inevitably bring about.

It’s already clear that the private insurance industry, as usual, will do everything in its power to minimize its share of the burden. Insurers take advantage of the fact that their policies often do not cover damages from flooding, passing that cost onto policyholders. Most of them are unaware of the fact and fail to purchase federal flood insurance until it is too late.

Insurers also exploit clauses in their policies that impose much higher deductibles for non-flood damages during hurricanes. Fortunately, governors in New York, New Jersey and Connecticut are blocking that maneuver by giving Sandy a different official designation (which is consistent with the National Weather Service’s use of the term “post tropical storm”). It remains to be seen, nonetheless, to what extent the insurance industry manages to create new obstacles for its customers.

The challenges for homeowners are just one part of the problem. Sandy also did tremendous damage to public infrastructure—roads, bridges, subway stations, etc. Although these are government assets, should the public sector bear the cost of rebuilding?

Many people are arguing, in the words of a New York Times editorial, that “a big storm requires big government.” That’s certainly true when it comes to initial disaster response. Many more people would have died and much more damage would have occurred but for the efforts of public-sector first responders and even the Federal Emergency Management Agency, which has been remade since its debacle during the aftermath of Hurricane Katrina.

But the challenges associated with extreme weather go far beyond those relief functions. There’s now discussion of the need for New York City to build a huge flood-prevention system along the lines of that in the Netherlands.

Taxpayers, especially those of the 99 percent, should not be forced to assume the entire cost of such a massive undertaking. Extreme weather is clearly linked to climate change, which in turn has been largely caused by the growth in greenhouse gas emissions caused by large corporations, especially those in the fossil fuel industry.

Holding corporations responsible for the consequences of climate change is not a new idea. Yet it is one that all too frequently gets drowned out amid the bloviating of the climate deniers, much of whose funding comes from the very corporate interests they are working to get off the hook.

Back in 2006 BusinessWeek wrote that lawsuits targeting corporations for global warming were “the next wave of litigation,” following in the footsteps of the lawsuits that forced the tobacco industry to cough up hundreds of billions of dollars in compensation. Such cases did materialize. For example, in 2008 lawyers representing the Alaska Native coastal village of Kivalina, which was being forced to relocate because of flooding caused by the changing Arctic climate, filed suit against Exxon Mobil, BP, Chevron, Duke Energy and other oil and utility companies, arguing that they conspired to mislead the public about the science of global warming and this contributed to the problem that was threatening the village.

Such suits have not had an easy time in the courts. The Kivalina case was dismissed by a federal district judge, and that dismissal was recently upheld by the federal court of appeals. A suit brought by the state of California against major automakers for contributing to global warming was also dismissed.

It is far from certain that corporations will continue to get off scot free. In fact, groups such as the Investor Network on Climate Risks argue that the potential liability is quite real and that this should be a matter of concern for institutional shareholders. The Network, a project of CERES, pursues its goals through initiatives such as appeals to the SEC to require better disclosure of climate risks and through friendly engagement with large corporations.

Yet it may be that a more confrontational approach is necessary to build popular support for the idea that big business needs to be held accountable for its big contribution to the climate crisis.

Unfortunately, we are already seeing steps in the opposite direction. The Bloomberg Administration in New York has already announced new storm-related subsidies that will apply not only to struggling mom-and-pop business but also to giant corporations. Unless there is a popular outcry, the city will repeat its mistakes in the wake of the 9-11 attacks of giving huge amounts of taxpayer-funded reconstruction assistance to the likes of Goldman Sachs (see the website of Good Jobs New York for the dismaying details).

The fact that the large New York banks that stand to benefit from Bloomberg’s new giveaways helped finance fossil-fuel projects that contribute to climate change shows just how self-defeating this approach is.

Rather than using public money to help wealthy corporations pay for storm damage on their premises, we should be forcing those companies to pay the costs of addressing the climate crisis they did so much to create.

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New in CORPORATE RAP SHEETS: a dossier on the many environmental and labor relations sins of chemicals giant DuPont.

We Subsidized It

We Built It. The Romney campaign and the wider conservative movement believe they have a winner in a slogan designed to refute President Obama’s comment about the role of government assistance to business in favor of an idealized Ayn Rand-style entrepreneurship that needs no stinkin’ public infrastructure.

They are so confident, in fact, that they asked a strangely inapt group of messengers to promote the theme at the Republican Convention: a slew of governors. Since Ronald Reagan, the right has ignored the incongruity of having public officials play a leading role in denouncing the public sector. Yet the GOP governors who took to the stage in Tampa to celebrate up-by-one’s-bootstraps free enterprise raised this hypocrisy to new heights.

Despite their frequently expressed laissez-faire beliefs, they have each presided over deals in which huge sums of taxpayer money have been handed over to large corporations in the name of economic development. The Romney campaign, which has been making deceitful allegations about Obama Administration changes in welfare work requirements, chose to have its big convention theme delivered by some of the biggest proponents of corporate welfare.

Take South Carolina Gov. Nikki Haley. She used her convention speech to honor her immigrant parents and the clothing company they created, adding: “So, President Obama, with all due respect, don’t tell me that my parents didn’t build their business.” She also gave praise to Boeing, saying that her state “was blessed to welcome a great American company that chose to stay in our country to continue to do business.” She failed to mention that Boeing’s decision to locate its second Dreamliner assembly line in Charleston was more than a little influenced by a state and local subsidy package estimated to be worth more than $900 million.

That deal was originally negotiated by her predecessor Mark Sanford but Haley enthusiastically carried it out and went to great lengths to defend Boeing against Machinists union charges that the move to South Carolina was prompted by anti-union animus. Haley has also made subsidy deals of her own, including the $9 million recently given to Michelin for a tire plant (photo). Haley subsequently told a tire industry conference: “We want to help you do more business in South Carolina and we want to make sure that you grow. That’s our job.”

Virginia Gov. Bob McDonnell—who told the convention “Big government didn’t build America: You built America!—agreed to give up to $14 million in subsidies to Northrop Grumman to relocate its headquarters to northern Virginia. The move was motivated by a need to be near the company’s dominant customer, the Pentagon, so the subsidies were probably unnecessary and could be seen as a reward for the large contributions the company made to his election campaign.

Ohio Gov. John Kasich, another member of the we-built-it chorus, has given in to job blackmail demands by companies threatening to move their operations out of state unless they got big subsidy deals. Kasich’s administration negotiated $100 million packages with both Diebold Inc. and American Greetings Corp.

Wisconsin Gov. Scott Walker, a rightwing hero for his campaign against public worker collective bargaining rights, used his convention speech to emphasis the importance of letting people “control their own destiny in the private sector.” In July, Walker announced that the state had awarded $62 million in tax credits to Kohl’s to get the retailer to expand its headquarters in the Milwaukee suburb of Menomonee Falls.

And then there’s conservative bad-boy idol Chris Christie, who gave the keynote address at the convention. The New Jersey governor’s administration has been handing out lavish tax credit deals to companies moving from one location in the state to another, including $250 million to Prudential Insurance, $100 million to Panasonic and $81 million to Goya Foods. Since taking office in 2010, Christie has given away more than $1.5 billion in subsidies to corporations.

The examples above focus on bigger deals involving larger companies, since those are the ones with the biggest giveaways of taxpayer funds. Yet many state subsidy programs also serve smaller firms. My colleagues and I at Good Jobs First have assembled data on more than 200,000 subsidy awards from state and local governments around the country in our Subsidy Tracker database. Most of the recipients are not in the Fortune 500.

I cannot resist mentioning that one of those small recipients is First State Manufacturing, a business run by Sher Valenzuela, who is running for Lt. Governor in Delaware on a tea party platform and who was given time at the Republican convention to tell her “I built it” story. In addition to the federal contracts and Small Business Administration loans revealed by Media Matters, information gathered for Subsidy Tracker shows that First State has received more than $29,000 in reimbursements for training costs through Delaware’s Blue Collar Training Grant program—a modest amount but another indication of business dependence on government.

Claims about the autonomy of the private sector are one of the Big Lies of modern conservatism. The real objective of the Right is along the lines of what Gov. Haley told that tire industry conference: to make sure government serves business through subsidies, deregulation, tax minimization and weakening of unions.

To the companies receiving these forms of assistance to expand their business, one could easily adopt the language of President Obama and say “you didn’t build that alone.” The truth is that both liberals and conservatives believe that government should aid the private sector. The difference between the two is in what is expected in return. Liberals make an effort (albeit inadequate) to impose some accountability, whereas the Right believes that business should be able to take all it wants with no strings attached. The debate over whether to limit government should really be one on whether there will be limits on corporate power.

ALEC Staggers But Will it Fall?

Wal-Mart’s decision to drop its membership in the American Legislative Exchange Council is a milestone in the remarkable effort to drive a wedge between ALEC and the large corporations that have used the organization to promote their self-serving policy agenda at the state level.

At least 18 companies are reported to have cuts ties to ALEC in the face of a pressure campaign spearheaded by groups such as Color of Change, Common Cause, People for the American Way and the Center for Media and Democracy.

The campaign—which has also prevailed against the likes of Amazon.com, Coca-Cola, Kraft Foods, McDonald’s and Procter & Gamble—is already one of the most successful corporate accountability initiatives ever undertaken, and more wins are likely to occur. Yet there are also high hurdles to overcome.

Those companies that have succumbed to the anti-ALEC pressure are pretty much all consumer products firms that were concerned about the possibility of boycotts on the part of customers outraged at ALEC’s role in promoting “stand your ground” laws like the one in Florida at the center of the controversy over the shooting of Trayvon Martin.

A decisive win against ALEC will require splitting off a much larger portion of ALEC’s sizeable corporate membership, including companies that are not fazed by consumer unrest. Quite a few firms of this sort are represented on ALEC’s Private Enterprise Board, whose membership roll reads like a rogue’s gallery of corporate irresponsibility.

The pharmaceutical industry, which has fought countless battles over pricing and safety and has been hit with billions of dollars in fines for illegal marketing practices, has several representatives on the board, including the senior vice president of its trade association PhRMA and officials from Bayer, GlaxoSmithKline and Pfizer.

Big tobacco, another battle-hardened industry, is represented by officials from Altria and Reynolds American. The national chair of the board, W. Preston Baldwin, is listed as being affiliated with the corporate strategy consulting firm Centerpoint360, but he used to be an executive with the chewing tobacco producer UST (now owned by Altria).

Also represented on the board are two leading villains of the natural resources sector—petroleum behemoth and climate-change denier ExxonMobil and Peabody Energy, the largest private-sector coal producer in the world. For good measure, the board also includes a representative of Koch Industries, which is not only heavily involved in petrochemicals but is also, through the Koch Brothers, one of the primary backers of groups promoting the same kind of rightwing agenda pushed by ALEC.

Apart from those on the board, ALEC’s membership list is believed to still include corporate bad actors such as ASARCO, Bank of America, BP America, Caterpillar, Chevron, Comcast, Corrections Corporation of America, Dow Chemical, Freeport-McMoRan Copper & Gold, Monsanto, Northrop Grumman, Shell Oil, T-Mobile and Verizon.

In other words, the effort to cleave off ALEC’s corporate members will increasingly mean taking on companies that are not only notorious but which have a long track record of fending off challenges from labor, environmental and other progressive forces.

It’s true that Wal-Mart, whose vice president for public affairs was serving as secretary on the ALEC board until the company’s departure, is also part of that category. Yet Wal-Mart has been less combative of late, due in large part to the fallout from a foreign bribery scandal and its ongoing effort to give the impression of being an environmental leader. And it is a consumer-oriented company.

So what will it take to knock out these other ALEC loyalists? There’s no easy answer, but it may be necessary for the campaign to treat the relationship of those firms to ALEC in a different way. Until now, the campaign has focused on making ALEC seem like a rogue organization that has adopted positions that diverge from the interests of the target companies. The online petition being circulated by Common Cause states:

Stop risking your company’s reputation. Your association with the American Legislative Exchange Council aligns you and your stockholders with a partisan drive to deny millions of Americans their right to vote, an attack on public schools, and the proliferation of “Stand Your Ground” laws that promote vigilantism.

Your company probably joined ALEC to get help in lobbying for legislation that impacts your business. But ALEC’s agenda these days puts the pursuit of private profit ahead of the public interest. It pulls business leaders like you into a radical ideological crusade involving issues that have nothing to do with your company.

Yet many of the companies listed above continue to support ALEC precisely because it is pursuing a radical ideological crusade that does have something to do with their interests. The anti-ALEC campaign will have to put more emphasis on the core issues that attract companies to the organization: business tax reduction, deregulation, privatization and other “fundamental principles of free-market enterprise, limited government, and federalism at the state level,” as the ALEC mission statement puts it.

ALEC’s identification with “stand your ground” and voter suppression opened an extraordinary opportunity to put the organization on the defensive, but in the end it is this broader corporate agenda that has to be confronted.