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corporations. Some are suggesting that the historic role of the states in chartering corporations is now archaic. They are wondering if minimum federal standards are needed to guarantee that corporations function as responsible elements of economic production, and discussing whether corporations should be held accountable for their social role as well as their economic role in our lives.
As trade unionists we feel that corporations must be held to more stringent standards, particularly insofar as their activities have a social impact on those who interface with them as citizens, employees and consumers. Given the nature of competition in this country, it is unlikely that even the most willing of corporations would be in a position to unilaterally change its approach in social areas. The demands of business competition are such that the progresssive corporation would find itself in an untenable economic situation relative to its competitors.
Thus, we feel there is validity to increasing the role of the federal government in regulating corporate activities. This does not mean that the federal government should or would take over businesses. Rather, we look to strong policing by existing regulatory agencies such as the SEC, and strict enforcement of laws designed to prevent the development and perpetuation of monopolies within our economic structure. Where needed, of course, legislation should be updated so that enforcement officials can cope with modern corporations. Although there are close to two million small to moderate size firms that could be impacted by such approaches, we are primarily concerned with the 750–1,000 giants that directly or indirectly control most commerce in this country.
The power of corporations exhibits itself to working people in many ways. All workers are consumers, many of them are shareholders, and so on, but it is in their role as employees that the economic strength of the corporation is most frequently brought to bear on them.
The National Labor Relations Act was intended as a bill of rights and protections for working people in this country. Recently, we have witnessed substantial violations of that Act by firms that, in effect, feel free to operate beyond the law. Section 7 of the Act expressly guarantees employees the right to organize themselves and to bargain collectively through representatives of their own choosing. The subversion of the Act in recent years has become so commonplace that we feel we must seek new and more substantial protections from corporate power. The most notable of such cases involves the J. P. Stevens Company.
Over the past eleven years, J. P. Stevens has been cited for violating the National Labor Relations Act in fifteen different cases before the National Labor Relations Board. Almost all of these cases have been affirmed by the United States Court of Appeals. In addition, on five separate occasions, the National Labor Relations Board has gone before federal Courts of Appeals seeking to adjudicate Stevens in contempt of existing Court decrees. Over this period of time Stevens has paid approximately $1.3 million in backpay to approximately 300 workers.
The Stevens record speaks for itself:
1. J. P. Stevens and Co., Inc., 157 NLRB 869, enfd. as modified 380 F. 2d 292 (2nd Cir. 1937), cert. denied 389 U.S. 1005 (1967).
2. J. P. Stevens and Co., Inc., 163 NLRB, enfd. as modified 388 F. 2d (2nd Cir. 1967) cert. denied 393 U.S. 836 (1968).
3. J. P. Stevens and Co., Inc., 167 NLRB No. 37, enfd. as modified, 406 F. 2d 1017 (4th Cir. 1968).
4. J. P. Stevens and Co., Inc., 167 NLRB No. 38, enfd. as modified, 406 F. 2d 1017 (4th Cir. 1968).
5. J. P. Stevens and Co., Inc., 171 NLRB 1202, enfd. 417 F. 2d 533 (5th Cir. 1969).
6. Black Hawk Corp, 177 NLRB No. 120, enfd, in part and denied in part, 431 F. 2d 900 (4th Cir. 1970).
7. J. P. Stevens and Co., Inc., 179 NLRB 254, enfd. 441 F. 2d 514 (5th Cir. 1971), cert. denied 404 U.S. 830 (1971).
8. J. P. Stevens and Co., Inc., 181 NLRB No. 97, enfd. in part and denied in part, 449 F. 2d 595 (4th Cir. 1971).
9. J. P. Stevens and Co., Inc., 183 NLRB 25, enfd. 461 F. 2d 490 (4th Cir. 1972). 10. Black Hawk Corp., 183 NLRB No. 34 (19).
11. J. P. Stevens and Co., Inc., 186 NLRB No. 34, aff'd. F. 2d - 78 LRRM 3116 (5th Cir. 1971).
12. J. P. Stevens and Co., Inc., 190 NLRB No. 139, enfd. 475 F. 2d 973 (D.C. Cir. 1973).
13. J. P. Stevens and Co., Inc., 217 NLRB No. 90 (1975). 14. J. P. Stevens and Co., Inc., 219 NLRB No. 156 (1975). 15. J. P. Stevens and Co., Inc., 220 NLRB No. 34 (1975).
1. NLRB v.J.P. Stevens and Co., Inc., 464 F. 2d 1326 (2nd Cir. (1972).
2. NLRB v. J. P. Stevens and Co., Inc., Civ. Ac. No. 26 246 (5th Circuit) (Settled November 1, 1971).
3. NLRB v. J. P. Stevens and Co., Inc., Civ. Ac. No. 73–3175 (5th Cir.)-Master's Recommendation (1975), decision pending.
4. NLRB v. J. P. Stevens and Co., Inc., Civ. Ac. Nos. 30–914, 30–591, 31-245, 31-164 (2nd Cir.)-Master's Recommendations pending.
5. NLRB v. J. P. Stevens and Co., Inc., Civ. Ac. Nos. 31-914, 30–391, 31-245, and 31-164 (2nd Cir. Filed February 24, 1976).
Although the above legal history of Stevens' propensity to violate the law is dramatic, it does not truly reflect the magnitude of the lawlessness here involved. Neither does it reflect the inhumane attitude of Stevens toward its workers' attempts to organize.
It is tragic, but J. P. Stevens has accomplished what it set out to do that is, to destroy the attempts of tevens' workers to organize. With one notable excep tion, Stevens has basically succeeded in precluding the holding of fair elections.
Amid the hundreds of unfair labor practices committed since 1963, eleven elections have been held. The results have been as follows:
1. Roanoke Rapids, N.C. (1965) —Union loses, files objections, election is set aside.
2. Greenville, S.C. (1965)—Union loses, files objections, election set aside (Dunean plant).
3. Piedmont, S.O. (Estes) (1965)—Union loses, files objections, Board overrules objections.
4. Greenville, S.C. (1966)—Union loses, files objections, election set aside (Dunean plant).
5. Statesboro, Georgia (1968)—Union loses, files objections and unfair labor practice charges, election set aside-NLRB orders company to bargain with the Union,
6. Black Hawk Corporation, Greenville, S.C. (1969) Union wins election, but Court disqualifies certain voters resulting in union loss. Election set aside.
7. Turnersburg, N.C. (1972)—Union loses, files objections. Region has not yet ruled.
8. Walterboro, S.C. (1973)-Union loses—files objections-Board overrules objections.
9. Aberdeen, N.C. (1973)—Union loses—files objections-Board overrules objections.
10. Roanoke Rapids, N.C. (1974)—Union wins election and is certified.
11. Wallace, N.C. (1975)—Union loses election, files objections and unfair labor practice charges-Board files motion for contempt adjudication on some of the charges, refers rest back to region. Region has not yet ruled on objections.
All told, J. P. Stevens has paid over $1,300,000 to employees illegally discriminated against, $50.000 for settlement of an eavesdropping suit and countless tens or hundreds of thousands of dollars on legal fees involved in fifteen NLRB unfair labor practice cases, twelve Court of Appeals cases, five contempt cases, three petitions for certiorari to the Supreme Court and numerous other NLRB investigations which did not result in issuance of a complaint.
If you think these "expenses" will in any way deter Stevens you are wrong. At the most recent shareowners meeting of J. P. Stevens held in New York on March 2, 1976 a share owner raised the issue of the high cost of the company's anti-union campaign. This issue was officially raised as a written proposal in the J. P. Stevens & Co., Inc. "Notice of Annual Meeting of Shareowners." The company's official response was simple and to the point:
"The Company costs directly or indirectly attributable to the union organizing and related activities are not material in the Company's overall operation. ..."
In other words, to Stevens, the cost of destroying worker attempts to organize and the cost of busting the union through vicious, contemptuous conduct is merely viewed as a minor cost of doing business.
If nothing is done to require responsible corporate behavior, then J. P. Stevens and other companies like it will continue to actively destroy the rights of workers and make a mockery of the federal labor laws.
The only thing this company and others like it understand is the "cost of doing business." Congress must act to take the profit out of violating laws such as the National Labor Relations Act. You cannot legislate morality but you can legislate a responsibility that Stevens and others like it will have to respect.
There are many other cases that come immediately to mind when we think of the tendency of some major corporations to flout existing law. During the 1950's and 1960's American industry engaged in a massive merger movement. According to Dr. Willard Mueller, former Director of the Bureau of Economics of the Federal Trade Commission, the top 200 manufacturing firms acquired some 3,900 companies which had a collective value of more than $50 billion. The result of this merger activity was the emergence of what we now think of as conglomerate corporations.
Conglomerates are firms that do business in a number of largely or totally unrelated industries. The impact of labor relations of conglomerate organizations has been profound. Such firms, operating in a variety of industries, have been able to fragment traditional relationships between employees and local managements. In certain cases, the administrative, financial and logistical advantages enjoyed by conglomerates have been used to frustrate the collective bargaining process itself by effectively impairing the bargaining strength of the unions,
In 1953, Litton Industries was a small electronics producer. By 1970 it had made more than 100 conglomerate acquisitions, and in 1975 it was the nation's 53rd largest industrial corporation. During that period of time, Litton Industries could be identified as the parent corporation involved in 29 separate National Labor Relations Board proceedings in which General Counsel for the Board issued complaints against Litton or its subsidiaries for alleged unfair labor practices under Section 8(a) (although in one instance Litton accepted a unilateral settlement agreement).
Litton operations were found by the NLRB to be in violation of the law on a total of 18 counts, in 13 of the 18 cases which reached the Board itself. A synopsis of these cases is attached herewith as Table 1. It was prepared by Dr. Charles Craypo, Associate Professor of Labor Studies, Pennsylvania State University, for presentation to the House Committee on Labor, Subcommittee on Labor Management Relations, last February.
The power of Litton Industries extends far beyond the borders of the United States. Litton is a prime example of the worst tendencies of an emerging form of corporate organization-the multinational firm. Multinationals can do things that purely domestic corporations cannot. Most typically, they are conglomerates on an international scale. They search the world for situations that will provide the maximum profit in the shortest period of time. They owe allegiance to no particular flag and are frequently able to operate in ways that thwart the laws of parent and host countries alike.
Frequently, a company such as Litton, which has the capacity to move its production sites from place to place throughout the world, uses that power to destroy collective bargaining relationships with its employees. Other multinational firms have done the same thing.
Because they are essentially unregulated by the bulk of U.S. corporate and tax laws, most of which were written prior to the emergence of multinationals, these firms exploit not only the labor force but the taxpayers and consumers of this country as well. By shifting production to foreign countries, these firms have drained over two million job opportunities from the U.S. economy. This estimate of job losses is only part of the story, since it excludes the construction work and other indirect inputs which would have serviced these jobs and the facilities in which they are performed. These firms have eroded the U.S. industrial base, sacrificed the growth of American productivity, created a situation which many in this country lament as a "shortage” of domestic investment capital, and have generally distorted the U.S. economy and international trade. A variety of tax loopholes, subsidies and deferrals makes the multinational life almost irresistible for U.S. corporations. In 1970, the total foreign-source income of American corporations was $17.5 billion. Of this, the U.S. Treasury collected only $900 million in taxes an effective tax rate of 5.1 percent. Most of this income, of course, went to the very large U.S. corporations that come off quite well on their domestic tax bills anyway.
The most important multinationals are among the 100 largest U.S. corporations—which paid an effective tax rate in 1970 of 26.9 percent while the remaining American corporations paid Uncle Sam an average rate of 44 percent. One result of these discrepancies in corporate tax rates is that the rich keep on getting richer, the biggest corporations get bigger, and American business is further encouraged to move its production profits overseas.
These discrepancies in tax rates are clearly not the only cause for the multinationals' export of production. But they have established a legal framework within which it is more profitable to operate overseas than in the U.S. The United States, in effect, often pays multinationals to relocate the sources of corporate income outside the borders of the U.S. The results are unquestionably profitable for the firm, but they dictate a premature death for American industries and unnecessary hardship for the workers and communities that depend on them. If we are to survive as a viable economic force in the world, we should see to it that laws governing corporations are recast in ways that will prevent U.S. firms from participating in such destructive pursuits.
We are submitting, along with this testimony, Volume 5, No. 4 of Viewpoint, an IUD quarterly magazine. In it you will find further descriptions of the multinational threat, and a study of one of the many cases involving Litton Industries. The article shows how the power of multinational firms can destroy the intent of the National Labor Relations Act and the lives of American workers.
There are additional areas in which corporate law needs to be reformed. For example, when a firm goes into bankruptcy, it is unlikely that its employees will be able to readily collect monies that are due to them. Even where they are able to collect, the law (written in 1926) covers only the first $600 of employees wage claims.
Most recently, we have been alerted to some of the ways in which corporations have misallocated stockholders' funds in attempts to influence individuals, firms and even entire governments. Because these funds have been misallocated by corporations rather than individuals, it is unlikely that the persons responsible for these misdeeds will suffer any serious consequences. We charter corporations in no small part to relieve some aspects of the liability which unincorporated business would be subject to. If we are to continue this practice, we must reexamine just which misdeeds can be hidden under the corporate rug.
Another area which requires great scrutiny involves the extent of corporaate disclosure both to the government and to the public. Many sets of government data which could be useful analytical tools are rendered useless because there are no uniform requirements as to how corporations handle their accounting. This means that the investing public cannot readily compare the performance of various firms and also makes it harder to arrive at meaningful public policy decisions. The little bit that corporations do report is frequently hidden under confidentiality rules which make it even more difficult to get a proper fix on the role of corporations in our society.
We talked earlier about the role of U.S. multinationals. The government collects precious little data on U.S.-based multinationals. Those of us who are interested in their economic and employment performance must rely totally on estimation and guesswork. There is no public data whatever on individual multinational firms.
We applaud this committee for undertaking this examination of the social and economic rights and duties of corporations. We feel that this area requires periodic reexamination so that public policy with regard to incorporated firms can be adjusted to reflect the concerns and realities of a changing world.
TABLE 1.-UNFAIR LABOR PRACTICE CHARGES FILED AGAINST LITTON INDUSTRIES' SUBSIDIARY COMPANIES IN WHICH THE NLRB GENERAL COUNSEL
ISSUED COMPLAINTS, 1963-75
Case (year of decision)
Airtron (Wichita, Kans.).
207 NLRB 154 (1973). American Book (Florence, Ky.).
do. 214 NLRB 44 (1974).
do. Automated Business Systems (Clifton, N.J.)-- Electrical (IUE).
205 NLRB No. 35 (1973).
.do. Automated Business Systems (Athens, Ohio). Graphic Arts
9-CA-7745-2 (1974) 1.
156 NLRB 1096 (1966).
Refusal to bargain.
217 NLRB 34 (1975).
do. Hewitt-Robins (Columbia, S.C.)...
Steelworkers. 11-CA-4962 (1973)
Refusal to bargain.
Refusal to bargain
Teachers (AFT)... 173 NLRB 153 (1968).
Refusal to bargain
Refusal to bargain
Interference, assisting rival
employee organization, Royal Typewriter (Springfield, Mo.).Allied Industrial Workers. 209 NLRB 174 (1974)..
Refusal to bargain.
26-CA-5655 (1975), 26-CA-5736 Discrimination.
(1975). Triad-Utrad (Blytheville, Ark.)..
7 cases consolidated (1975). Interference, discrimination.. Twin City Tool....
1 Indicates the year in which settlement occurred. 3 Unilateral Board settlement.
No complaint issued.