Published: Monday 24 September 2012
“It is increasingly apparent that the pay awarded to chief executives is becoming profoundly detached from not just the pay of the average worker, but also from the companies they run.”


CEO pay has increased 725 percent over three decades, while worker pay has essentially remained flat. A new study challenges a conventional practice corporations use to justify skyrocketing CEO pay, which is that without it, CEOs would leave for competitors. According to the study by the University of Delaware’s Charles M. Elson and Craig K. Ferrere:

It is increasingly apparent that the pay awarded to chief executives is becoming profoundly detached from not just the pay of the average worker, but also from the companies they run. Offsetting the external focus, which is so heavily relied upon today, with internal metrics and internal benchmarking may help to curb the persistent escalation. We hope that if directors are no longer constrained by notions of “competitive” pay, which are driven by the false belief that CEOs are interchangeable, they may have the space to rationalize the upward spiraling pay ratchet and deliver what is more shareholder acceptable compensation.

Company boards rely on a practice where they use loosely defined “peer groups” of supposedly similar companies to set the CEO’s compensation. In reality, few CEOs leave one company for another: Of 1,800 CEO successions between 1993-2005, less than 2 percent had held the position at a competing firm. Their skills, highly specific to the company, are not easily transferrable.

Another issue is the “peer groups” companies use is so ...

Published: Sunday 26 February 2012
“It is only a matter of time before the volume of intellectual output from China to the U.S. exceeds the flow in the opposite direction.”

As Apple’s stock continues to hit record highs and its sales and profit reports exceed all expectations, Steve Jobs’ reputation as an entrepreneurial genius grows ever larger. He succeeded in developing products that people around the world very much want to buy. In this sense, Jobs stands out from the mediocrities that run most corporations and collect huge pay checks in the process.

It may be some time before another innovator comes along who can match Steve Jobs record, but we constantly see companies developing new products, even if few will have the same impact as the iPod or iPad. The United States continues to be at the forefront in innovation, but this will likely not always be the case.  It is worth asking whether we should care. This requires a clear-eyed assessment of the benefits to the country provided by innovators like Jobs.

As the New York Times recently documented, Jobs deserves credit for developing products that people value, but it is less clear that he deserves much credit for creating jobs in the United States. Apple has long outsourced to China and other countries virtually all of its manufacturing operations. Apple has absolutely not been a boon for U.S. manufacturing workers.

Apple directly and indirectly employed tens of ...

Published: Saturday 25 February 2012
“The president’s proposal will require companies to pay a minimum corporate tax on all offshore profits, thus reducing the incentive for offshore production and parking profits in a tax haven.”

President Obama announced plans on Wednesday to reform the corporate tax code to make it simpler and fairer. The plan would reduce the top corporate tax rate substantially from 35 percent to 28 percent (25 percent for manufacturing) without increasing the deficit, a tall order indeed. Eliminating special interest tax breaks for business is an obvious quid pro quo for a lower tax rate and has the added benefits that it reduces the complexity and increases the fairness of the tax system. But this will not be sufficient.

To achieve a tax cut that is revenue neutral, the president has proposed eliminating three provisions in the tax code that create significant inequities and economic distortion. He proposes limiting the tax deductibility of interest, eliminating the special tax treatment of earnings of hedge fund and private equity managers, and reducing incentives for companies to offshore profits in tax havens.

Currently businesses can deduct interest payments on all of their debt no matter how highly leveraged they are. This leads companies to assume high debt-to-equity ratios not justified by business requirements. This makes companies vulnerable to financial distress in an economic downturn. A recent study of 2,156 highly leveraged companies found that a stunningly high 25 percent of them went bankrupt between 2007 and 2011. The tax deductibility of interest also encourages businesses to use complex financial instruments whose only purpose is to reduce the company's taxes. Finally, the disparate treatment of interest on debt and earnings retained by the corporation discriminates against ...

Published: Tuesday 13 December 2011
The way in which China keeps its currency down against the dollar (or keeps the dollar up against its currency) is by buying huge amounts of U.S. government bonds.

The Commerce Department’s release of trade figures last week showed another large deficit with China for October, albeit slightly lower than the record hit the previous month. This figure will renew the calls for stronger action against China.

Unfortunately the debate over China is often buried in confusion, leading to a situation that is not conducive to effective action. A major reason for this confusion is that there is not a common U.S. interest against China. The interests of the 99 percent differ greatly from the interests of the 1 percent. Until this fact is recognized more generally, there is no possibility that our economic relations with China will change in a way that benefits the vast majority of working people in the United States.

The central issue with China is the fact that the dollar is over-valued against the Chinese currency. This over-valuation is the result of the explicit Chinese policy of pegging its currency against the dollar.

The peg is often referred to as “manipulation,” but it doesn’t really fit the bill for two reasons. First, it is an official policy. China targets the value of its currency quite openly; it is not doing it in the middle of the night when no one is looking.

The second reason is that China’s mechanism for targeting the value of its currency is something that on alternate days our Treasury actually requests. They buy up U.S. government debt.

If this seems absurd, it should because it is. The way in which China keeps its currency down against the dollar (or keeps the dollar up against its currency) is by buying huge amounts of U.S. government bonds.

The media often tells us that we need China to buy our debt. This is not true. There are plenty of other potential investors, including the Federal Reserve Board. However we cannot both want China to buy U.S. government debt and then complain about China’s currency manipulation. This is how they ...

Published: Friday 18 November 2011
“Republican lawmakers continue to aid and abet corporate tax avoidance by protecting offshore profit deferral, which allows corporations to claim domestic tax credits for profits they earn overseas.”

With income inequality in the U.S. at its highest level since the Great Depression, Americans from every end of the income spectrum are clamoring for corporations and the wealthy to pay their fair share in taxes. But because of the numerous tax loopholes and credits worked into the tax code, corporate taxes are at historical lows.

Bank of America paid nothing in federal taxes in 2009. While earning billions in profit, companies like Boeing, Exxon-Mobil, and Wells Fargo also paid nothing in recent years. Other corporations, like Google and Pfizer, dramatically lower their tax rates by deferring profits they make overseas. After making more than $14 billion in profits last year, General Electric not only got a pass on paying any corporate income ...

Published: Tuesday 15 November 2011
Pharmaceutical company Pfizer has developed a new way to stay on top and make you pay more.

Pharmaceutical companies have sought for years to protect their expensive brand-name drugs by paying generic rivals handsome sums of money to put off efforts to introduce cheaper, generic alternatives that could steal market share.

The controversial practice, known as “pay for delay," occurs as part of patent litigation settlements and typically buys a brand-name drug company more time to sell its blockbuster drug exclusively until its patent on the drug expires. Federal Trade Commission regulators have said the practice costs consumers an estimated $3.5 billion each year, and have pushed for a ban.

But now it appears the drug company Pfizer is adding yet another twist to its efforts to delay generic competitors. As The New York Times reports, the company seems to have struck a deal with certain pharmacy benefit managers — the middlemen in the ...

Published: Monday 7 November 2011
“The new report details human experiments led by US researchers and drug companies on Africans who are typically undereducated, poor, and lack full understanding of their rights.”

A new policy brief faults prominent institutions and drug companies like Pfizer, Columbia University, Johns Hopkins University, and Population Council, for their involvement in unethical and illegal human experimentation in Africa.

The report is titled “Non-Consensual Research in Africa: The Outsourcing of Tuskegee” in reference to the illegal human experiment conducted in Tuskegee, Alabama, between 1932 and 1972 by the US Public Health Service. In that experiment, some 600 impoverished African-American men were observed in a study on the progression of untreated syphilis. Some of the men were intentionally infected with the disease and all of them were denied the cure. Regrettably, the report notes, no one was held accountable for this crime against humanity.

The new report details human experiments led by US researchers and drug companies on Africans who are typically undereducated, poor, and lack full understanding of their rights. The human subjects often are led to believe that they are receiving medical treatment from governmental health services or health ministries.

These practices hearken back to the appalling experiments carried out by US researchers in Guatemala in the 1940s where hundreds of Guatemalans were deliberately infected with sexually transmitted diseases without information or consent. President Obama formally apologized to Guatemala for these experiments last year.

Human experimentation in the United States is regulated by the Office of Research Integrity and various Ethical Research Institutional Boards. Many African countries lack these institutions. Even when they exist, they lack independence and are controlled by corrupt government officials.

In one experiment on HIV sponsored by Gilead Sciences, the ...

Published: Wednesday 2 November 2011
“When the holiday was granted once before, in 2004, some of the wealthiest corporations had their taxes cut by billions of dollars.”

Almost 70 members of Congress co-sponsoring legislation for a massive tax holiday have received almost a million dollars in campaign contributions from the corporations that would benefit most.

Among the leading advocates for a bill that would allow the firms to pay cut-rate taxes on a trillion dollars these firms have stashed offshore is the WIN America campaign, a coalition of trade groups and companies like Apple, Pfizer and Google. An iWatch News analysis of campaign finance data has found that 68 of the 80 sponsors of the legislation in the House and Senate have received donations from WIN-affiliated companies since the start of 2009, taking in more than $940,000.

In addition to contributions to lawmakers, the WIN affiliates gave huge amounts to the two national political parties. The national committees for the Republicans got at least $576,000 while their Democratic counterparts collected at least $408,000 during this period.

For a select group of companies that would benefit most from the tax holiday, the stakes are high. When the holiday was granted once before, in 2004, some of the wealthiest corporations had their taxes cut by billions of dollars. Pfizer profited to the tune of $37 billion; Merck by $15.9 billion, Hewlett-Packard by $14.5 billion and IBM and Johnson & Johnson by some $10 billion each.

Given the number of tech firms that stand to benefit from the tax holiday, it is no surprise California Democrats with Silicon Valley connections are among the top recipients. Reps. Anna Eshoo and Zoe Lofgren, who both claim part of Silicon Valley in their districts, are among the 11 Democrats to co-sponsor the House bill. They ranked first and second in funds received from WIN affiliates among co-sponsors of the bill, with Eshoo receiving more than ...

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