Crises always seem to bring out the best in Americans. Six weeks ago, AT&T and the Communications Workers of America were in a tense struggle over the legendary company’s future. AT&T’s leadership, under pressure from activist investor Paul Singer to post short-term share price gains, was deferring needed investment in favor of a stock-buyback strategy. AT&T had cut almost 40,000 jobs over the last two years. The union was fighting for its members’ jobs, families, and future.
Then, last week, AT&T changed direction. After negotiations with CWA and in recognition of the extraordinary efforts of its workers to keep the company running and its customers connected in the face of a global pandemic, AT&T announced a 20% bonus for its front line union employees, whether they are working from home or at their regular work sites.
But AT&T and CWA looked beyond the money to make sound decisions about the present and future. The company canceled $4 billion worth of stock buybacks and worked with the union to enhance safety procedures and strengthen sick and family leave protection for all CWA-represented AT&T workers. With their close collaboration, focus on the long term, and commitment to problem-solving, AT&T and CWA showed us the right way forward through the crisis and beyond.
As the effort to shore up our shutdown economy moves forward with passage of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, we all need to work together for shared economic progress, and reverse decades of dividing ourselves over the short-term demands of the financially powerful.
We don't have to tolerate profiteering
Minority Leader Chuck Schumer and House Speaker Nancy Pelosi should be congratulated for negotiating a bill that will give the economy a much-needed boost by putting money in the hands of those who need it most and will spend it immediately. And we should acknowledge their determination in forcing Congress to severely restrict the ability of greedy executives and corporate raiders to enrich themselves with taxpayer dollars through stock buybacks, executive bonuses, and other irresponsible strategies.
However, the CARES Act is just the beginning. Elected officials, organized labor and progressive organizations need to hold the Trump administration’s feet to the fire. We must force it to deliver effective comprehensive oversight that will guarantee any corporate bailout money flows to families who need it and not into the pockets and portfolios of rich shareholders and vulture capitalists. The AT&T-CWA relationship shows us that good decisions can be made in hard times. We don’t have to acquiesce in the sort of profiteering we saw by some in the wake of the bank and auto industry bailouts.
In the aftermath of the 2008 financial crisis, auto parts supplier Delphi ended up receiving billions in direct and indirect taxpayer dollars as part of the auto industry bailout.And activist investors won big. Just one investment firm, Paul Singer’s Elliot Management, made more than $1 billion on the deal.
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The lesson is clear. Good intentions and an open federal checkbook are not enough. With wounded companies now eligible for hundreds of billions of dollars, the vultures smell blood. The real work of keeping them away so that companies heal and workers work starts now.
Stock buybacks stand out as a corporate strategy that is ripe for abuse. They’ve been used in recent years to juice the stock price of several companies, such as American Airlines, which is now seeking bailout money. Many of these companies have rewarded the architects of buybacks with lavish executive compensation while laying off workers and robbing the remaining workers of basic labor rights. The CARES Act’s restrictions on buybacks build on an emerging trend among some corporations. Companies including Nordstrom, McDonald’s and Citigroup have already suspended stock buyback programs.
AT&T and CWA are leading by example
The act's buyback prohibitions and worker protections are a good start, but there is more to do. Sens. Sherrod Brown and Elizabeth Warren have practical proposals to limit buybacks and reform Wall Street. Congress should consider them now. New legislation should have support from a new national consensus that working and growing together is our common goal.
If workers get a better workplace, higher wages and stronger job protections, and their employers undertake more long-term investment, that is good for everyone in their communities, not an inefficiency. AT&T and CWA have given us an example we can choose to follow, and create truly collaborative relationships between companies and the men and women who work for them.
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The United States is facing an unprecedented two-front crisis: a global pandemic that threatens the health of tens of millions of Americans, and a potential economic collapse that could destroy an equal number of lives and livelihoods. For more than 200 years, Americans have come together in crises, working to support one another, and looking to leaders who could bring us together.
We are blessed to have millions of people — health care professionals, concerned neighbors, communications workers and many more — working to help everyone through this crisis. It is time to pull together so we can get through this unprecedented American challenge and come out a stronger nation on the other side.
Seth Harris was acting secretary of Labor and deputy secretary of Labor in the Obama administration. Follow him on Twitter: @MrSethHarris