Disclosure

Sharing the Clean-Car Prize

John McCain’s suggestion yesterday that the federal government offer a $300 million prize for the development of a next-generation battery for plug-in hybrids or electric cars is being derided in some quarters as bringing a “game-show ethos to American politics.” It is also awkward that Daniel Yergin’s definitive account of the oil industry’s quest for domination was entitled The Prize.

The idea of offering a cash award for a technological innovation is hardly unprecedented. Such bounties, however, are usually offered by private entities such as the X Prize Foundation. What McCain is forgetting is that when a prize is offered by government—that is, when taxpayer money is the source of the reward—the public should get some direct benefit for its “investment.” A benefit, that is, beyond the fact that the new technology would be available for sale.

This is the principle behind the proposal put forth by people such as James Love of the Consumer Project on Technology to replace privately financed drug research with taxpayer-funded prizes. Pharmaceutical researchers would get substantial sums for the creation of new treatments that create demonstrable improvements in health conditions. This does not, however, create windfalls for the winners. Drugs that receive the prize—which was incorporated into a bill introduced last fall by Vermont Sen. Bernie Sanders—would not have patent protection and thus would be widely available at a cheap generic price.

There’s no indication that McCain has this trade-off in mind. He presumably would want the winners of the battery competition to be rewarded twice—with the prize as well as the patent.

Until prizes and other “carrot” approaches succeed in bringing about cleaner cars, some government “sticks” will remain necessary. One disclosure-based version of the latter is being introduced in California. The state’s Air Resources Board announced last week that, beginning next January, every new car put on sale in California will be required to carry a label informing potential buyers of the vehicle’s environmental impact. The label will rate the car based both on its emissions of greenhouse gases and its contribution to smog. The Board already has a website that provides data on the cleanest, most fuel efficient cars on the market.

Compared to his dismaying embrace of expanded offshore oil drilling last week, McCain’s clean-battery-prize idea is not completely foolhardy. But he shouldn’t forget that the role of government is to put a check on business shortcomings—if only through mandated disclosure—rather than fostering more winner-take-all “solutions.”

Peeking at a Company’s Pay Rates

Company-specific compensation data is one of those rare areas in which more is known about people at the top of the social pyramid than those at the bottom. Publicly traded corporations are required to file proxy statements each year that disclose down to the last dollar what top executives are paid in salary, bonuses, long-term compensation, stock options and perks. We know what the big boss earns but generally not what the company pays its middle managers or hourly workers.

Glassdoor, a new website launched this week in beta form, starts to fill that information gap. The site was created by Rich Barton, the former Microsoft executive who founded Zillow, a popular website containing data on real estate values. Whereas Zillow is based at least in part on government data, Glassdoor relies on voluntary submissions by users who anonymously reveal their own salaries, along with information on vacation time, medical coverage and retirement benefits. Users are asked to specify their length of experience and geographic location, so that salary variations can be evaluated. Those who do not wish to name their employer can specify the size of the company and the industry sector.

As the site is just getting off the ground, Glassdoor’s data are far from comprehensive. But there are already, for instance, 60 salary reports covering computer networking giant Cisco Systems. The site also provides anonymous company evaluations by current and former employees, including one in which a former product manager at Cisco complained: “They will try to work you to death.”

While we wait for Glassdoor to grow into a richer source, it should be noted that there are some limited sources for company-specific wage and salary data on those who are not top executives. For example:

* A few states that disclose the economic development subsidies they give to companies ask those firms to report on the wages of the jobs they create. The best example is Illinois, which has a database of reports filed by companies with job creation statistics, including average salaries.

* Some jurisdictions that have enacted living wage laws require employers to file periodic reports that may become part of the public record either automatically or as the result of freedom-of-information requests.

* The U.S. Department of Labor has an online archive of collective bargaining agreements—which typically include wage rates and other conditions of employment—arranged by employer. (The Bureau of Labor Statistics has data by industry but not by specific company.)

* Companies in some regulated industries have to report payroll expenses. For example, airlines must disclose this and other operating and financial data on Form 41, which is submitted to the Bureau of Transportation Statistics. The BTS system is cumbersome to navigate, but the Airline Data Project at MIT has used it to compile handy summary tables of wage and salary rates by job category for each of the major carriers going back to 1995.

* And finally, you can always check want ads and job postings to look for salary figures offered by those companies that don’t hide behind the statement that the pay rate “depends on experience.”

Obama and McCain Agree on Transparency

Although he’s been busy with some other matters, Sen. Barack Obama found time this week to introduce legislation that would expand the amount of information made available to the public on federal procurement contracts. The measure was introduced with Sen. Tom Coburn (R-Okla.), who had joined Obama in a previous bipartisan initiative that resulted in the 2006 passage of legislation creating the USA Spending database. The original co-sponsors of the new bill (S.3077) are Senators John McCain (R-Ariz.) and Tom Carper (D-Del.).

S.3077 calls for an expansion of the data provided via USA Spending, the creation of which also needs to be credited to OMB Watch, which built its own contract database, FedSpending, on which the federal resource ended up being based.

As summarized by Obama’s office, the bill would add to USA Spending:

– A copy of each Federal contract in both PDF and searchable text format.

– Details about competitive bidding, the range of technically acceptable bids or proposals, and the profit incentives offered for each contract.

– The complete amount of money awarded, including any options to expand or extend under a contract.

– An indication if the Federal award is the result of an earmark.

– Information about government lease agreements and assignments in the same manner that information is reported for contracts, grants, and other assistance.

– An assessment of the quality of work performed on Federal awards.

– Information about Federal audit disputes and resolutions, terminations of Federal awards, suspensions and debarments, and administrative agreements involving Federal award recipients.

– Information about any civil, criminal, or administrative actions taken against Federal award recipients, including for violations related to the workplace, environmental protection, fraud, securities, and consumer protections.

– Information about Federal tax compliance by Federal award recipients.

– Information about parent company ownership that will be made accessible, along with other data on USASpending.GOV, through application programming interfaces.

– Links to publicly available Government reports.

Legislation covering the bullet point about disclosure of the legal track record of contractors—along the lines of the Project On Government Oversight’s Federal Contractor Misconduct Database—has already passed the House.

It is not clear whether the new Obama-Coburn bill would do anything to address a problem highlighted by Secrecy News—the fact that intelligence agencies such as the Defense Intelligence Agency and the National Geospatial-Intelligence Agency have been refusing to submit data on even their unclassified contracts to USA Spending. As noted in the last issue of the Digest, the intelligence agencies are outsourcing more and more of their work, so disclosure of those contracts becomes all the more important.

Letting More Sunshine In

I’m writing this from beautiful Bigfork, Montana, where I’ve had the pleasure of attending a gathering of government transparency experts and activists convened by the National Institute on Money in State Politics. The message here is a mixed one. Speakers such as Charles Davis, head of the National Freedom of Information Coalition, told harrowing tales of how state governments try to block access to public records. Yet we are also being treated to reports on new advances in disclosure and new online tools to access the data. I’ll focus here on the latter.

Ed Bender, executive director of the Institute and our host, demonstrated new features recently added to the Institute’s already remarkable Follow the Money website as well as features that will soon be introduced. These include:

Committee Analysis Tool (or CAT). Using continuously updated legislative rosters compiled by Project Vote Smart, a user of Follow the Money can now quickly see all the contributions going to members of a given committee.
Lobbyist Link. This feature, which is currently in beta form and is expected to launch in the next month or two, allows users to see the extent to which a large company or other institution is trying to influence policymaking throughout the country. For example, by searching Verizon, one will be able to see data on the giant phone company’s lobbying efforts in every state and the campaign contributions associated with those efforts. The Institute invites Digest readers to preview the tool, but recognize that work is still being done on matters such as variations in company names. Send comments to the Institute using the link on the beta page.

Sheila Krumholz and Susan Alger of the Center for Responsive Politics provided a tour of their recently redesigned Open Secrets site, the leading source for data on federal campaign contributions and related issues such as lobbying, financial disclosure by public officials and the revolving door between the public and private sectors. The redesign makes it possible for registered users to display a personalized set of data on particular candidates or donors every time the site is opened. This was described as just the first in a series of planned personalization tools. The Center is also considering adding data on earmarks and federal contracts to the site.

Greg Elin of the Sunlight Foundation, whose new site Fortune 535 I wrote about recently, wowed even this sophisticated crowd with his description of a prototype tool called Influence Explorer, which will allow one to dump a body of text, such as a newspaper article, into a database that will automatically extract key names and assemble data on those individuals. The initial application is limited to members of Congress (the data thus include items such as campaign contributions), but it could be extended to other groups of people or institutions.

Among the other speakers were Cindi Canary of the Illinois Campaign for Political Reform, who told about the origins of Open Book, a site that combines data from campaign contributions and procurement contracts in Illinois (which I covered last year), and Mike Smith, chief technology officer of the Washington Public Disclosure Commission, who described plans for upgrading the state’s already excellent site on campaign finance, lobbying and financial disclosure.

Hearing these presentations and others was both exciting to me as a researcher looking for new tools and inspiring evidence that proponents of transparency are making major inroads against the forces of darkness.

Living Large on Capitol Hill

After being in office for a while, many lawmakers cannot wait to go through the revolving door to the private sector so they can earn a lot more than the salary of $169,300 currently paid to members of Congress. However, a new tool created by the Sunlight Foundation suggests that some senators and representatives do quite well in building up their nest egg while still on the public payroll.

The Fortune 535 is a website that approximates changes over time in the net worth of members of Congress. First among these accumulators of wealth is Rep. Darrell Issa (R-Calif.), who is estimated to have grown richer by some $210 million since 2000. Two others are said to have boosted their net worth by more than $100 million: Rep. Jane Harman (D-Calif.) and Sen. John Kerry (D-Mass.).

Although the Fortune 535 is based on the personal financial disclosure forms filed by members of Congress and made available on the web by the Open Secrets website of the Center for Responsive Politics, its net worth numbers are not quite ironclad. That’s because legislators are allowed to report their assets and liabilities in exceedingly broad ranges. Fortune 535 combines the midpoints of the ranges for each asset and liability and compares the overall result for the earliest available disclosure form to the legislator’s most recent filing. The site does not attempt to explain the changes in the estimated net worth figures. By necessity, it is not the most rigorous data source, but it serves both to illustrate the flaws in the current financial disclosure system and to suggest that many members of Congress are not sharing the financial distress being experienced by their constituents.

Another new data source on Congress appears at first to contain more precise data. Legistorm has introduced the Foreign Gifts Database, which contains information on both tangible items and travel/lodging given by foreign governments to senators, representatives and their staff over the past decade. The database can be searched by recipient, country or description of the gift. Former Speaker Dennis Hastert, for example, reported receiving a ceremonial dagger from the government of Morocco worth $10,000. Hastert filed his reports on the dagger and other gifts only upon leaving office rather than within the specified 60 days after receiving the items.

Legistorm, which also provides databases of Congressional member and staff salaries and trips, also raises questions about the completeness of the reporting: Hastert’s filings are the only ones made by a member of the House in the past five years.

Rebuffed by Supreme Court, NAM Complies with Disclosure Law—for Now

It’s rare these days for powerful business interests to be rebuffed by the U.S. Supreme Court, but that’s what happened when Chief Justice John Roberts denied an emergency request from the National Association of Manufacturers (NAM) last week having to do with disclosure. NAM has been waging a court battle against a new law (Section 207 of P.L. 110-81) that requires trade associations to list member companies that are extensively involved in developing the organization’s lobbying strategies or that contribute at least $5,000 toward those efforts. NAM believes its members should be able to lobby confidentially.

NAM was seeking a stay on enforcement of a portion of the Honest Leadership and Open Government Act that took effect on April 21. The DC Court of Appeals turned down the request, so NAM went to the Supreme Court, which also said no.

This week, NAM submitted an amended lobbying disclosure filing to the Clerk of the House and the Secretary of the Senate. Beginning on page 54 of the 71-page document, NAM responded to a question about additional affiliated organizations by including a link to a page on its website.

That page contains the names of 63 large corporations and two trade associations (American Petroleum Institute and the Edison Electric Institute) whose lobbying involvement, NAM decided, now has to be made public. Not surprisingly, the companies include giant industrials in sectors such as energy, pharmaceuticals, chemicals, heavy equipment, food processing and aerospace. In other words, companies that have a lot of interests that need to be fostered in Washington.

Here’s the complete list: Albemarle Corporation, American Electric Power, American Petroleum Institute, AREVA Group, AT&T, Bayer Corporation, BD, Boston Scientific Corporation, BP Corporation North America, Bristol-Myers Squibb Company, Campbell Soup Company, Caterpillar Inc., Chevron Corporation, CN, CONSOL Energy, Corning Incorporated, Deloitte & Touche LLP, Delphi Corporation, Dominion Resources Services, Dow Corning Corporation, Eastman Chemical Company, Edison Electric Institute, Entergy Corporation, Exxon Mobil Corporation, FirstEnergy Corp., FMC Technologies, General Electric, Goodrich Corporation, Illinois Tool Works, Ingersoll-Rand, JELD-WEN, Inc., Johnson Controls, Koch Industries, Loews Corporation, Marathon Oil, Mead Westvaco, Merck & Company, Northrop Grumman, Occidental Petroleum, Owens-Illinois, PPG Industries, PPL Corporation, Rockwell Automation, Rohm and Haas, SABIC Americas, Inc., Sanofi-Aventis, Shell Oil, Smurfit-Stone Container, Sony Electronics, Temple-Inland, Terra Industries, Textron, The Clorox Company, The Hershey Company, The Timken Company, Unilever United States, Union Pacific, United States Steel, USEC, Verizon, Volvo Group North America, W L Gore & Associates, W. R. Grace & Co., Weyerhaeuser Company, and Xerox Corporation.

It is no great surprise that companies such as these are deeply involved in trying to shape federal policies, but what’s important here is the principle: lobbying is not a process that companies can engage in surreptitiously by funneling their spending through business associations. NAM President John Engler (former Republican Governor of Michigan) warned that the new disclosure requirement might prompt companies “to curtail their memberships or restrict their involvement in trade associations.” That might sound like a problem to Engler, but less corporate involvement in manipulating public policy is music to my ears.

Federal Database of Contractor Misconduct Now One Step Closer

The effort to centralize information on federal contractors that have broken the law or violated regulations took an important step forward today when the House approved by voice vote H.R. 3033, the Contractor and Federal Spending Accountability Act. The issue now goes to the Senate, where Claire McCaskill (D-Mo.) today introduced a companion measure.

The bills would require the federal government to take over a function that until now has been unofficially handled by the Project On Government Oversight. POGO’s Federal Contract Misconduct Database has been an immensely valuable pilot effort covering the 50 companies doing the most business with Uncle Sam.

First on that list in terms of contract dollars is arms maker Lockheed Martin, for which POGO has found 42 instances of misconduct—resulting in $553 million in fines and settlement costs—since 1995. Number two contractor Boeing has 24 instances and $863 million in misconduct dollars, followed by Northrop Grumman with 23 instances and $450 million. While Lockheed leads in the number of misconduct instances (followed by General Electric and Exxon Mobil and Honeywell International before Boeing and Northrop), it ranks 9^th in misconduct dollars. The winners in that category are Exxon and BP Amoco. POGO defines “misconduct” as cases in which contractors “violate laws or regulations or are the subject of misconduct allegations in their dealings with the government, individuals, or private entities.”

H.R. 3033 would mandate the creation of a public database that would reveal whether any recipient of a federal contract or grant had, within the past five years: been involved in any civil, criminal or administrative proceeding resulting in a finding of fault of $5,000 or more; had a federal contract or grant terminated because of default; or been suspended or debarred from doing business with the federal government. This would enable federal agencies to weed out bad actors before awarding future contracts.

If it passes, the contractor database would represent the second instance in recent years in which a disclosure initiative pioneered by a non-profit became an official federal program. The recently launched USA Spending database of federal contracts and grants, mandated by bipartisan legislation sponsored by Sen. Barack Obama (D-Ill.) and Sen. Tom Coburn (R-Okla.), was directly modeled on the FedSpending database that had been created by OMB Watch.

CEOs Who Never Pick Up the Tab

I was intrigued by a post that just appeared in Footnoted.org about some companies whose recent proxy statements disclose they are reimbursing top officers for the cost of having their cars washed. We have all heard about the expensive perks large corporations shower on their executives: country club memberships, use of corporate jets, personal financial advisors, etc.—all in addition to munificent salaries and bonuses. Yet are companies also taking care of mundane everyday expenses as well?

In theory, it shouldn’t be possible to learn these details, since even under the more rigorous disclosure rules imposed by the SEC in 2006, companies are not required to list perks worth less than $10,000. Nonetheless, I decided to follow Footnoted’s lead and search the database of recent proxy statement to look for other kinds of personal services being provided to executives. Here’s an assortment of what I found.

SLM Corp.—the student loan company also known as Sallie Mae—reports that it not only provided a townhouse for president C.E. Andrews but also paid for “real estate taxes, homeowner’s insurance, neighborhood association fees, repairs and improvements, utilities, lawn and housekeeping services, and pest control.”

Harris & Harris Group—a business development company focusing on nanotechnology—pays for both a health-club membership and a personal trainer for chief executive Charles E. Harris.

BioLase Technology—a producer of dental lasers—paid the laundry expenses of Keith Bateman while he was executive vice president of the company.

Military contractor Raytheon and numerous other companies pay for security systems at the homes of their top executives.

Home Depot pays for the home internet services used by their top executives and picks up the tab when they send funeral flowers.

Beermaker Anheuser-Busch has a company barber shop for top executives and provides free beer “for personal use and entertaining.”

The costs of these perks are trivial in comparison to the cash compensation the executives receive and are barely a blip in the overall finances of the companies. But they illustrate the regal manner in which the corporate elite are treated. How can a CEO who doesn’t have to pay many of his or her own personal expenses—including in some cases the cost of six pack—understand the situation of those who get nothing for free?

The Fortune (Mostly Non-Union) 500

Fortune magazine has come out with the latest edition of its list of the 500 largest publicly traded U.S. corporations, and all the attention will be paid to which companies rank higher or lower based on revenue. For the average person, another measure of the performance of those giant corporations may be more relevant: the extent to which they are depressing wage rates by getting rid of unions or continuing to keep them out of their operations.

One way to gauge this is to look at the new 10-K filings that companies have been issuing in recent weeks. Each of those documents—annual reports submitted to the U.S. Securities and Exchange Commission—has a section on employees in which companies have traditionally given an indication of the extent to which their workforce is unionized.

I decided to look at these sections for the top 50 on the new Fortune list. I found that, of that group, only five reported that a majority of their U.S. employees are covered by a collective bargaining agreement: General Motors, Ford, AT&T, Kroger and UPS. An additional half dozen reported that a minority of their U.S. workers have union protection: Verizon (40%), Boeing (36%), General Electric (15%), Costco (11%), AmerisourceBergen (4%) and Wellpoint (“a small portion”). Two companies—United Technologies and Marathon Oil—mention unions but don’t indicate the extent of their presence.

The remaining 35 companies (State Farm and Freddie Mac don’t file 10-Ks) make no reference to unions or declare they are union free. Home improvement retailer Lowe’s almost seems to be gloating when it says:

As of February 1, 2008, we employed approximately 160,000 full-time and 56,000 part-time employees, none of which are covered by collective bargaining agreements. Management considers its relations with its employees to be good.

And, in the absence of a union, who’s going to tell them otherwise?

A few of the more than 30 companies in the group that don’t mention unions are known to engage in some collective bargaining (the big oil companies, for instance), but it’s interesting that they deem it so insignificant that it need not be mentioned in a document that is supposed to warn investors of potential risks such as work stoppages. Unfortunately, the SEC rule (Regulation S-K) governing what is supposed to go into 10-Ks is not very explicit about disclosure requirements relating to labor relations, but the general principle is that matters material to the financial prospects of the company have to be reported.

It appears that most big companies have reached the point that the union presence in their workforce is not material. That may allow investors and managers to breathe easier, but it explains a lot of what is wrong with the U.S. labor market.

Look here for information on one proposed remedy for declining union density—the Employee Free Choice Act.

EMMA: Municipal Bond Documents Finally Being Made Accessible

For more than a decade, key corporate filings with the Securities and Exchange Commission have been available to the public at no charge through the EDGAR website. This has been a boon for transparency and a godsend for researchers.

During the same period, those who wanted to access analogous documents on tax-exempt bonds filed with the lesser known Municipal Securities Rulemaking Board (MSRB) have had to use commercial services such as Munistatements and DPC Data that charge hefty subscription or pay-per-view fees.

Now that is beginning to change. This week MSRB introduced EMMA (short for Electronic Municipal Market Access), which is described as “an Internet-based disclosure portal.” The key document EMMA will disclose is the Official Statement (OS), a prospectus that issuing agencies publish with details on new municipal securities.

The OS is useful not only to municipal finance specialists and investors in tax-exempt bonds. Because certain types of municipal securities such as industrial revenue bonds provide funding for private-sector projects, many OS filings shine a light on ways in which public money is being used to subsidize for-profit ventures.

EMMA starts out this week on a pilot basis covering only advance refundings of outstanding securities. The site also provides real-time trade price data — an effort to end market insiders’ monopoly on price information. Fuller access to OS filings will begin after June 30, but it remains to be seen whether EMMA will have the full search capabilities of Munistatements and DPC.