For Egalitarians, A Sudden Sense Of Possibility

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Above photo: Getty Images.

The Corona crisis has left the greed grabs of corporate America considerably more vulnerable.

Something seems to be in the air these days — besides coronavirus. A hopefulness. A boldness. A conviction that we now have a real opportunity for blunting the corporate power that’s done so much to make the United States the world’s most unequal wealthy nation.

How can we seize that opportunity? New reports from two veteran national advocacy groups — Public Citizen and Oxfam America — are offering up a gameplan.

Public Citizen released its “blueprint for reform” last week on the tenth anniversary of the Dodd-Frank Act, the 2010 legislation that tried to clean out the corporate and financial rot that birthed the Great Recession. That attempt came up short. But the effort, the new Public Citizen analysis by Bart Naylor shows, has left us with a jumping-off point for a much more rigorous assault on corporate greed.

Oxfam has gone back decades further in America’s corporate reform history, back to the excess profits taxes levied during the 20th century’s two world wars. Those taxes didn’t just raise substantial new revenue. They helped check corporate power and empower workers — and could have that impact once again, Oxfam argues, if reconfigured for our 21st century’s war on the coronavirus.

Globally, that virus is so far more than holding its own. But the biggest winners so far in our pandemic era may well be America’s biggest corporations. The nation’s 25 largest corporate concerns, Oxfam details, are averaging 11 percent profit margins for the 2020 fiscal year, this at a time when small U.S. firms have seen their quarterly earnings drop by as much as 85 percent.

Many of Corporate America’s top 25 have far surpassed that average 11 percent gain. The credit card giant Visa is looking at a 52 percent profit margin for fiscal 2020, with Microsoft, Pfizer, and Intel all reporting annual 2020 profit rates of 30 percent or more. The 17 most profitable of the top 25 are together grabbing over $85 billion more in 2020 profits than they averaged the previous four years.

Average American workers, meanwhile, have taken quite a corona wallop. One in five have lost hours and wages to layoffs and furloughs.

This striking contrast between worker insecurity and burgeoning corporate bottom-lines, Public Citizen points out, represents nothing new. America’s economic rewards have been concentrating “at the top” since the 1980s.

“The induced coma of the pandemic,” adds Public Citizen’s Bart Naylor, “has ripped the scar off this economic wound, requiring massive aid to newly displaced workers who have no savings to fund more than a few weeks of basic expenses.”

We won’t see any real recovery from our corona wounding, the new Public Citizen analysis explains, until the nation starts seriously addressing the ongoing reality of excessive corporate executive compensation. Outrageously high rewards are continuing to give top execs an incentive to behave outrageously — to their workers, customers, and communities — on everything from job safety to the cost of prescription drugs.

The new Public Citizen report advances a variety of politically plausible corporate pay reforms. The most imaginative — and impactful — of these proposals spin off a Dodd-Frank Act provision that didn’t get too much attention at the legislation’s original enactment a decade ago. This provision — a mandate that requires publicly traded corporations to annually disclose the ratio between their CEO and typical worker compensation — only went into full effect three years ago.

What makes this provision so important? Back in the 1960s, big-time CEOs nationally averaged about 20 times the pay of average American workers. Over recent years, major corporate CEOs have been collecting pay that runs over 300 times the pay of average workers. Before Dodd-Frank’s disclosure mandate, we couldn’t drill down from these national executive-worker pay ratio figures to the individual enterprise level. Now we can. Last year, for instance, an Institute for Policy Studies report used Dodd-Frank disclosure data to identify 50 U.S. CEOs who took home in 2018 over 1,000 times the pay of their company’s most typical workers.

The AFL-CIO, in its just-released annual CEO pay study, has found that another 20 CEOs took home over 1,000 times their worker pay in 2019 and then turned around and furloughed over half their workers when the pandemic hit in 2020.

The time has come, Public Citizen argues, to place consequences on unconscionably wide executive-worker pay ratios.

One example: The original Dodd-Frank legislation requires corporations to hold advisory shareholder votes on top executive pay packages. But corporate boards can ignore these votes. The Public Citizen proposal: Don’t just make these votes binding. Instead, if shareholders reject an executive’s pay deal, pay for that executive “should revert to 20 times the median pay at the company.”

Congress could apply the same ratio leverage to share buybacks, the financialization maneuver that artificially boosts corporate share prices — and the executive pay that links to these prices. Legislation already before Congress, notes Public Citizen, would prohibit share buybacks where CEO pay exceeds 150 times median worker pay.

Congress could also apply pay-ratio consequences to government procurement, as lawmakers in Rhode Island have proposed. Federal lawmakers, urges Public Citizen, “should ban contracts to corporations with extreme gaps or give preferential treatment to firms with narrow gaps.”

Federal subsidies could carry the same pay-ratio strings. In fact, during the deliberations this past March on what became the CARES Act for coronavirus assistance, a House of Representatives Financial Services Committee draft “capped CEO pay at aided firms to 50 times the median pay at the firm.”

That notion never advanced into the final CARES Act text. But the Congress elected this November could next year include a progressive contingent strong enough to insist on adding a ratio rider to every piece of proposed corporate subsidy — or tax — legislation. The basic principle: no tax dollars or tax breaks for companies that pay their top execs over 50 times what their most typical workers earn

Oxfam America’s newly released corporate reform report zeroes in on those moments of crisis — like the current pandemic — that corporate power so relentlessly endeavors to exploit. Generations ago, Americans had an answer for blatant corporate greed grabs: the excess profits tax.

During the World War I and then again World War II eras, Congress legislated stiff taxes on corporate profits that ran above the pre-war norm. These taxes spoke directly to a public that, in the words of one contemporary economist, “sought insurance that none would profit from the nation’s misfortune.”

Our current misfortune, by contrast, is turbocharging corporate profits and, by extension, the personal fortunes of that slim sliver of the American population that owns the vast bulk of the nation’s corporate stock. America’s richest 1 percent, Oxfam notes, how holds 52 percent of corporate share wealth, quadruple the 13 percent share now in the hands of the nation’s bottom 90 percent.

Oxfam America’s new paper, Pandemic Profits Exposed, is calling for a 95 percent tax on 2020 net profits that exceed a company’s average net profits during the four years before the pandemic hit. The tax would only apply to large corporations with at least $500 million in annual gross receipts.

Applying this tax would raise, Oxfam America calculates, almost $80 billion annually from the nation’s top 25 corporations alone. Those billions could help Americans in desperate need of coronavirus-era support. But an excess profits tax would have a broader economic impact as well.

The nation’s five biggest tech companies , for instance, are riding a virus wave that has them “flush with around $557 billion in fresh cash,” as Oxfam notes, “the dry-powder they need to continue to rewrite the rules in their favor while swallowing up key pieces of the U.S. economy.” Taxing excess corporate profits could stall this swallowing.

“None of the most profitable companies have worked harder or made better decisions than the millions of small businesses across the nation about to enter bankruptcy,” Oxfam America sums up. “Americans should expect the companies who have benefitted most to give back in meaningful and democratic ways.”

The decisionmakers at those companies will most likely not agree, not as long as we let outsized corporate profits generate personal windfalls for the execs who commit that outsizing.

In other words, as economist Dean Baker observed earlier this month, “to allow for more pay at the bottom, we have to do something about pay at the top.”

San Francisco voters may do just that this November. Now on the city ballot: a proposal that would up taxes on large businesses in the “city by the bay” that pay their top execs over 100 times more than what their most typical workers take home.

Sam Pizzigati co-edits Inequality.org. His recent books include The Case for a Maximum Wage and The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970. Follow him at @Too_Much_Online.

  • Steven Berge

    There isn’t much focus on the fact that the average worker fared the best during the time of high taxes on outsized profits. The fifties and sixties were the golden era for workers, with living standards rising as fast as productivity. If only we could put a cap on the wealth of individuals and a cap on the size and wealth of corporations that would preclude the ability to significantly affect politics. But for the real decision makers, that would be too much like democracy.

  • mmckinley

    What we need to do is tax the hell out of rent. By this I mean all unearned income derived from ownership and privilege. Not just landlord-type rent from residential and commercial real estate, but royalties from intellectual property, interest, dividends, capital gains and other appreciation, inheritance and gifts, extraction (and destruction) of resources from the land, air, water, and other commons, special tax breaks and subsidies, insurance premiums and other legalized protection rackets, financial advantages from monopoly (such as excess profits, manipulating supply, collusion, competitive restrictions, regulatory privileges, etc.). Tax the hell out of any personal income not derived from work, and any corporate income not derived from production (added value) of goods and services. Ya wanna buy low, sell high without adding value? Gonna cost ya. Pay up.

  • iowapinko

    Within this capitalist belly-o-the-beast nation, workers fare best when they are protected/represented by a union. Hence, our standard of living was relatively higher, as you state, in the 1950’s.

    1954 correlates with the highest ever percentage of unionized workers in the U$, 35% of the entire workforce were union members.

  • Meepestos

    Canada is now at 31 percent and growing.

    Canada and the US are so different when it comes to labour relations and
    unions. Canada has legislation that makes hard to union bust and easier to
    form a union and to strike. Nevertheless, 80 percent of the private
    sector in Canada do not have a company pension plan. And almost 90% of
    public servants, who make up 20% of the country’s workforce, have a workplace pension plan, which, in most cases, guarantees the benefit no matter what.

  • Meepestos

    To think there was a time in Canada and the US when their bedroom
    communities were the engines of economic growth for the manufacturing
    sector. An economy that was built primarily on renewed public sector
    investment in infrastructure. How times change.

    In our lifetime we have witnessed the wealthiest shifting tax burdens
    downward onto the middle and upper middle class and an entire Income
    Defense Industry rise to the point of assisting oligarchs to off shore
    billions without paying taxes on it and somehow all done off the
    political radar screen.

  • iowapinko

    Thanks for sharing these statistics, Meepestos, I had no idea there was such variation in U$/Canadian labor statistics.

    No WONDER Canadians have a better quality of life than we do here in the belly o the beast! Part of the discrepancy is probably also due to the disastrous fallout from the historic impact the anti-communist, Joe McCarthy had on the development of organized labor in the US. During the “red scare” of the 1950’s, militant union-members and leaders were expelled as communists. Afterwards, what remained of the labor movement seems to have become co-opted by management, their effectiveness in representing the interest of workers greatly diminished.

    31% union membership is quite an accomplishment!

  • iowapinko

    ‘somehow all done off the
    political radar screen.”

    Yep, this is an example of our corporate media misleading, especially through a withholding of information. I often wonder how much difference there would be in public opinion if the people were ever to learn the actual truth about our exploitation.

  • Meepestos

    I am glad I ceased becoming self employed in my later years and got a good
    union job where my employer and union had a good relationship thus I got to
    retire early with a “pre-funded defined benefit” pension, which does not rely on the stock market; only 10 percent of the holdings were invested in emerging markets equities. The plan was and still is today designed that each generation pays in advance for its own basic benefits and is subject to seven legislative acts; i.e., good regulation. I’m glad more and more young folk in unions are demanding such pension plans.

    Canada has a Red Scare too, but less blacklisting and witch hunting. Folk that were
    determined to be security risks were quietly moved out of their positions and got other jobs in less sensitive areas nevertheless some were hounded by the RCMP for some years.

  • mwildfire

    I totally agree. How is it that unearned income is taxed at 15% (nominally, before loopholes) while workers are taxed at a higher rate–in a country where supposedly it’s “hard work” that justifies wealth?

  • mmckinley

    Take a look at Guy Standing’s stuff on the precariat, if you haven’t already. I read The Corruption of Capitalism a few weeks ago, have just ordered Plunder of the Commons, his latest. In The Corruption of Capitalism, he talks about the financialization of the economy, where majority of income has become rent, a rentier economy based on ownership (often monopoly) of things like real estate, land, intellectual property (patents and royalties), money (interest), stocks and bonds, and anything else that provides you unearned income, simply from owning things. Especially interesting to me is the redefining of what is meant by “worker” in this rentier economy. Yes union membership has fallen, but what has really fallen is the number of people who think of themselves as proletarian “workers” as we move away from a producing economy to a rentier economy. The precariat, who have no real employer (or many employers, insecure with no real relationship) are becoming the majority, rapidly. Just as unions have shrunk, so have what we traditionally think of as “labor.” Part of this is reflected in the corporatization of union leadership. This redefinition of “work” in the gig economy must be accommodated by the left, theoretically as well as actually. One response, and I think a good one, is Standing’s advocacy for a Universal Guaranteed Living Income, paid for out of rentier incomes, which will eliminate poverty and dependency on (inevitably insufficient) means-tested welfare, and drive a stake in the heart of capitalism, with its gross inequality, monopoly control over labor, and definition of work as slavery (you don’t eat without cutting into yourself to make more value for The Man than he pays you. If you don’t then you die.) I argue for at least $3,000 per month for every adult ($750 per month for every dependent minor), which is a figure derived from the MIT index of minimum cost of living.