The Progressive Ensign

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Category: Corporate Power (Page 1 of 4)

Saving Democracy: Economics – Corporate Stock Buybacks Imperil Corporate Viability

Goldman Sachs just completed an analysis of corporate payouts and found that dividend and stock buybacks were 103.8% of their free cash flow. Meaning that they were paying more out in cash than they had on hand!  Free cash flow has dropped to – 15 %, while debt is up 8 %.

Sources: Goldman Sachs, Marketwatch – 7/29/19
Sources: Goldman Sachs, Marketwatch – 7/29/19

This squeeze is unprecedented, it is the worst cash flow crisis since 1980, and is unsustainable.  Corporate executives have turned to extremely high borrowing levels to keep this financial merry-go-round going. While, turning to stock buybacks to hype the price of their stock and keep earnings per share high to the tune of $1.5 trillion by S & P 500 companies in the last year.

If sales and profits drop due to the trade war and consumer spending declines as it has in the last four months, corporations will default on their debt. A downward economic spiral will be triggered. 

Maybe this is another reason the Fed announced a cut in interest rates and shift to an ‘inflation averaging framework’.  JPMorgan recently commented to Marketwatch they believe Fed economists are shifting to a position of not worrying about inflation but instead on keeping money flowing to corporations at low interest rates possibly to zero.  By keeping rates super low the Fed is enabling executives to waste profits on stock buybacks to hype their pay and stock price. We need strong companies making investments in research, development, innovation, productivity improvements and raising wages for workers. When the economy works for all then democracy is strengthened.

The financial music will stop when sales and profits decline, an already desperate cash flow position becomes untenable putting company viability in doubt.  Looking out a year or two, we expect the Fed to come to the rescue after possible zero interest rates have panned out. Last March, former Fed Chair, Janet Yellen recommended that the Fed be authorized to purchase corporate stock and bonds to keep the economy going if a recession hits.

Saving Democracy: Technology – Does the Internet Serve or Undermine Our Democracy?

Technology is constantly pervasive in our lives.  Let’s think for a moment about how one incredibly pervasive technology has changed the way we live twenty four hours a day.  The Internet was built by the Defense Advanced Research Projects Agency (DARPA) contracting with universities and research centers to build a powerful internetworking protocol and network for the military research and communications beginning in 1969.  The network evolved with more research centers and government organizations using the system for communication and joint projects.  By the mid 1990s the Internet was opened to the public primarily for email, though soon websites and messaging systems were established.  Commercial common carriers were offered government contracts to provide more communication network support and services.  In 1993 the Internet provided 1 % of all two way communications, by 2000 51 % of all communications were over the Internet, then growth exploded to 97 % of all telecommunications information in 2007.  As recently as 25 years ago there were no companies like Facebook, Netflix, Google, Twitter, eHarmony, LinkedIn, Instagram, Amazon, et al. Yet, these companies were allowed to grow into behemoths largely unregulated with young entrepreneurs maximizing profits not focused on the public trust.

Just twenty-five years later just about everything in our daily life is changed, from task assistants like Siri, dating with eHarmony, finding a job via Linked In, searching for answers on Google, watching on demand movies in our homes via Netflix, sharing photos via Instagram and taking a picture on our smartphones and sharing it with our friends via Facebook.  Corporations embraced the Internet for new applications, channels of distribution, low cost communications, outsourcing of work remotely and low cost entry to new markets.

Along with all these applications, democracy pundits had visions of a more engaged electorate, citizen forums, exchanges of ideas, more facts based discussion, online referendums on key issues and more responsive government. It certainly has not worked out that way, corporations give hundreds of millions of dollars to congressmen and senators, there is certainly more dialog via blogs and websites in the millions – but do we see more heat than light? Plus, with technology gone wild; more fake videos (not the authentic video but edited words and pictures), more hate stories and posts from adversaries like Russia to influence our elections.  The lowest common denominator has certainly been hit with the present POTUS and Congress in place largely not responding to the people’s opinions due to corporate and special interest group lobbying and influence from campaign financing. For instance Pew Research completed a recent poll on climate change, the existential issue of our time, where 56% of all voters view protecting our environment as a top priority for the President and Congress.

Source: Pew Research Center – 4/19/19

Instead, we have an administration loosening targets for auto emissions to static levels, EPA rolling back fossil fuel emission standards and wilderness preserves being opened up to oil drilling.

We ask a fundamental question: is technology in the instance of the Internet serving the needs of democracy or undermining its very foundation?  We will also look in this series of Saving Democracy chapters on other technologies; automation and robots, AI and content platforms.  First, we look at the backbone of the Internet, its vast network built by the federal government, universities and research agencies and now being subverted by corporations.

Net Neutrality – Corporations Undermine the Common Good

Built by taxpayer money by DARPA  for military communications,  next universities and research centers, then open to the public and commercial enterprises. So, why do companies like AT & T, Verizon, and Comcast think they should control how Internet is offered to our people?  We paid for it, as it evolved the Internet was envisioned is new way to engage citizens in the political process and to level the playing field for new companies.

We certainly, have seen how innovation with a plethora of new services has emerged in the last 20 years, yet now a few giants run the content side: Google, Facebook, Netflix, Disney and the network side run by AT &T, Verizon, and Comcast.  As the content companies merge with networking companies we have huge companies deciding how to make more money from a network entity that is actually a public trust built by taxpayer money.

One way we see inequality growing is access to the Internet for many in poor, or rural  regions of the country is limited in speed and services.  Without Internet speedy Internet access or innovative services for universities, hospitals, and companies in these regions it is difficult for the working class to gain the skills to get a better job, or companies to compete with their high speed competitors.  Investment is declining in some regions of the Midwest and South due to poor Internet infrastructure which means fewer jobs for people living in the area.

Source: ISSR – 12/20/17

An analysis in December, 2017 by the ISSR shows that over 177 million Americans would be left without protection if the net neutrality policy were reversed.  Note all the light yellow regions of the country that have no broadband provider at all.  Orange and red regions have providers who have violated net neutrality rules. Without high speed Internet access these mostly rural regions are left to declining investment, fewer jobs and poorer health care.

Next Step:

The Internet backbone network is really a Common Good. It is a utility, not a platform for companies to make profits and take control of access, speed and content which was the original purpose in designing the Internet as a peer to peer protocol rather than hierarchical.

The present GOP administration installed a company lobbyist as chair of the FCC who immediately decided that the network neutrality doctrine of the Obama administration should be overturned, giving control to for profit entities to charge whatever they wanted for speedy access or content. It is as if we turned the interstate system of freeways over to GM, so GM could give special lanes to GM cars and the others would have to go in slower lanes.

No, we don’t see the Common Good being protected by a for profit doctrine, the profit policy just can’t do the job.  In July, 2018 when firefighters in the California Mendocino fire went over their mobile data plan limit, Verizon throttled their data transmission to 1/200 of the speed.  After the outrage over such predatory practices Verizon relented and will now offer all western state first responders standard data plans without throttling.  Why should they even be able to throttle?  If a user needs more data then just charge more over a certain limit – but throttling their network speed is coercive.

Network neutrality for all content, all websites, all messaging is the just doctrine for a Common Good like the Internet built with public funds.  An equal access Internet provides a critical column foundation for democracy to serve all the people not just the rich. The fact that corporations think they should be able to do whatever they want shows once again that corporations have control and power over the public interest.  Their position needs to shift to supporting the public interest as priority one, not profits. We need to have the common carriers see they have a public trust, and social responsibility in operating a public Internet utility.

Saving Democracy: Why Wages Have Declined for 20 Years, Labor Needs Equal Role With Capital

(Saving Democracy Series:  this post focuses on what factors are causing labor to lose it rightful position as an equal partner with capital in the US economy and concludes with ideas on how to bring labor back into an equal role; from new institutions like a Federal Reserve for Labor, to corporate law reform, ending stock buybacks, and training with a powerful apprenticeship program)

Labor has been viewed as a cost for hundreds of years. Somehow the early accountants working for Middle Age Venetian families invented double entry accounting systems with debits and credits, These accountants called credited assets like money, land and equipment while labor was a debit labeled as an expense. Labor is viewed as an expense to this day because the owner-entrepreneur has to pay employees to work – in effect ‘renting labor’..  Workers have had the ‘cost’ yoke around their necks ever since.  Yet, are employees really a cost?  The staff are the ones doing the work, creating the product or service and solving the problems – money does not create the product or service only people do. CEOs are often heard to say that employees ‘are our most important asset’ but then treats them like second class citizens in making policies for the company, gaining a fair share of the profits or enjoying job hours flexibility. Today, Wall Street applauds wages being stagnant for the 80 % while profits go up while wealth accumulates for The Elite.

Over the past 20 years in particular, workers have seen their ‘economic position’ continue to deteriorate.  Labor sovereignty continues to decline on multiple fronts: wages, benefits, standard of living, job negotiating clout, choice of companies and the constant sword of Diogenes held over their job by automation.  For example over the past fifteen years wages for workers have been stagnating.  However, this declining wage trend is not new, it has been happening since the early 1980s, when President Reagan took office and ‘trickle down economics’ was promised as a way to give workers a fair share of the economic pie.  Workers have lost their wage share of business sector income ever since.

Sources: The Federal Reserve Bank – St. Louis, The Wall Street Journal, The Daily Shot – 5/3/19

Labor’s share of business sector income has dropped by 15 % since 1950.  While, this labor share statistic uses wage employment data and estimates for self- employment, some observers think the decline is largely due under estimates of the size of the ‘gig economy’.  However, separate wage data supports the declining wage trend:

Source: Global Technical Analysis – 5/3/19

When real wages calculated after inflation are allocated across all employed workers the decline is most apparent, a 34 % decrease since 1983.  The softening wage trend is not getting better, Bankrate surveyed 1,000 workers last year and found that only 27 % received a wage increase.

Why have wages continued to fall the past 50 plus years?  There are multiple factors combining to put workers at the lowest point of wage negotiating power in recent times.  Automation is one of the prime reasons for the loss in wage bargaining power.

Sources: FiveThirtyEight, The Federal Reserve, Bureau of Labor Statistics – 3/2016

Almost 5 million manufacturing jobs have disappeared since 2000, yet over the past 9 years factories have been coming back to the US by increasing employment by 5 %, but with far fewer workers. Yet, the US is taking the No. 2 position in worldwide manufacturing output with a 20 % increase in output

The reduction of manufacturing jobs in the US, automation has been a key factor weakening the worker wage bargaining position. A recent Ball State University study found that over 88 % of lost manufacturing jobs were due to automation and productivity increases not offshoring.

Automation started decades ago, as IT applications deployed in offices and manufacturing plants in the 1970s and 80s displaced thousands of workers performing repetitive manual tasks such as data gathering and reporting, answering phone calls, editing and copying documents, sending and receiving status reports, manufacturing reporting and others that were easily automated by software.  By 1995, the Internet began to impact the workplace, networking software applications so that jobs once requiring local support or data could be performed overseas for far less.  In Silicon Valley, an entry level software engineer would be paid $65 – 75 @hr., while an engineer in India was paid $20 @hr. or less. Thus, most business processes for ‘non-core’ functions like accounting, IT, customer support and benefits processing were moved offshore to reduce costs by 50 – 75 %.

In addition, major corporations have been outsourcing non-core services to US contracting companies to the detriment of worker’s pay security or benefits.  For example, in Silicon Valley starting in the 1980s until present – many core IT functions were outsourced with ‘facilities management’ agreements, where IT workers are fired, and rehired by outsourcing companies at 30 – 40 % less in salary with no benefits or health insurance. The workers were faced with no good choice – look for another job or take a pay and benefits cut for the job they had before.  In the Bay Area,  H1-B visas are often used to keep wages low by offering a worker from India 40 % of the local prevailing wage for a software engineer. The present GOP Administration has significantly reduced H1-B visas by a ratio 1 accepted of every 4 applications the lowest rate in 10 years.

Automation investments continue as software firms develop applications that automate many business activities previously thought to be difficult to automate:

Source: McKinsey Global Institute – 2/28/17

Jobs requiring skills from sensory perception fine motor activity or navigation are going to be automated over the next 30 – 50 years. All this investment in automation results in less competition for employers to find employees to do the work they need – a machine will do it.  The machine shows up on time, requires no vacation, is not absent, and does not sue the company for management miscues.  Plus, the added benefit is in well implemented automation projects costs are driven down, profits up so executives see their compensation increase.

Corporate Oligopoly

Another way corporations limit worker job options is by merging with other companies and then laying off workers in the newly combined firm.  Since 1997 the average market share for the top four firms in most of 893 industry sectors has increased from 26 % to 34 %.  For a tenth of these sectors where the top four firms have 33 % to 66 % market share their revenues have increased by 37 %!

Sources: Census Bureau, The Economist – 3/2016

The antitrust section of the Department of Justice has been asleep the past two decades. In the airline industry, there are now 4 airlines that own 80 % of the business.  In finance, just 5 banks have   50 % of $15 trillion in total assets. In the information search sector – the top 4 companies have 98.5 % of the search industry market. The wireless communications industry is dominated by the top 4 companies control 94.7 % of the market between them – Verizon, AT &T, Sprint and T-Mobile. In the tire manufacturing sector, the 4 top firms dominate the US market with a total market share of 90.1 %.  In 2012, entertainment, media and distribution markets were concentrated in 6 conglomerates with a total of 90 % market share. In 1983, 90 % of entertainment and related markets was distributed over 50 corporations, this chart sho concentration in the fastest growing streaming markets:

Sources: The Wall Street Journal, The Daily Shot – 4/22/19

The advertising industry has consolidated into a two Internet behemoths – Google (Alphabet) has nearly 50 % market share and Facebook with 16 %:

Caption: Bloomberg, Zenith Media, The Wall Street Journal, The Daily Shot – 9/25/17

From 1997 to 2017, the number of publicly listed corporations has declined by 50 % overall.  Fewer corporations for job candidates translates into fewer corporations offering good paying jobs with high quality benefits. Plus, an analysis of corporate concentration in the five year period of 2007  to 2012  in the services sector, found that where corporations control markets and reduce the number of workers to support sales wages are likely to decline.

Sources: The Wall Street Journal, The Daily Shot – 6/27/17
Sources: David Autor, Professor oF Economics, MIT et al, The Wall Street Journal, The Daily Shot – 7/23/19

Gig Economy

The ‘gig economy’ of freelancing and independent contractors has ballooned to about one-third of our workforce or 56 million workers in 2016 according to the McKinsey Global Institute.  A survey by Gallup indicates the types of gig jobs; full-time gig job, part-time gig job, two part-time gig jobs, one traditional job and one gig, or where the first job is a gig and the second job is a traditional job for 36 % of the the total workforce:

Sources: Gallup, The Wall Street Journal, The Daily Shot – 9/5/19

Workers in the bottom 80 % in income have seen their wages actually decline over the past 10 years. So, it is no surprise middle class workers need to hold at least two jobs to maintain their standard of living.  The number of workers holding multiple jobs has skyrocketed in the past few years to the highest level since 2008 (note the recessions at the peaks of multiple jobs).

Sources: Deutsche Ban, The Wall Street Journal, The Daily Shot – 9/5/19

When major corporations experience a slowdown in sales, as has occurred in the last quarter, temporary and gig workers are the first to be laid off or see their contracts cut back along with rates.

The growth of ‘shared economy’ companies like Uber, Lyft, Lime, Airbnb, VRBO and many others have provided these gig workers new flexible income opportunities without the financial safety net of traditional employer jobs.  Gig economy workers often have limited or no access to worker’s compensation, unemployment insurance, 401K retirement plans, disability insurance or health insurance. Independent workers are required to pay both the worker and company portion of Social Security taxes and worker portion of Medicare each year on their income. In the Gig Economy, 33 % of our national workforce is not organized into a union or any bargaining unit. These contract workers are at the mercy of corporations or businesses that set the terms of a work contract, and if there is a problem they quickly find another contractor with no obligation to the contract worker. Uber, and Lyft dominate the ride sharing market, pushing out taxi cab firms, car companies and shuttle businesses – many with full time employees including benefits.  While the cost of rides maybe going down for the passenger, workers are seeing their wages held steady or reduced (Uber reduced driver share of fares by 20 % a year ago) with estimates of an hourly wage ranging between $8.55 to $10.00 per/hr by Stanford researcher, Stephen Zoepf. Drivers receive no compensation for gas costs, auto depreciation, car insurance, Medicare and Social Security – paying both personal and self employment, car repairs and or financial protections. Uber and Lyft receive fees ranging from 25% to 39 % of fare totals. Drivers do receive tips. Financial protection for gig economy workers is in the infant stage, where companies are holding off any meaningful changes until class action suits are brought against them. Last March, Uber settled a suit filed by drivers from California and Massachusetts to be declared employees. The suit settled for $20 million to the drivers, without changing their employment status which stays independent yet they will be given more transparency on driver deactivation and a chance to purchase shares in Uber’s  coming IPO.

Source: Marketwatch.com

Uber’s public stock offering demonstrates the gross inequality of income and wealth, as the drivers are providing the service, yet only a few drivers were offered stock options and the founders made billions of dollars from the public offering. The IPO is a good microcosm of how the Silicon Valley economy works rewarding a few while others providing the services or making products gain very little compensation in comparison.

Productivity

In 2018, Goldman Sachs estimates S & P 500 corporations will spend over $1 trillion in stock buybacks, and they forecast a similar figure for 2019.  None of these funds are being invested in the business to develop new technology, processes, training or systems to increase productivity or cut costs. Business executives are using stock buybacks to goose the price of their stock artificially adding to their compensation packages and the stock returns of shareholders most of which are in the top 1 % in income. Essentially, management is robbing workers of increases in future wages due to the nearsighted allocation of funds to take care of them themselves and pander to the wealthy.

When productivity is anemic, offering wage increases to workers cuts into profits.  Executives are compensated well based on hitting profit targets, so wage increases are not going to happen other than low inflation level 1 – 2 % increases. Over the past nineteen years manufacturing productivity has dropped from 8.0 % to 1.0 % this past year. 

Source: Bureau of Labor Statistics – 5/2/19

Most of our economy is services based, and productivity improvements in the services sector have been slow in coming compared to the goods based sector. For example in social assistance, education, and healthcare there has actually been a reduction in productivity by about 9% since the 1980s.  Plus, hiring has centered on our services sectors so productivity increases are likely to be limited into the future. Our fastest growing sectors in the economy are among the least productive.  Artificial intelligence and software services may change this trend, but the results are still to be seen.

Sources: Brookings Institution, The Wall Street Journal – 10/30/16

Job changes are the lowest in the least productive services sectors, indicating work to be done to automate or implement productivity systems in these services sectors.

Sources: The Brookings Institution, The Wall Street Journal – 10/30/16

Executive Pay

Today, executive compensation at S & P 500 corporations is on average 300 times the average pay of their workers! Senior management enjoys a combination of high salaries, executive healthcare, house low cost loans, stock options and bonuses for achieving earnings targets (hyped by stock buybacks).  In 1975 CEO pay to mean employee pay was 25:1, in 1995 112: 1 and in 2017 312:1.

Sources: Adam Grant, Professor at Wharton, Compustat, Bureau of Labor Statistics – 9/27/18

Note the ratio of CEO to worker pay soars in the 1990s as a result of the the de-regulation, trickle-down and stock buyback allowance policy of the Reagan – Bush administrations. Extreme executive compensation is taking wages from workers who would otherwise receive their fair share wage. Corporations have committed over $1 trillion to stock buybacks, according to Goldman Sachs in 2018 which only go to increase their stock compensation plans and the top 1 % who own most stocks.  That trillion dollars could be better allocated to increasing worker wages so the economy works for the 80 % in income.

Worker Compensation

One aspect of worker compensation that has increased by 12 % since 2006 is total worker compensation in the form of benefits.  While wages have increased by just 4 % in the same period.  Paid leave, health and other benefits have grown faster than wages, except in a few months. Wages as a percentage of total compensation have dropped from 70 % in 2006 to 68.3 % in 2017.

Sources: Labor Department, The Wall Street Journal – 6/9/19

The health component is somewhat misleading, while corporations have seen increased costs for medical coverage, they have reduced those costs by moving the majority of cost increases over to employees.  Corporations have done this by increasing the deductibles covered, reducing the number of plans and increasing premiums.  Worker households are caught in a cash squeeze by having to pay more for the health care coverage they had previously while corporations are holding their costs in line with inflation or slightly more.

Federal minimum wage laws are not keeping up even with inflation. Some states are making up the difference, by requiring higher minimum wages than the federal minimum wage (dark blue, blue and light blue).  Other states offer the same minimum wage (yellow) and yet in the South many states don’t have any (dark grey) wage minimum laws with others (light grey) below federal minimum wage rates like Georgia and Wyoming. Note many foreign car manufacturers have deployed plants in no minimum wage states like Tennessee, Alabama and South Carolina.

Sources: National Conference of State Legislators, Bloomberg, Quick Take – 2018

Job Market Automation

LinkedIn was designed for corporate recruiters with the features and services they wanted to speed the recruiting process.  The edge to recruiters is obvious in the design of the service. For example job seekers cannot have multiple resumes or experience sets styled toward different jobs.  Unless the candidate – user is adept at settings updates to profiles are immediately sent out to all people in their network.  Recruiters have dashboards with filtered candidate lists around search preferences and locations.  The majority of LinkedIn’s revenue is from the corporate recruiting market – candidates are promoted to meet the needs of recruiters.  The use of LinkedIn, Monster, Indeed and other Internet job search services create and sustain a powerful recruiting edge for corporations.  Businesses can identify hundreds of high quality resumes and candidates quickly from all over the world in just a few hours or less. 

Source: Zety.com – 4/7/19

Resume scanning programs (recruiting bots)  further refine the candidate list, filtering content by keywords, phrases or other text targets.  Candidates are left with the challenge of figuring out what keyword ‘hits’ the bot is looking for and entering them into their resume so their resume will have the most ‘hits’ and rise to the top of the list of 250 plus candidates. Job seeking workers try to promote their job skills and experience with workers via social media sites, but are caught between being too public in their search with their boss finding out, or tipping off other candidates to the job they are seeking. Employers use their vast recruiting power in salary negotiations (‘we can always go to plenty of other qualified candidates’) and even after hiring keep all those candidate resumes online to fill the position if the new worker does not meet expectations. Only executives get promoted by an executive recruiter paid by corporate HR departments for find the right executive for an open position, once again the executives get a powerful edge over all other workers.

HR departments often hide behind Internet screens, offer no phone contact numbers and provide few ways for candidates to follow up with key staff.  Often, the trend now is to interview a candidate and not get back to them after the interview if they aren’t interested – sending a de facto message of ‘if we were interested we would send you a message or call’. Without an inside contact, a candidate is left to be a cog in the corporate recruiting machine.

Unions

When the manufacturing sector had the majority of American jobs, union power in representing employees was paramount. Unions are still a key bargaining entity for public employees, nurses and teachers. U

Fifty years ago 33 % of all US workers were members of a union, by 2015 membership had declined to just 10 % – a greater than 66 % decline.  The decline was quite pronounced in ‘right to work’ states in many in inland regions and the South:

Source: NPR – 2/23/19 Percentage of Workers – in Unions 2014

Unions played a crucial role in working to raise wages, benefits and ensure that people worked in safe conditions. Due to automation and offshoring the manufacturing sector has lost millions of jobs, thus unions and their role will need to evolve to the new services technology based economy.

In summary, workers are faced with a daunting set of economic forces holding their wages down – diminished bargaining units, the juggernaut of automation, stock buybacks instead of wage increases, fewer jobs at merged corporations, temporary jobs in the gig economy, reduced productivity, exorbitant executive pay and corporate control of job markets.

To make our democracy work, labor needs take an equal place in our government, corporate and social structure with capital.  Democracy = capital + labor where capital and labor have an equal political, economic and societal position.

Next Steps:

Federal Reserve Bank of Labor – the Federal Reserve system of Governors represents the nation’s largest banks with the President appointing each Governor.  The system has worked well for the banking system to manage financial crisis’s  and interest rates.  The business community and national policy makers await a continuing stream of reports and the Beige book on the status of business throughout the 12 regions with baited breath. The Federal Reserve made up of 12 governors from regional banks, do not represent workers, or really have the tools, levers or policy role to solve labor problems. The Fed’s real mission is to ensure that banks stay viable and the financial system is sound. Yet, Congress charted the Fed with a dual role of keeping inflation in check and supporting full employment. Using the unemployment rate as an indicator of labor’s health is a mistake. The number does not include the millions of workers who have quit looking for work, those without the skills, or those possible workers who are suffering in the drug epidemic because of despair in part from lack of work. The miss match between the millions unemployed vs job openings is a huge challenge and needs to be undertaken by an organization lead by executives from labor focused organizations.

Source: The Wall Street Journal – October 18, 2018

Labor needs an equal organization to represent labor at the table with capital. The new organization would advocate, collect research, and make decisions to promote the welfare of workers, improve wages and lead efforts to fill U.S. job openings.  The mission of the Federal Reserve Bank of Labor (FRBL) is to ensure the United States has the most competitive, up to date skills in a labor force to fill all positions that US corporations have open. In short, the FRBL is in charge of the Labor Bank. The Federal Reserve of Labor would match the 12 regions of the Fed, would be composed of 12 Governors selected by the President from academia, corporate human resources, unions, government worker groups and worker rights group leaders to guide labor policy and programs for the country.  The Governors would meet monthly, setting minimum wage rates by state in the country, review the results of labor statistics, write a Lavender report on the status of labor in each region, with a focus on putting unemployed workers who are seeking work back into the labor force and target an increase in the national labor force participation rate.  The Governors establish interest rates and the size of allocated loans from a bank of $100 billion in labor development loans which are allocated to corporations, NGOs, Unions, universities and others to drive the development of the labor force. The Governors establish the Federal Minimum Severance rates by industry sector state, executive, manager and worker. A minimum severance rate is the proportion of salary received in severance for example 3 months salary.  The FRBL board drives research into issues like why so many workers are still unemployed even with the unemployment rate being at a 50 year low, and why wages have stagnated over the past 20 years. The FRBL is charged with upgrading our labor indicators to assist policymakers in what is really happening to our labor force by industry, job type, racial group. The Governors are chartered to establish a labor force set of goals that are updated by month to measure the results of labor force development, both qualitative and quantitative. Labor experts in the Fed would move to the FRBL, coordinate surveys and research with Census and Labor departments.  The Federal Bank of Labor Governors meet quarterly with the Fed Governors to coordinate capital and labor development plans and programs. Regional FRBL and Fed Governors meet monthly to coordinate regional programs.

In addition to building the FRBL these policy initiatives need to be implemented or similar:

  1. Place Workers on Boards – as Germany has so effectively setup, engaging management with required representation of workers on Boards, through Worker Councils or Unions if so voted by the majority of workers.
  2. End Outsourcing – corporations would pay 50 % tax on each job moved overseas making the move costly, encouraging corporations to move jobs to low cost or inland areas of the US, or innovation economic zones (special tax geographies) and to invest in worker training to receive training tax credits.
  3. End Low Cost H1-B Visas – the practice of importing inexpensive labor to drive down wages in US markets would be ended
  4. Focus Repatriated Funds on Labor – profits parked in banks overseas are invested in productivity programs, increasing wages of workers (not executives), reducing costs or innovation research. Stock buybacks or dividends would be prohibited
  5. End Stock buybacks – these funds are totally wasted, mislead investors on earnings reports and only serve to increase compensation for executives and shareholders. These funds are better allocated to increase worker wages or increase productivity so workers can receive higher wage increases
  6. Breakup Oligopolies – breakup market concentrations in key sectors: information technology, banks and financial services, health insurers, airlines, hospitals and clinics, entertainment, media and distribution and others as deemed in the public interest
  7. Balance Job Market Process– require companies over 100 employees to offer information on their website for contacts, phone numbers, job listings with identified contacts, and to let the candidate know the status of his consideration, and candidate introductions held monthly for F2F communication
  8. Balance Worker and Executive Pay– Empower Work Councils and labor representatives on Boards to approve all executive pay packages. Work Councils in industry sectors would meet and decide on executive to worker ratios of average salary to enable all companies to remain competitive within an industry yet require labor approval. End golden parachute packages by taxing 50 % of every dollar received above $1 million. Severance packages for workers would have to be in proportion to the highest executive package ie, executive receives a minimum of  X dollars in proportion to total salary then a worker receives the same portion with a minimum of 50 % of their yearly salary or the Federal Minimum Severance Rate whichever is greater
  9. Fund Worker Training related to Robots and Increase Wages – for each robot employed, the corporation would be required to offer training, skills development for the displaced worker to find a comparable job within the company or outside. Where automation software or technology is deployed 10 % of the realized cost benefit would be used to raise the wages of all workers in the company.  Tax deductions of up to a 50 % credit would be offered on the cost of training and development programs.  For individual workers, if they pay for career development training they would be able to deduct the full cost of their investment in themselves from their taxes.            
  10. Fund Education and Apprenticeship Programs – Representative Ro Khanna has introduced an idea to fund a 21st century Morrell (1862 Land Grant) Act that would grant to 50 rural and urban universities funds to establish a United States Technology Institute where students would gain technology skills needed in a technology based economy.  In addition, our country needs a stem winding apprenticeship program patterned after the German model to bring skills needed for today’s manufacturing without a college degree.  The program would be given the same prestige and recognition as college programs, companies would pay the same wages, benefits and compensation for skills achieved in this program as any college skills program.
  11. Pool Stock at Public Offering to Workers – all drivers at firms like Lyft and Uber, and workers at other new corporations should be able to receive compensation for their hard work in providing service or building a product. While, some key workers receive stock options with a strike price below the IPO price, we propose that all workers receive stock shares in a pool at the time of IPO, they can cash out or keep the stock then they receive a reward as well as founders (workers should not be forced to hold shares longer than management). Stock pool shares can be awarded based on service years, performance ratings or other recognition approach that is objective and fair to all workers. After all, isn’t it worth it to founders to build a workforce that is loyal and excited about the company, by letting go of even 10 % of their billion dollar stock reward or $100 million to workers?

Corporations Need To See Themselves As A Member of the Community

Photo: target.com

Amazon announced last Wednesday that they were pulling out of the deal to locate a second corporate headquarters in Queens, New York City.  The company pledged thousands of jobs, hiring of local contractors and to develop state of the art technology campus to revitalize the neighborhood.  To lure the huge firm to New York, Gov. Cuomo and New York Mayor de Blasio offered over $3 billion in tax and other incentives.  Local politicians were blindsided by the incentive package triggering grassroots opposition.  Amazon only allocated one person to work with local groups, who did not move into the area until the last few weeks.  Too little local focus too late.

Let’s look at the real issue, the company coming in from Seattle is an outsider.  To become a member of the community it needs to start with local leaders, interest groups and those possibly displaced by the move in.  Plus, the company executives had to realize there would be blow back about the incentives in a community that is concerned with affordable housing, healthcare and jobs for all levels of income not just high paid tech workers. The neighborhood leaders are going to be suspicious of an outsider to begin with, then add the huge corporate power of Amazon and the fight was on.  Local politicians saw this move in as an example of big corporations taking advantage of local communities to make more profits for itself at the cost of taxpayers.   The $3 billion dollars will not be spent on local programs, healthcare, job training, or affordable housing the community needs.

Executives should have realized they are joining a community, and needed to win over local leaders just as a resident might move into a new neighborhood and make friends with the neighbors first before building a monster home (changing the design to be acceptable).  Companies are used to being able to get their way, make profits at the cost of local communities and not worry about the politics.  Those days are over, the political tide has shifted from worshipping corporations to seeing them as having all the laws, rules of markets and labor go their way for the last 20 years.  Including, millions of dollars corporations spend on lobbyists in Washington to ensure they maintain their advantage over citizens in the halls of power.

Companies have to see that they must design their corporate policies, programs, and worker relationships to build the common good.  The common good can support companies taking initiative, innovating, and sharing their wealth, while still providing a good return to shareholders.  Executives that balance the needs of the community with their requirements to make reasonable profits will be the most successful, others will find arrogance will lead to fights, lawsuits and new laws eventually hitting the bottom line.

The Big Myth: Stock Buybacks Boost the Economy & Create Jobs

After the recent NY Times op-ed by Senators Bernie Sanders and Chuck Schumer to require corporations share profits with workers before stock repurchases, there has been a lot of confusion about how stock buybacks work and their impact on the economy.  Let’s clarify how share buy backs work first.

Corporate stock is bought and sold in open markets between a buyer and seller. On any one day the share price moves up or down depending on the demand for shares between a buyer and seller.  Corporate executives can manipulate the price of shares by reducing the pool of shares on any trading day, according to SEC rules up to 25 % of the daily volume and not executing a repurchase within the first 30 minutes of the open or the close.  If shares are taken off the market on any one trading day, posted to the books of the company those shares are effectively taken out of the market and if demand stays the same the price goes up.  Of course, the share price can go down as well, if demand drops on the repurchase day.

Stock buybacks cause misleading reports on earnings per share.  A simple example, if Gigantic HiTech has profits of $1 million for the quarter and 1 million shares are outstanding in the market, then the EPS is $1.00.  However, if the firm purchases 100,000 shares during the quarter and takes them off the open market the total number of outstanding shares is reduced to 900,000 artificially boosting EPS to $1.11 or 11 %.  The company has not increased profits during the period they have just reduced the number of shares outstanding and report the EPS figure in non GAAP reports.  GAAP reporting requires EPS be calculated on the number of outstanding shares before repurchase.

So, the dollars spent on stock share repurchases do not go into ‘jobs, the economy or re-invested’ the money is spent on goosing stock prices. The SEC in 1982 prior to the Safe Harbor policy that allows for stock repurchases called corporate stock repurchasing ‘stock price manipulation’.  From 1982 to today the policy allowed corporations to execute market stock purchases and not be held liable in shareholder lawsuits for price manipulation.  Plus, companies only had to report open market purchases each quarter voluntarily.  Effectively, the SEC gave companies the green light to drive stock prices anyway they wanted. Just because time has gone buy that does not change the manipulative character of the stock repurchase practice.

How big a problem is it?  Goldman Sachs estimates that $940 billion stock repurchases were made in 2018, and they continue to forecast a similar figure for 2019.  Major players in FAANG stocks repurchase billions of dollars of shares supporting stock prices.  Forbes estimates that Apple spent $100 billion in share repurchases in 2018.  CNBC calculated a year ago that Apple share prices were inflated by as much as 20 %.  Between 2015 through 2017 S & P companies spent 60 % of all profits on stock buybacks, according to Forbes.

So, where else could they be spending the money instead of driving stock prices up and increasing the compensation of executives?  On employee wages, but wage increases are not happening, interestingly since 1982 when the SEC Safe Harbor provision went into effect real wages have declined.

Source: Global Technical Analysis – 2/5/19

Real wages after inflation have continued to decline when allocated across all persons employed.  Bankrate surveyed 1,000 workers at all income levels last year finding only 27 % received raises. Corporations are not increasing wages even to keep up with inflation.

What about capital expenditures are they up?  No.  With all the pronouncements of executives that they are investing in their companies to increase innovation and productivity they are in fact not performing, here is the analysis of business investment as percent of GDP since 1998:

Sources: The Wall Street Journal, The Daily Shot – 11/9/18

Note the declining business investment line in the chart from 4.5 % of GDP in 1998 to 2.5 % in 2018, a 44 % reduction.

Maybe corporations are still increasing productivity anyway so they can afford to do stock repurchases?  No.  Productivity continues to stall.  The following chart shows total factor productivity (TFP) since 1948, the long term average is the green line from 1948 to 1971 versus 1972 to today red line today, plus growth in productivity is close to zero:

Sources: San Francisco Federal Reserve, Real Investment Advice – 1/16/19

Executives have made decisions about how to allocate profits that are not increasing productivity, raising wages, hiring workers or reducing prices.  Our economy and our workers are the losers while executives and the wealthy elite who own stocks profit from these short term decisions.

Next Steps:

Do executive decisions on profit allocation really affect workers and consumers?  Yes.

GM last year announced the closing of their Lordstown plant and the layoff of 15,000 workers due to a shift in consumer buying to trucks and misallocated investments in poor selling product lines.  Yet, since 2014 GM spent $13.9 billion in stock repurchases according to the Wolf Report.  GM could have spent that money on employee training, shifts in product development, the phased closing of plants and phased in building of new plants and likely would not have had to resort to massive employee layoffs.

Mylan announced 18 months ago a 584 % increase in the price of EpiPen’s used in life – death situations to counter act food allergy shock.  At the same time Mylan executives took care of themselves first with over $1 billion in stock repurchases to drive stock prices up. Analysts evaluated the product cost of goods and assembly for EpiPens and estimated it cost Mylan about $2 billion to manufacture, so the $1 billion could have gone toward reducing the cost of the EpiPen by 50 %.

In both examples corporate executives took care of themselves first, and their employees or patients second.  This profligate management of profits from customers and patients was not allowed prior to 1982. Corporate executives have a social and ethical responsibility to allocate funds in the balanced interests of the company, employees and the community

Executives are executing stock buybacks at the cost of sound financial management as well. The debt to cash ration of S & P 500 corporations is at 18 %, a lower level than at the 2008 recession. When the economy slows corporations will be squeezed between debt loads, operating costs and low cash reserves.

Sources: Wells Fargo Investment Institute, Factset – 2/14/19

Our economy continues to decline as GDP shrinks year over year, in part by trillions of dollars being wasted on stock repurchases instead of being invested in worker training, wages, capital equipment and research and development. A trillion dollars is 5.26 % of the U.S. economy shifting buy back dollars could have a huge impact. Corporate executives have magnified the problem by borrowing money at low interest rates to keep stock repurchases going even when profits lag. Today, corporate debt is 45 % of GDP at all time high inflating the economic bubble.

Sources: St. Louis Federal Reserve, Real Investment Advice – 2/21/18 (recessions in gray)

A reduction in corporate borrowing to inflate stock prices would go a long way toward putting the economy on a more solid business foundation. A major SEC policy shift ending stock buy backs would need to be phased in as a percentage over several years to allow markets to adjust, yet if we are to build an economy that works for all we need to end this misleading, damaging and costly practice.

Only 27 % of Workers Received Raises in Past Year

(Editor Note: Insight Bytes focus on key economic issues and solutions for all of us, on Thursdays we spotlight in more depth Solutions to issues we have identified. Fridays we focus on how to build the Common Good. Please right click on images to see them larger in a separate tab. Click on the Index Topic Name at the beginning of each post to see more posts on that topic on PC or Laptop.)

Photo: fortune.com

Last month, Bankrate.com completed a survey of 1,000 workers from all income levels across the U.S. and found that only 27 % of existing full time and part time workers had received wage increases. For all the recent news about wage inflation, from the worker perspective they just aren’t seeing the wage increases.  The wage inflation reported by government surveys is an average and does not take into account income levels.  The higher paid workers are getting the raises so the average moves up.

Sources: Bankrate.com, Marketwatch – 12/14/18

If a worker changed jobs then the pay raise figure rises by 5 %, though from our perspective that still seems low.  When  workers change jobs shouldn’t they be receiving a raise in this tight labor market?  This trend seems to indicate that wage leverage for workers is still quite low compared to the power businesses have over wage increases.  As we have noted in the past businesses enjoy leverage over workers by automating jobs, Internet access to hundreds of candidates nationwide and outsourcing of non-core functions.  Plus, executive power is increasingly concentrated with mergers and acquisitions cutting down the number of competitors that workers can chose to work.

Pew Research reports most pay raises going to the top 10 %,while non-supervisory and production workers barely received any wage increases.

Sources: U.S. Bureau of Labor Statistics, Pew Research – 8/7/18

Real wages (taking into account inflation) have risen 4.3 % since 2000 for the lower quarter in income. Yet, for the top 10 % wages have increased by 15.7 % or $2,112 per year. Some of the pressure employers feel is from increased health insurance costs and adding non-wage benefits to keep pace with competitors.  The reality is that wages are what workers have to use to make the majority of their payments for housing, food, and necessities.  Plus, wages for the top 10 % keep going up anyway, so why don’t workers get the same rate of wage increases?

Wage stagnation has been happening for years.  Since 1964 an analysis of wages for production and non – supervisory workers by Pew Research shows that today’s wages have just not kept up with inflation.

Source: U.S. Bureau of Labor Statistics, Pew Research – 8/7/18

Next Steps:

For all the discussion in the financial media about a wage inflation spiral the reality is that structurally workers in the lower 80 % income bracket are not getting their fair share of the economic pie. While, there have been federal laws proposed for limiting CEO pay Portland, Oregon has passed a law with a limit for executives at 150 % of worker pay or tax penalties are paid. Regulating pay in this way seems to be micro managing pay scales. However, we have a fundamental issue with pure capitalism of the American economy not delivering wealth to the vast majority of workers. In the 1970s, 1980s workers were receiving wage increases at 6 %, 7 % and sometimes 8 %.  After the Great Recession workers are just averaging 2 % to 2.5 % in wage increases.  Globalization caused outsourcing of manufacturing jobs held by the working class which hallowed out good paying lower education jobs. Millions of manufacturing job have been lost and not replaced.  Our economy is 70 % services based with highly educated knowledge workers receiving most of the benefits. Ending stock buybacks would certainly put more cash into corporate coffers to distribute to workers – but will executives raise wages?  Raising wages is an expense on the corporate ledger, and executives are paid to increase profits not reduce them. Executives are at the pinnacle of their power. Yet, as a society we have to fundamentally rethink how we make the economy work for all not just the few at the top of the corporate pyramid.

GM: Case Study to End Share Buy Backs

(Editor Note: Insight Bytes focus on key economic issues and solutions for all of us, on Thursdays we spotlight in more depth Solutions to issues we have identified. Fridays we focus on how to build the Common Good. Please right click on images to see them larger in a separate tab. Click on the Index Topic Name at the beginning of each post to see more posts on that topic on PC or Laptop.)

Image: GM Lordstown plant to be closed – gmauthority.com

Yesterday, GM announced a series of plant closings and layoffs of 15,000 workers in North America.  GM attributed the need to shift its focus to electric car development, trucks and SUVs that consumers were buying, as sedan sales are falling.  Actually, auto sales worldwide have been dropping for the past year.

Source: Bloomberg – 11/27/18

Jesse Colombo, analyst at Clarity Financial notes that while GM’s announcement focused on electric car development the plant shutdowns and layoffs really were driven by of slowing auto sales.  The auto market has been shifting rapidly with the development of driverless cars, ride sharing reducing the need to own a car, and urbanization causing policy makers to fund more public transit. The auto maker announced that it will end production of the Chevy Volt electric sedan with sales falling short of targets. GM has targeted gig economy drivers for ride sharing companies like Uber and Lyft by offering an on demand service for the Chevy Volt at $225 per week in Austin.  It is not clear what will happen with this on demand service marketing beta test with Volt production being halted.  GM has partnered with Lyft, and made a $500 million dollar investment in the ride sharing company 2 years ago.  Thus, GM has made some investments in key new markets and technologies, yet is behind in adjusting to sedan sales which fell by 11 % in third quarter.

At the same time the auto market is undergoing rapid change, GM executives have been taking care of themselves as a first priority.  Wolf Richter, editor of the Wolf Report blog reports that GM spent $13.9 billion in stock buy backs since 2014.

Sources: Wolf Richter, Wolfstreet.com, Y- Charts, Marketwatch – 11/27/18

GM stock purchases took shares off the market to reduce supply, while expecting stock demand would move the share price up.  However, as Richter notes GM share price has actually fallen 10 % in that four year period. So, much for boosting the price of shares to pad the executive stock compensation plan.  Instead of investing in new technologies, research, new plants, employee training, increasing wages and other key transition programs GM completely wasted $13.9 billion dollars.  Poor management judgement is now causing 15,000 workers to lose their jobs in the U.S. and Canada.  While we will not know over the last four years if good business investments would have prevented all the layoffs it is certain the economic damage to Midwest and Canadian communities could have been significantly mitigated.

Next Steps:

Goldman Sachs estimates that S & P 500 corporations will complete $1.0 trillion dollars in stock buybacks this year.  One trillion dollars will be wasted by U.S. corporations as productivity investments have lagged over the past 5 years, and average real wages have been stagnant for the 80 % in income since the Great Recession.  As the GM example demonstrates, besides hurting employee wages, making U.S. companies less competitive and inflating stock prices now workers are losing jobs due to executive mismanagement and myopia on stock price.

Prior to 1982, the Securities Act of 1934 held that stock buybacks were a form of ‘stock price manipulation’ and were not allowed by the SEC.  This policy was overturned by an E.F. Hutton executive, John Shad as SEC Chairman appointed by President Reagan.  He created a ‘safe harbor’ policy where corporations could purchase their own stock, only a certain times during the trading day, with disclosure quarterly and blackout periods prior to earnings reports. Corporations have used buy backs since then but stock buy backs took off in 2015 to $695 billion and almost doubled to $1 trillion for 2018.

We recommend an end to the stock buyback safe harbor provisions and a return to the pre-1982 policy, management in many corporations has lost their bearings on why the company exists – first priorities being workers, their families, customer communities, society and the nation not their own compensation plan. Making the corporation profitable and valuable to shareholders is a means to achieving our societal goals of a decent wage, quality housing, and the ability of families to support their children.  In October, we posted an analysis on how major corporations like Boeing, GE and American Airlines underfunded their pension plans while executing  billions of dollars in stock buy backs. Executives need to take responsibility for full funding of all pensions not wasting money on stock buy backs. It  is time with so many middle class and economic investment needs that corporations receive a direct SEC policy shift to end stock buy backs.

Truth Has Lost It’s Most Important Defender – POTUS

(Editor Note: Insight Bytes focus on key economic issues and solutions for all of us, on Thursdays we spotlight in more depth Solutions to issues we have identified. Fridays we focus on how to build the Common Good. Please right click on images to see them larger in a separate tab. Click on the Index Topic Name at the beginning of each post to see more posts on that topic on PC or Laptop.)

Image: spjla.org

Just before Thanksgiving, the FBI briefed the president on what actually happened to Washington Post columnist Jama Khosshoggi, that the Crown Prince of Saudi Arabia had to know and give the order for his murder in the Saudi Turkish Consulate.

Instead of defending the constitutional right of freedom of speech and the press and those that work so diligently at revealing and publishing the truth – POTUS defended the brutal killing of Khosshogi.  In a wholly greedy, self-serving, money grabbing (as Dickens would put it) way he talked about how important Saudi oil was to the U.S and for the kingdom to keep buying U.S. arms – killing thousands of innocent Yemeni people along the way.

The Truth lost its most important defender today.  We all lost out to geo politics and power in its most naked way.  The message being sent by our President is: “as long as you keep paying us and buying our stuff you can kill anybody you want and we will look the other way, including journalists”.  Historians will look back on this event as the low point for Truth in this country and the defense of the Press.

Our founding  fathers knew that a strong press was crucial to keep government in check from overreaching with its power over the people.  Jefferson and Madison believed in the American experiment that a well-informed citizenry will in the end make wise decisions about who and how they should be governed.

This president with all his demagoguery, scapegoating, bullying and no respect for the truth has taken the moral level of our country to a new low – in our eyes and the eyes of the world. He passed the 5,000 mark in falsehoods, misleading statements and just plain lies as recorded by the Washington Post this past September.  He has actually increased the number of falsehoods as he was campaigning for candidates he backed to an average of 32 per day from 8 per day up to his 601st day in office.

Journalists are under attack around the world, in the first 6 months of 2018 there has been 47 journalists killed worldwide almost the same number as for all of 2017.

Source: Statista – 2018

With nearly double the number of deaths through June 2018 journalists have a target on their backs.  Our POTUS did not help the situation by sending the message that dictators can kill journalists and there is no consequence.  When worldwide we a renewed focus on the truth, instead we are giving a green light to the creation of lie after lie.

Our national leaders need to be defending journalists throughout the world and in the U.S in particular because they are the investigators, researchers and messengers of truth.  Truth is the fresh air of democracy.  Our democracy cannot survive as a representative government when the truth and those who find and express the truth are under attack.

Congress and our national leaders need to take action to show the Saudi government that we want a relationship with the nation, not their present brutal leader, and the Saudi people.  We must defend the Truth, Liberty and Freedom wherever it is under attack in the world.

Ignorance Over the Common Good? Blind Governance is Dangerous!

(Editor Note: Insight Bytes focus on key economic issues and solutions for all of us, on Thursdays we spotlight in more depth Solutions to issues we have identified. Fridays we focus on how to build the Common Good. Please right click on images to see them larger in a separate tab. Click on the Index Topic Name at the beginning of each post to see more posts on that topic on PC or Laptop.)

Photo: washingtonpost.com

Something’s not right.  My grandson is not playing soccer and POTUS nominates a coal lobbyist to lead the EPA?

We all feel it.  Right in the pit of our stomach, here in Northern California, while we are being hurt by the effects climate change.  While not completely to blame, the Butte County fire storm was compounded by global greenhouse gas effects and as a possible cause a spark from an electricity wire.

Something is not right.  As we experience in the Bay Area our eighth day of unhealthy air from the Camp Fire in the Sierra foothills. Those with lung diseases are shut away in their homes, people are not going out. Businesses that depend on foot traffic are seeing losses of 10 – 20 %. Football games like the Big Game, between Stanford and California are being rescheduled to December 1st – the first time that game has been rescheduled since the assassination of President Kennedy in 1963. Local universities and colleges are closed for classes: Stanford, University of California, Santa Clara University, De Anza College and many secondary school districts.

Yet, our President nominates a coal lobbyist to head up EPA?  The mission is in the name Environment Protection Agency, Not Environmental Destruction Agency.  Coal is a fossil fuel contributing to massive amounts of gas emissions warming our earth. Heating the planet every day.  Here is the path we are on toward 1.5  degrees C and eventual extinction of the human race:

Sources: The Wall Street Journal, The Daily Shot – 11/15/18

My grandson’s soccer game was cancelled last Saturday and will be cancelled again tomorrow due to unhealthy smoke in the air.  Is this the new normal?  We don’t have to support this heresy destroying our environment, our families and our lives anymore!

Why in the world is a coal lobbyist heading up EPA?  Something is very wrong with this picture. Maybe the House Progressive Caucus has it right to camp out at Nancy Pelosi’s office the other day demanding climate change legislation.

We have accepted the status quo too long on climate change.  Industry priorities must come second to clean air, water and the planet period.

The sheer ignorance, lack of wisdom and understanding of science is killing our people, making life a struggle for thousands, shortening life expectancies and reducing the sales of legitimate businesses – all so coal companies that should be shifting their business from fossil fuels to renewables have not made the transition.  We should not be paying for coal company executive mistakes.

We need to be asking at what cost do we keep coal? It is clear the cost is too great.  We need to quit accepting the platitude  ‘it saves jobs’ and replace it with we want ‘live saving jobs’ for all. We can’t accept this environmental spiral downward for the ourselves and our planet. We must return to the Paris Climate Change agreement, renew investments in renewables, focus on clean jobs training and development.  Get on with it now, future generations and our planet are depending on us to make sound decisions and not accept blind governance one day longer.

Memo To CEOs: Invest in the Company, Not Yourself

(Editor Note: Insight Bytes focus on key economic issues and solutions for all of us, on Thursdays we spotlight in more depth Solutions to issues we have identified. Fridays we focus on how to build the Common Good. Please right click on images to see them larger in a separate tab. Click on the Index Topic Name at the beginning of each post to see more posts on that topic on PC or Laptop.)

Photo: wikipedia.org

To: CEOs – S & P – 500

From: The Progressive Ensign

Subject: Stock Buybacks Are Out of Control

Date: November 5, 2018

Congratulations, this past quarter you knocked earnings out of the park, profits were higher in particular, though revenues lower and you did well by raising stock prices to new highs in September via stock buybacks.

Source: Standard & Poors – 11/4/18

Ok, you did well on stock compensation too with soaring stock prices.  You can take that trip to Cancun, buy a boat and a villa for extended stays.  You have worked hard, your team has gone all out to make your companies successful, and worked harder.  Remember, while you were traveling and making decisions on sales, financing, product development and marketing they are actually designing, building, shipping, selling and supporting your products and services.

Sources: The Labor Department, The Wall Street Journal, The Daily Shot – 11/5/18

Next, you have not been making the investments in capital equipment , R & D and innovation to move companies along and be prepared for more overseas competition or increase productivity. Thanks for moving wages higher for less than high school educated workers recently they still aren’t enough to keep up with inflation though. If you can increase productivity we can give workers raises without it hitting the bottom line an increasing cost, and earning would be stabilized or even get better. You wouldn’t need to use financial gimmicks like stock buy backs to take stock off the market, and goose the price so earnings look better on a per share basis.  Between 2010 and 2017 S & P companies spent 51 % of their operating earnings on stock buy backs.  That’s money just hyping stock nothing else.  Note that business investment is continuing to decline with lower highs and investments flat since 1998.

Sources: The Wall Street Journal, The Daily Shot – 11/5/18

Your joy ride on $1 trillion of stock buybacks needs to end.  We want to see a plan by the end of the month on how you will use that $1 trillion dollars in meaningful long term ways such as raising wages, job training, purchasing new equipment and systems, and innovating new products.  You are basically taking away the future of your workers and the country for your short term gain. Show by quarter how you will implement the plan and get your businesses actually growing again (in real dollars not financial gimmicks), workers supporting their families in sustainable lifestyle and making America stronger.

P.S. By the way, it is time to end your constant borrowing, rates are going up, and you spent most of the money on stock buybacks or other goodies not investing in the company.  You are mortgaging the future of the business by taking on a record amount of debt.  Please submit a plan for retiring this debt as part of your financial plan for investing in the company by the end of the month.

P.P.S.  For those of you ( a minority) who are not doing stock buybacks, thank you, and you who are spending on capex and raising wages thanks a lot!  Just submit a set of graphs showing your investments so we can show the other CEOs how it is done – as a best practice.

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