Archive for January, 2018

The Bonus Boondoggle

Thursday, January 25th, 2018

Home Depot is the latest company to join the bonus bandwagon, announcing that it will give hourly employees one-time payments of up to $1,000 as a “reward to our associates for continuing to deliver outstanding customer service.” CEO Craig Menear added: “This incremental investment in our associates was made possible by the new tax reform bill.”

No one should begrudge a few more bucks to underpaid retail workers, but the bonuses should be regarded with a skeptical eye. It’s clear, to begin with, that the companies making these announcements are doing so to curry favor with the Trump Administration and Congressional Republicans. And the amounts being offered to employees represent a small portion of the financial benefits the corporations will enjoy from the tax giveaway. At Bank of America that portion was reported to be about 5 percent.

There’s also a problem with the way the payments are being made. The fact that many of the workers are being given one-time bonuses rather than increases in their base pay means that the impact will be fleeting and do little to address the ongoing problem of wage stagnation.

But perhaps worst of all is that employers are taking these steps on their own rather than negotiating with their workers. That’s possible because they are in almost all cases non-union. Some such as Walmart have a notorious history of anti-union animus, while others like Starbucks have resisted organizing drives in more subtle ways.

There are a few exceptions. For example, AT&T, which is extensively unionized, discussed its bonuses with the Communications Workers of America before making the announcement. Nonetheless, the CWA, which had called on telecommunications companies to provide the $4,000 wage increase Republicans claimed would result from the tax bill, vowed to negotiate for more than the $1,000 payments AT&T said it would provide.

While AT&T maneuvered to downplay the role of the CWA, most of the bonus givers need not take such steps. They can present their payments purely as an act of corporate benevolence.

They are also an affirmation of the lop-sided balance of power in non-union companies. Management gets to decide whether and how to share the tax windfall in the same way it makes all other decisions that affect the lives of their workers. This is seen in the fact that companies such as Walmart and Comcast announced their bonuses around the same time they were carrying out substantial layoffs.

Large companies are adopting the Trumpian practice of pretending to act in the interest of workers without actually empowering them. If Corporate America really wanted to help their employees, they would drop their opposition to unions and let workers bargain for real gains rather than handouts.

The Corporate Trumps

Thursday, January 18th, 2018

After the 2016 election there was much trepidation in the corporate world about what the election of a self-proclaimed populist would mean for business. Trump’s intervention in the controversy over layoffs at a Carrier plant in Indiana was taken as a signal that he would be tough on the Fortune 500. “Corporate America unnerved by Trump” was the headline of a front-page story in the Washington Post on December 7, 2016.

At the one-year mark of the Trump Administration, those fears have been long forgotten. Although some corporate executives have spoken out against the president on certain social and civil rights issues, they have generally made peace with him on economic policy. They are delighted with his deregulatory moves and are thrilled at the windfall they are enjoying from the tax bill. Meanwhile, they grow wealthier by the day as a result of the stock market’s new bout of irrational exuberance.

Some companies are taking things a step further by also adopting Trump’s style of making exaggerated and self-serving claims while pretending to be acting in the national interest. The ranks of the these corporate Trumps seem to be proliferating.

Even before Trump took office, the Japanese company SoftBank proclaimed that it was inspired to invest $50 billion in the United States and create 50,000 jobs. The Taiwanese company Foxconn promised $7 billion in investment and also the nice round number of 50,000 jobs.

In February Intel, praising Trump’s policies, said it would invest $7 billion in a U.S. chip plant and create 3,000 jobs. In May the Indian business services outsourcer Infosys claimed it would hire up to 10,000 people in the United States.

During the summer, Foxconn upped its ante with an announcement that it would spend $10 billion to build a flat-screen plant in Wisconsin that would ultimately employ some 13,000 workers.

The latest company to Trumpify itself is Apple, which says it is so happy with the tax law changes that it will invest $30 billion in the U.S. over the next five years and create over 20,000 new jobs. Although it has not linked its move directly to Trump’s policies, Amazon’s announcement in September that it planned to create a second headquarters with 50,000 new jobs fits into the same trend.

What these announcements have in common is that they seem to be designed more as public relations stunts than as serious economic commitments. Many of the numbers are far beyond the norm and appear to be chosen to attract attention.

At a time when the typical plant workforce is shrinking, especially in high-tech, Foxconn’s claim that it will employ 13,000 people in that Wisconsin facility seems far-fetched. Equally implausible is Amazon’s stated intention to more than double its headquarters staff. The idea that Apple, which was built on cheap Chinese labor, will suddenly become a high-road domestic employer is preposterous.

It is unclear whether some of these initiatives will ever see the light of day at any employment level. Foxconn, in particular, has a track record of failing to follow through on announced projects.

Some of the companies are probably currying favor with the Trump Administration in order to achieve regulatory relief or other administrative benefit. Some, especially Foxconn and Amazon, have used their announcements to encourage state and local officials to offer bountiful financial incentive packages. Apple is trying to burnish its image long tarnished by foreign labor scandals and accusations of tax evasion on a monumental scale.

What all the companies are counting on is that eventually their lavish promises will have been forgotten when they deliver a lot less in the way of investment and jobs – and especially job quality. Taking their cue from Trump, they are focusing on the short-term benefits of making unsubstantiated statements and giving little heed to the longer-run consequences of their actions.

Wage Reparations

Thursday, January 11th, 2018

Donald Trump got a lot of mileage during his presidential campaign from criticizing the poor record of wage growth during the Obama era. Since taking office he has done nothing to directly address the issue. In fact, his administration’s attacks on labor rights have made it more difficult for workers to push for higher pay through unions.

Instead, Trump and his Republican allies in Congress came up with the cynical ploy of promoting their massive corporate tax giveaway as an indirect way of boosting paychecks. The right has always tried to lure labor with the promise of higher net pay that would come from reduced withholding schedules. Yet this time the claim was that companies would respond to reductions in their tax liabilities by boosting gross pay.

From the perspective of labor market dynamics, this made no sense whatsoever. There is no direct tie between corporate tax rates and wage levels. Most of the U.S. public seemed to understand this and expressed little enthusiasm for the tax bill.

Now, however, selected corporations are in effect colluding with Trump by announcing selective wage increases that they claim are inspired by the corporate tax reductions. Walmart is the latest and largest of the employers to play this game with plans to increase starting wages for its “associates” to the princely sum of $11 an hour. Some employees will be awarded one-time bonuses ranging from $200 (for those on the job for less than two years) to $1,000 for those hardy souls who have stuck it out for 20 years.

This plan, like the ones announced by the likes of AT&T and Wells Fargo, is far from a market response to lower taxes. These companies are no doubt using the increases to curry favor with the White House in the hope of better outcomes in their federal regulatory problems.

Then there’s the fact that these are increases that Walmart in particular had to make in response to previous wage hikes at its competitors. Even so, Walmart’s increases will leave many of its employees short of a living wage.

Another reason to doubt these moves are tax-inspired acts of generosity is that the companies involved each have a history not only of keeping wages down but of taking steps to deny workers the full pay to which they were entitled. In other words, all three have a history of wage theft.

Walmart, of course, was long the most notorious employer in this regard. It found myriad ways to get employees to work off the clock, thus violating the minimum wage and overtime provisions of the Fair Labor Standards Act. In the late 2000s Walmart was fined $33 million by the Department of Labor’s Wage and Hour Division and paid out hundreds of millions of dollars more to settle a slew of private collective-action lawsuits.

AT&T and its subsidiaries have paid out more than $80 million to settle about a dozen similar wage and hour and misclassification cases.  Wells Fargo and its subsidiaries have paid more than $120 million in at least 17 cases.

These settlements provided some necessary relief, but the amounts probably don’t begin to approximate the full extent to which the companies shortchanged their workers.

Consequently, whatever voluntary pay increases the companies are offering now can be seen as additional reparations for their past sins of wage theft.

If the management of Walmart really wanted to solve its compensation shortcomings once and for all, it would at long last recognize the right of its workers to form a union and bargain collectively.

Note: the litigation figures cited here come from data being collected for a forthcoming expansion of Violation Tracker.

Money Laundering and Corporate America

Thursday, January 4th, 2018

Money laundering has jumped back to the top of the corporate crime charts, thanks to Steve Bannon’s statements about Trump’s associates as well as the revelation by the founders of Fusion GPS that they gave Congressional investigators leads about the president’s questionable business transactions.

Amid all this, the Office of the Comptroller of the Currency reminded us of the wider scope of corporate ties to money laundering by announcing that it was fining Citibank $70 million for failing to comply with a 2012 consent order the bank signed with the agency to resolve allegations of violating the Bank Secrecy Act. Western Union is paying a $60 million penalty in a similar case brought by New York regulators.

According to data compiled for Violation Tracker, the Justice Department and federal financial regulators have since 2000 brought more than 80 successful cases against corporations for deficiencies in their anti-money laundering practices. These companies have paid a total of $5.9 billion in fines and settlements.

The targets of these cases include several of the largest U.S. banks. JPMorgan Chase paid the largest penalty, $1.7 billion, to resolve a criminal case connected to its role as the banker for Ponzi schemer Bernard Madoff. Wachovia, now owned by Wells Fargo, was fined $110 million in 2010. Citigroup subsidiary Banamex agreed last year to forfeit $97 million to resolve a criminal case involving remittances to Mexico.

Foreign banks have also been involved. In 2012 HSBC had to pay $1.3 billion to resolve charges relating to anti-money laundering deficiencies as well as violations of economic sanctions. Last year Deutsche Bank – the same institution whose name keeps getting mentioned in connection with the Trump investigation – was penalized $41 million by the Federal Reserve and was fined $425 million by New York State regulators for anti-money laundering deficiencies said to be connected to the illicit transfer of more than $10 billion out of Russia.

Federal prosecutors and regulators have also brought cases against non-bank entities that handle lots of cash, including Western Union, American Express and casinos. In 2015 the Tinian Dynasty Hotel & Casino was fined $75 million, and in 2013 the Las Vegas Sands Corp. paid $47 million to resolve criminal charges.

Also in 2015 the Treasury Department imposed a $10 million penalty on the Trump Taj Mahal Casino Resort, which by that time was no longer controlled by Donald Trump.  Yet the justification for that penalty mentioned that the casino had been found in violation of the Bank Secrecy Act many times in earlier years, including 1998, when, with Trump running the show, it was fined $477,000 by Treasury.

All of which is to say that neither Donald Trump, his current and former business interests, nor many of the largest financial institutions are strangers to issues of anti-money laundering deficiencies. For the most part, these cases involve a failure to detect and report suspicious transactions on the part of clients and customers. The big question for the Trump empire is whether it will faces charges of having engaged in such transactions on its own.