Thursday, June 15, 2006
The Unpatriotic Corporation
Capitalism in the United States is not "free enterprise" nor does it represent a market economy, but is primarily domination of supply and/or demand by large oligopolies. These same large economic entities dominate the major business association, the U.S. Chamber of Commerce, which, along with other corporate trade groups, greatly influence both houses of Congress and the White House, as well as the federal regulatory bureaucracy. Through the American Legislative Exchange Council (ALEC), a national corporate-sponsored lobbying organization, state legislators in all fifty states are also wined and dined and provided the best "model" legislation money can buy to expand nuclear power, limit environmental protection and protect oil, chemical, tobacco companies and the arms and ammunition manufacturers.
Oligopolies appear to offer competition for consumers, but in a very limited way, principally by advertising campaigns carried out by corporate-dominated media outlets. How much competition is there between Exxon Mobil and Chevron, between Home Depot and Lowes, between Dow Chemical and DuPont, or between General Mills and Sara Lee? Most "competition" is between styles, not substance, as one examines advertising campaigns of those corporations mentioned above, or of General Motors vs. Daimler Chrysler, or Cingular Wireless vs. Sprint Verizon.
Our government is being privatized at a rapid pace, and most of our foreign policy is being driven by lucrative federal government contracts to mercenary-oriented security companies such as DynCorp and MPRI, as well as those in the pockets of the current administration, such as Bechtel, Fluor, Halliburton and Monsanto. Foreign aid per se is mostly military aid, and the prime contractors continue to be Boeing, Lockheed, Northrop Grumman and General Dynamics.
Citizens of other countries identify the United States by our military presence in Iraq and Afghanistan, or by our corporate presence represented by McDonald's, Burger King, Starbucks and Coca Cola. Corporate logos are recognized more in foreign lands than the flag of our nation, which is distinguished by Iraqi occupation, not humanitarian assistance or fair trade.
Corporate legal entities are not democratic, nor does corporate management necessarily believe in democracy or democratic institutions. Management is selected by self-nominated boards of directors and most are elected by a plurality of as little as one vote. Shareholders or owners can’t even vote "against" a self-nominated slate of directors. Corporations operate efficiently and effectively throughout the world under monarchies, dictatorships, single party rule, communist, authoritarian and totalitarian governments.
Transnational corporations are not patriotic to the U.S. government, nor do they necessarily believe in any of the political ideologies of governments under which they operate. Corporations believe only in manipulating governments based upon their own materialistic self-interest and advancing the interests of the corporation; but first and foremost, to advance the narrow self interests of its management team. If management believes it is in the interest of the corporation to manipulate state, federal and local rules and advance their own interests by stretching the rule of law, they will do so. Loyalty is only owed to the corporation, not sovereign governments, local communities or political democracy.
Management, which controls the corporation, is separate from ownership. Ownership is dispersed, diffused and weak. Control is centralized, unified and strong. Ownership can be comprised of international public and private interests, many individuals and numerous institutions. Management is not only separate from ownership, but is separated from communities. The corporation can be in literally thousands of locations and in hundreds of local communities, but corporate management at the top has no loyalty to any overall community of interest or to any local community. Its only interest is absolute power, control and maximizing its own materialistic self-interest, the interests of its board of directors, and possibly, the interests of its diverse and diffused owners, if it also serves corporate management’s self-interest. In fact, national interests and community interests may, and often do, run counter to corporate interests, or management’s materialistic self-interest. In this case, management’s loyalty by corporate charter and by-law is owed exclusively to the corporation.
Many national governments have determined that it is in their sovereign right to control their country’s natural resources to benefit the public or civil society. Such resources include potable water, as well as other finite natural resources such as oil, gas, minerals and timber. As corporations continue to threaten, dominate, or control national sovereignty for their own materialistic self-interests, governments should be required to exert national sovereignty on behalf of the public interest. There is no reason why the public should not protect their national resources through government action. National natural resources need to be protected in perpetuity and sovereign governments are within their legal rights to take any action necessary, including nationalization, to control and protect such sovereign resources from exploitation.
Governments are also within their rights under the rule of law to control corporate charters, requiring corporations to serve the public interest or civil society. Corporations are legal entities created by law. Corporations should serve civil society or they should not exist as legally protected entities with special rights and privileges. If this is not acceptable to corporate management, the corporation should not be allowed to sell their products or services in the sovereign nation or jurisdiction nor manufacture or produce their products or goods for distribution and sale.
National sovereignty and the rule of law should be sacrosanct. Voluntary corporate codes and codes of voluntary unenforceable corporate conduct are not sufficient or acceptable as an alternative to the rule of law by sovereign nations and sovereign people. The public interest and civil society should be protected from the excesses of materialistic self-interests and the unpatriotic corporation.
Wednesday, May 17, 2006
"Déjà Vu: South Africa and China" was published yesterday on AlterNet.org, and has already received some thoughtful, interesting feedback.
Thursday, March 09, 2006
Brad Johnson reviews "The Challenge to Power" for HopeDance:
One reason Harrington believes SRI is so important is that our political system is largely out of our control. And as more emphasis shifts to the economic sphere, he feels individuals should include investing as the “third leg” of a triad of economic activities that includes our consumer spending and charitable giving. Throughout the book, he mentions various funds and indices that may be useful to potential investors.
Despite his enthusiasm, Harrington is quick to point out that the tremendous growth of SRI means there is a need for skepticism and vigilance about the types of corporations being labeled socially responsible. He notes that the Dow Jones Sustainable Index includes companies like Dow Chemical, and more and more corporations are approaching the issue as public relations rather than a change in behavior. As a result, we see corporate “codes of conduct” and talk of “sustainability” without any accountability or definition of what those terms mean.
Friday, February 24, 2006
Déjà vu: South Africa and China
As things change, everything stays the same.
Remember apartheid South Africa? Remember the voluntary corporate code of conduct called the Sullivan Principles? Remember Reagan’s "constructive engagement?" The Sullivan Principles and constructive engagement were a cover for "business as usual" in an effort to dispel criticism of the brutal suppression of the majority of the South African population, financially underpinned by U.S. corporate investments, bank loans, and trade.
Have you recently heard the outcries in Congress about the evil Chinese totalitarian, communist government requiring U.S. technology companies that make lots of money by selling their wares, to spy on and violate the human rights of the majority of the Chinese population? The solution: a Global Internet Freedom Task Force to get to the bottom of this "question" and the hint of a new voluntary technology industry code of conduct. Déjà vu?
In the early 1970s, global corporations, including about 350 U.S.-based transnational companies, were pouring millions of dollars into racist, white-minority-ruled South Africa, to earn lots of money. Why not? There was cheap, controlled, and abundant black African labor, cheap natural resources, a western banking system, an industrial economy exporting products to Europe and the West, and a police and military state elected in a whites only "democracy" to keep the trains running on time.
In the People’s Republic of China, we find a one-party dictatorship of the proletariat, welcoming global corporations into an enormous and expanding economy based upon cheap controlled and abundant labor, cheap natural resources, an increasingly Western financial system, an industrial economy with little or no environmental, health, safety, and labor protections, exporting to the global economy, as well as having a healthy international balance of trade, thanks primarily to their exports to the U.S. Top it off with a military and police state, enhanced by the most sophisticated Western security technology money can buy.
Internet search engine companies such as Yahoo and Google were recently castigated by Congressional politicians for working for the Chinese government to censor the internet, spy on Chinese citizens, and turn over email records to Chinese security forces. Several years ago, it was discovered that Cisco Systems, Nortel, IBM, Sun Microsystems, Microsoft, and Oracle Corporation, among many others, were selling the government the technology to violate human rights, all to make money and have access to one of the largest national markets to make even more money. So what’s changed? Not much.
Our wonderful Clinton and Bush Administrations and Congressional Democrats and Republicans, taking corporate money hand over fist, and listening to thousands of corporate lobbyists in Washington, D.C., provided this terrorist government "most favored nation" status, welcomed it into the World Trade Organization (WTO), and lavished the Chinese economy with enough industry, technology, and capital to create guaranteed political, economic, and military impregnability.
In South Africa, you may remember, corporations came under increasing political pressure by the majority African population, while the world community, including many in the U.S., supported the end of apartheid rule by exercising shareholder advocacy, divesting stock, and refusing to bank and do business with corporations supplying capital and other strategic resources to help keep the white dictatorship in power. To counter this strategy, corporate management trotted out the Sullivan Principles, or a voluntary code of conduct in South Africa, for corporations operating there to legitimize their presence by advocating "equal pay for equal work," desegregating restrooms and cafeterias for workers, and verbally calling for "change" in South Africa. Corporate management’s Sullivan Principles were supplemented by President Reagan’s constructive engagement.
Of course, this was a convenient cover for corporations to continue "business as usual," while economically and politically strengthening the apartheid machine. It did, however, allow corporate management to publicly decry racial discrimination in South Africa and for politicians to jump on the meaningless bandwagon of humanitarian concern for the suppression of democratic rights, free speech, evil segregation, and . . . blah, blah, blah. In other words, corporations, politicians, and government officials in the United States all participated in the dialogue of "constructive engagement" to avoid destroying apartheid or more importantly, disrupting ordinary business and reducing large corporate profit margins.
Naturally, the Sullivan Principles, an unenforceable corporate voluntary code, was propaganda, corporate "leaders" in South Africa and Ronald Reagan never intended to really challenge apartheid because that would threaten their lucrative business relationship with the white masters. Ten years after the Reverend Leon Sullivan announced his "principles," he denounced them as unworkable and supported mandatory economic sanctions. In the meantime, how many human beings were tortured and murdered in South Africa, and how many corporate managers pocketed Krugerrands?
We’ve now held public hearings in Washington, D.C. on how the technology companies are supporting human rights violations, politicians have been able to sound off, and corporate spokespeople have said how they really believe in freedom of expression and how "awful" and "shameful" it is that the Chinese dictatorship requires their companies to comply with a "censorship brigade." Meanwhile, thousands of Chinese citizens demonstrate daily, and thousands die in prison or are tortured to death for their religious or political beliefs.
The Bush Administration created the Global Internet Freedom Task Force to study the issue, and Republican legislation has been introduced to enact the Global Online Freedom Act which would create a code of conduct for internet companies. You can bet it will be a voluntary, unenforceable industry code established much like the Sullivan Principles to guarantee corporate "business as usual" in China.
What brought down the white minority government in South Africa was not words, but economic deeds. The apartheid government was stripped of its powerful economic, financial, and strategic material support of Western corporations, due to those corporations and banks losing investments, deposits, and sales to individuals, city and state governments, and institutions exercising economic democracy. Corporate morality is the morality of materialistic self-interest, or the morality of money, and that alone provides the life blood to the heart of the beast.
If Americans and other citizens want to impact corporate conduct in China, especially the conduct of those technology companies that sell their products and make their money from a totalitarian, terrorist government that uses that technology to violate the human rights of its citizens, meaningless words and voluntary codes are not enough. A terrorist does not weaken his resolve as he grows economically, politically, and militarily stronger, more technologically efficient, and even more resourceful.
Change in China will only come about when sovereign governments, pressured by their citizens, eliminate all business ties to China, end strategic investments and discontinue the export of capital and technology to this terrorist, totalitarian government. That means we must put economic pressure on corporations that make money, and lots of it, in China. For American consumers, it means refusing to buy cheaply-produced Chinese goods (12% of China’s exports to the U.S. go to Wal-Mart) that are inexpensive because of the exploitation of human and natural resources in China. The only morality the corporation understands and responds to is the morality of materialistic self-interest.
As things change, everything stays the same.
Thursday, January 19, 2006
Tessa Brunton reviews "The Challenge To Power" in the latest Metro Santa Cruz:
Self-defense manuals do not often recommend hitting an aggressor in the wallet. But in a world where megacorporations have carte blanche and suspect business practices can lead to environmental disasters, human rights abuses and corruption, concerned citizens have to hit corporations where it counts. And that means hitting below the belt at the bottom line.
However, due to the fact that corporations are composed of people with limited liability, who self-govern in a self-perpetuating system, corporations are frighteningly untouchable. "They are sovereign and don't have to obey the laws of the land and can move with adeptness and agility not only from one state to another but from one country to another," Harrington says. "There's no way to get at this leviathan. That's the really frightening part of it."
While the U.S. government does regulate corporations, the measures taken are often ineffective. A recent example of this was the Monsanto Corporation's brush with bribery. Monsanto, a major producer of genetically modified seed, recently admitted to bribing Indonesian officials in order to speed the approval of its products. Monsanto was later fined $1.5 million dollars by the U.S. government for violating the Foreign Corruption Act. But according to Harrington, such fines have little impact on giant corporations.
"They can pay fees and fines, but the fines are fairly meaningless in the stream of income," Harrington explains. "The only thing that these leviathans will respond to is money. So when you affect their access to capital and their market or their cost of doing business, that's the only time they ever respond."
Wednesday, December 21, 2005
Wednesday, December 07, 2005
I recently appeared on Corporate Watchdog Radio, to talk about the potential and limitations of socially responsible investment strategies, the foibles of the Securities and Exchange Commission, and the need for big picture strategies.
You can listen to the show here.
Tuesday, November 15, 2005
I read with great interest Stephen Bainbridge's article, "The Siren Song of Corporate Social Responsibility."
In my over 20 years of experience as a Registered Investment Advisor, I've only seen corporate management give lip service to "corporate governance" and spend lots of shareholder money on public relations propaganda to advertise "CSR" and "sustainability." It has done absolutely nothing to make corporations more "socially responsible" or more "sustainable."
Management plays the "CSR" song for public consumption only by adopting meaningless and unenforceable voluntary codes of conduct, and as The Economist says, hire lots of "CSR" consultants to improve the corporate image.
Shareholders long ago gave up control for liquidity, cannot nominate corporate directors, cannot vote against management's slate of nominees, and shareholder resolutions are advisory only. Stalin would have loved this style of authoritarian "corporate governance."
Corporate management also continues to use the mantra "enhancing shareholder value" which is basically "corporate speak," while they stuff shareholder's money in their pocket on payday and rule only to create wealth for themselves. Management may "define their role as running the company for the benefit of its shareholders," but in truth, it is as much propaganda and public relations as is "CSR" and "sustainability." Management does not rule to serve stakeholders, or for that matter, shareholders.
Directors are accountable to no one but themselves and management, nominating and electing themselves, setting their own salaries while protected by a battery of attorneys and lobbyists, while given protection from liability; thus making a joke out of director fiduciary duty. They have been able to buy off politicians, control state, local and national governments, including regulatory agencies, violate the law and ignore the global community as well as all of civil society.
Citizens have allowed managers to create their own immortal god (not unlike Thomas Hobbes' immortal Leviathan): a corporate structured legal entity, self-perpetuating, and sovereign, subsidized by taxpayers, and no longer accountable to elected governments, and certainly not accountable to their legal owners, the shareholders.
Shareholders need to take control of managers, reassert their ownership responsibility, and require managers to serve shareholders and civil society in a true market economy, not allowing corporate management to play on a rigged authoritarian, oligopolistic, anti-competitive playing field. It would also help if our elected officials not bought by corporate management, actually enforced the law, required corporations to serve the public by enforcement of charter revocation for lawless management, held directors personally, legally, and financially liable, and put a stop to corporations "feeding at the public trough" by discontinuing the privatization of taxpayer-supported government services.
Adam Smith would never recognize "capitalism" in the 21st Century.
Wednesday, November 09, 2005
William Baue reviews "The Challenge To Power" in SocialFunds.com:
John Harrington's writing, which springs from his long career in socially responsible investing (SRI) advocating social and environmental justice, walks a fine line between the kissing cousins of deep cynicism and deep hope. His cynicism stems from his encyclopedic identification (when does he find time to read all the sources he cites?) of how corporate actions systemically and systematically advance social and environmental injustice. His hope derives from his faith that SRI, working in coalition with other instruments, can effect change by holding corporations accountable for past actions while simultaneously creating a system that more actively requires companies to benefit society and the environment in the first place.
"SRI can be a progressive force of change," writes Mr. Harrington in The Challenge to Power: Money, Investing, and Democracy (Chelsea Green). "The goal is not simply to maximize financial return and feel good about it, or to have less guilt, but to understand that capital is a major source of power and authority in American culture."
A pattern develops throughout the text where Mr. Harrington introduces a problem, illustrates it by citing and quoting primary and secondary sources, then ends the paragraph with cutting sarcasm, isolating and exposing ethical failings like a surgeon's scalpel slicing out a cancer.
"Halliburton [ticker: HAL] disclosed in 2002 that one of its units made 'improper' payments of $2.4 million for favorable tax treatment to a Nigerian tax consultant who turned out to be an employee of a local tax authority," Mr. Harrington writes. "Gosh, Halliburton reported making a bribe!"
"It's unclear if Halliburton received a tax deduction for this," he adds, extending the irony.
Later, Mr. Harrington explains how Coca-Cola (KO) did an end-run around its own July 2003 pledge to stop marketing soda to children under 12 by replacing Coke with Swerve, a skim milk-based drink made with the same amount of sugar as Coke and double the sodium.
"[School] districts must wean the kids off Coke and onto Swerve--sort of like going from heroin to methadone," he states dryly.
There are no sacred cows for Mr. Harrington, who founded the SRI firm Harrington Investments Inc (HII) in 1982, and co-founded Working Assets Money Market Fund (now managed by Citizens Funds) in 1983 and ProgressiveAsset Management (PAM) in 1987. He is an equal opportunity critic of corporations, politicians, regulators, nonprofits, SRI, corporate social responsibility (CSR), and sustainability, among many other things. He calls the latter two terms "captives of 'corporate-speak,' now completely devoid of meaning, used primarily by marketers and public relations firms working for large corporations." In the next chapter he takes voluntary corporate codes of conduct to task, finding them "just that: voluntary."
"Without a comprehensive code enacted into law and enforced by national and international laws, and an international judicial system with the authority to levy penalties and mandatory sanctions, voluntary codes are a great waste of everyone's time, including the SRI community," he says.
Mr. Harrington also skewers nonprofits with progressive social and/or environmental missions that fail to put their money where their mouth is in that they lack SRI investment policies. He conducts an informal survey, asking the progressive organizations he belongs to (such as Citizen Works, Sierra Club, Nature Conservancy, Greenpeace, Amnesty International) for copies of their goals and objectives, investment policies, and schedules of investments.
"Most of the groups that responded had no social or environmental investment mission statement, and when they did, it could not be determined whether it was being implemented," he states in frustration.
Perhaps most importantly, Mr. Harrington exposes how free market capitalism as exercised in corporate America is essentially devoid of democracy.
"[O]ne of the major obstacles to shareholders improving corporate conduct [is that] shareholders have almost no power," he writes. "Even if large institutional shareholders and other owners could effectively coordinate massive serious shareholder vote challenges to management, resolutions are 'advisory,' amounting to begging; non-management nominations of board members are prohibitively expensive; and 'withhold' votes are worthless."
Mr. Harrington's sarcasm and cynicism would depress readers if it seemed intended to destroy the people, institutions, and practices he criticizes; however, his goal is to redeem them from the shortcomings he identifies with such acuity. In the final chapter, he lays out a vision of SRI working in collaboration to advance "corporate campaigns" or coordinated, comprehensive, long-term and wide-ranging efforts to promote positive progress in corporations.
"What is now needed is a strategy that is a 'systems' approach that coordinates all the stakeholder strategies at one time to overload the corporate system," Mr. Harrington. "Shareholder advocates will play a role, as will activists in the streets, NGOs in the community, labor in the workplace, and peasants, farmers, and workers in the fields of developing countries."
"Corporations will not be able to deal with campaigns coordinated at the local, state, national, and international levels," he adds. "We need to act now as investors, as voters, as philanthropists, as executives, as consumers, as activists, and most important of all, as human beings concerned about the survival of our planet, our economy, and our struggling democracy."
Wednesday, October 19, 2005
Michael Shapiro reviews "The Challenge to Power" in the latest North Bay Bohemian:
Harrington shows why making money one's sole criterion is a recipe for disaster. He also shows that responsible investing can be as lucrative, or even more financially rewarding, than traditional investing. Just ask any shareholder in Enron or Merck.
Among the actions Harrington recommends are shareholder activism, community mobilization and active citizenship. He speaks candidly about what individuals can do to challenge corporate power and create a fair market economy that makes people and the environment a priority over corporate welfare. Though most thinking people already know about many of the issues Harrington raises, they may not realize how high the stakes are. Harrington argues that unchecked corporate power threatens our survival as a species, and that time is running out.
Tuesday, October 18, 2005
Corporations have run amok. For evidence I refer you to the slew of major corporate scandals to have come down the pike in the past few years—Enron, WorldCom, and Halliburton (which is doing such a fine job overcharging the American taxpayer in Iraq that George Jr. awarded Halliburton a multi-million dollar, no-bid contract for work in Katrina-devastated New Orleans).
The worst aspect of all this collective incompetence is that the taxpayer pays all the bills—pays them through taxes, investment portfolios, and retirement accounts. Corporate America and its lobbyists can be accused of running the Government (and one need look no further than the recently passed polluter-friendly energy bill for proof) but it is shareholder cash that drives corporate power, and we are asleep at the wheel.
Even people who do not think of themselves as investors often are. The majority of working adults own some form of stock, bond, CD or pension fund—all of which can be seen as underutilized political capital.
In an era when corporations wield so much political power, our investments represent more than simple monetary gain. Each share of stock is a vote for a corporate entity, its policies, lobbyists and environmental standards. So the question is, do you want to vote for Phillip Morris, or do you want to vote for Co-op America? Do you invest your retirement funds in gigantic, bloated organizations which underpay their workers and send all the cash to the fat cats in the glass tower, or do you seek out smaller, local investment opportunities which are equitable and shareholder driven? These seem like rhetorical questions, but take a peek at your portfolio and see who your dollars are supporting.
Lest I be accused of starry-eyed idealism, there are precedents for investor-sparked social change. The most notable success was the anti-apartheid disinvestment movement of the 1980s. Individuals and institutions shed their holdings in companies that did business in South Africa, which included familiar names such as Coke and IBM. Investor pressure created the momentum needed for the Comprehensive Anti-apartheid Act to pass despite the veto of then-President Reagan. The cost of doing business in South Africa increased dramatically, both monetarily and in public goodwill, and American corporations were forced to withdraw.
There is an additional reason to invest in responsible companies—it’s better for your finances. Over the years, socially responsible investments have an equal or greater rate of return as traditional funds. Your mother was right, being good really is its own reward.
Originally posted at The Huffington Post.
Monday, September 19, 2005
Jay Goetting reviews "The Challenge To Power" in The Napa Valley Register:
We're running out of time.
And if we don't exercise some control over our investments, start taking some responsibility for decision making and going to the polls, our world could change for the worse.
That's the premise of a new book, "The Challenge to Power: Money, Investing, and Democracy." by Napa investment specialist John C. Harrington. It serves as not only an excellent primer for those looking for socially responsible investing techniques, but it's a platform for Harrington's progressive philosophies that have served him and his various financial ventures well over the past three decades.
Running out of time is a scary premise, but Harrington said, "That's the whole purpose of the book. We're losing democracy."
Without some fundamental change, America -- and, indeed, the world -- may become slaves to giant corporations run amok. Corporate influence is becoming more pervasive, but Harrington says there are still ways to take back control.
Greater access to corporate ballot boxes and making it easier for shareholders to nominate and elect candidates to boards of directors is a good start.
From publisher Chelsea Green's pre-release notes, "'The Challenge to Power' gives the reader strategies to thwart corporate domination of the earth's resources, decentralize and democratize the economy, restore participatory democracy, tame corruption and revitalize community control of our capital. Anybody who has an interest in the health of our democracy must read this book."
Who should care about the issues set forth in Harrington's book? The short answer is everybody. People who invest, people involved in politics, nonprofit groups and environmental individuals and organizations are just some of those who have a stake in the future as the author sees it unfolding.
Harrington called his first book, "Investing With Your Conscience," basically a how-to book. "The Challenge to Power" is broader in its perspective. "That's very important to me," he said, noting more than $2 trillion dollars has been poured into socially responsible investments, much of it in "feel good while doing good" mutual funds.
Harrington founded Working Assets, one of the first SRI firms. He was instrumental in getting investment groups, pension funds and others to stop capital that had been pouring into South Africa when Apartheid was still official national policy.
When the average investor who may have money in a pension fund, public or private, puts down Harrington's book, he'd like to see the reader moved to become more involved in corporate affairs.
"Find out what your pension fund is doing, where they're investing," said Harrington, "then make sure they vote right."
Perhaps most importantly, Harrington believes in local investing. He encourages Napans, for instance, to put their money into local financial institutions and small businesses. "Generally, local and small businesses are more responsive to their investors," he said.
As corporations merge and power becomes more centralized, individual investors have less influence. They can't even affect change on a board of directors under most current corporate by-laws.
"Stalin would have loved our system," said Harrington, adding he sees corporations continuing to merge, but coming up short of becoming monopolies which then subject themselves to greater scrutiny and control. The Wal-Marts and Coca Colas of the world are oligopolies that could evolve to monopolies.
The wine industry is much more diversified despite the mergers and buyouts that frequent our new reports, besides noted Harrington, "It's an agricultural commodity that could be more susceptible to purchase by a large food conglomerate."
To the surprise of few, America's political parties fall into the same bag as huge corporations. The two major parties are controlled by similar, if not the same, interests. "They pretty much homogenize the issues," said Harrington.
Bottom line: Be aware of how you consume and invest, exercise your right to vote and use your money responsibly.
Harrington is about to embark on a master's thesis with the theme, "The Morality of Materialistic Self Interest." It will draw on his expertise in matters financial as well as his studies in philosophy and governance. Perhaps book three will evolve from that along with the changes that continue to occur in the corporate world.
"The Challenge to Power" is being released this month by Chelsea Green Publishing. It is available in both hard-cover and paperback. Harrington heads Harrington Investment with offices in downtown Napa. He plans a national book tour to unveil it later this fall.
Wednesday, September 14, 2005
The Challenge To Power in GreenMoney Journal
Here is an excerpt from my recent article in GreenMoney Journal:
Capitalism in the traditional sense no longer exists, if it ever did, except for small businesses that actually compete in a relatively free local marketplace, but are ultimately manipulated by large corporations that dominate their trade associations. These same giants of American enterprise control supply as well as demand (through ownership of the major media outlets and mass advertising). There are probably only about 200,000 people across the globe that control our natural resources, wealth, and truly act as self-appointed kings (or Niccolo Machiavelli's "princes"), preaching the myth of free enterprise, while exercising authoritarian economic control, bottom feeding at the public trough, and privatizing everything that moves.
Friday, August 26, 2005
"Shareowner Resolution Asks Monsanto to Create Ethics Oversight Committee"
The company stonewalls inquiries related to the resolution, which springs from a $1.5 million settlement with the SEC and DOJ earlier this year regarding a bribe Monstanto paid in Indonesia.
Earlier this week, Harrington Investments Inc. (HII) filed a shareowner resolution with Monsanto (ticker: MON) asking its board to create an ethics oversight committee of independent directors to monitor compliance with laws as well as the Monsanto Pledge and Code of Business Conduct. Why make such a request?
The resolution recounts the company's $1.5 million settlement with the US Department of Justice (DOJ) and Securities and Exchange Commission (SEC) in January 2005 over violations of the Foreign Corrupt Practices Act (FCPA). In a nutshell, a senior Monsanto manager authorized a $50,000 bribe to get a senior Indonesian Ministry of Environment official to repeal a 2001 environmental impact assessment decree obstructing market entry for genetically engineered crops.
Thursday, August 25, 2005
Halliburton: Another Very Special Company
In the first chapter of The Challenge To Power, I write a great deal about one of America’s most beloved companies: Halliburton. Our brave Vice President, Dick Cheney (remember the duct tape episode?), ran Halliburton from 1995 to 2000. As early as 1991, Cheney told a group of his oil company buddies that he was against getting rid of Sadam Hussein because the corporation needed Hussein’s money and our country needed his oil.
Also, when Cheney was running Halliburton, two subsidiaries, Dresser-Rand and Ingersol Dresser Pump Company, sold Hussein $73 million in oil field supplies. At that time, this fortuitously did not violate U.S. sanctions against Iraq for supporting a terrorist state because the company had conveniently located the subsidiaries “off shore.” Alas, Halliburton’s subsidiary in the Cayman Islands received an embarrassing grand jury subpoena last year for documents regarding their Iranian operations; since then, the office of Foreign Assets Control has referred their investigation of Halliburton to the U.S. Department of Justice. Thanks to the foresight in locating at least 44 of Halliburton’s subsidiaries in tax havens, the company also pays very little in federal taxes; in fact, Halliburton received an $85 million rebate in 1999.
Halliburton, of course, receives plenty of Defense Department contracts, from building prison cells in Guantanamo, Cuba, to running mess halls, dorms, and laundry services for U.S. military troops all over the world. The company has a lock on rebuilding Iraq’s oil industry even if Halliburton consistently over-bills the U.S. government. When Cheney was the company’s “leader,” Halliburton paid the government $2 million in fines for overbilling; in August 2004, the company paid $7.5 million to the SEC for failing to disclose how the company accounted for certain cost overruns, which resulted in the company issuing misleading profit numbers in 1998 and 1999.
Cost overruns, overbilling and faulty accounting are “business as usual” at Halliburton. The company is under investigation by the Pentagon to determine whether they overcharged the military $1.2 billion in fuel sales in Iraq, and a Pentagon audit found that Cheney’s old company failed to adequately account for about $4.2 billion the company was paid for providing logistical support for troops in Iraq and Kuwait. Oh, I forgot to add that the FBI is investigating the company employees who were reported to have accepted $6 million in illegal kickbacks. Halliburton has also been accused of overcharging on contracts in Afghanistan, another flowering oasis of company profits.
Following Halliburton’s disclosure of $2.4 million in “improper” payments by a company employee to a Nigerian tax official, an ongoing investigation has now pulled Chicago Bridge and Iron into the company’s web of crime partners. Chicago Bridge and Iron is a Halliburton subcontractor on the multibillion dollar TSKJ Bonner Island liquefied natural gas plant project. The SEC, the U.S. Department of Justice, and French and Nigerian officials are all investigating. The investigation has widened to not only looking for a violation of the U.S. Corrupt Practices Act, but a violation of U.S. antitrust laws. It seems that the former chairman of Halliburton’s Kellogg Brown & Root unit announced that he took payments from a British lawyer who was responsible for funneling between $130-140 million from the construction consortium to Nigerian officials.
What makes you feel warm inside is to know that Halliburton continues to receive large multi-billion dollar taxpayer-funded contracts, uses tax havens to avoid paying U.S. taxes to support the government that they bilk, overcharges on contracts, bribes foreign government officials, engages in business with terrorist nations, and “cooks the books,” all while former company executive Cheney receives $180,000 a year in deferred compensation.
Don’t you get a nice fuzzy feeling knowing that our government has so recognized what a good patriotic job Halliburton is doing for our country in Iraq and Afghanistan – at a cost of $10.5 billion – that the U.S. Army recently approved $9.4 million in bonus payments to the company’s Kellogg Brown & Root subsidiary?
Last year, Medea Benjamin, representing Global Exchange, and Pratap Chatterjee, representing Harrington Investments, Inc., were denied entry into the shareholders meeting in Houston, Texas. Both were holding shares of Halliburton and were serving as proxies for owners of the company, but were still denied entry. In fact, Medea was physically accosted and searched by corporate-paid security personnel. They were not allowed to attend the Halliburton meeting because they wanted to question the company’s management on all of the multiple ongoing government investigations. This year Medea was able to gain entry on behalf of Global Exchange and questioned management. The answers, of course, were evasive and promised to be supplied in the future. Don’t count on it. Corporations believe they are answerable to no one, certainly not the U.S. government or the legal owners of the company.
America is being privatized and corporatized at an increasing rate. American citizens are losing their sovereignty. In fact, we may have given up our nation’s sovereignty to the corporate-controlled World Trade Organization (WTO). Perhaps supreme power no longer rests with the people through our elected government, but with a sovereign that is corporate. Perhaps it is high time to reverse this loss of sovereignty and deconstruct the beast that we created. Perhaps it is time to return to a market economy and democratic control of capital: stay tuned.
Wednesday, August 17, 2005
"It's Time To Fix Social Security"
In his op-ed, "It's Time To Fix Social Security," Jay Ambrose argued that Congress needs to begin to seriously address the issue of the long-term viability and solvency of our federal Social Security system. He also praised George Bush's privatization plan and blamed the Democrats for "demagogic obstructionism" in preventing the President's individual private account plan from being enacted into law.
Conversely, in his op-ed, "Social Security Lessons," Paul Krugman claimed that Bush 'lied' about the current system, and used taxpayer money to promote his partisan agenda, attempting to transform '... Social Security from a social insurance program into a mutual fund.'"
Both Ambrose and Krugman were clearly partisan in their rhetoric, but each touched upon important points. Ambrose was correct in his demand that Congress address Social Security solvency, but was absurd in blaming only the Democrats. For successive Administrations and throughout dozens of Congressional sessions, Democrat and Republican politicians in power have ignored the need for long-term viability of our most important retirement safety net for literally millions of Americans.
Krugman was correct in his claim that the current Administration, which has a long and despicable record of attempting to privatize everything that doesn't move and some things that do, is working hard to shift the responsibility for Social Security from the public to the private sector, a private sector driven only by self-interest and money, not collective responsibility and care.
A solvent retirement or pension plan needs to be actuarially sound and committed to growing sufficiently to be able to pay benefits to current and future beneficiaries. Normally, retirement plans adjust their actuarial tables based on projected mortality rates, beneficiary levels, new money coming into the system, portfolio appreciation, and interest rate assumptions. In the case of the Social Security fund, investments are only made in U.S. treasury securities (100% principal and interest guaranteed), and any shortfall in meeting benefit payments will come out of the federal budget.
Thanks to the intelligence of George Bush and his Republican Party majorities in Congress, our country is presently running enormous and growing annual federal budget deficits (propped up, I might add, by a Social Security Fund surplus) in addition to outrageous monthly foreign account deficits. Also one of the major reasons why the deficits are growing is the cost of the war in Iraq and the privatization of government. Add to this plague on our federal budget, interest on the national debt and huge tax breaks given by Congress to the wealthy that run corporate America, it is no wonder that we can't feed, educate, care for, and employ our country's citizens.
As we have all known, fewer and fewer workers are paying into Social Security to support an increasing number of beneficiaries. This will be another drain on the budget once the current Social Security fund surplus is depleted, we have a "pay as you go" retirement system, and the return on U.S. Treasury bonds barely keeps up with the rate of inflation. The answer, however, is not privatizing Social Security with personal accounts as King George would have us believe.
There are several reasons why the current Administration, many Congressional representatives (supported by lobbyist money), and the corporate elite in this country want to privatize Social Security. First, creating private accounts that allow future beneficiaries to invest in stock mutual funds will inevitably, in the long run, be a gold mine for the financial services and mutual fund industry. It is a great big payback for all those corporate and wealthy citizens that contributed millions to King George and our current crop of politicians. Don't believe such personal account investments will be limited to "conservative" stock index funds. Once the financial services industry gains access to Social Security assets, those highly paid lobbyists in Washington, D.C., will make sure politicians open Social Security accounts up to permissible investments in everything from hedge funds to emerging markets. It won't be long before "partial" Social Security privatization becomes "full" privatization. Never underestimate the power of money and greed.
Secondly, privatization of Social Security will shift the burden from a public sector life-saving insurance and retirement program to a private sector roulette-style lotto game, where few will win and most will lose. There will be no minimal benefit level; every man and woman will be for himself and herself. This will reinforce authoritarian capitalism's reach beyond simple "privatization"”; it will be Thomas Hobbes's materialistic dream come true. His most famous philosophic phrase will become reality: that life (in America) in the state of nature will be "solitary, poor, nasty, brutish and short."
Finally, corporations and the wealthy have so skewed the budget priorities away from human services, education and welfare, to now paying for war, corporate contractors and rich folks' tax breaks, that any future federal support for Social Security diminishes their ability to dig deeper into American taxpayer pockets. God forbid, we subsidize our country’s retirees, when we can subsidize General Electric, Lockheed and Halliburton instead.
To strengthen Social Security, why not create a Social Security Retirement Board (SSRB), independently appointed and/or elected, whose members have fiduciary duties and responsibilities, among other things, to invest beneficiary assets into a diversified portfolio of stocks, bonds, real estate, private equity and other investments to increase portfolio performance? Such investments could include small businesses, alternative energy, federal mortgage securities supporting moderate income housing, as well as community investments to strengthen and increase wealth in local neighborhoods and in rural and urban communities across the country.
Similar to fiduciaries of private pension plans covered by ERISA, SSRB trustees should each be financially and legally liable and responsible to beneficiaries in carrying out their duties to meet the investment goals and the long-term obligations of Social Security.
The Board’s duties and responsibilities would be similar to large public employee pension plans, such as CALPERS, CALSTRS, and the New York State Retirement System, all of which have excellent long-term investment performance and have successfully been meeting their investment goals and objectives for current and future beneficiaries.
If the President is really concerned about making sure that the Social Security system is financially solvent and sound, what could be more important than increasing the performance of retirement assets? But this must be accomplished collectively, responsibly investing for all the beneficiaries, not putting each individual alone open to speculation and with each beneficiary hoping to win the lotto. Assets need to be managed by legally and financially liable fiduciaries, whose responsibility it is to invest beneficiary assets to meet the goals and objectives of providing retirement income, not as a transfer of Social Security assets to the financial community as a payback for political contributions and lobbyist lunches.
Until and unless we stand together as Americans, taking care of our elderly parents, family, and friends as one nation united, we shall continue to be divided by fortune, income, and class, where the overriding American philosophy will be individual self-interest.
Wednesday, May 25, 2005
"Big bucks bucking big biz"
Star op-ed columnist Dan Carpenter writes in today's Indianapolis Star:
So who is John Harrington anyway, and where does he get off trying to tell one of Indiana's largest companies how to run its business in China?
Cummins brass gave assurance they're working on a code of proper conduct for Chinese enterprises with which they deal. Meanwhile, shareholders, as expected, voted down an 11-point human rights initiative based on a United Nations model.
That proposal came from Harrington Investments Inc. of Napa, Calif., which earned the forum by purchasing about 5,000 shares of Cummins stock.
Harrington doesn't think they're bad guys at Cummins. In fact, if Cummins dealt in, say, child labor, union-busting or tobacco, there would be no buy-in and lobbying to begin with.
Harrington, founded in 1982, is one of the granddaddies of the socially responsible investment movement, and the 59-year-old father of the firm still keeps the fires burning behind his genial manner.
"I think I've turned more radical," John Harrington said in a phone interview. "As things have changed, they have not changed that much. Instead of staying on top of corporate conduct, too many in my industry are just passive screeners."
In other words, image-savvy companies can stay on the good side of the $2 trillion conscientious-investment community by pledging enlightened labor practices and environmental concern. But are they ultimately good for you, me and our neighbor in that New Delhi factory? In Harrington's view, less and less.
"We have moved away from what I consider to be a free market. What we have now is what I call oligopolistic capitalism. We have moved away from local communities to global enterprises with very little substance at the local level.
"In your sector (news media), very, very few players dominate the market. Wal-Mart is not a competitive enterprise. It is a dominant enterprise. This is not good. We need diversity."
Diversity and diversification. Handling more than $140 million in assets despite refusal to invest in defense (it deems the Iraq war illegal and immoral) and World Bank bonds (in protest of the bank's policies toward poor countries), Harrington Investments validates the leader's belief "a lot of people want to do more than make money for making money's sake."
But executives, at Cummins and elsewhere, still run the show, Harrington notes; and he sees too many with too little interest in principle -- even though "in the long run doing the right thing will enhance shareholder value and protect the company."
As a counselor, lecturer, shareholder and author (his new book is "The Challenge To Power: Money, Investing and Democracy" from Capital H Press), he'll keep sending the message. But he understands how Cassandra of ancient Troy felt.
"I'm not sure I'm very optimistic about global corporate enterprise. Corporations have more power than governments. We've lost our sovereignty, or nearly lost it. They're almost impossible to control. That's what I talk about in my book, how they play states and nations off against each other. This is a monster that may devour us."
Monday, May 23, 2005
"Schwab Responds to Activist Shareholders"
Bob Hirschfeld writes for Financial-Planning.com:
On May 19, shareholders voted to change how the board of directors will be elected at discount broker Charles Schwab. And CEO Charles Schwab clarified the company’s stand on the privatization of Social Security, which the company appeared to be advocating.
The discount broker had come under fire from at least one investor/client, Harrington Investments, for its corporate governance, which is currently “classified,” for its lagging share price, and for its avowed support of Social Security privatization. Harrington Investments is a socially conscious registered advisory firm based in Napa, California.
In an open letter issued prior to Schwab’s May 19 shareholder meeting, Harrington called on fellow shareholders to vote “yes” on a proposal by the New York City Pension Funds to “declassify” the board of directors. Currently, only some of the 10 board members come up for election on an annual basis. Declassifying the board would mean each of the 10 would be elected each year.
“The current situation keeps board control out of the hands of shareholders,” says Peri Payne, Harrington’s social research advocate. The assumption is that declassified boards are more democratic.
At Thursday’s meeting, 57% of those shareholders voting approved the proposal for annual elections. A Schwab representative said the company was evaluating the results of the vote.
“In 1996, close to 75% of our stockholders approved the current system of electing directors,” says Schwab spokesperson Glen Mathison. “The reason people voted in favor is that it increases the chances that there will be directors with prior experience on the board.”
Harrington, which is a custodial client of Schwab’s as well as an investor in Schwab shares, also criticized CEO Charles Schwab for his membership and support of a single-issue group, the Alliance for Worker Retirement Security, which is dedicated to promoting private accounts in Social Security.
Claimed Harrington, “Where is board accountability when the CEO appears to be on an ideological mission?”
“The thing that’s disconcerting is that Schwab has stated they are remaining neutral when it’s a known fact they are supporting a one-issue organization,” adds Payne. “That’s an obvious disconnect.”
During the question-and-answer section of the May 19 meeting, CEO Charles Schwab responded by noting that the company had taken no position on the issue and regretting that his personal position and the company’s position tend to get merged. “We are not a political company,” said Schwab.
As to Harrington’s third plaint, which concerns Schwab’s share price, spokesperson Mathison was more agreeable. “We’re not happy about the stock price, either, but it’s going in the right direction,” he said. “It is up since Chuck Schwab took over the company last summer.”
“The client attrition he [Harrington] is referring to is decreasing in the wake of our price cuts. Client accounts are one measure, but the point is we bring in more new client money than any other firm reporting that number and our total client assets are at a record level,” says Mathison. “We got $16 billion in new client assets in the first quarter. In the past year we have been steadily removing costs. We feel we have the company headed in the right direction.”
Thursday, April 21, 2005
1001 2nd Street
Napa, CA 94559
Dear Mr. Harrington:
I am writing in response to your letter dated April 18, 2005 regarding the privatization of
At Charles Schwab, we work with millions of investors each year helping them plan for
and reach their financial goals. From that experience we know that retirement security is
the top financial priority for most Americans. Assuring that Social Security remains
viable for current and future generations of American retirees is a common national
objective and should be one of today's most important long-term goals for policy-makers
and the public, regardless of political affiliation. We have encouraged and will continue
to support an open discussion about ways to address Social Security's long-term strength
and viability. We're hopeful the nation can reach a bipartisan compromise to assure
Social Security's long-term viability. We believe that Americans deserve a system that
works and provides a stable and predictable future for them. At this time, The Charles
Schwab Corporation is not an advocate of any specific political approach related to
addressing Social Security.
If you have additional comments or concerns please do not hesitate to contact me at 1-
Monday, April 18, 2005
The Charles Schwab Corporation
101 Montgomery Street
San Francisco, CA 94104
Re: Social Security Privatization
Dear Mr. Schwab:
On February 1, 2005 I sent you a letter regarding Schwab’s support of the plan to privatize Social Security. Although I received a phone call informing me that the letter had been received, I have yet to receive a written response. Considering the current media furor over this issue and the ensuing public outcry, it would seem obvious that a formal response is warranted. Our clients, who are uniformly opposed to the privatization of Social Security, have been contacting me out of concern that Schwab is supporting this dangerous, foolish and self-serving proposal.
As a member of the Alliance for Worker Retirement Security, a group created specifically to fight for privatization, Schwab’s public claims of being neutral simply do not ring true. Furthermore, John L. Sweeney, president of the AFL-CIO, claims that an executive vice-president of Charles Schwab Corp., William L. Atwell, is a “principal proponent” of private accounts on the Securities Industry Association board. This also calls Schwab’s neutrality into question, as does the participation of Schwab officials in White House meetings focused on the privatization of Social Security.
I have worked with your firm as a client and stockholder for many years and hope this does not jeopardize our business relationship. On the other hand, if your position of supporting the privatization of Social Security is unalterable, our continued relationship is indeed threatened.
I would appreciate a prompt response and look forward to hearing from you.
Tuesday, February 01, 2005
The Charles Schwab Corporation
101 Montgomery Street
San Francisco, CA 94104
Dear Mr. Schwab:
I am writing this letter as both a client and customer of Charles Schwab and a shareholder representing 86,900 shares.
I am concerned that the plan by the George W. Bush Administration to partially privatize social security is short-sighted, foolish, and could possibly destroy the stability and solvency of our social security program and the Social Security Administration.
Recently, numerous financial services companies, professional organizations representing corporate management, and other business groups have announced support for creating personally-directed accounts to invest social security assets in mutual funds. The Charles Schwab Corporation has been identified as a member of this group. Clearly, this is self-serving, and is intended to allow the financial services industry to gain access to public funding of social security. This position is despicable and will negatively impact the industry. It is also another example of greedy corporate management feeding at the public trough. It exemplifies “welfare for the rich” and is yet another corporate subsidy.
Several studies have indicated that professional investment managers managing qualified retirement accounts generally out-perform individuals managing their own 401(k) and other self-directed qualified pension plans. Inevitably, individuals will be susceptible to deceptive mutual fund performance advertising, which often exaggerates positive performance. This will lead to a loss of retirement assets, as individual investors chase performance. Individual investors often move from one fund to another in the quest for short-term financial gain. This will lead to not only numerous bankrupt individual plans, but lead to bankrupting social security for those not investing their own assets.
A much better approach would be to create a nationally appointed and/or elected board, similar to CalPERS and CalSTRS, to serve as fiduciaries, covered by ERISA, with trustees personally financially liable, to manage social security assets. Such a board could also be authorized to invest in a diversified portfolio, including equities, to maximize performance.
I urge you to take a leadership role in opposing the privatization of a major national retirement program that has well served the people of the United States in their retirement years for several generations.