Why Are Federal Execs Getting Bonuses ?

(Image was found at website Slate.com.)

As you must know by now, the "sequester" budget cuts are kicking in. These forced federal budget cuts affect every government agency -- and it will result in not only a cut in services for the Americans who depend on those agencies, but also will result in furloughs for many federal workers (which equals a pay cut). Well, nearly all federal workers.

There is a class of federal employee that is immune to these cuts, and actually will be getting huge bonuses for their job performance. They are the Senior Executive Service. These employees, comprising about 1% of federal workers, are the top executives (except those appointed agency heads) of government agencies. Last year, these government executives received 6300 cash bonuses that totaled about $78 million dollars (for an average bonus of about $12,381 each).

These are not low-paid workers either. Their salaries are far more than most government workers get -- ranging from $119,000 to $179,000 a year (more than two to three times the median wage of workers in the United States). There are those who say the bonuses are necessary, to keep these "best and brightest" from leaving to find better jobs in the private sector (the same argument used to overpay corporate CEOs). I disagree. These people are being paid far more than most Americans, and if they want to leave those jobs we should let them. There are many competent people who would be happy to do those jobs in their place.

I don't have any problem with those bonuses in good economic times, but these are not good economic times. If other government agency workers are getting furloughed (pay cuts), the least these executives could do is to forgo those bonuses. The sequester cuts should be felt across the board, and no one working for the government should be immune -- and it should be understood that no one gets a bonus. It's bad enough that those in Congress didn't get pay cuts due to the sequester (or at least voluntarily give a portion of their salaries back), but at least they aren't getting bonuses.

And Republicans can't blame these scheduled bonuses on President Obama. These bonuses are given because Congress, back in 1978, dictated they should be given. But in the face of the new Republican-imposed austerity, the bonuses should be discontinued (at least for now).

Fortunately, there are some in Congress who agree. Senator Claire McCaskill (D-Missouri), along with Senator Tom Coburn (R-Oklahoma) and Senator Ron Johnson (R-Wisconsin), is introducing a bill to stop the bonuses from being given for as long as the sequester is in effect. McCaskill said, "The idea that some of the highest paid federal government employees could be getting bonuses while others are being furloughed is outrageous."

I agree with McCaskill. It is outrageous, and it should not happen.

More Indefensible Executive Bonuses

While I am certain that the root cause of the current Great Recession was the vast gap of wealth and income between the richest 1-2% of Americans and the bottom 98-99% of Americans, that was not the trigger that started the economy's downhill slide. The trigger was the financial mismanagement on Wall Street -- especially concerning the bundling and sale of unsustainable home mortgages.

The Republicans in Congress have been trying to protect their buddies (and campaign contributors) in the giant Wall Street Banks by placing all of the blame for the economy's crash on Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation). That's just hogwash. The giant Wall Street banks played a big part in cratering the U.S. economy, and they should have been held responsible for it (but sadly, they weren't).

But while Fannie Mae and Freddie Mac weren't the sole causes of the economy's crash, neither were they innocent bystanders. They also played a big role in the sale of homes to people who clearly could not afford them (and the bundling and resale of those mortgages), and need to shoulder their own part of the blame for throwing this nation into recession.

Do Oil Companies Have Any Shame ?

It's only been about a year since the oil disaster in the Gulf of Mexico. An oil rig being run by Transocean and BP oil companies exploded in the Gulf of Mexico, killing 11 oil workers and dumping millions of gallons of oil into the Gulf waters. It took many months to staunch the flow of oil, and the Gulf waters still have not recovered from the disaster and may not recover for many more years (even though it is no longer a story the mainstream media is interested in).

A reasonable person might think that after such a mess the oil companies would want to maintain a low profile for quite a while -- especially since a government investigation blamed both Transocean and BP for the "accident", saying the companies used drilling practices they knew to be unsafe (in order to speed up the drilling and save the companies a few pennies). But this is oil companies we are talking about They have no shame and care nothing for common decency.

Consider the recent action of the leadership at Transocean. In spite of the disaster they caused, they have decided they had a very safe year. They either are ignoring the 11 employees they killed or they expected to kill a lot more than that, since company officials claim they exceeded their safety expectations for the year. In appreciation for this "exemplary statistical safety record" the company has rewarded its executives with huge bonuses.

In fact, the company's annual report says ". . .we recorded the best year in safety performance in our company's history, which is a reflection on our commitment to achieving an incident free environment, all the time, everywhere." If true, that's pretty sad. I hate to think about how unsafe the previous years were for their employees -- the ones who do the actual work (and didn't get a huge bonus).

Personally I think it's totally unacceptable for any company to intentionally take shortcuts that kill 11 workers, and if it was my company I certainly wouldn't be bragging about the safety record or handing out bonuses to the executives responsible for the disaster.

These bonuses are both unwarranted and inexcusable. But then that's how most corporations operate. As long as the bottom-line profits are protected they just don't care what happens to the rank-and-file employees.

Do They Even Care About The Miners ?

On April 5th, Massey Energy had a "catastrophic and preventable mine explosion." The explosion killed 29 American coal miners. I say it was preventable because the CEO of Massey Energy, Don Blankenship, has put production over mine safety in an effort to maximize the company's and his own profits.

It is common knowledge in the coal industry that the miners allowed to have and join unions enjoy much safer working conditions. This is because the unions don't just negotiate wages and benefits, but also check on safety conditions in the mines and mandate the companies maintain as safe a workplace as is possible.

But Blankenship is legendary for his union-busting skills. The mine in which the explosion killed the 29 miners was one of the mines that Blankenship had gone to great lengths to make sure it did not unionize. This may have provided shareholders with a few more dollars, but it allowed the mine operators to let the mine deteriorate into less than safe conditions for the workers.

And the company knew the mine was not safe. Michael Garland, spokesman for CtW Investment Group, said (about Massey Energy), "In 2009. . .the company had more violations than in any prior year, and was warned more than any other company. . ." Unless Blankenship hid the large number of safety violations from the company's Board of Directors, they had to know the mine was unsafe.

So what did Massey Energy do? In spite of the record number of safety violations, they gave Don Blankenship more than a $2 million bonus "for exceeding goals on mine safety." Those must have been some pretty low goals if they could be achieved with a record number of violations!

It makes me wonder if the company cares at all about the lives of the miners.

Bail-Out Must Have Exec Pay Cap

I still do not like the $700 billion Wall Street bail-out, but if there is to be a bail-out it must have as one of its provisions a cap on executive pay and bonuses. Democrats should not vote for any package that does not have the pay caps.

The executive pay in all American corporations has really gotten out of whack and needs to be adjusted. As Social Seppuku tells us, CEOs made 24 times the average worker's salary in 1965. By 1980, the CEO compensation was 40 times an average worker's salary, and today the CEO pay is 374 times the average worker's salary. While worker wages have stagnated, CEO compensation has risen exorbitantly.

Do the Republicans and their Wall Street buddies really expect these kind of ridiculous executive compensations to be paid out of taxpayer monies? We may have to bail these companies out, but we don't have to make their executives obscenely rich off taxpayer money.

Treasury Secretary Paulson opposes the cap on executive pay. He says he's afraid some companies won't participate in the bail-out if executive pay is capped. That sounds stupid to me. Paulson has been telling us that these companies will go bankrupt and cease to exist if they aren't bailed out by the taxpayers.

Is he now telling us these companies would rather be put out of business rather than accept executive pay caps? If so, then it is easy to see why these compaies are in trouble. Their executives have put their own greed above what is good for the company.

I say we must proceed with the pay cap as a requirement for getting bail-out money. If a company doesn't want taxpayer money (and the rules that go with it), then they don't have to take it. We should not beg any company or force any company to take bail-out money from the taxpayers.

I like Senator Feinstein's attitude when she said, "I'm told that the reason the Treasury Secretary doesn't want limits on executive compensation is because he believes that an executive then won't bring his company in to partake in any program that is set up. Well here's my response to that. We can put that executive on his boat, take that boat out in the ocean and set it on fire if that's how he feels. That's what should happen, or his company doesn't come in."

(Numbers in above illustrations come from The Economist.)

AA Pilot's Union Elects New Leadership

It looks like the troubles are starting for American Airlines. Their pilot's union just held a leadership election, and the entire slate of incumbents was easily defeated by a slate of candidates advocating a much more confrontational approach with the airline.

The new slate didn't just win -- they won by a landslide. The new slate basically doubled the votes given to the incumbents. And the voter turnout was large. At least 81.5% of the unions members voted, setting a new voter record.

The pilots are very unhappy that while they are working with substantial paycuts, the management of the airlines are dividing up millions in bonuses. They are not the only ones. We already know that the flight attendents are very upset over this, and a couple of weeks ago the ground workers signaled they are going to take a more confrontational approach with management.

Is it any surprise that rank-and-file workers are unhappy? They helped to save the company by agreeing to take substantial paycuts. They had a right to believe they would be rewarded for their sacrifice when the company got on a firmer footing. But they were stabbed in the back.

The company is now operating in the black, but all the rewards for that have gone to management. While the management got millions in bonuses, the workers got ignored. They are expected to go on working for the reduced wages.

I have a feeling that's not going to happen. The company is in store for some very rancorous negotiations in the upcoming contract discussions. This is only right. Management should not have been given a penny in bonuses until the reduced wages had been restored.

A company spokesman said, "A vote other than for the incumbency is essentially a vote to go backwards in the management labor relationship. The problem is management has not done a good signaling to labor that they don't want to go back down that path."

That's not true! Management's signal was loud and clear when they gave the management bonuses -- and it was confrontational.

If there is a strike in the future, and I expect there will be considering management's attitude, I know I will not be flying with any "scab" pilots. I urge my readers to make the same decision.

Employees/Shareholders Put AA CEO On Hotseat

The annual shareholder's meeting didn't turn out too well for the CEO of American Airlines, Gerard Arpey. Arpey kept trying to change the subject and talk about how his management team had saved the airlines and brought it back to profitability.

But the shareholders and employees would have none of it. They knew who had saved the airline - the employees who agreed to large cuts in their pay several years ago to keep the organization afloat. They were repaid by being ignored, while 800 executives divided up $160 million in bonuses last month.

The shareholders kept bringing the subject back to the payment of the bonuses, and how unfair it was to enrich management while the backbone of the company, the employees, still labor under the stringent paycuts.

Arpey seems to think the most important people in the company are the beancounters. He seems to have forgotten that there would be no beans to count without the dedication and hard work of frontline employees. These people should have had their pay restored before the subject of executive bonuses was even discussed. After this greedy move, how can employees trust the company executives?

The employees got no sympathy from Arpey, as he told them they would just have to "agree to disagree". But he may be singing a different tune next year, when the employees get their turn at bat.

Next year, the union contracts start coming up for renewal. You can bet that the employees will remember the greed shown by executives this year, and they'll be demanding their share of the pie.

I hope they don't give in until they get it.