Notes on Economics - Corporations
Per reader suggestion, from the unwritten Sense note folder I have gathered some thoughts and observations on economic matters, divided into nine subcategories, one of which I will publish every day or so. Remember, these are not developed or researched ideas, just notes for something to consider developing.
The Federal Pension Guaranty Fund is actually welfare for incompetently managed corporations and their shareholders, the cost of which, when it tumbles, will fall on ordinary taxpayers, including the workers. Workers who accept 401k plans instead of guaranteed benefit plans better negotiate higher wages for giving up the guarantee, and better put some of that extra pay aside to cover future taxes.
An established company with high rated products and services should have no problem maintaining it's employee pension plan in the face of low price competition.
Proxy voting in corporate elections seems unamerican. Imagine if we allowed incumbent candidates to use taxpayer money to solicit voter proxies for re-election.
Corporate officers are not the only ones who should be held accountable for corporate failures. The Boards of Directors should also be held to task. Boards are usually dominated by insiders with interlocking connections, and padded by a few look good political appointees and civic arts types. Not welcome to membership, but definitely needed, are consumer and labor representatives.
At least some of the money being used for enabling corporate financial giants to survive and consolidate their dominance should have been given to local community banks to loan to small businesses in their own communities to help those businesses with payrolls, inventory financing and debt servicing.
posted by Tom Blake | 8:04 AM
3 Comments:
Tom,
This reads like a rant. The Federal Pension Guaranty Fund is as sacred as the FDIC to those of us who still have defined benefit pensions. You could say the FDIC is corporate welfare for banks, but you probably wouldn't because I suppose you have money in the bank. And, of course, you don't have a defined benefit pension because you never worked for a corporation.
The second sentence of your first paragraph is a non-sequitor. What has the Federal Pension Guaranty Fund got to do with corporations jetisoning defined benefit pensions in favor of 401K plans?
You talk about workers accepting 401K plans as if they had a choice. I worked for two crporations that changed from defined benefit to defined contribution plans, Honeywell and Motorola. They didn't ask me how I thought about it. At Honeywell I was required to tell my 80 employees about the change. Of course I was directed to put a positive slant on it.
I was nervous as I began my speech and pretty soon someone stood up and shouted that the company failed him and his wife. They had counted on retiring in a few years, but now would not be able to do that. They had been loyal employees but the company did not return that loyalty. Then he walked out.
All eyes were on me, and I lost my nervousness. I said I understand very well how he feels. He and I are both in our fifties and this decision hits our age group the hardest. I feel the same way he does. But I know this:
Corporate America is changing. Global competition and global markets force changes on us. Over half our market is overseas. Thecompany must make changes to stay viable in this situation. And some of us are going to be hurt. Our hope is that the company will remain competitive so that we all have jobs in the future.
So I did put a positive spin the the situation as my bosses asked. I believed what I said then and I believe it now. Three years later I left Honeywell (when I say Honeywell I mean the mainframe computer business of Honeywell, one of the original seven dwarfs) and went to Motorola where the same thing happened. I was not asked to address my 120 employees. It was all done by memo and HR forms.
So Jan and I between us have three defined benefit pensions. The amount we get from those pensions is much less than what we get from social security. Nevertheless, I am glad the federal program is in place to protect those funds as every little bit helps.
Furthermore, it will become less and less of a burden on the federal budget. In 50 years no one will know what a defined benefit pension is.
I don't agree with your other points too. But I'll leave them for another day. Your attack on the Federal Pension Guaranty Fund hit me hard.
John from Phoenix
Whoa, take it easy John. Let me explain. This post was supposed to be the start of a series publishing my notes of possible ideas to explore. Unfortunately, I left out the introductory paragraph, so I have now edited the piece to add it back.
The note on the FPGF is misleading because it is incomplete. I think the fund is an excellent idea and a necessity. The problem is that the fund appears to be underfunded, due to failure to adequately assess premiums on the companies whose pension funds are being guaranteed. The FDIC as far as I know is adequately funded because it charges adequate premiums. Allowing corporations to pay inadequate premiums to the FPGF was what I meant by corporate welfare.
The personal experiences you related confirm that employees prefer a guaranteed pension. Your argument about global competitiveness echos the corporate desire for 401k plans instead of guaranteed benefits. When 401k plans took the place of guarantees, there were no longer any incoming contributions to the guaranteed plan, no younger worker payments to help keep the guarantee solvent for older workers entering retirement. Companies could soothe concerns in that regard by pointing to the FPGF.
My point about workers negotiating higher wages as a tradeoff for giving up a guaranteed pension was part of my continuing advocacy for worker unionization and collective bargaining.
With the fourth bailout of AIG, a second pitfall of monopoly is demonstrated. Progressives, starting with Teddy Roosevelt, worked to break up monopolies, to prevent them from taking all available profits and stifling competition. Now we see that another danger is that a failed monopoly drags down the whole economy. Monopolies have to be banned not just because of the unfairness of their success but also because of the danger of their failure.
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