IPI Incomes Parity Initiative

A shareholders’ resolution...

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WHEREAS:

Data: US Census

1. As shareholders, we want the business of [The company] (“company”, herein) conducted in a manner not merely consistent with our own interests, but fairly in the interests of our employees, users and buyers of our products and services, suppliers and the general society.
2. Extreme disparity of incomes in the general society
1. creates a negative economic externality
2. results in social stratification manifesting
   1. distortion of democratic processes and
   2. emergence of a social class resembling aristocracy.
3. In our era, our society produces and distributes goods, services and incomes via corporations such as the company.
4. The company provides an admired, influential, leading example for other companies worldwide.

RESOLVED:

We request that the board of directors implement an Incomes Parity Policy (“Policy”, herein) such that

1. The annualized rate of compensation of the least well compensated employee of the company will be more than 1/70th (one seventieth) of the annual rate of compensation of the most highly compensated employee. This is the core principle of the Incomes Parity Policy.
2. “Employee”, as used here,
   1. during the first year of effectiveness of this Policy, and thereafter, refers to any employee, director, executive officer, whether “exempt” or “non-exempt” or “temporary” or “permanent” or “full time” or “part time” or “casual” or otherwise, without regard to geographic location.
   2. during the second year of effectiveness of this Policy, and thereafter, refers additionally to any person providing labor or services comprised significantly of labor, by formal or informal contract with an agency or union or directly, including all consultants and other workers.
3. “Compensation”, “compensated”, etc., as used here, refer to all salaries, wages, bonuses, equity awards, contractual payments, fees, stock options, payments in kind and deferred income, and similar transactions, including, but not limited to, all forms of compensation mentioned in the Executive Compensation section of the annual proxy statement and other forms of compensation of employees. “Compensation” does include dividends and change in value of shares of stocks and financial instruments awarded to an employee as compensation. “Compensation” doesn’t include dividends and change in value of ordinary common stock purchased by the employee with their own funds.
4. The board will interpret the Policy broadly, to defeat attempts to circumvent the meanings of “Employee” and of “Compensation”.
5. The board will oversee the amounts and timing of adjustments of employees’ compensation.
6. If existing contracts bind the company, the company will honor them, but new, extended and renewed contracts will comply with the Policy. The board, at its discretion, may incur significant and material costs to cancel or modify contracts to achieve compliance with the Policy.

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The text of the above resolution, excluding graphics, is less than 450 words. I am grateful for the advice of friends who reviewed early drafts.

Sources consulted:

Alphabet Inc.,  2016 Proxy Statement 
Craig McGuire, “How to write a shareholder proposal”  (2012) 
Daniel Brockman, "The 1% and the 99%" (Nov 13, 2011)
U.S. Census, current population survey household income data tables (http://www.census.gov/hhes/www/cpstables/032012/hhinc/toc.htm downloaded Nov 2011, no longer available. See www.census.gov.)

This entire article is a free cultural work (CC0  2016). Anyone may use it for any purpose without seeking permission.

To the extent possible under law, Daniel Brockman has waived all copyright and related or neighboring rights to Incomes Parity Initiative. This work is published from: United States.

On Resolving Trump’s Conflicts of Interest

President-elect Donald J. Trump owns many properties and companies worldwide. A conflict of interest exists if a presidential decision shaping national policy could benefit him personally. A blind trust is a customary way of hiding assets from an owner to prevent a conflict or the appearance of a conflict of interest. 

An article by Dean Baker on the Center For Economic and Policy Research site, and commentary from Russ Abbott and several others, inspired my thinking on a route to divestiture.

There are complications with divesting Mr.Trump’s assets to establish a blind trust. Accurate estimates of the values of major commercial properties can escape even highly experienced appraisers, even as auctions sometimes yield prices of great works of art that surprise professionals. The properties have unique characteristics, including conditions affecting the seller, and the potential buyers have varied perceptions, opportunities and constraints.

Photo: trumphotels.com/las-vegas

With the Trump properties, the brand name influences the value of the asset. And tax effects may reduce the value the seller can realize in an early sale, versus several years or indefinitely in the future.

A strategy something like the following could fairly accommodate these considerations:

1. Appoint 3 Trustees agreeable to Mr. Trump and certified professionally capable by the General Accounting Office, with the Senate Ethics Committee having general oversight.  The 3 Trustees manage the divestiture and conveyance of the proceeds to the blind trust. They (and their staff) organize the Trump assets, properties and companies into suitable accounting entities to “package” the assets for sale. They prepare financial statements and projections for each asset. They hold sealed-bid auctions for each of the entities. These will be net assets, reduced by the debt they bear. Let the market set the value. Each asset not receiving bids in two years and each asset clearly having negative value would go to its own separate bankruptcy.

2. For each asset, escrow all related income occurring after Dec 31, 2016. The buyers of the properties will receive the accumulated income. At the time of the sale, the Trustees will estimate the income tax effect, based on the difference in income taxes for Mr. Trump between (hypothetically) holding the asset and selling it, and the tax effect will be escrowed and sold as part of the property. The escrow will accomplish separation of Mr. Trump from the assets. Mr. Trump will receive no income from the asset after Dec 31, 2016. Bidders at the auctions will need several months to inspect the assets, estimate incomes, and kick the tires before they bid. Prudent management of the distribution from escrow could require a few months after the sale. Disposition of all assets could possibly take three or four years.

3. With great publicity, the Trustees will change the brand of each property from "TRUMP" to "T1" on Dec 31, 2016, with new signage going up promptly. Buyers may continue operating under the "T1" brand. The "Trump" brand will divest for $1 to Trump's children, which they may not use before 2037. Thus everyone will know the "T1" brand labels the divested Trump asset.

4. For those currently using the "TRUMP" brand under license, their right to use the brand will cease at the next scheduled fee payment date, and they will not pay license fees after Dec 31, 2016.

5. For each asset, the Trustees will govern business operations after Dec 31, 2016.

6. The Trump family may not buy any of the assets before 2037.

What do you think?

Sources:

Dean Baker, “Ending Trump’s Conflict of Interest Problem in three Easy Steps”, Center for Economic and Policy Research (Nov 22, 2016) http://cepr.net/blogs/beat-the-press/ending-trump-s-conflict-of-interest-problem-in-three-easy-steps

Update: The 35-Hour Work Week: Remedy for Unemployment

Reduce the standard working hours per week from 40 to 35.

Each week, the 325 million people of the United States produce, by their labor, a quantity of goods and services that more or less satisfies their wants and needs. They apportion the labor (strictly speaking, the employment) unequally to half of the people, about 160 million (excluding children, prisoners, the armed forces, and people who can’t work or don’t want to work), including 124 million employed “full time”, and 28 million employed “part time”. 

The average number of hours of employed work per day, for a person who works on a weekday, is about 8. They work 40 hours per week.  

Different people work different numbers of hours per week. In 2015, 25% worked less than 35 hours per week, 68% worked 40 hours per week or more, including 16% (1 out of 6 workers) who worked 49 hours per week or more.  

The people who want to work, but haven’t found a job, are about 5% or 8 million, plus about 1 million “marginally attached” to the labor force. 

As a first-order calculation, if the people worked 7 hours per day, instead of 8, then they would produce 7/8 as much stuff as they now do. If they also hire an additional person for each 7 persons now working, that would make up the difference in production. That would create a labor demand for 20 million workers. That would employ most of the 8 million now seeking work. 

The question immediately arises whether to adjust the pay rate of the employee working 7 hours per day, instead of 8. In the California state employee furloughs, the additional time away from the job had net value for many workers. Further, Talent Thread in Sep 2016 reported 

“...when a company comes up short on the salary side of the equation, workers said they’d consider options like a flexible schedule or more paid time off to balance things out.” 

This question of pay adjustment need not have a generally applicable answer. Workers and employers can forge relevant agreements in each organization.

If you have a car with a leaking engine, you might keep it going a few more miles by adding oil. However, this won’t fix the problem. To fix it, you must make structural changes. Similarly, President-elect Trump’s $1 trillion infrastructure program, if implemented, won't fix the continuing unemployment in the United States, though it will save some people from destitution. In our opinion, the society, led by the government in partnership with businesses, must seek structural changes to reduce income disparities and distribute income more broadly, and thereby remedy the extensive unemployment in the economy. Reducing work to 35 or fewer hours per week per worker is one structural change that tends to distribute income more broadly. (Nobel economist Joseph Stiglitz has documented a number of other possible beneficial structural changes in his book “Rewriting the Rules”. )

One policy to incentivize the 35-hour work week might look something like this:
1. The spirit of this policy. The national interest warrants that, while large numbers of willing workers are unemployed, excess hours of work facilitate a negative economic externality, and employees should work 35 hours per week or less, with few exceptions.
2. Reduce employer’s incentive for excess hours. Employers will pay the employee 135% of the employee’s regular pay rate for hours worked in excess of 35 in any week and on days worked in excess of 5 in any week.
3. Reduce employer’s incentive further. Employers will pay a payroll tax surtax of 35% for employee’s pay for hours in excess of 42 hours in any week, for each employee working excess hours.
4. Reduce employee’s incentive to work excess hours. Each employee working excess hours will pay a payroll tax surtax of an 35% for their pay for hours in excess of 49 in any week. 
5. Reduced hours won’t imperil benefits. Employers will provide full employee benefits to any employee who usually works more than 10 hours per week.
6. No excuses - the rules apply to just about everyone. Employers will make a fair and reasonable estimate of hours worked for each employee not paid by the hour and for every employee paid at a lower rate than 1/10 of the rate of the most highly compensated employee.
7. No excuses - if they look like a worker, and act like a worker, then they are a worker. Employers using contract employees, or time and materials workers, or workers via an agency or similar arrangement, will consider these rules to apply to these workers. 


Related earlier articles:

This 2016 article makes updates a 2010 analysis: The 35-Hour Work Week http://daniel-brockman.blogspot.com/2010/07/the-35-hour-work-week-remedy-for.html.

The California Experience http://daniel-brockman.blogspot.com/2010/12/california-experience.html 

The French Experience http://daniel-brockman.blogspot.com/2010/11/french-experience.html 


Additional information on Sources:

24 Seven, “Talent Thread” (Sep 1, 2016, downloaded Dec 1, 2016) https://talentthread.com/2016/09/01/66-of-employees-are-planning-a-job-change-job-market-report-2016/

BLS Bureau of Labor Statistics, “Technical Notes, Household Data” (Feb 2016) http://www.bls.gov/cps/eetech_methods.pdf 

BLS, “The Employment Situation - October 2016” (Nov 4, 2016) http://www.bls.gov/news.release/archives/empsit_11042016.htm

BLS, “Labor Force Statistics from the Current Population Survey; Household data annual averages; 19. 2015, Persons at work” (Feb 10, 2016, downloaded Dec 1, 2016) http://www.bls.gov/cps/cpsaat19.htm

United States Census Bureau real time population clock http://www.census.gov/

Donald J. Trump, “Infrastructure: Donald J. Trump’s Vision” (Downloaded Dec 1, 2016) https://www.donaldjtrump.com/policies/an-americas-infrastructure-first-plan