CWA on Front Line In Fight To Reform Corporate America

Business accountability suddenly emerged as a huge news topic in the wake of corporate bankruptcies, accounting scandals and stories of CEOs looting their corporations of hundreds of millions of dollars while workers lose their jobs and retirement security.

However there is one institution that has been sounding warning calls and fighting for better accounting practices and responsible corporate governance for years — the labor movement.

Following Enron’s $63.4 billion collapse, CWA and the AFL-CIO in February joined the Council of Institutional Investors to press for action on Capitol Hill. The council is calling for measures to ensure that accounting firms maintain real independence from the corporations they audit, for criminal prosecution of irresponsible auditors and for tougher standards of independence for corporate boards of directors.

Intense pressure from labor helped win passage of a corporate reform bill requiring CEOs to sign affidavits attesting to the truthfulness of their companies’ books. President George W. Bush signed the bill into law July 30, the same day that hundreds of CWA and other union members rallied on Wall Street. They heard AFL-CIO President John Sweeney announce the federation’s “No More Business as Usual” campaign highlighting the plight of Enron, WorldCom and other workers who lost jobs or retirement savings because of corporate irresponsibility.

But much of the real work of corporate reform — limiting the growth of executive compensation, leveraging bargaining opportunities for union members and fighting for pension fairness and workers’ rights — goes on at annual shareholder meetings and in the courts, where CWA, other unions and public pension funds have been regular fixtures for years.

Unions, their members and the pension plans they control are shareholders and, as such, are entitled to a voice in corporate governance. Since the early 1990s, according to an article in the July 15 issue of Business Week, unions and their pension plans have leveraged more than $3 trillion in stock holdings to push corporations to improve on governance practices. Unions submitted fully 28 percent of all shareholder resolutions during the 2002 proxy season.

Demanding Workers’ Rights
CWA has often participated in annual meetings to pressure shareholders to demand that companies honor collective bargaining agreements, to fight for the right of workers to organize and to call attention to the exploitation of workers’ rights.

For example, in preparing for telecom bargaining two years ago, CWA leaders attended both the Verizon and AT&T annual meetings, delivering proxies collected from thousands of CWA members and demonstrating that union members are a major stakeholder in both companies.

Speaking to Verizon shareholders in Denver, union officials called for the company to stop violating the union contract and sought support for organizing employees in the company’s rapidly expanding wireless sector, as well as protection for workers’ wages, pensions and benefits.

At the AT&T meeting in Chicago, CWA leaders also presented a shareholder resolution calling for the board of directors to develop standards for evaluating and compensating executives based on their efforts to foster employee participation in workplace decisions and improve worker training and job satisfaction.

IUE-CWA the same year presented a resolution to General Electric shareholders calling on the company to adopt a workplace code of conduct based on internationally recognized labor rights. “GE shows little respect for workers’ rights wherever it operates, whether in Europe, Asia, Latin America or the United States,” a union flyer read.

At Ameritech, in 1998, the CWA Negotiated Pension Plan raised a shareholder issue that forced the company to back off its policy of requiring secret ballot voting in union representation drives, a policy designed to thwart union card-check organizing at its new lines of business.

In 1997 Knight-Ridder took over the Monterey (Calif.) Herald and forced all workers to reapply for their jobs. The Newspaper Guild-CWA presented a resolution at Knight-Ridder’s annual shareholder meeting in 1998 designed to “restore excellence” at Knight-Ridder papers by forcing the company to become more accountable to communities.

Protecting Retirement Security
Many CWA shareholder actions have been focused on protecting workers’ pensions. For instance, Local 1701 turned up at the last three annual IBM shareholder meetings to support a resolution to give all IBM workers the same options in pension and retirement health care plans.

The company unilaterally imposed a cash balance pension plan on all workers in 1999, later relenting somewhat after intense pressure from CWA and Congress. The resolution received a whopping 28.4 percent support in 2000. (Resolutions that capture 10 percent of shareholder support are eligible for automatic inclusion on the following year’s proxy.)

Publicity from Local 1701’s appearances at the shareholder meetings has helped position the CWA Alliance@IBM as a voice for all IBM workers. With as many as 15,000 IBM workers facing the possibility of layoffs, many have recently joined the local, increasing its size by 20 percent, to about 5,000 members.

At General Electric, IUE-CWA focused on the need to increase pensions for retired members through a resolution to require shareholder approval of plans to raise pension benefits of non-employees such as board members. A union flyer compared the pension of a woman who worked for the company 39 years — $626.40 a month — with the pension of former board Chairman Jack Welch — about $8.4 million a year. The resolution received 33 percent support in 2000. GE subsequently adopted the union’s recommendation and also raised benefits for IUE-CWA retirees.
CWA also has initiated or joined several court cases to protect members’ pensions.

In June 2001, six months before declaring bankruptcy, Global Crossing sold former Frontier Communications units — where CWA represents about 1,000 members in New York, Minnesota and Iowa — to Citizens Communications.

The creditors committee in the Global bankruptcy attempted to seize CWA members’ grossly over-funded defined benefit pension fund, once valued at $70 million, before it could be transferred to Citizens. CWA joined a lawsuit filed in U.S. Bankruptcy Court by Citizens seeking a summary judgment ordering Global to move the money.

The union also subsequently organized a class action suit on behalf of the workers, alleging that Global breached its fiduciary duties in its handling of the workers’ 401(k) plan.

Another case on behalf of shareholders at Sunbeam Corp. was brought by the CWA/International Typographical Union Negotiated Pension Plan, which covers 28,000 Printing Sector members and local union staff and controls $1.2 billion in pension assets.

The court case resulted in a $110 million settlement from embattled accounting firm Arthur Andersen and $15 million from former Sunbeam CEO Albert Dunlap. The suit charged that accounting fraud caused Sunbeam stock to plummet from $52 to about $8 a share.

Going After the Big Bucks
CWA has taken many opportunities to spotlight and attack excessive CEO compensation. The union has sponsored shareholder resolutions calling for companies to stop calculating pension fund income as “profits” to inflate top management compensation at General Electric, IBM and other companies.

GE’s pension plan last year produced 10.6 percent of overall pretax earnings, or $2.1 billion in income. “Earnings from the pension fund should be used to help retirees who built the company live in dignity,” said the 14-union Coordinated Bargaining Committee, which includes IUE-CWA.

The Alliance@IBM/CWA Local 1701 presented a similar resolution at the IBM shareholders meeting April 30 in Louisville, Ky. “IBM executives earn bonuses of about 10 percent a year based on the performance of pension fund assets used to inflate the company’s bottom line,” Local 1701 President Linda Guyer said.

In 1998, the CWA Negotiated Pension Plan joined the Council of Institutional Investors and the AFL-CIO in criticizing New York Stock Exchange Rules allowing companies to offer broad-based stock option incentives to up to 20 percent of their workforce without gaining the approval of shareholders.

CWA repeatedly has attacked excessive compensation for company executives such as Sprint CEO William Esrey and former AT&T CEO Bob Allen.

A 1999 Sprint resolution called on shareholders to limit any executive benefit package adopted in the event of a corporate takeover and won 27 percent of the shareholder vote. CWA estimated that Esrey’s compensation solely from stock options from 1997 to 1999 totaled $280 million. The AFL-CIO calculated that it would take a minimum-wage worker 7,142 years to earn what Esrey did in 1997 alone.

From Antitrust to Bankruptcy
The Telecommunications Act of 1996 was supposed to promote competition, to generate more companies providing more services to consumers at better prices. Instead, the telecom industry is in a freefall. Bankruptcies and declining markets have cost tens of thousands of workers their jobs and, in some cases, their retirement security.

CWA successfully fought a mammoth campaign to keep non-union WorldCom — which earlier took over MCI — from merging with Sprint. This mega-merger would have been devastating for the Sprint workers CWA represents and would have given WorldCom monopoly control of the Internet backbone.

The union also sounded a warning that the WorldCom-MCI merger was a house of cards. Addressing a symposium on the proposed merger, which was completed in 1998, CWA President Morton Bahr correctly predicted the merger would not result in the billions in “synergy” cost savings the companies claimed.

Now the company is in bankruptcy and has admitted to misreporting $7.6 billion in expenses as profits. WorldCom plans to write off $50.6 billion in losses and has laid off thousands of workers.

Taking Care of Members
Today CWA members are directly affected by scandalous looting of other companies including Qwest and Adelphia Cable.
Qwest’s troubles began when it was revealed that its former management team had exaggerated profits between 1999 and 2001 while executives and directors cashed out $1.5 billion in Qwest stock. Former CEO Joseph Nacchio alone walked away with $248 million while the company was deceiving Wall Street. He was forced out in June and his dealings are being investigated by the Justice Department.

As Qwest’s new leaders struggle to turn the company around, CWA is supporting Qwest’s bid to provide long distance service in Colorado, Idaho, Iowa, Nebraska and North Dakota. Expansion into long distance should give a shot in the arm to 32,000 Qwest workers CWA represents.

Bahr also has expressed strong public support for new Qwest CEO Richard Notebaert, who previously headed Ameritech.
At Adelphia, CWA continues to represent workers and participate in an exchange of information with Adelphia’s major creditors, and is seeking an “ex officio” position in the corporate restructuring of the bankrupt cable company.

Behind Adelphia’s downfall, prosecutors allege that CEO John Rigas and family members in key positions engaged in accounting fraud and secret self-dealing to the tune of billions of dollars.

“We’re working to preserve our represented franchises, to extend CWA representation to other workers, and to preserve quality service for Adelphia customers” said CWA Southern California Director Jim Weitkamp.

CWA’s activism on behalf of its Adelphia members has been noticed by unorganized workers at the company, who have become increasingly receptive to information from the union, he said.