Putting Off Corporate Absolution

I was just beginning to recover from President Obama’s dismaying speech at the U.S. Chamber of Commerce when I found myself in the middle of another effort to gloss over the misdeeds of big business. This occurred at the annual conference of the BlueGreen Alliance, which brought together some 1,600 labor and environmental activists to discuss the prospects for a sustainable economy but also invited representatives of some supposedly enlightened corporations.

When we gathered for lunch on the first day we first had to listen to a presentation by David Kiser, a vice president at International Paper, which is listed in the conference program as one of the “Platinum Sponsors” of the event. Kiser went on about IP’s commitment to “environmental stewardship” and “caring for employees.”

I had to restrain myself from laughing out loud. IP has one of the worst track records of any major corporation when it comes to both labor and environmental practices. Some of the earliest anti-corporate research I ever did was to assist a campaign launched by the Paperworkers union (now part of the Steelworkers, which co-founded the BlueGreen Alliance) to resist company demands for contract concessions in the 1980s.

After workers at an IP mill in Mobile, Alabama voted against the concessions, they were locked out by the company. The Mobile workers then made a coordinated bargaining pact with their counterparts at three other IP mills—in Jay, Maine, Lock Haven, Pennsylvania, and De Pere, Wisconsin—where contracts were expiring and the rank and file had decided to strike rather than concede.

IP responded by bringing in replacement workers from around the country, many of them recruited by BE&K, an Alabama-based construction company that had diversified into strikebreaking. The campaign by the striking and locked-out locals was eventually crushed by the company.

Yet during that campaign, workers at the mill in Jay, Maine (photo, from 1973) drew national attention to the environmental hazards of IP’s operations, which were a major contributor to the dioxin problem due to chlorine used in the paper bleaching process. The labor and environmental issues intersected in February 1988, when unskilled strikebreakers hired by the company accidentally broke the valve on a tank containing chlorine dioxide gas in pressurized liquid form. About 112,000 gallons of the liquid poured out and vaporized into a huge green cloud that floated out from the mill, forcing the evacuation of some 3,000 people from homes, schools and businesses. If the weather had been warmer and the winds weaker, many could have died.

Paperworker union members helped enact local ordinances in Jay that cracked down on IP’s emissions and pressured Maine state officials to file suit against the company for environmental violations. IP paid $885,000 to settle the charges. Later, the U.S. EPA also brought action against the company, which in 1991 pleaded guilty to five felony charges and paid a fine of $2.2 million. Over the following decade, IP was implicated in state and federal environmental violations in states such as New York, Massachusetts, Wisconsin, Mississippi, Florida, California, Georgia and Virginia.

Since the early 2000s the company has been trying to rehabilitate its environmental image by actions such as donating land to conservation groups and appointing the head of one such group to its board of directors.  Yet the company remains a heavy polluter. In the EPA’s most recent Toxics Release Inventory, IP mills rank first and second among all paper facilities in the total volume of releases and account for 15 of the industry’s top 50 polluters, with total toxic releases of more than 43 million pounds.

IP’s labor relations are a lot less tumultuous these days, but in the last decade the company has slashed its U.S. hourly workforce from 45,000 down to 24,000.

The International Paper of 2011 is not the same as the IP of 1988, but I still find it difficult to regard the company as an ally in the effort to shape the green economy of the future. It takes a long time for the impact of past transgressions to dissipate.

This was brought home to me at another session at the BlueGreen Alliance conference. An official of the EPA was talking about how Recovery Act money is being used to help clean up a Superfund hazardous waste site in New Jersey where a long-defunct company had dumped large quantities of radioactive thorium once used in the production of gas lamps. Thorium, the EPA guy noted, has a half life of 14 billion years.

When the impact of business misbehavior can endure for eons, it will take more than a few social responsibility gestures to redeem corporate sinners.

Mubarak’s Foreign Corporate Backers

Pro-Mubarak thugs charged into Tahrir Square on horses and camels in an effort to save the embattled Egyptian dictator. It was not long ago that the regime was being propped up by a different breed of supporter: foreign investors arriving on corporate jets with billions of dollars in capital.

Long overdue attention is being paid to the foreign arms contractors that have equipped the Egyptian military with weapons funded by U.S. aid programs. Also deserving of close scrutiny are the major U.S. and European corporations that have invested heavily in Egypt, thereby shoring up the regime. Here are some of the main culprits.

BP. Formerly known as British Petroleum, BP has a long history in the Middle East in general and Egypt in particular. The company’s website makes no bones about its huge involvement in Egypt during the Mubarak regime: “BP Egypt has been a significant part of the Egyptian oil and gas industry for more than 44 years. During this time, we’ve been responsible for almost half of Egypt’s entire oil production and we are the single largest foreign investor in the country…Over the years we’ve established strong relationships with the Egyptian Government and the Ministry of Petroleum.” In July 2010 BP agreed to sell some of its Egyptian assets to Apache Corporation as part of a divestment effort to raise funds to pay for the cleanup of its massive oil spill in the Gulf of Mexico.

Nestlé. Just a week before protests broke out in Cairo, this Swiss food giant announced that it would invest some $170 million to expand its existing factories and distribution centers in Egypt, adding 500 new jobs to its 3,000-person workforce. After the announcement, the country’s Ministry of Investment put out a press release quoting Nestlé’s CEO as saying that the move was based on studies “that had proven Egypt to be a promising market with security, stability and high profitability in the long term.”

Procter & Gamble. In June 2010 P&G laid the cornerstone on a huge new diaper manufacturing plant outside Cairo. The $176 million facility would nearly double the value of P&G’s operations in Egypt, which currently involve the production of products such as detergents, soaps and other personal care products.

Electrolux. The Swedish appliance company announced last October that it would spend about $475 million to buy a controlling interest in Egypt’s Olympic Group, the largest producer of household appliances in the Middle East and North Africa.

Saint-Gobain. In July 2010 the large French construction materials firm opened a $100 million glass production plant in Ain El Sokhna on Egypt’s Red Sea coast.

PepsiCo. In December 2009, International Dairy and Juice Limited, a joint venture between PepsiCo and Almarai, announced that it had acquired Egypt’s International Company for Agro-Industrial Projects (Beyti).

Deals such as these – some of which are now on hold – helped to make Egypt the second largest recipient of foreign direct investment among African nations (behind Angola). In 2008 the U.S.-based National Outsourcing Association named Egypt its “Outsourcing Destination of the Year.”

The appeal of Egypt for foreign investors is not just better access to a market of 80 million consumers. As in China, a repressive political environment has weakened the power of labor and kept down wages to the advantage of major employers, both foreign and domestic.

Egyptian workers have been attempting to build a movement that would help raise their standard of living. A series of labor protests helped pave the way for the current uprising. The group that is credited with sparking the revolt, the April 6 Movement, takes its name from the effort to support workers who launched an aborted general strike in 2008. Hundreds of workers took to the streets of Cairo last May to call for an increase in the country’s pitiful minimum wage while also calling for an end to Mubarak’s rule. And amid the current revolt, Egyptian workers formed a new independent labor federation.

Large corporations try to have it both ways. They promote the view that the expansion of “free” markets goes hand-in-hand with the growth of free societies, yet they do not hesitate to do business in the most repressive societies. And they are quick to take advantage of repression’s side effects, above all weak unions.

However the uprising in Egypt turns out, it has served to highlight the hypocrisy not only of the U.S. government but also that of big business when it comes to selective support for democracy. And like the Obama Administration, major corporations will have to scramble to avoid ending up on the wrong side of history.

An Indictment of the Financial Sector

The purpose of the traditional blue-ribbon government panel has to been to study a serious problem and issue a report with vague explanations of causes and mushy policy prescriptions. The new report from the federal government’s Financial Crisis Inquiry Commission is a refreshing exception to the rule.

In the place of such nebulous prose, the 600-page-plus document is filled with pointed analyses of who did what wrong when. In other words, it names names. The FCIC acknowledges that it needed to delve into arcane subjects such as securitization and derivatives, but the report’s preface states:

To bring these subjects out of the realm of the abstract, we conducted case study investigations of specific financial firms—and in many cases specific facets of these institutions—that played pivotal roles. Those institutions included American International Group (AIG), Bear Stearns, Citigroup, Countrywide Financial, Fannie Mae, Goldman Sachs, Lehman Brothers, Merrill Lynch, Moody’s, and Wachovia. We looked more generally at the roles and actions of scores of other companies.

To get a sense of the scope of the rogues’ gallery of financial players, take a look at the report’s index, which, interestingly, is not in the official PDF but can be found on the website of the publisher that is issuing the commercial version.  There are dozens of entries for specific firms and even more for specific individuals. Goldman Sachs and Lehman Brothers, for instance, each have listings for about 40 different pages.

The FCIC does not just mention names; it assigns responsibility and soundly rejects the notion—expressed at commission hearings by major financial industry executives—that the crisis came as a complete surprise:

The crisis was the result of human action and inaction, not of Mother Nature or computer models gone haywire. The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand, and manage evolving risks within a system essential to the well-being of the American public.

It is satisfying that the report acknowledges the culpability of figures in both the private and the public spheres. Along with Wall Street villains, it fingers government institutions and officials, especially those with regulatory responsibilities:

The sentries were not at their posts, in no small part due to the widely accepted faith in the self-correcting nature of the markets and the ability of financial institutions to effectively police themselves. More than 30 years of deregulation and reliance on self-regulation by financial institutions, championed by former Federal Reserve chairman Alan Greenspan and others, supported by successive administrations and Congresses, and actively pushed by the powerful financial industry at every turn, had stripped away key safeguards, which could have helped avoid catastrophe.

Figures such as current Fed Chairman Ben Bernanke, former Treasury Secretary Henry Paulson and former SEC chair Christopher Cox are singled out for making misleading statements in 2008 about the gravity of the situation just before the crisis erupted. The report goes on to state:

Our examination revealed stunning instances of governance breakdowns and irresponsibility. You will read, among other things, about AIG senior management’s ignorance of the terms and risks of the company’s $79 billion derivatives exposure to mortgage-related securities; Fannie Mae’s quest for bigger market share, profits, and bonuses, which led it to ramp up its exposure to risky loans and securities as the housing market was peaking; and the costly surprise when Merrill Lynch’s top management realized that the company held $55 billion in “super-senior” and supposedly “super-safe” mortgage-related securities that resulted in billions of dollars in losses.

Finding that “a combination of excessive borrowing, risky investments, and lack of transparency put the financial system on a collision course with crisis,” the FCIC cites the high leverage ratios at the leading investment banks and the fact that “the leverage was often hidden—in derivatives positions, in off-balance-sheet entities, and through ‘window dressing’ of financial reports available to the investing public.”

The report continues: “When the housing and mortgage markets cratered, the lack of transparency, the extraordinary debt loads, the short-term loans, and the risky assets all came home to roost. What resulted was panic. We had reaped what we had sown.” One chapter, covering the explosion of risky financial instruments such as collateralized debt obligations is entitled “The Madness.”

Perhaps most damning is the FCIC’s finding of a “systemic breakdown in accountability and ethics” that “stretched from the ground level to the corporate suites.” For example, the report cites the case of the subprime lender Countrywide (later taken over by Bank of America):

As early as September 2004, Countrywide executives recognized that many of the loans they were originating could result in “catastrophic consequences.”  Less than a year later, they noted that certain high-risk loans they were making could result not only in foreclosures but also in “financial and reputational catastrophe” for the firm. But they did not stop.

All in all, the FCIC report paints an incriminating picture of the U.S. financial industry as well as the government regulators and private entities such as credit rating agencies that are supposed to put some checks on the unbridled pursuit of profit. In fact, the document in many ways reads like a criminal indictment. We would all be better off if some actual prosecutors pursued these leads.

Note: The report, dominated by a section of more than 400 pages endorsed by a majority of commissioners, also contains a 125-page dissent from the minority as well as 80 pages of endnotes. But that’s not all. The document indicates that it is not the sole repository of what the FCIC found:

A website—www.fcic.gov—will host a wealth of information beyond what could be presented here. It will contain a stockpile of materials—including documents and emails, video of the Commission’s public hearings, testimony, and supporting research—that can be studied for years to come. Much of what is footnoted in this report can be found on the website.

A critical researcher’s dream.

U.S. Workers Face Chinese Employers

Much of the discussion of Hu Jintao’s visit to the United States is focused on China’s treatment of its dissidents and its workers, but another issue is becoming increasingly important: the treatment of U.S. workers by the Chinese companies that are rapidly expanding their presence in the United States.

Hu’s decision to include a stop in Chicago is not meant primarily as an homage to President Obama’s hometown. He wants to spotlight a Chinese-owned company called Wanxiang America, which from its suburban Chicago headquarters has built an auto parts and renewable energy conglomerate that has become the largest example of direct foreign investment in the U.S. from the People’s Republic.

Until recently, China accounted for a negligible portion of overseas money flowing into the American economy. But in the past two years there has been an enormous influx. The Washington Post cites a consulting company estimate that the Chinese stake has jumped to $12 billion since the beginning of 2009.

There’s every indication that number will continue to rise rapidly. The Chinese government is encouraging the trend to help protect its access to American markets, and the job-hungry U.S. seems to no longer have any of the objections that thwarted the efforts of Chinese companies to buy the oil company Unocal and the appliance firm Maytag a half dozen years ago.

Many U.S. observers are celebrating the arrival of Chinese capital, but this is actually a very dismaying state of affairs. The fact that companies from a country in which many workers are paid near-starvation wages find it economical to produce here says a lot about the dismal state of labor in the United States. The anti-union hostility of American employers has forced down pay rates in this country to the point that the U.S. is now considered a low-wage haven, at least among the countries of the developed world.

There’s no indication that investors coming from a dictatorship of the proletariat will do anything to reverse the decline of U.S. workers’ power. If anything, they will follow the pattern of companies from heavily unionized countries in Europe and Asia that eagerly embrace the culture of union-busting once they arrive on these shores.

Chinese investment in U.S. industry has already shown signs of anti-union animus. Not long after China International Trust and Investment Corp. (CITC) took over bankrupt Phoenix Steel in Delaware back in 1988 with the support of the United Steelworkers, the new operation, named CitiSteel, refused to recognize and bargain with the union, which had represented the Phoenix workforce for decades.

And when appliance-maker Haier Group became the first large Chinese company to build a factory from scratch in the United States, it chose South Carolina, one of the states most hostile to labor unions. In subsequent years, Chinese firms have continued to concentrate on right-to-work states. For example, Tianjin Pipe is planning to build a $1 billion production facility in Texas.

Today’s U.S. affiliates of Chinese companies are not entirely non-union. Wanxiang America has taken over unionized auto parts operations being shed by major U.S. companies, but many United Autoworkers members depart during the buyouts and other workforce reductions that accompany the change in ownership. The UAW has also survived GM’s sale of Nexteer Automotive to China’s Pacific Century Motors—a deal that went through after union members approved a contract that cut wage rates.

The ability of these companies to maintain good relations with their unions will depend in part on whether they engage in the kind of restructuring ploys favored by U.S. employers. It was not an encouraging sign when Neapco Components, an affiliate of Wanxiang America, announced last year that it was shutting down its manufacturing plant in Pottstown, Pennsylvania and transferring the operation to Nebraska, where state officials arranged for the company to get $1 million in federal stimulus funds to underwrite the move.

The larger labor relations challenge is the inevitable clash between Chinese and U.S. workplace cultures. Even in non-union companies, U.S. workers are used to a certain level of respect for individual rights. Many Chinese firms retain the remnants of a repressive collectivism. The Haier plant in South Carolina, for instance, is festooned with motivational banners exhorting workers to “make the impossible possible without an excuse.” The original Chinese managers there caused resentment by chastising individual workers for slip-ups in front of the entire workforce.

It remains to be seen how U.S. workers take to the pseudo-Maoism of contemporary Chinese business, but there’s no question that the rise of Chinese investment is another strong argument for the revival of an aggressive U.S. labor movement.

Public-Private Power Grab

As unemployment rates remain stubbornly high around the country, the Republican winners of November’s gubernatorial races face a dilemma: How do they respond to the clamor for more job creation while holding true to their opposition to government activism. The answer, apparently, is to go with a gimmick.

In at least four states, the gimmick consists of proposing that the state agency responsible for business recruitment—and other functions such as awarding subsidies that come under the rubric of economic development—be handed over to the private sector. Governors in Wisconsin, Ohio, Iowa and Arizona are calling on legislators to approve the dismantling of commerce or development agencies and the transfer of their responsibilities—and their funding—to public-private partnerships (PPPs).

It turns out that economic development privatization is nothing new. My colleagues and I at Good Jobs First have completed an analysis of the subject, which we’ve just published in a report titled Public-Private Power Grab.

We found that the idea is far from new but it is not a common or standard practice. Economic development PPPs date back more than 20 years, but only seven states currently allow private entities to control their business recruitment functions: Florida, Indiana, Michigan, Rhode Island, Utah, Virginia and Wyoming. Several other states previously employed PPPs but abandoned them because of performance problems.

Most of the seven states that currently make use of economic development PPPs have experienced a variety of performance problems. These include the following:

  • Misuse of taxpayer funds
  • Excessive executive bonuses
  • Questionable subsidy awards by the subset of PPPs that have a role in that process
  • Conflicts of interest in subsidy awards
  • Questionable claims by the PPP about its effectiveness
  • Resistance to accountability

Two of the features of the PPPs that promote corruption are that, in addition to public funding, they accept contributions from corporations and that their boards are often chosen by the governor will little or no legislative oversight. What this means is that the PPPs may end up favoring those contributors in making subsidy awards, and those awards are likely to go to the governor’s major corporate campaign donors.

Such sleazy practices have been seen most clearly in Texas, where the state’s Emerging Technology Fund is run by a public-private partnership controlled by Gov. Rick Perry and has a tendency to give its subsidy awards to Perry’s donors. According to an investigation by the Dallas Morning News, those donors have collected more than $16 million from the fund.

In 2006 the St. Petersburg Times published a 6,000-word investigation on Enterprise Florida, finding a pattern of conflicts of interest among the PPP’s board. In a follow-up editorial, the newspaper wrote that Enterprise Florida “has shown itself to be a public-private venture only in the sense that the public pays and the private receives. Despite critical audits, legislative questions and gubernatorial promises of reform, the group has proved to be virtually immune to the normal checks and balances.”

Aside from corruption, the PPPs tend to be characterized by incompetence or poor judgment. For example, the Michigan Economic Development Corporation (MEDC) found itself in hot water last year when it was revealed it had approved a $9 million subsidy to a company headed by a convicted embezzler and scam artist.

The Indiana Economic Development Corporation, which is often cited as a model by today’s privatization proponents, lost much of its luster last year after a TV station found that many of the jobs IEDC had taken credit for creating did not in fact exist. A former Indiana budget official recently told a reporter that “most of the numbers [IEDC] gave us were either not true or could not be substantiated,” adding that he considered IEDC “a political organization that really only served to make it seem like the governor was doing something about the economy.”

When challenged about their poor record, the chief executives of the PPPs tend to complain about the criticism rather than addressing their substance. In the wake of a series of scandals in 2010 about the MEDC’s handling of tax credit awards, the entity’s executive committee issued an open letter of complaint to the media and the legislature.  Rather than addressing MEDC’s shortcomings, the letter made the dubious claim that the controversy might prompt companies to shun the state. “Political in-fighting is a clear warning to business that a state lacks a cohesive climate for economic development,” the letter stated, “and a clear signal to invest elsewhere.”

Not surprisingly, our report concludes that economic development PPPs are a bad idea. Unfortunately, advocates of privatization in this area and others have a tendency to ignore evidence and persist in their misguided belief that the private sector can always do everything better.

Aiding Corporate Outlaws

In a move akin to asking burglars for suggestions on how to make security systems less effective, Rep. Darrell Issa, chairman of the Oversight and Government Reform Committee in the new Republican-dominated House of Representatives, is consulting corporations and trade associations on regulatory policy.

Seeking to revive the anti-regulatory fervor of the Reagan era, Issa is throwing around fabricated numbers ($1.7 trillion) about the cost of business compliance with government rules and bogus claims about the negative impact of regulation on job creation. And in an unambiguous signal that corporate interests are now to be considered paramount, he has been sending letters to scores of companies and associations asking for their deregulatory wish lists.

Issa’s office declined to disclose a complete list of those sent the love letters, but Politico reports that the recipients include trade groups such as the National Association of Manufacturers and the American Petroleum Institute, and individual companies such as Toyota, Duke Energy, Bayer and FMC Corp.

Of all these names, FMC is probably the least well known, but it is a good example of the kind of corporation that will probably benefit the most if Issa and his colleagues have any success – i.e. a company with an abysmal track record.

FMC is a $3 billion chemical company that produces pesticides, insecticides, herbicides and specialty chemicals for food processing and other industries. Headquartered in Philadelphia, the company dates back to the invention of an insecticide pump by John Bean in the 1880s. From the 1920s onward it functioned as a conglomerate, acquiring a wide range of food processing and chemical firms (it was also a military contractor for a period of time).

It was through these acquisitions that FMC assumed responsibility for some of the most hazardous production facilities and waste sites in the country. For example:

In 1977 FMC’s South Charleston, West Virginia plant was shut down under court order for discharging carbon tetrachloride (used in cleaning agents) into drinking-water supplies of communities along with Kanawha and Ohio rivers. After FMC and two of its executives were indicted in federal court on charges of conspiring to conceal excessive discharges at the plant, the company agreed to pay a fine of $35,000 and to place $1 million in escrow to finance future water pollution studies. In 1983 an explosion at the plant killed one worker and injured three others. OSHA later determined that safety violations by the company contributed to the conditions that caused the accident.

In 1983 FMC agreed to spend $6 million to clean up a hazardous waste site in Minnesota that threatened the drinking water supply of Minneapolis. The cleanup at the munitions plant in the town of Fridley, where chemical wastes were buried for more than two decades, involved the treatment of up to 58,000 cubic yards of soil for contaminants such as trichloroethylene.

In 1995 about 6,250 pounds of phosphorus trichloride spilled from an overfilled tank onto the ground, reacted with rainwater and sent a toxic cloud of hydrochloric acid from the FMC plant in Nitro, West Virginia.

In 1998 the EPA fined FMC $209,600 for underreporting Toxic Release Inventory data related to a phosphorous processing plant on the Shoshone-Bannock Fort Hall Reservation near Pocatello, Idaho. Later that year, FMC and the EPA reached agreement on a consent decree to resolve other violations at the plant by requiring the company to spend approximately $158 million on remedial measures. FMC also agreed to a penalty of $11.8 million, a record at the time for violations of the Resource Conservation and Recovery Act.

In 1999 FMC reached agreement with the EPA and the Justice Department regarding the cleanup of the Avtex Fibers Superfund site in Front Royal, Virginia, which FMC owned and operated from 1963 to 1976. Avtex bought the facility in 1976 but shut it down in 1989 under the weight of some 2,000 environmental violations related to many years of contamination with asbestos, lead and other toxic substances. FMC agreed to spend about $100 million for the clean-up of the site, considered the biggest environmental problem area in the state.

By 2000, FMC had been named as a potentially responsible party in connection with about 30 locations on the federal government’s National Priority List of hazardous waste sites.

Add to all of this FMC’s involvement over the years in cases involving price fixing, sex discrimination, defrauding the federal government and other violations of laws and regulations. In 2000 it paid $80 million to settle a whistle-blower lawsuit challenging the safety of the Bradley Fighting Vehicles the company was producing for the U.S. Army.

In recent years FMC has restructured itself, spinning off many of its operations. But it continues to battle with the federal government over regulatory issues. Its biggest fight has concerned the controversial pesticide carbofuran, sold by FMC under the name Furadan. In 2006 the Bush EPA finally acknowledged the product was so dangerous for humans and for animals that it should be completely banned, as the European Union has done.  The slow process of removing the product from the market has continued ever since, with FMC kicking and screaming in protest.

The company has been largely unsuccessful in its legal challenge up through the appellate level and has been considering an appeal to the U.S. Supreme Court. It may now hope for relief from Congress instead.

The deregulatory juggernaut is nothing more than an effort to aid and abet the country’s worst corporate outlaws. We’ll be in big trouble if Issa and his ilk succeed.

IKEA Knocks Down Labor Rights

When my colleagues and I at Good Jobs First introduced the Subsidy Tracker database recently, our hope was that the information would be helpful to a wide range of campaigns for economic and social justice. I can now offer one particular use.

By plugging the name Swedwood into the search engine, one finds that the company received a $1 million cash grant under the Virginia Investment Partnership program in connection with its vow to invest $281 million and create 740 jobs. Actually, this grant was just part of a series of subsidies worth a total of $12 million that Swedwood received from the state (the data in Subsidy Tracker are not yet comprehensive).

Swedwood is significant because the company, a unit of the retail giant IKEA, is at the center of a controversy over its labor practices at a furniture plant in Danville, Virginia for which it received the $1 million subsidy. Employees of the facility, fed up with dangerous working conditions and discriminatory employment practices, have been trying to organize with the help of the Machinists union, which produced a report concluding that the Danville operation may be the most hazardous furniture plant in the country. Swedwood and its parent have responded to the organizing drive by harassing union organizers and firing union supporters.

The Machinists and the Building and Wood Workers International labor federation have launched a campaign to pressure IKEA and Swedwood to respect the rights of the Danville workers. Among other things, the campaign is asking supporters to send a holiday card to IKEA Chief Executive Mikael Ohlsson with instructions on how to build a fair collective bargaining relationship with the workers (allen wrench not included).

The unions might also want to make an issue of the fact that a company that was generously subsidized with taxpayer funds is now flouting labor laws.

The financial assistance IKEA got in Virginia is not the only time it has played the subsidy game. In places such as Tempe, Arizona and Frisco and Round Rock in Texas, the retailer has received millions of dollars in sales tax rebates and infrastructure assistance to help finance new stores. It is expected to receive up to $18 million in subsidies for the store it is building in Centennial, Colorado.

In fact, tax avoidance is at the center of IKEA’s entire corporate structure, a complex arrangement that puts nominal control in the hands of a Dutch private foundation but allows founder Ingvar Kamprad and his family to dominate the company and grow wealthier from it (according to Forbes, Kamprad is the 11th richest person in the world, with a net worth of $23 billion).

IKEA is a prime example of how companies that have reputations for being socially responsible somehow get away with exploiting the system of economic development subsidies and with being hostile to unions in the United States – while cooperating with them in countries (such as IKEA’s native Sweden) where they are well established and protected. In the past, IKEA has relied on paternalism – including better than average employee benefits – to discourage unionization at its U.S. operations. The events in Danville suggest a troubling turn toward heavy-handed union busting.

Perhaps this will begin to change the view of corporate social responsibility arbiters such as Ethisphere magazine, which lists IKEA as “one of the world’s most ethical companies.” While the idea of corporate ethics is an oxymoron, companies should not be singled out for praise of any kind if they deny the rights of their workers to organize.

Note: The Dirt Diggers Digest index of information sources featured or utilized in the blog has finally been brought up to date.

Introducing Subsidy Tracker

Over the past decade, the National Institute on Money in State Politics has built its Follow the Money database into an impressive resource for showing the influence of large corporations on state electoral campaigns. I have long wanted to create a comparable tool to track the flow of money in roughly the opposite direction: economic development subsidy awards from states to big business.

I am happy to announce that my colleagues and I at Good Jobs First have just introduced such a resource. Subsidy Tracker is the first national search engine for determining where a company has gotten economic development subsidies around the country. The database stitches together information from scores of different disclosure sources, many of them obscure reports and webpages. The subsidy programs covered include corporate income tax credits, property tax abatements, enterprise zone tax breaks, cash grants, reimbursement of worker training costs, and others.

In its initial form, the database contains information on more than 43,000 subsidy awards from 124 subsidy programs in 27 states; the number will soon jump to more than 64,000 in 34 states and will continue growing.

Here are some ways Subsidy Tracker can be used:

  • To find companies that have received subsidies in many places. Currently, for instance, Wal-Mart shows up 69 times, trailed by Target at 45.
  • To find companies that have gotten some very large individual subsidies. General Electric received a tax credit worth up to $115 million in Ohio in 2009.
  • To find bad actors that have received subsidies. Super-polluter and climate denier Exxon shows up 23 times in Louisiana alone. The anti-union T-Mobile shows up eight times so far. Wall Street villain Goldman Sachs has received more than $124 million in tax credits and grants in Utah and New Jersey.
  • To find good actors that have received subsidies. Flambeau River Papers, included on the American Rights at Work 2010 list of employers that “practice labor-management cooperation while creating pioneering solutions to the environmental challenges of the 21st century” shows up in Subsidy Tracker as having received a grant of $249,000 from Wisconsin in 2008.
  • To find companies that have received subsidies in states where they have made substantial campaign contributions. Agribusiness giant Archer Daniels Midland, which according to Follow the Money made more than $546,000 in campaign contributions in Illinois since 2003 (including those of its executives and employees), has received more than $87 million in enterprise zone tax credits in the state during the same period.
  • To find companies that profess extreme laissez-faire views and then take subsidies. Koch Industries, whose owners bankroll the Tea Party movement, received two tax credits worth a total of more than $10 million from Oklahoma in the past year.

I’m sure researchers, journalists and others will think of many more ways to use the database. Each entry in Subsidy Tracker contains a link back to the original online source (except a limited number of cases in which the data we obtained is not posted on the web). Search results can be downloaded to a spreadsheet. For more on the data and how the site works, see the User Guide.

Good Jobs First introduced Subsidy Tracker along with two other resources: a report called Show Us the Subsidies, which evaluates the subsidy disclosure practices of the 50 states and the District of Columbia; and Accountable USA, a set of pages that review each state’s subsidy policies, describe large and controversial subsidy deals and provide other provocative information.

We hope all these tools help shine a light on the many excessive and ineffective subsidies that are going to large companies at a time when states and localities can ill afford the loss of what is estimated at $60 billion a year in public revenue.

Subsidy Tracker is a work in progress. In this first phase, we have focused on data sources that we discovered in preparing Show Us the Subsidies and Accountable USA. In the months ahead, we plan to go deeper by using freedom of information requests to obtain data not currently disclosed in any form.

I hope that Dirt Diggers Digest readers will find Subsidy Tracker to be a useful tool in your research. I look forward to your comments and suggestions.

Resources

Subsidy Tracker main page

Subsidy Tracker User Guide

Inventory of data sources currently in Subsidy Tracker

Table of online disclosure links for major subsidy programs (not all data yet in Subsidy Tracker)

Accountable USA main page

Index of companies whose subsidy deals are profiled in Accountable USA

Show Us the Subsidies report and state appendices

Good Jobs First case studies of companies and industries that are major subsidy recipients

It’s Not Paranoia if Dow Chemical Really is Breaking Into Your Office

Wall Street has been in a state of high alert over reports that the next big document dump by the transparency extremists at WikiLeaks will concern a major U.S. bank. The stock price of Bank of America recently plunged for a while on speculation that it was the target.

Yet the bigger espionage story of recent days is one in which a major U.S. corporation is alleged to be the culprit rather than the victim. Greenpeace has just filed a racketeering complaint in DC federal court alleging that Dow Chemical and a smaller chemical company – a North American subsidiary of South Africa’s Sasol Ltd. – conspired with a leading public relations firm, Ketchum Inc., and a smaller pr outfit called Dezenhall Resources Ltd., to spy on Greenpeace.

This is said to have occurred from 1998 to 2000, a period when Greenpeace was campaigning against the dioxin risks created by manufacturing facilities such as those run by Dow and Sasol North America, which at the time was known as CONDEA Vista and was owned by the German energy giant RWE.

What’s the big deal, you might ask. Don’t environmental groups monitor big corporations all the time? In fact, the web page on which Greenpeace presents its materials about the lawsuit contains a prominent link to its archive of its corporate investigations. Shouldn’t companies be able to keep tabs on their opponents?

The difference between what Greenpeace does and what Dow et al. allegedly did is the small matter of adherence to the law. The defendants are accused not of using legitimate information-gathering techniques but rather of engaging in illegal activities such as trespass, invasion of privacy, conversion (a form of theft) of confidential documents – even misappropriation of Greenpeace’s “trade secrets.”

The complaint alleges these firms hired private security consultant Beckett Brown International (BBI; later known as S2I Corporation) to do their dirty work. The now defunct BBI, at the time run and staffed by former employees of the Secret Service and federal intelligence agencies, is said to have hired subcontractors who broke all kinds of laws to get at internal information about the  operations, strategic plans and finances of Greenpeace and apparently a number of other groups such as Friends of the Earth and the Center for Food Safety. Prominent environmental activists allied with Greenpeace, such as the legendary Lois Gibbs, are also said to have been spied on.

One of the most troubling allegations in the complaint is that BBI employed off-duty DC police officers to gain access to private premises (including locked areas in which Greenpeace kept its trash and recycling materials before they were collected) by showing their badges as if they were on official business. Greenpeace says it has recovered more than 1,000 pages of its internal documents – a fraction, it says, of what was taken. Greenpeace alleges that most of the papers came not from BBI incursions against its dumpsters but rather from direct break-ins at the group’s DC offices. Electronic surveillance is also charged.

BBI apparently did not have much of a reputation to protect, but the case is presumably a significant setback for Dezenhall Resources, which calls itself “the nation’s leading high-stakes communications consultancy.” Its principal Eric Dezenhall, a White House staffer during the Reagan Administration, has written several books (fiction and non-fiction) and frequently publishes commentaries in the Huffington Post and the Daily Beast. He helped Forbes compile its list of the year’s biggest corporate blunders.

Having worked for clients such as Michael Jackson and Enron executive Jeffrey Skilling, Dezenhall fancies himself a pr gunslinger; others have called him the “pit bull” of public relations. Now that he is on the hot seat himself, Dezenhall seems less inclined to take the offensive. When the Washington Post contacted him about the Greenpeace suit, his response was “no comment.”

That was also the response of spokespeople for Dow Chemical, Sasol and Ketchum. Dow, of course, has been no stranger to controversy from its role as a producer of napalm and Agent Orange during the Vietnam War to its refusal to adequately compensate the victims of the Bhopal tragedy after taking over Union Carbide. Just think of all the juicy secrets that would come out if WikiLeaks ever got hold of its archives. But for now the Greenpeace suit is shedding light on an egregious case of corporate misconduct.

Behind the GM Euphoria

Wall Street is always looking for a reason to be euphoric, and it found one this week in the return to the market of General Motors.

Less than two years after filing for bankruptcy and being taken over by the federal government in a $50 billion bailout, the automaker became the darling of investors and commanded a surprisingly high initial price of $33 a share.

Many of those investors had apparently not read the voluminous S-1 Registration Statement that GM filed with the Securities and Exchange Commission. If they had, they would have found a document that in its current iteration requires more than 13,000 words to summarize the risk factors facing the company.

Companies are required to be especially candid in warning investors what they may be facing when buying into a company whose shares are being offered for the first time (after its transformation GM is technically a new firm). But this prospectus is amazing. Here are some reasons why.

  • Acknowledging that its current chief executive and chief financial officer are from other fields, the S-1 says the company’s prospects depend on their ability to “quickly learn the automotive industry.”
  • The document reveals : “We have determined that our disclosure controls and procedures and our internal control over financial reporting are currently not effective. The lack of effective internal controls could materially adversely affect our financial condition and ability to carry out our business plan.”
  • The company admits that it has an image problem: “The automotive industry, particularly in the U.S., is very competitive, and our competitors have been very successful in persuading customers that previously purchased our products to purchase their vehicles instead as is reflected by our loss of market share over the past three years. We believe that this is due, in part, to a negative public perception of our products in relation to those of some of our competitors.”

Inexperienced management, poor financial controls and a negative public perception don’t seem to constitute a foolproof recipe for success. But there’s much more to the recitation of risk factors, including the fact that even after the stock offering the U.S. government will remain by far the company’s largest shareholder.

GM reminds potential investors that its bailout came with some strings attached. For one thing, the company is supposed to take steps to maintain its U.S. workforce at or near existing levels. If GM is a shining example of a renaissance of American manufacturing, as some observers would have us believe, it shouldn’t be a problem to maintain jobs in the USA, especially in light of the concessions that members of the United Auto Workers union consented to in order for the bailout to proceed.

But GM’s management hints that it might be interested in even cheaper labor abroad. The S-1’s summary of the company’s current business strategy includes the following:

Enhance manufacturing flexibility. We primarily produce vehicles in locations where we sell them and we have significant manufacturing capacity in medium- and low-cost countries. We intend to maximize capacity utilization across our production footprint to meet demand without requiring significant additional capital investment.

That sounds like a plan to expand foreign rather than domestic production. Elsewhere the company seems to be complaining when it notes that the federal government “may have a greater interest in promoting U.S. economic growth and jobs than other stockholders of the Company.”

GM’s management also bemoans the fact that “restrictions in our labor agreements could limit our ability to pursue or achieve cost savings through restructuring initiatives.”

In other words, the new GM is beginning to sound a lot like the old GM: blaming unionized workers for problems caused by management failures and market conditions. And like its predecessor, the new GM seems to be itching to dump more of those workers in favor of cheap labor abroad. This may be the main reason it is so eager to bring the federal role to an end.

If cost cutting on the backs of workers — rather than real innovation and competent management — is to be the focus of the new GM, it will probably end up in the same mess as its predecessor.

The investor excitement about the new GM may be good news for the federal government, but it could turn out to be just another market bubble.

Final irony: one of the big beneficiaries of the GM initial offering is Goldman Sachs, which in July agreed to pay the feds $550 million to settle charges of having deceived investors. Goldman is making about $9 million as one of GM’s underwriters.