How American Corporations Plundered Employee Pensions

Wall Street Journal reporter Ellen E. Schultz discusses her new book RETIREMENT HEIST in this interview with Salon.com. How did many major American corporations plunder their employees' retirement funds? It wasn't complicated. It was surprisingly easy for them to do. First they hired expert help. Legal and accounting experts. Then they went to work. Read and share this interview. RETIREMENT HEIST is an important book.

"Think of pensions as a debt. If a company can reverse a debt, it can record it as income. And that income is the same as if they got it from selling trucks or whatever it is the company sells. There were billions in promises to retirees for pensions and healthcare and death benefits and life insurance, and the companies figured out that if they cut or eliminated them altogether then they could get those billions in profit -- and even use them for executive compensation."

But what are promises? What are obligations? Why do large profitable companies steal pension funds? Because they can, and their executives instruct them to do so. They are rewarded for doing so.

Remember, a corporation is properly called a "limited liability corporation". In a legal sense, in a purely capitalistic sense, they are formed and operated to avoid obligations, to evade responsibilities, to figure out ways of delivering as little as possible for as much money as possible. "Innovation" often involves devising ways to give poorer, cheaper, delayed and/or non- service for as much as they can charge. Companies that do this are admired for "outcompeting" their competitors, and their shareholders are the envy of the shareholders whose companies have more scruples.

Not all corporations behave this way, but without regulations to keep the game fair the ones that do cheat have a competitive advantage.

This is happening more and more because consulting companies and corporate leadership pow-wows and business schools have taught business leaders to ignore two of the three loyalties corporations have, the loyalty to the customer and to the employee, and to put all effort and dedication to pleasing the third group––the owners and shareholders. Corporate executives usually belong to this group. When possible the loyalty is confined to the executives themselves, leaving shareholders holding the bag.

Getting Underlings to Commit Your Crimes

Reading the news I often get the feeling I've read the same thing before. There's this from a Stephen Moss profile of historian and Hitler biographer Ian Kershaw in the Guardian:

" ...the phrase most associated with Kershaw: "working towards the Führer", the idea that though Hitler was not dictating every aspect of policy the entire bureaucratic apparatus devoted itself to trying to interpret his wishes. "People second-guessed what he wanted," Kershaw explains. "He didn't need to command everything. People interpret 'getting rid of the Jews' in different ways, and cumulatively that then pushes along the dynamic of the persecution without Hitler having to say 'do this, do that, do the other'."

And this paragraph from Michael Wolff's analysis of the Murdoch scandal in AdWeek from a week ago:

"It’s all about the organization. It’s an organization all about doing what Rupert wants you to do, or doing what you imagine Rupert wants you to do, or doing what you imagine your boss imagines Rupert wants done. There are few companies as large as News Corp. that are so devoted and in thrall to one man. There are few companies which, over so long, have so assiduously hired the kind of people who would be in thrall to one man. Indeed, News Corp. can be quite a disorganized and scattered company, and yet its driving premise, what unites and motivates this oft-times gang-that-couldn’t-shoot-straight enterprise, is to do as Rupert would have you do."

In the Reagan White House, this same management style gave Reagan "plausible deniability" when his subordinates were selling advanced weapons to Iranian terrorists and using the profits to arm Central American guerillas that Congress had refused to support. Ollie North's "neat idea." They knew what the president wanted and got it done without explicit instructions. When the crime was discovered, the boss avoided blame.

The useful managerial instruction "I don't care how you do it...just get it done" has caused of a lot of misery in the world, but it takes awhile for the consequences to fall on the perpetrator. The harm hits everyone else first. Ethical managers know better. It isn't a new phenomenon. In the twelfth century Henry II had an archbishop named Thomas á Beckett who he wanted dead, and some eager minions who took care of it for him.