Month: September 2023

Big Business on the Defensive

Too often, the news is filled with stories of large corporations getting away with all kinds of abuses—mistreating workers, fouling the environment, cheating consumers, undermining our privacy. This week has been different.

On the labor front, there has been more coverage of strikes than we have seen for a long while. This includes a resolved dispute involving film and TV writers, a continuing one involving actors and an escalating one involving autoworkers. These work stoppages are all receiving widespread public support.

The auto strike also brought about the first-ever visit of a sitting U.S. President to a picket line. Occupants of the White House have more typically responded to walkouts by blocking them—as Biden did with railroad workers last year—or with more extreme measures such as Reagan’s firing of the air traffic controllers in 1981.

At the same time, news outlets are giving substantial play to efforts by federal and state governments to curb the power of Big Tech. The Federal Trade Commission, along with 17 state attorneys general, just filed a sweeping complaint against Amazon.com, accusing the e-commerce giant of abusing its market power to the detriment of both consumers and small businesses that rely on its platform to sell their goods.

The FTC complaint arrives as the trial proceeds in a Justice Department lawsuit against Google for monopolizing the online search market. Both cases challenge the core business models of the companies. Even if break-ups of the tech giants are unlikely, adverse court rulings could require them to make fundamental structural changes in the way they operate.

Significant changes, while perhaps not as drastic, could also result from the current labor disputes. It appears that the new contract won by the Writers Guild of America will put limits on the industry’s control of content created with the help of artificial intelligence. United Autoworkers members are seeking to dismantle tiered wage structures and reduce the basic workweek while the industry is making the transition to electric vehicles.

Other fundamental challenges to corporations can be seen in the environmental area. Not long ago, a group of young people in Montana prevailed in their lawsuit arguing that the state’s failure to consider climate change when approving fossil fuel projects was a violation of a provision in the Montana constitution guaranteeing residents the right to a clean and healthy environment. This is just one of numerous efforts to use the courts to address the climate crisis. Large companies are also facing the prospect of new greenhouse gas disclosure requirements—one passed by the California legislature and another pending in the European Union.

Corporations are not giving into these challenges without a fight. They are trying to limit their concessions to unions, aggressively arguing their positions in the court cases, taking steps to sway public opinion and employing legions of lobbyists to promote their point of view to legislators and policymakers.

Yet, for the moment, it is a pleasure to see Big Business on the defensive.

Corporations Are Not Saving the Planet After All

It used to be that you had to go to the websites of groups such as Greenpeace to learn how large corporations are failing to live up to their promises to help solve the climate crisis. Now that fact can be found on the front page of the Wall Street Journal.

The business-friendly newspaper just published an article detailing the ways in which the decarbonization efforts of the world’s largest companies are fizzling out. A big part of the problem is that most companies never developed meaningful climate transition plans and instead relied on dubious carbon offsets instead. The Journal quotes the environmental non-profit CDP as saying that of the nearly 19,000 companies using its disclosure platform, fewer than 100 have credible plans.

Some companies don’t bother to develop any plans—or they keep them to themselves. The Journal cites data showing the percentages of larger publicly traded companies that do not disclose specific plans to meet long-term climate targets. Among those in the coal, oilfield services, and midstream oil sectors the portion is 100 percent. Among integrated oil companies, 93 percent fail to do so.

Big Oil’s detrimental role in dealing with the climate was highlighted in another recent Journal article. It’s well known that Exxon Mobil worked for years to downplay the harmful effects of greenhouse gas emissions. In 2006 the company finally acknowledged those dangers, but the Journal found that within the company the policy did not really change. The newspaper was given access to internal company documents that had been collected by the New York Attorney General but never made public.

These documents, the Journal says, show that Rex Tillerson, who had just taken over as CEO at the time, continued to work behind the scenes to play down the severity of climate change. Exxon executives and scientists were apparently encouraged to go on questioning the mainstream consensus on climate harm.

In other words, it appeared that Exxon, rather than fully abandoning its overt climate denialism, replaced it with a more low-key version while simultaneously reaping the benefits of greenwashing.

Apart from its malignant impact on the climate problem, the fossil fuel industry also continues to be a major source of conventional pollution. We are reminded of this fact by a new report from the Center for American Progress which looks at the long-standing boondoggle surrounding the system by which the industry is allowed to drill on public lands and offshore.

Making extensive use of data from Violation Tracker, the report shows that the top 20 leasing companies are responsible for more than 2,000 environmental violations in their overall operations over the past two decades. Exxon Mobil leads the list with 442 such penalties, while BP has paid out the most—over $30 billion—largely due to its role in the 2010 Deepwater Horizon disaster in the Gulf of Mexico.

CAP’s report recommends that proposed new standards issued by the federal Bureau of Land Management for companies seeking leases be strengthened to include language specifying what defines a bad actor, adding: “Such bad actors should not be eligible for new leases or permits until they have resolved all outstanding issues and demonstrated that they are capable of changing their practices. Further, leases of companies found not to be a qualified or responsible lessee should be subject to cancellation.”

Tougher standards such as these will help to get the message through to the fossil fuel giants that they need to change their ways once and for all.

Corporations and National Security

Most of the cases handled by the Justice Department’s National Security Division involve individuals accused of providing support to foreign terrorist organizations, or more recently, domestic far-right extremists linked to groups such as the Proud Boys.

Yet the division has another mission: prosecuting corporations which violate international economic sanctions or which fail to prevent sensitive technology from being transferred to unfriendly foreign countries. It is beefing up this work, especially the latter part.

The division just appointed its first Chief Counsel for Corporate Enforcement and Deputy Counsel for Corporate Enforcement. In making the announcement, Assistant Attorney General Matthew Olsen suggested that a tougher stance is being taken: “We have watched with concern as investigations of corporate misconduct increasingly reveal violations of laws that protect the United States. Enforcing the laws that deny our adversaries the benefits of America’s innovation economy and protect technologies that will define the future is core to the National Security Division’s mission.” Olsen is in effect saying that some corporations are national security risks—or perhaps more accurately, national economic security risks.

These appointments are consistent with the announcement earlier this year that the National Security Division was joining with the Commerce Department’s Bureau of Industry and Security (BIS) and other agencies to form the Disruptive Technology Task Force. Its mission is “to target illicit actors, strengthen supply chains and protect critical technological assets from being acquired or used by nation-state adversaries.”

Until now, the division’s corporate prosecutions have been limited. In Violation Tracker we document 17 cases that have been brought against companies over the past decade. Most of these are foreign-based companies. For example, in in 2017 a penalty of $430 million was imposed on the Chinese telecommunications company ZTE for illegally shipping U.S.-origin technology items to Iran.

BIS, which brings civil rather than criminal actions, has a much bigger caseload. Violation Tracker documents over 600 export control cases brought by the agency since 2000.  It has also gone after foreign companies such as ZTE but its case list includes numerous domestic companies, including Boeing, General Electric and Northrop Grumman. Earlier this year, it penalized Seagate Technology LLC $300 million for illegal sales of computer disk drives to China’s Huawei Technologies. (Seagate’s parent is technically incorporated in Ireland for tax reasons, but its operational headquarters are in California and it is effectively an American company.)

A focus on domestic companies is also seen in the caseload of another federal export control agency: the State Department Directorate of Defense Trade Controls. Violation Tracker shows there have been around four dozen cases brought against companies by DDTC since 2000, nearly all of them U.S.-based. RTX Corporation (formerly Raytheon Technologies) and its subsidiaries account for the largest share of the penalties.

Given the willingness of U.S.-based transnationals to share technology with customers in countries such as China over the past few decades, the DOJ’s new focus on economic security may be too late to undo much of the damage. Yet if prosecutors are going to address the problem nonetheless, they should follow the lead of other agencies and go after domestic as well as foreign culprits.

The Other Wage Theft

When we hear references to wage theft, there is a tendency to think of low-paid workers being cheated by fly-by-night employers. That is only part of the story.

Wage and hour violations affecting better-paid white-collar workers are also common, and the employers involved are often household names. Their abuses typically consist of practices such as denying overtime pay to low-level supervisors by erroneously classifying them as managers.

The federal law governing workplace pay practices, the Fair Labor Standards Act, provides exemptions for bona fide executive, administrative and professional employees, who are typically paid a salary. Yet in order for the exemption to apply, the person must be paid above a certain level.

Unfortunately, that threshold has not been adequately updated and is today only $35,000 annually. As a result, many first-line supervisors and similar employees with quite modest salaries end up working many extra hours without additional compensation.

A new proposal from the U.S. Labor Department would alleviate the situation by raising the threshold to about $55,000 a year. Yet this would not completely solve the problem.

Some employers will flout the new standard the way they did with the old one. In fact, the higher threshold will probably tempt even more companies to cheat. Along with the new threshold, the Labor Department needs to put more emphasis on enforcement, especially at larger corporations.

In 2018 I wrote a report called Grand Theft Paycheck that analyzed the prevalence of wage theft in big business by looking both at DOL enforcement actions and private collective action lawsuits brought on behalf of groups of workers. The latter accounted for most of the penalties collected from large corporations.

During the past five years I have continued to document wage theft cases for Violation Tracker, and the trend continues. Here are some of the significant settlements since 2018 involving white-collar and professional workers:

Humana agreed to pay $11 million to settle allegations that it improperly treated nurses as exempt from overtime.

Wells Fargo agreed to pay over $10 million to settle allegations that it failed to pay home mortgage consultants proper commissions and incentive payments.

CVS Health agreed to pay over $10 million to resolve a lawsuit alleging it did not properly compensate pharmacists for time spent on company-mandated training.

Computer Sciences Corporation agreed to pay over $9 million for failing to pay overtime to system administrators.

Pharmaceutical company Baxalta agreed to pay over $4 million for failing to pay overtime to technicians.

Santander Bank agreed to pay over $4 million to settle litigation alleging it did not pay proper overtime compensation to branch operations managers.

Facebook agreed to pay $1.65 million to resolve a lawsuit claiming it improperly classified its client solutions managers as exempt from overtime pay.

All these cases were brought by plaintiffs’ lawyers, who provide an important service (while collecting a portion of the proceeds). It would be preferable, however, to see the Labor Department pursue more of these cases as well as the ones involving small businesses.

Wage theft comes in multiple forms. Regulators should be investigating them all.