Making Corporate Crime Easier

It never ceases to amaze me. Maybe I--and you--should get used to it. Maybe i'm naive. But, you gotta love the gall...The Committee on Capiutal Markets Regulation has recommended that it be "harder for companies to be indicted by the government or sued by private lawyers, and urges policies to keep the Securities and Exchange Commission from adopting rules that impose high costs on business," according to a report today in The New York Times (for reasons I won't bore you with, I can't link and format certain things today).

The Times' article tells us more: "Federal indictments of corporations should occur only 'in exceptional circumstances of pervasive culpability throughout all offices and ranks,' the report stated." Hmmm...and who will decide what is pervasive?

The full report isn't to be released until today but this has a very deja vu feeling to it. You may remember that back when the de-regulation rage started, the whole idea of cost-benefit analysis was heavily promoted to decide whether, for example, environmental regulations made sense.

All this smells pretty bad. At a time when the concern over corporate malfesance and abusive power is on the rise, this Committee--chaired by, surprise, Glenn Hubbard, former Bush Administration Council of Economic Advisors chair (and wow didn't he do right by the average American) and John Thornton, who was president of Goldman Sachs and now is chair of the inside-the-Beltway Brookings Institution--is trying to give corporate power an even looser leash.

BW on Chinese Sweatshops

    Well, yes, thanks--I had a grand little vacation. Thanks to Stef for covering the blog for me. I hope everyone treated her nicely...

    I am still wading through the various stuff floating around in email and on my desk but this caught my eye: just as I was thinking of canceling my Business Week subscription (it's gotten pretty thin, for my taste, and the higher-ups went and dropped some good friends from the staff including labor reporter Aaron Bernstein), there's a cover story entitled "Secrets, Lies, and Sweatshops: How Chinese suppliers hide the truth from U.S. companies."

    The thesis of the story is that Chinese factories essentially keep two sets of books to mislead the outside auditors who look into sweatshop conditions.

For more than a decade, major American retailers and name brands have answered accusations that they exploit "sweatshop" labor with elaborate codes of conduct and on-site monitoring. But in China many factories have just gotten better at concealing abuses. Internal industry documents reviewed by BusinessWeek reveal that numerous Chinese factories keep double sets of books to fool auditors and distribute scripts for employees to recite if they are questioned. And a new breed of Chinese consultant has sprung up to assist companies like Beifa in evading audits.

    The article does a good job of giving background on the scope of the problem:

CHINESE EXPORT manufacturing is rife with tales of deception. The largest single source of American imports, China's factories this year are expected to ship goods to the U.S. worth $280 billion. American companies continually demand lower prices from their Chinese suppliers, allowing American consumers to enjoy inexpensive clothes, sneakers, and electronics. But factory managers in China complain in interviews that U.S. price pressure creates a powerful incentive to cheat on labor standards that American companies promote as a badge of responsible capitalism. These standards generally incorporate the official minimum wage, which is set by local or provincial governments and ranges from $45 to $101 a month. American companies also typically say they hew to the government-mandated workweek of 40 to 44 hours, beyond which higher overtime pay is required. These figures can be misleading, however, as the Beijing government has had only limited success in pushing local authorities to enforce Chinese labor laws. That's another reason abuses persist and factory oversight frequently fails.

Some American companies now concede that the cheating is far more pervasive than they had imagined. "We've come to realize that, while monitoring is crucial to measuring the performance of our suppliers, it doesn't per se lead to sustainable improvements," says Hannah Jones, Nike Inc.'s (NKE ) vice-president for corporate responsibility. "We still have the same core problems."

    And...

The problems in China aren't limited to garment factories, where labor activists have documented sweatshop conditions since the early 1990s. Widespread violations of Chinese labor laws are also surfacing in factories supplying everything from furniture and household appliances to electronics and computers. Hewlett-Packard, (HPQ ) Dell (DELL ), and other companies that rely heavily on contractors in China to supply notebook PCs, digital cameras, and handheld devices have formed an industry alliance to combat the abuses.

A compliance manager for a major multinational company who has overseen many factory audits says that the percentage of Chinese suppliers caught submitting false payroll records has risen from 46% to 75% in the past four years. This manager, who requested anonymity, estimates that only 20% of Chinese suppliers comply with wage rules, while just 5% obey hour limitations.

    Now, I have to say off the bat: I don't believe for a minute that U.S. companies really are fooled by what Chinese suppliers do. But, more important, let's remember the context here: the labor standard says that a facility has to comply with the official minimum wage...which is somewhere between $45 to $101 PER MONTH for a 40-44 hour work week (actually, the more common workweek, as the article points out, is 60-100 hours).

    So, even if the local facilities were adhering to the rules, U.S. companies are still going to realize huge profits relative to wages here--and, therein, lies the real challenge. I'm all for eliminating "sweatshops" but let's be truly clear that the global wage machine--that would be, the machine that drives down wages--will function just fine if it plays by the rules.

India Won't Go Gently Down the Walmart Road

There's already resistance to Walmart's plan to open hundreds of stores in India. Walmart's deal to partner with the Indian company Bharti is being called into question as an attempt to skirt the law.

As per the agreement between the two corporate giants, Bharti would manage the front-end of the business, while Walmart would take care of the supply chain, logistics and other back-end operations.

The Left parties have even asked trade unions to launch a nationwide action against the entry of Walmart and other multinational retailers into the domestic market.

"FDI in retail trade in not permissible under the existing policy on foreign investment in India. The Walmart's franchisee agreement with Bharti Enterprises is an attempt to circumvent existing policy regulations to gain a foothold in the Indian market," CPI(M) said. - IBN

Meanwhile the company is being called out on its fake astroturf blog, "Working Families for Walmart" which is written not by working families but by the staff of the Edelman PR firm. But unfortunately for Edelman, they forgot to register the domain, and Walmart Watch has snatched it up.

Walmart to Enter India Market

While Walmart's sales fell short of expectations this holiday weekend, and its website crashed on "Black Friday," the company announced a new deal today that will expand its empire into India. Partnering with the Bharti Group, India's top telecommunications company, the joint-venture plans to open "several hundred" stores, beginning next summer. The partnership is necessary to skirt India's rules which bar foreign retail chains, except for "single-brand specialty stores."

Mittal said it would take several months to set up the first stores, adding that the deal was in "compliance with existing (government foreign investment) rules."

The tie-up between the world's largest retailer and Bharti is the first direct assault on India's 15 million small shops, the highest density of retail outlets in the world and with annual turnover of 300 billion dollars which is expected to double by 2015, according to consultants PriceWaterhouseCoopers. - AFP

So, there are a few thousand more downtowns that can expect to be wiped out, and a few million more small businesses that can expect to close.

~Stef

More on the New Economic Populists

More discussion of the divisions between the Clintonite "free-trade" Democrats and the incoming populists in today's NY Times.  I just hope they come up with a better name for their group than "Shared Prosperity."  That sounds like a team on Survivor.

Justice for Janitors

Congratulations to the Houston janitors, who won higher pay, increased hours and health insurance after a six-week strike.  As Jordan Borab's analysis of the victory at firedoglake concludes, "[e]very city can be Houston. And every election can be 2006."

~Stef

Why the Democrats Will Save Us

Because they must.

What is the alternative?  It's common wisdom now that we've just about reached the tipping point in terms of globabl warming. While the Dick Cheneys of the world seem to believe that their obligation to their descendants is met by leaving them a large inheritance of ill-gotten funds, most Democrats understand that future generations are owed a habitable planet. We have ten years or less to reverse the trend, not enough time for third parties to build enough power to step into the breach. We must rely on the new Democratic majority to assert some common sense and address the urgency of the problem. We must insist they do it.

Already, energy firms are adjusting their attitudes:

"We have to deal with greenhouse gases," John Hofmeister, president of Shell Oil Co., said in a recent speech at the National Press Club. "From Shell's point of view, the debate is over. When 98 percent of scientists agree, who is Shell to say, 'Let's debate the science'?"

[snip]  Exxon Mobil Corp., the highest-profile corporate skeptic about global warming, said in September that it was considering ending its funding of a think tank that has sought to cast doubts on climate change. And on Nov. 2, the company announced that it will contribute more than $1.25 million to a European Union study on how to store carbon dioxide in natural gas fields in the Norwegian North Sea, Algeria and Germany.

These changes come as Democratic leaders prepare to take over key committees on Capitol Hill. Sen. Barbara Boxer (Calif.), who calls global warming "the greatest challenge of our generation," will take the place of Sen. James M. Inhofe (R-Okla.) as chairman of the Senate Environment and Public Works Committee. Inhofe refers to global warming as a "hoax." - Washington Post

Let's hope it's not too little too late.

~Stef

Democrats Will Reject Colombia & Peru Deals

Sander Levin says Congressional Democrats have sent a letter to the president in opposition to new trade deals with Colombia and Peru.

The congressman said labour standards were at the “core” of Democrats’ objections - a sign that the influence of the labour movement within the party has been strengthened by the election result, which saw a notable rise in economic populism among voters.

Thea Lee, policy director of the AFL-CIO union, said, “Colombia is a very emotive issue for people in the labour movement”, adding that the country was regarded as the world’s deadliest for union organisers. More than 1,200 deaths of activists and rank-and-file members have been recorded in recent years. - Financial Times

Pending trade deals with Korea and Malaysia are also on the line, as well as Bush's "fast-track authority," which will expire and be up for a vote this summer.

"We have to protect American jobs. We have to protect American manufacturers. And I don't see enough pro-American attitude," said Democratic Rep. Charles Rangel of New York, who will be chairman next year of the House panel that oversees trade. - Plain Dealer

Bush signed the Colombian trade deal this week, though it has not yet come before Congress for approval.

~Stef

Striking Steelworkers Fight Back on YouTube

The United Steelworkers hopes to go viral with this new internet ad on YouTube, intended to demonstrate the possible dangers of tires made by replacement workers.  The video is part of a new website the union has launched to inform investors about Goodyear Tires. 15,000 USW workers at 16 plants have been on strike since October 5, to protest plant closings and safeguard jobs and pensions. The jobs are being filled by non-union and temporary workers, plus management. Goodyear claims all replacement workers are qualified.

Meanwhile, some Midwest retailers are already feeling a trickle-down effect from the strikes and lay-offs. Wall Street analysts are predicting tough times for Rust Belt merchants this holiday season.

In Akron, the unemployment rate is 5.4 percent. It's 5 percent in Cleveland, where steel and other manufacturing jobs have been lost. Detroit has the nation's highest unemployment rate, 7 percent.

More than half of Dearborn, Mich.-based Ford Motor Co.'s 35,000 to 40,000 white- and blue-collar layoffs are in the Midwest, and that will be especially challenging to stores such as Kohl's Corp. that have a heavy presence in the region, Goldman Sachs points out in a report to investors.

Higher-end retailers and department stores stand to hurt the most, the analysts wrote in their report, while discounters might do better. - AP

But cheer up! Dick Cheney's in Baghdad! Happy Thanksgiving.

~Stef

House Democrats to Roll Out Series of Ethics Reforms

This bodes well, if it works. The Washington Post reports today that House Democrats will introduce a series of votes on ethics reforms:

But they will do it with a twist: Instead of forwarding one big bill, Democrats will put together an ethics package on the House floor piece by piece, allowing incoming freshmen to take charge of high-profile issues and lengthening the time spent on the debate. The approach will ensure that each proposal -- including banning gifts, meals and travel from lobbyists as well as imposing new controls on the budget deficit -- is debated on its own and receives its own vote. That should garner far more media attention for the bill's components before a final vote on the entire package.

Additionally, Nancy Pelosi plans to establish a new work ethic by keeping the House in session through January, rather than heeding the tradition that has members attending a ceremonial first week after the holidays, then adjourning for the rest of the month. As Mark Sandlow of the SF Chronicle posits:

Pelosi's team apparently figures there's no reason to allow President Bush to set the agenda in January by leaking bits of his speech. Instead the Democratic Congress will immediately plunge into its lengthy to-do list, starting with an ethics reform package, and perhaps have some bills on Bush's desk by the time the State of the Union is ready for delivery.

And to top it off,the NY Times reports that Pelosi will evict Denny "Mark Foley Who?" Hastert from his prized office suite.

In something of a break with recent tradition, the incoming Democratic speaker, Nancy Pelosi of California, is planning to expropriate the second-floor suite of offices now occupied by the current speaker, J. Dennis Hastert — a handful of rooms providing a spectacular view of the Mall.

That space has been in Republican hands for 50 years or so, even when Democrats were in charge. In fact, the main offices are so strongly associated with Republicans that they were officially designated the Robert H. Michel Rooms by the House in 1995 in honor of the popular former Republican leader.

You go, girl!  And I look forward to seeing John Conyers holding hearings in regular conference rooms from here on out, instead of the basement offices where he's been relegated by a belligerant Republican majority.

~Stef