CHAPTER 30                      SEIU Demands Economic Reforms       Need More Jobs, Fewer Bonuses In Aftermath Of 2008 Col...
226                                                                                   STRONGER TOGETHER: THE STORY OF SEIU...
SEIU DEMANDS ECONOMIC REFORMS                                                                                             ...
228                                                                                                 STRONGER TOGETHER: THE...
SEIU DEMANDS ECONOMIC REFORMS                                                                                             ...
230                                                                                       STRONGER TOGETHER: THE STORY OF ...
SEIU DEMANDS ECONOMIC REFORMS                                                                                             ...
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Chapter 30 seiu demands economic reforms - SEIU demande des réformes économiques


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Stern, who chaired the SEIU Master Trust, which had about $1.3 billion in assets, wrote to the boards of directors of 29 major companies in the Trust’s investment portfolio demanding a stop to unmerited executive payouts. He also called for an overhaul of executive compensation practices to better align them with corporate performance.

Andy Stern, président du SEIU Master Truste (qui gère les fonds de pensions de ses membres), qui gère à peu près $1,3 trilliards en avoirs, a écrit aux conseils d'administration de 29 entreprises majeures présentes dans le portfolio du SEIU Trust, leur demandant de couper aux cadres non-méritant le paiement de toute prime. Il a également appelé à une refonte des pratiques de primes concernant les cadres, une qui s'alignerait mieux avec les performances de l'entreprise.

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Chapter 30 seiu demands economic reforms - SEIU demande des réformes économiques

  1. 1. CHAPTER 30 SEIU Demands Economic Reforms Need More Jobs, Fewer Bonuses In Aftermath Of 2008 CollapseL loyd Blankfein, the CEO of Goldman Sachs, pocketed his bonus of $9 million for 2009 with the typical arrogance ofa Wall Street “Master of the Universe.” union emerged as a powerful voice on global economic issues. SEIU members frequently took to the streets in a wide range of protests and demonstrations—in front of Goldman Sachs e Goldman Sachs bonus pool of more than $16 billion o ces in Washington, D.C., at the American Bankers Associa-meant the “average” employee would get a bonus of $500,000 tion convention in Chicago, at Bank of America locations inand many top execs would get seven- and eight- gure bonuses Charlotte, North Carolina, and elsewhere.(much of it in stock). e union’s broad opposition to Goldman Sachs and Bank All this for a company that would have gone bankrupt of America was rooted in the inequities inherent in those busi-had the hardworking taxpayers not bailed them out when the nesses (and many others) paying their executives huge bonuseseconomy collapsed at the end of 2008. and stock options after their own recklessness had plunged the Further proof of Wall Street’s insensitivity came when economy into the worst downturn since the Great Depression.Blankfein told the press that he’s just a banker “doing At the same time, rms such as Goldman Sachs and Bank ofGod’s work.” America had survived by bene ting from huge taxpayer bail- Few Americans, and particularly the millions who were outs and then launched vigorous lobbying campaigns againstjobless, believed the titans of nance whose greed helped bring nancial reforms aimed at preventing future collapses.on the economic collapse deserved their bonuses and self-righ- And the Wall Street banks and hedge funds also beganteousness. Instead, the overpaid Wall Street bankers symbol- lobbying hard against other SEIU-backed legislation, such asized how wide the gap between the very rich and regular work- healthcare reform and labor law improvements through theing families had become at the end of the 21st century’s rst Employee Free Choice Act.decade. Incredibly, the top six banks paid their executives and At a taxpayer mobilization against Goldman Sachs in No-sta $140.5 billion in bonuses and compensation in 2009—an vember 2009, SEIU President Andy Stern told the crowd theamount that was almost enough to cover every state govern- nancial behemoth, which had just set aside billions to pay bo-ment de cit for scal year 2010. nuses for its executives, was “out to lunch and out of touch.” SEIU ramped up its role as a progressive advocate for With one American losing a home to foreclosure everyworking families long before the nancial meltdown that nearly 13 seconds at that point in time, Stern called upon Goldmancollapsed the economy at the end of 2008. e union warned Sachs to place its bonus money in a fund to help undo someagainst the dangers posed by Wall Street greed, including pri- of the damage its nancial practices had caused. e bonusesvate equity rms piling huge debts on companies they had “could prevent every single foreclosure in America in 2010,” heacquired. And following the onset of the nancial crisis, the told workers at the protest.
  2. 2. 226 STRONGER TOGETHER: THE STORY OF SEIU old. With o cial unemployment surging above 10 percent and the real jobless rate more like 17 percent, SEIU gave voice to the concerns of those who felt a rising populist anger over huge nancial institutions that were “too big to fail” and that seemed to know no shame in heaping rewards upon themselves. SEIU members during this period participated in pen- sion funds with more than $1 trillion in assets, some of that lost to the greed and speculation of the real estate bubble with its predatory loans and to the broader collapse of 2008-2009. Stern, who chaired the SEIU Master Trust, which had about $1.3 billion in assets, wrote to the boards of directors of 29 major companies in the Trust’s investment portfolio demand- ing a stop to unmerited executive payouts. He also called for an overhaul of executive compensation practices to better align them with corporate performance. “It’s as if these guys got a windfall payo for betting the family’s savings on the wrong horse,” Stern said in April 2009. In 2008, when the economy faltered, Goldman Sachs re- “A fundamental duty to shareholders has been violated, and weceived $64.6 billion in bailout funds from U.S. taxpayers and, expect immediate action…to put a stop to these unmerited ex-despite its problems, turned a $2.3 billion pro t. But the Wall ecutive payouts.” From 2005 through 2008, the top ve mostStreet rm paid executives $4.8 billion in bonuses. CEO Lloyd highly paid executives at the 29 nancial services rms targetedBlankfein got $42.9 million that year, far more than the $6.93 by SEIU received a total of more than $3.5 billion in cash andan hour received by workers at Burger King (partially owned equity pay, and more than $1.5 billion in stock options. oseby Goldman Sachs). companies included Goldman Sachs, American Express, AIG, “America is not living up to its promise when one of the JPMorgan Chase & Co., and Citigroup.architects of the economic crisis gets paid millions in bonuses At the time, AIG—the American International Group—for his failures, while workers take home wages barely above had received a huge taxpayer bailout: more than $173 billion.the poverty level,” Stern said. He called for passage of the Em- More than $90 billion of that went toward paying banks,ployee Free Choice Act as an important step toward restrain- including Bank of America and Citigroup, that were part ofing the huge disparity between those at the top and work- the huge lobbying e ort against legislation that would bene ting Americans. working families, such as the Employee Free Choice Act. Anger at Wall Street’s excesses remained very high in this Citigroup, which got $341.1 billion in taxpayer bailouts,period among diverse elements of the public and crossed many hosted a conference call to build opposition to employee freeof the normal fault lines of Democrats and Republicans, blue- choice and invited a top o cial of the anti-worker U.S. Cham-collar and white-collar Americans, rural and urban, young and ber of Commerce to lead the call on March 11, 2009.
  3. 3. SEIU DEMANDS ECONOMIC REFORMS 227 When Citigroup bankers and others in the American ic chaos, funnel money from families and small businesses intoBanking Association held their convention in Chicago in late their own pockets, then leave all of us to clean up their mess.2009, SEIU Secretary-Treasurer Anna Burger led thousands of “And not only do they get away with it, they pay them-workers and taxpayers in protest. Writing on e Hu ngton selves billion-dollar bonuses and throw lavish parties to cel-Post blog, Burger called the bankers’ meeting “a four-day cel- ebrate their conquest,” Burger continued. “But this isn’t aebration of wealth and opulence. movie. It’s really happening. Wall Street bankers have taken “ e nancial section of the newspaper is starting to read $17.8 trillion of our tax dollars through bailouts and turnedlike the script for a far-fetched crime movie,” Burger said. “A them into massive pay and bonuses for themselves.”196group of villains hatch a plot to steal trillions of dollars from e Chicago protest led by Burger and Tom Balano , anunsuspecting Americans. ey drive the country into econom- SEIU vice president and long-time leader of Local 1, called upon the big banks to stop lobbying against nancial reform legislation that was pending in Congress. President Obama recognized SEIU’s important role in ad- vocating for pro-worker economic policies by naming Burger to the President’s Economic Recovery Advisory Board. S EIU’s prominent and outspoken role on behalf of econom- ic fairness during the collapse of 2008-2009 grew in part out of work the union had been doing to urge reforms to halt abuses engineered by the multibillion-dollar “private equity” buyout nanciers. ose rms invest in industrial and service companies whose common stock then ceases to trade on public stock exchanges. e private equity buyout rms operate virtually free of oversight and accountability, yet their decisions a ect large numbers of American workers and communities. Unlike pub- licly traded companies that are subject to federal securities laws and regulations, private equity rms often legally can keep their practices and pro ts largely hidden from public view. In addi- tion, private equity rms, which get substantial capital from public employee pension funds, often pay very little in taxes. eir business model thus undercuts government’s ability toSEIU workers demanded that Congress pass nancial reforms that would stop nance public services.big banks, hedge funds, mortgage companies, and credit card rms among Major brand names in the United States, such as Burgerothers from greedy and dangerous nancial practices like those that led to eco-nomic collapse in 2008-2009. King, Dunkin’ Donuts, Hertz, Hilton Hotels, and Toys“R”Us,
  4. 4. 228 STRONGER TOGETHER: THE STORY OF SEIU their portfolio companies would give private equity four of the top 25 spots in the Fortune 500. ese private equity rms have more annual revenue than companies such as Bank of America, JPMorgan Chase, and Berkshire Hathaway. that employ nearly 4 million workers.Change to Win Chair Anna Burger, SEIU President Andy Stern, and AFL- E ven in a slow economy, the private equity partnerships receive hefty fees and the top executives get lavish salaries, perks, and other riches. Many leading partners at private eq-CIO President Richard Trumka joined the Rev. Jesse Jackson at a protest dur-ing the American Bankers Association meeting in Chicago in 2009. uity rms are billionaires at a time when inequality has widened to historic levels.have been taken over by corporate buyout rms. SEIU’s con- Stern, Burger, Mary Kay Henry, and other SEIU leaderscerns heightened when one of the nation’s hospital chains was repeatedly raised the wealth gap issue in the debate over theinvolved in a private equity buyout. And a leading multiservice need for much tighter regulation of the nancial sector gen-company SEIU had been organizing, Aramark, was acquired by erally and private equity in particular. ey found a strangeprivate equity, as was the nation’s largest o ce building land- bedfellow seeming to agree with them in Alan Greenspan, thelord, Equity O ce Properties. former Federal Reserve chairman, who warned that growing e union estimated that, of the $1 trillion in assets held inequality “is not the type of thing which a democratic societyin trust by pension funds of SEIU members, about 5 percent to can really accept without addressing.”19810 percent of those assets are invested in private equity. While millions of Americans are unemployed or working Often, union experts say, corporate buyout deals end up harder for less money and eroding bene ts, the top 300,000costing workers their jobs as the new ownership borrows to Americans enjoyed almost as much income as the bottom 150the hilt and then cuts costs in order to manage the payments million Americans combined.199 SEIU, in a publication titledon the debt and maximize its pro ts. Business Week noted, for Behind the Buyouts, argued in 2007 that “there is no doubt theexample, that “buyout shops have always been associated with income being accumulated in the buyout business is a majorjob losses.”197 contributor to the concentration of wealth among the top one If workers su er from the decisions made by private equity percent of Americans.”executives, the rms engaging in the deals do extremely well. Stern widened the debate over the economic unfairness ofConsider these facts: current policy when he joined union leaders from UNI Global - Union; Unite, the British union; and the Trade Union Advi- er than the annual budgets of all but 16 of the world’s sory Committee to the Organization for Economic Coopera- largest nations.
  5. 5. SEIU DEMANDS ECONOMIC REFORMS 229tion and Development (OECD) in a global teleconference in state actors, like labor unions, must work together toward aearly 2009. system where competition is based on the quality and sustain- “Financial manipulation, greed, and deregulation have led ability of goods and services provided—rather than a race toto economic havoc,” Stern said. “For our global economy to lower costs at the expense of workers, the environment, andthrive and grow again, corporations, governments, and non- product quality.” SEIU’s Principles For e Private Equity Industry As the threat of private equity buyouts expanded, portunities that align the long-term interests of SEIU’s private equity campaign, coordinated by Stephen everyone who builds the value of a company— Lerner, developed a set of principles for the industry: from direct employees and contract workers to senior management. 1. e buyout industry should play by the same set Workers should have paychecks that can support of rules as everyone else. a family. e industry should provide transparency and dis- Workers should have quality, a ordable healthcare closure about their businesses, their deals, their in- coverage. come, their plans for the companies they buy and Workers should have secure retirement bene ts. sell, and the risks of the debt they load onto portfo- Workers should have a voice at work—meaning lio companies. the freedom to join a union using majority sign-up e industry should invest in the health, security, without interference from any party. and long-term prosperity of America by supporting equitable tax rates and the elimination of loopholes 3. Community stakeholders should have a voice in that increase the tax burden on working Americans. the deals and bene t from their outcomes. e industry should work to build con dence in Buyout rms should play a proactive and construc- the securities markets by eliminating con icts of tive role in the communities a ected by their deals. interest and other potential abuses in their deals. Community stakeholders should be involved as deals are being made. 2. Workers should have a voice in the deals and e private equity buyout industry and community bene t from their outcomes. stakeholders should use wealth generated by deals Workers should have a seat at the table when deals to improve the quality of life, the environment, are being made. the health, the safety, and the long-term stability Private equity deals should create economic op- of communities.
  6. 6. 230 STRONGER TOGETHER: THE STORY OF SEIU SEIU demanded a range of reforms: income of two-thirds due to an 80 percent increase in total - interest payments. out portfolio company. e Hertz workers su ered from the deal when the private equity owners launched a new “productivity and e ciency” portfolio companies.200 initiative in early 2007. Hertz announced the elimination of - 1,550 jobs and later said that only one of every two departing vent future leverage-fueled crises from undermining the workers would be replaced. global economy. With Carlyle entering the nursing home business via its - purchase of ManorCare, SEIU raised questions about the pri- forms, oversight, and protections. vate equity rm’s record in its earlier deals. “Big buyout rms like the Carlyle Group and others should be held accountable for the impact of their actions on private equity. seniors, taxpayers, and workers,” said Gerry Hudson, SEIU ex- ecutive vice president. “When Carlyle and other private equity G20 countries, the major industrial nations of the world. giants buy out nursing homes, they become the owners and, as such, are directly responsible for what happens to patients.” Large private investment groups had bought out 6 ofO ne example highlighted by SEIU in its broad public campaign for regulation of private equity and the nan-cial sector was the case of Hertz, the rental car company. A the nation’s 10 largest nursing home chains, containing more than 141,000 beds, or 9 percent of the total number of nurs-consortium headed by the Carlyle Group bought Hertz from ing homes in the nation, according to e New York Times.Ford Motor Company in the fall of 2006. ey argued that Private investment groups owned at least another 60,000since private equity rms are not under public scrutiny, they beds at smaller chains and were expected to acquire manycan focus on long-term business growth. more companies.202 But Carlyle and its partners borrowed against the Hertz “ e rst thing owners do is lay o nurses and other starental eet, jeopardizing the company’s credit rating and caus- that are essential to keeping patients safe,” said Charlene Har-ing a downgrade of Hertz bonds to junk status. e private rington, a professor at the University of California in San Fran-equity owners also had Hertz take out $1 billion in loans just cisco, who studies nursing homes. She told Charles Duhiggsix months after the purchase of Hertz was nalized in order to of e New York Times: “Chains have made a lot of money bypay Carlyle and its partners a special dividend.201 cutting nurses, but it’s at the cost of human lives.”203 en they took the company public again and used that SEIU’s work on private equity in 2007 and 2008 situatedmoney to pay o the loan and, with the money left over, they the union to deal with buyouts that could impact members,had Hertz pay them yet another special dividend: this time such as those at ManorCare, Aramark, and Allied Security. Itof $200 million. All the increased debt piled on by Carlyle also empowered the union to speak for a far broader group ofand its partners meant that even though Hertz increased rev- American workers when the economic collapse occurred inenues by 8 percent in 2006, the rm su ered a decline in net late 2008.
  7. 7. SEIU DEMANDS ECONOMIC REFORMS 231 As Bank of America and Goldman Sachs and other su- well as in mainstream media such as e Wall Street Journal andper-wealthy nancial rms expanded their gluttony during on television.troubled times and lobbied hard against healthcare and labor From a small union of at janitors in Chicago had comelaw reform, SEIU workers were in the streets week after week. more than two million members ghting for a more fair econ-And they also campaigned on Twitter, Facebook, and Flickr as omy with great spirit at a time of bleak recession.