Bailouts and the corporate form

Some things have really been bothering me about the auto bailout talk vis-a-vis the financial sector bailout, and especially the recent Citigroup bailout.  

First, I agree with Rachel Maddow that something seems off when the (white collar) financial sector can get a quick bailout with few strings attached with no blame placed on employees and CEOs compensation structure (or any suggestion that it be revamped to take the federal funds), but in the case of the auto manufacturing sector, the quick blame is placed on the unionized workers, with their outrageous expectation for health care and decent wages.  These worker “demands” are unreasonably passed on to consumers in the form of higher vehicle prices, according to conservatives like Cal Thomas, and that’s the real reason US car manufacturer’s cannot compete. Meanwhile, CEOs still rake in overly inflated incomes, benefits, stock options, and other perks instead of lowering vehicle prices so as to not “pass on” health care costs to the consumer.  Be sure to check out this excellent analysis of the cost-per-employee figures being used to blame union labor.  

Class warfare, indeed.  I don’t mind criticizing compensation structure, but how is unionized labor being blamed for the failure of the auto industry?  What about the auto CEOs?  And finance CEOs compensation is irrelevant to their bailout?  This is akin to blaming welfare to the poor for the economic strain on the middle class, while the average compensation for an S & P 500 CEO in 2007 is projected to have been $14.2 million; in 2006 the average Fortune 500 CEO received $10.8 million, which is 364 times the average worker.  In 2007, the Ford CEO’s total compensation was $21,670,674, and GM’s CEO’s was $14,415,914.  The average of auto worker’s wages (not the pay of the average worker, but the average of workers’ pay) is $20.53/hour, or $42, 702/year–just below the median income.  And it’s the unions’ fault?

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Second, why is the troubled banks seen as economically “necessary” and an industry with $1.1 direct workers (in 2005) and several million related workers is not?  Auto manufacturing, like the manufacturing sector of time past, has been a way for lower-skilled, less educated workers to have jobs with security, with decent wages, and health care.  Sure, they can get new jobs, but what will these new jobs look like?In our deindustrialized economy, when these jobs go, they aren’t going to be replaced with like jobs.  The loss of these jobs will undoubtedly create new economic hardships for a slew of families.  When we start talking about “necessary” industries, I want to ask, Economically necessary for who, and why?  

Third, and this is really what’s been getting me, I am absolutely floored that when corporations are coming to the government for help in a state of desperation and vulnerability, that we are not adequately using this leverage to make demands for corporate change.  We have the position of power here.  These CEOs don’t want their companies to go down–think of their company stock and stock options that would become valueless!  Why aren’t we using it to get the regulations and accountability we’ve desired of them?  


I just used the excellent film, The Corporation (watch it in installments here), in my sociology classes this week in doing the Politics and the Economy chapter, so after watching it again–3 times this week–it’s been invading my thoughts.  Underlying the definition of the modern corporation is that it’s only legal obligation is to the shareholders, and that under a ridiculous usage of the 14th Amendment, the corporation itself is a person, meaning that no actual human being is held responsible for the actions of the corporation.  This was not always so.  Originally, corporations existed for the purpose of the public good.  Now, they do not have any commitment to the community or tho their employees; they are legally required to act in the best interests of their shareholders in the pursuit of short-term profit (which, not surprisingly, is tied to a huge chunk of CEOs’ compensation).   Corporations and their activities are not held accountable to the democratic process, which is supposed to keep institutional power in check. Well, until now.  To me, our economic crisis ought to be an opportunity to evaluate the way we do business (literally) in the United States, and to make steps that will hold corporations ultimately accountable to the interests of the public good (environmental, social welfare, whatever), not the interests of pure profit.

Published in: on December 4, 2008 at 8:07 pm  Comments (3)  

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3 CommentsLeave a comment

  1. I really liked your analysis. This certainly does seem like it should be an opportunity to reform the corporate world. Unfortunately, most of those in power like things the way that they are…

    I did want to point out one small problem – the
    you cite concerning auto worker’s wages itself says that they are 11% higher than mean, and you don’t give a source for ‘median’ income. Just curious about the numbers!

  2. Thanks for the comment! I’ve used the median income stat before, so I guess I was just lazy: Census data, via the Tax Foundation.

  3. […] workers’ wages be reduced to the level of non-unionized workers at foreign auto plants. Now I’ve written this before, but I’m going to say it again: there were no such stipulations given to the financial […]

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