A Contract With Corporate America
By Philip Mattera and Charlie Cray
December 20, 2006
Philip Mattera heads the Corporate Research Project, an affiliate of Good Jobs First. Charlie Cray is director of the Center for Corporate Policy. They can be contacted about the Corporate Reform Initiative, a new collaboration among corporate campaigners and policy experts helping Congress challenge excessive corporate power.
The midterm election demonstrated a deep dissatisfaction with the Bush administration’s handling of the war and with the cornucopia of corruption that infected the Republican-controlled Congress. Yet it was more than a partisan victory for the Democrats. It also represented a popular backlash against business-friendly policies that have left many Americans behind.
The new Congress faces a staggering list of corporate abuses that have been ignored by lawmakers for years—including executive pay levels that remain out of control, rampant contract fraud and war profiteering in Iraq and at home, widespread corporate tax avoidance, the offshoring of well-paying jobs, and the shredding of health, safety and environmental standards. It’s enough to keep many congressional committees working overtime for years.
But the election must be seen as much more than a rejection of government of the Halliburtons, by the Enrons and for the Pfizers. It was also a sign that the myth of the good corporate citizen providing for broad prosperity has been punctured, providing an opportunity for deep change in the entire relationship between government and big business.
Some of the initial measures planned by Democrats, such as a minimum wage increase and a rollback of oil industry tax breaks, will begin to rectify the situation. But much more needs to be done. Twelve years ago, when the Republicans won control of Congress, they proposed a Contract with America. Now is the time for what might be called a Contract with Corporate America—an effort to put limits on the power of big business.
What follows are a few clauses that Congress might include in such a contract. They come out of an ongoing conversation we’ve been having with leading corporate campaigners and policy experts poised to help Congress take a tough stance on business oversight and regulation.
• Provide Financial Oversight—
Business apologists want us to believe corporate fraud is a thing of the past, yet we continue to see business corruption in activities like the widespread backdating of stock options. Rather than tightening controls, the Bush administration and business groups have been seeking to relax the rules. Just last week, the Securities and Exchange Commission announced that companies would be given more flexibility in structuring their internal financial controls. The adjustment is touted as necessary to avoid excessive recordkeeping and auditing costs. Yet this limited relief will only encourage business to push for even more radical deregulation. Now is the time for stricter not weaker financial oversight.
• Curb Corporate Crime—
Also last week, the Justice Department announced it was putting new restrictions on the ability of federal prosecutors to use methods such as pressuring companies to waive the confidentiality of their legal communications—a common technique in developing evidence against an executive suspected of fraud. The claim is that these changes restore “balance” to the process; in truth, Justice is caving in to demands from right-wing academics and former prosecutors who have moved to lucrative careers in the leading white-collar criminal defense firms. It should go without saying that Big Business has not earned the right to lax enforcement.
• Restore Regulatory Integrity—
Serious regulation—on the environment, product safety, occupational safety & health, etc.—is also being eviscerated as top positions at federal agencies have been filled with industry lobbyists who pass through the revolving door from the private sector and later return to the corporate world. Restoring reasonable oversight is possible only if those making regulatory policy are truly independent of the companies they are supposed to be regulating, which means tightening restrictions on the revolving door, encouraging the appointment of career public servants and providing strong protections for whistleblowers.
• Address Corporate Concentration—
Today more than half of the top 100 economies of the world are corporations. Mammoth companies dominate sectors such as energy, food processing and media. The consequences of this concentration are many. While a few start-ups strike it rich, the barriers to entrepreneurial success are formidable. In industries such as oil, a handful of major players can gouge consumers by colluding to keep prices high. In other cases, such as Wal-Mart’s growing domination of retailing, prices are kept low, but workers and suppliers are squeezed. Media concentration has impoverished journalistic standards and threatened free speech.
At a minimum, antitrust enforcement must be reinvigorated and updated for the 21st century economy. Congress could take the lead by creating a subcommittee tasked to investigate the extent of corporate consolidation and control, and the consequences for small businesses, consumers, communities, the culture and our democracy.
• Close Liability Loopholes—
If businesses had full financial liability for their toxic waste, for their contributions to global warming and other harmful practices, there would be strong incentives to use safer materials and cleaner, more efficient technologies. Congress should push business along this path by measures such as restoring the Superfund tax on toxic chemical producers. A moratorium on major sources of global warming–such as the dozens of coal-fired power plants planned for Texas and the Ohio River Valley—should be mandated, while substantial efforts are need to be made in order to accelerate the introduction of wind, solar and other alternatives.
• Push Transparency and Democracy—
Following the 1929 stock crash, publicly-traded companies were required to disclose some information about their finances and operations. Today we need more disclosure, especially about environmental matters such as greenhouse gas emissions. Given the size to which some privately held companies have grown, Congress should consider imposing some disclosure requirements on them as well.
Disclosure is also an element of shareholder rights. Congress should ensure there are no limits on the rights of shareholders to request relevant and material information from management. With transparency should come a greater measure of corporate democracy. Shareholders should be allowed to nominate board candidates, so there is a greater chance truly independent directors can be elected.
• Establish Equitable Treatment—
Too many employers these days think they can chew their workers up and spit them out. Apart from increasing the minimum wage, Congress can restore fairness in the workplace by reforming labor law so workers can more effectively organize themselves to improve employment conditions. Large companies should be barred from shifting costs onto taxpayers by failing to provide decent health care benefits, thereby forcing low-wage workers to enroll in public programs such as Medicaid. At the other end, executive pay has to be brought under control once and for all. Companies should not be allowed to award top executives ever-increasing compensation packages without majority approval from shareholders, and limits on the tax deductibility of such packages should be tightened.
• Let Government Do What It Does Best—
More and more functions of government have been outsourced to the private sector. While the private sector is sometimes capable of greater efficiency than government, excessive privatization—actually, corporatization—and outsourcing of inherently governmental functions, have undermined accountability and oversight, often resulting in massive waste and inefficient delivery of services. As the Iraq and post-Katrina reconstruction contracts revealed, an excess of outsourcing can lead to an epidemic of abuses and outright fraud. Inherently governmental responsibilities like contract oversight should always be conducted by public employees.
• Restore Integrity to the Legislative Process—
Undue corporate influence is not the only reason for the moral decay of Congress, but it deserves a lot of the blame. Many members of Congress have come to depend on campaign contributions from corporate interests. The expectation they will move into lucrative private-sector positions after leaving office makes many legislators, like regulatory officials, inclined to favor corporate interests. Business has a right to argue its case, but it shouldn’t be able to use its wealth to dominate policy debates. We need stricter controls on corporate contributions and lobbying expenditures in order to restore integrity to public policymaking, while public funding of campaigns is long overdue as a means of opening the election process to those not beholden to moneyed interests.
Despite the frequent claim that “government is the problem,” large corporations have more impact on the life of most Americans. To an extraordinary degree, they control how we earn a living, what we consume and even what we think. They also have enormous influence over our public life. For too long, the federal government has been acting as a virtual captive of big business interests. The change in control of Congress is the first opportunity in years to start shifting power back to the rest of us.