WASHINGTON – The “say-on-pay” movement, holding corporate executives financially accountable for their risky decisions, is making progress, despite corporate resistance to it and to all other aspects of financial reform and clean-up, a panel of reform advocates says.
Panel members warned, however, that the corporate interests – including but not limited to the banks and other financiers – are still battling the law tooth and nail, by lobbying against giving law enforcers any money and blocking nomination and appointment of key federal overseers.
The Americans for Financial Reform, the labor-backed group that helped mobilize public opinion to crack down on Wall Street after the 2008 crash, convened the panel at the AFL-CIO on Dec. 12. And panel members said their work, and that of other financial reform advocates, is incomplete, because what they won must be protected.
The discussion occurred against a backdrop of congressional Republican plans to emasculate financial reform in various ways.
The GOP-run House, for example, wants to freeze spending at the Securities and Exchange Commission and cut it at the Commodity Futures Trading Commission, the two current federal agencies given the task of writing and enforcing new rules to curb the financiers and their shenanigans.
And a Senate GOP filibuster halted Democratic President Barack Obama’s nomination of former Ohio Attorney General Richard Cordray to head the new Consumer Financial Protection Bureau. The agency would have the power to crack down on the financiers – everyone from payday lenders to big banks peddling shaky mortgages and mortgage-based securities – who endanger consumers. But the GOP blocked Cordray because they want to water down the agency.
Nevertheless, panel members said, “say on pay,” advisory resolutions mandated by the Dodd-Frank financial regulation law, have resulted in executive turnover at top corporations, including eight of the Fortune 500. Many others altered their behavior to conform to the law. But it’s not enough, since the say on pay is only advisory.
That’s led two big California state worker pension funds, the California Public Employees Retirement fund (Calpers) and the $146 billion California Teachers
retirement fund, to take the lead in campaigning for tougher corporate governance, said
Anne Sheehan, corporate governance director for the teachers’ fund.
Not only is her fund pushing say on pay resolutions at firms it invests in to hold corporate officers accountable for long-term thinking and long-term returns, but Sheehan’s contacting her counterparts at big mutual funds to join the campaign. Her fund opposed 23 percent of corporate pay packages last year. It also opposed supposedly independent corporate “compensation committee” directors who created them.
Still, that’s only one move in the crusade against corporate excess.
Sarah Anderson of the Institute for Policy Studies pointed out “there’s a big backlash from companies” against a requirement of the Dodd-Frank securities law, which applies to all firms, to disclose their top executives’ compensation as a multiple of how much they pay their average worker. The current ratio of CEO pay to average worker’s pay is 325-1.
Some firms even say they can’t compute their workers’ pay, which prompted AFL-CIO President Richard Trumka to offer to help them. “Give me your spreadsheets and a computer and in two days, I’ll have it,” he said with a grin.
But the desire for secrecy and opposition to federal controls are why the big banks that got the $700 billion Troubled Asset Relief Program (TARP) taxpayer bailout repaid the funds so fast, Anderson added. They didn’t want to disclose their executives’ pay, much less limit it – which the law did for any firm taking federal funds.
All this led the panel, Trumka and Rep. Elijah Cummings, D-Md., who keynoted the conference, to warn advocates that the fight continues. Cummings added it must expand, to aid Main Street with money that should come, rightfully, from Wall Street.
One possible point of leverage: Federal contracts. Companies do billions of dollars worth of business with the federal government, panelists said. The Office of Federal Contract Compliance, a Department of Labor agency, could write limits on executive pay at government vendors into its contract requirements.
But in the meantime, the corporate executives, financial and non-financial, are back to their old ways, said Anderson warned: Taking huge financial packages while taking huge financial risks for short-term gains and ignoring long-term investing.
And that’s the real risk she added. Outside analysts and investigators have concluded that the risky financing, driven by high executive compensation and the focus on short-term gains, led directly to the risky housing investments and other phony financial instruments.
This article was written by Mark Gruenberg and distributed by PAI.