Corporations - Page 10

(2/21/03) - Fat cat compensation packages for corporate executives are already beginning to seem like quaint relics of a halcyon bygone era.

Legislators, corporate boards, commissions – and others with a vested interest – moved with lightning speed in 2002 to dramatically overhaul how executive officers and corporate directors are rewarded for their services.

"In the not-so-distant past, CEOs were practically given a blank check. As long as the company's stock price was good, they could virtually write in any amount they wanted and the board wouldn't bat an eye" said Wade Close, managing director of the Pittsburgh office of Boyden, a global executive search firm.

Belts tighten

Those days are clearly over. Corporate scandals and a sour economy have let the air out of stratospheric salaries that, by Close's estimate, had ballooned to as much as 500 times the average worker's pay.

"I think that this year will likely show a decrease in overall executive compensation," said Bill Coleman, general manager of the Columbus office of Lee Hecht Harrison, a national outplacement firm.

But it's the equity portion of these packages where some of the biggest changes are occurring. New laws from October's passage of the Sarbanes-Oxley Act of 2002 (a.k.a. the Corporate and Criminal Fraud Act) are taking aim at a number of common compensation practices, particularly those related to stock options.

CEOs and CFOs of public companies, for example, are now required to pay back bonuses and profit from the sale of stock if the company they lead is required to restate its financial statements as a result of misconduct. Executives are also banned from selling stock during black-out periods, and they must report changes in their beneficial ownership of company stock before the end of the second business day following the day the transaction is executed.

"New accounting standards for stock options have also been proposed and are expected to be in place by 2005," said Stephen Cahill, the Midwest practice leader in the Chicago office of Mercer Human Resources Consulting Inc. Indeed, the International Accounting Standards Board is proposing that companies should treat stock options as an expense.

The Securities and Exchange Commission recently adopted new rules regarding disclosure of equity compensation plans, including those that have not been approved by shareholders. But if the New York Stock Exchange and Nasdaq get their way, shareholders of all their member companies will eventually be required to approve the plans.

"Stock options were always considered a valuable retention tool. But there was generally no real risk of loss on the part of the executive. It was a no-lose proposition for them that simply got out of hand," Close said.

Insurance questions

Another new law prohibits public businesses from making loans to executive officers and directors. That brings into question whether split-dollar life insurance – a popular component of the executive benefits package that many see as an extension of credit – should be taxable.

"It's under debate right now within the insurance industry," Close said.

The gleam might be coming off golden parachutes, too. Proposed regulations that would increase their cost to companies will likely result in a scaling back.

A growing number of corporate boards and compensation committees are aligning compensation packages around key performance issues of the business, including sales growth, improved profitability, efficiency gains, market share, customer satisfaction, and innovation, Coleman said. Since different companies have different measures of success, savvy boards pick financial measures that drive the value of their business and are correlated to shareholder value.

"There's a heightened focus now on doing it this way," Coleman said.

As corporate boards take on a much more active role, board compensation is actually increasing in some cases, Cahill said. But the way they're being paid is often different than it's been in the past.

"They used to get a lot of stock options and meeting fees, but now there's a trend toward a flat retainer and restricted stock that's much more aligned with the real shareholder," Cahill said.

With an eye on corporate performance instead of just stock performance, boards are coming up with incentive plans that have a longer-term look to them, according to Close.

"I think the pendulum swung too far and now they're finally addressing it."

(2/21/03) - NEW YORK (Dow Jones)--Moves by Verizon Communications and General Electric Co. to exclude income or profit from their pension plans when calculating bonuses for senior executives are likely to put pressure on other companies to follow suit.

Both GE and Verizon adopted the measures in response to shareholder proposals from groups representing retired employees. A number of large companies, including International Business Machines Corp. and Qwest Communications International Inc., face similar shareholder proposals.

As investor fury over exorbitant executive paychecks has boiled over in the past year, "it would be unusual for a Fortune 500 company not to take a hard look" at the issue, said Jean FitzSimon, a corporate-governance specialist at consultancy Bridge Associates LLC.

However, FitzSimon added, companies tend to be slow to act when it comes to transparency. "Unless they receive a push from shareholders, they are unlikely to jump on the bandwagon," she said.

Declining pension assets may help make these measures more palatable. Although pension plans still generate big profits at some companies, their contribution to earnings is declining as the stock market takes a toll on returns and the costs of benefits rise.

GE's pension plan contributed $1.5 billion to income in 2002. But that was down from $2 billion a year earlier.

Verizon expects pension income to contribute between three and five cents to earnings per share this year, down from 35 cents a share in 2002.

That means top executives will have less to lose by excluding the impact of pension-plan income or profits from the calculations used to determine their pay.

Both GE and Verizon plan to spell out their new compensation systems in their 2003 proxies, due out next month.

Activist investors are targeting excessive executive compensation as the number one problem requiring shareholder action this year. Executive pay issues, ranging from expensing stock options to abolishing options completely, have drawn more shareholder resolutions than any other topic.

"The executive pay issue is capturing the focus of a lot of shareholders," said William Patterson, head of the AFL-CIO's (News - Websites) Office of Investments.

Last year, Verizon received three shareholder proposals from the Association of BellTel Retirees, one on the calculation of executive compensation, one on executive severance agreements and one on the composition of the board of directors. While all three were defeated, the proposal to disallow Verizon from including earnings on its $55 billion pension fund for the purposes of calculating officers pay received the widest margin of support, at 43%.

The company subsequently decided to adopt the measure. "We wanted to be responsive to shareholders," spokesman Bob Varettoni said.

IBM is facing a similar proposal on this year's proxy ballot, but the company remains opposed to such a move.

"We strongly believe that compensation of executives should be based on a company's performance as reported to stockholders," spokesman Bill Hughes said.

"We don't see any merit to the contention that IBM administers its pension plan in a manner other than in the best interest of company employees and retirees," he said.

Qwest Communications spokesman Chris Hardman said the company is also facing another shareholder proposal on excluding pension income from calculations of executive pay this year, but declined to comment further.

AT&T Corp. was also the subject of an unsuccessful shareholder proposal to exclude pension income from calculations of executive pay last year, but the company wouldn't indicate whether such a proposal would appear on this year's proxy ballot. "We're not going to speculate on what we may or may not do in future on executive compensation," spokesman Dan Lawler said.

(2/11/03) - General Electric and Coca-Cola have agreed to phase out certain generous salary and pension benefits for top executives after pressure from investors.

Their decision to abolish the benefits - a deferred salary plan at GE and an executive retirement plan at Coca-Cola - is a sign that leading US companies are taking shareholder concerns on executive compensation seriously, as the spring season of annual meetings approaches.

But shareholder activists believe big US companies should go further and intend to use the meetings to press for wide-ranging corporate governance reform.

The AFL-CIO labour federation said it had not yet decided whether to withdraw resolutions opposing the GE and Coca-Cola plans and was in talks with other companies about curbing executive compensation and benefits.

This year, unions have been demanding that directors who are members of the compensation committee should attend negotiations. "The only way you can begin to get real action is having a director along," said Bill Patterson, director of the AFL-CIO's office of investment.

The three-year bear market and last year's corporate scandals have made US companies extremely sensitive to shareholder criticism, and annual meetings could be particularly stormy at some companies this year. But both GE and Coca-Cola played down the role of direct shareholder pressure in the decision on executive benefits. "Input from our shareholders is always a factor," said Coca-Cola.

The compensation committee at GE, which came under fire last year for retirement benefits granted to former chief executive Jack Welch, has ended its "special salary deferral plans" for the five best-paid executives.

The plan allowed its highest executives to defer annual salary and receive an above-market interest rate. GE is keeping, however, a less generous deferral plan for about 4,000 top managers, on the grounds that it helps encourage loyalty.

Coca-Cola said its Key Executive Retirement Plan, which was offered only to three top executives, including Douglas Daft, chief executive, would be phased out. It offered additional pension benefits on top of the regular company retirement plan.

Melissa Moye of Amalgamated Bank, the union bank, is cautious about predicting voluntary reform at companies. She said the bank's talks with companies had not yielded any substantial changes of policy so far.

The bank's Longview funds are backing motions on issues such as splitting the roles of chairman and chief executive and repatriating US companies incorporated offshore. It is expected that some changes may only be implemented after annual meetings.

(2/20/03) - Pop music played a crucial role in the national debate over the Vietnam War. By the late 1960's, radio stations across the country were crackling with blatantly political songs that became mainstream hits. After the National Guard killed four antiwar demonstrators at Kent State University in Ohio in the spring of 1970, Crosby, Stills, Nash and Young recorded a song, simply titled "Ohio," about the horror of the event, criticizing President Richard Nixon by name. The song was rushed onto the air while sentiment was still high, and became both an antiwar anthem and a huge moneymaker.

A comparable song about George W. Bush's rush to war in Iraq would have no chance at all today. There are plenty of angry people, many with prime music-buying demographics. But independent radio stations that once would have played edgy, political music have been gobbled up by corporations that control hundreds of stations and have no wish to rock the boat. Corporate ownership has changed what gets played — and who plays it. With a few exceptions, the disc jockeys who once existed to discover provocative new music have long since been put out to pasture. The new generation operates from play lists dictated by Corporate Central — lists that some D.J.'s describe as "wallpaper music."

Recording artists were seen as hysterics when they complained during the 1990's that radio was killing popular music by playing too little of it. But musicians have turned out to be the canaries in the coal mine — the first group to be affected by a 1996 federal law that allowed corporations to gobble up hundreds of stations, limiting expression over airwaves that are merely licensed to broadcasters but owned by the American public.

When a media giant swallows a station, it typically fires the staff and pipes in music along with something that resembles news via satellite. To make the local public think that things have remained the same, the voice track system sometimes includes references to local matters sprinkled into the broadcast.

What my rock 'n' roll colleague William Safire describes as the "ruination of independent radio" started with corporatizing in the 1980's but took off dramatically when the Telecommunications Act of 1996 increased the number of stations that one entity could own in a single market and permitted companies to buy up as many stations nationally as their deep pockets would allow.

The new rules were billed as an effort to increase radio diversity, but they appear to have had the opposite effect. Under the old rules, the top two owners had 115 stations between them. Today, the top two own more than 1,400 stations. In many major markets, a few corporations control 80 percent of the listenership or more.

Liberal Democrats are horrified by the legion of conservative talk show hosts who dominate the airwaves. But the problem stretches across party lines. National Journal reported last month that Representative Mark Foley, Republican of Florida, was finding it difficult to reach his constituents over the air since national radio companies moved into his district, reducing the number of local stations from five to one. Senator Byron Dorgan, Democrat of North Dakota, had a potential disaster in his district when a freight train carrying anhydrous ammonia derailed, releasing a deadly cloud over the city of Minot. When the emergency alert system failed, the police called the town radio stations, six of which are owned by the corporate giant Clear Channel. According to news accounts, no one answered the phone at the stations for more than an hour and a half. Three hundred people were hospitalized, some partially blinded by the ammonia. Pets and livestock were killed.

The perils of consolidation can be seen clearly in the music world. Different stations play formats labeled "adult contemporary," "active rock," "contemporary hit radio" and so on. But studies show that the formats are often different in name only — and that as many as 50 percent of the songs played in one format can be found in other formats as well. The point of these sterile play lists is to continually repeat songs that challenge nothing and no one, blending in large blocks of commercials.

Senator Russell Feingold of Wisconsin has introduced a bill that would require close scrutiny of mergers that could potentially put the majority of the country's radio stations in a single corporation's hands. Lawmakers who missed last month's Senate hearings on this issue should get hold of the testimony offered by the singer and songwriter Don Henley, best known as a member of the Eagles, the rock band.

Mr. Henley's Senate testimony recalled the Congressional payola hearings of 1959-60, which showed the public how disc jockeys were accepting bribes to spin records on the air. Now, Mr. Henley said, record companies must pay large sums to "independent promoters," who intercede with radio conglomerates to get songs on the air. Those fees, Mr. Henley said in a recent telephone interview, sometimes reach $400,000.

Which brings us back to the hypothetical pop song attacking George Bush. The odds against such a song reaching the air are steep from the outset, given a conservative corporate structure that controls thousands of stations. Record executives who know the lay of land take the path of least resistance when deciding where to spend their promotional money. This flight to sameness and superficiality is narrowing the range of what Americans hear on the radio — and killing popular music.

(12/26/02) - Even as the economy shows some signs of emerging from the doldrums, several leading companies — like Goodyear, Humana and Verizon — are cutting thousands more jobs.

They plainly believe that lowering labor rolls now will help them perform better in the long term. But experts on corporate strategy and human resources are not so sure.

Some argue that layoffs, combined with a careful revamping, can set the stage for growth. Others, however, contend that companies that avoid cutting jobs reap huge benefits in loyalty and productivity.

In a quest for the most productive companies in the world, Jason W. Jennings, a consultant and author of a recent book on the subject, settled on 10 businesses that had never made a layoff.

"Not only have they never had a layoff," Mr. Jennings said, "but each of them has a written or well-understood covenant with the workers that the corporate checkbook, or management missteps and misdeeds, are never going to be balanced on the backs of the workers."

Mr. Jennings, who chose the companies using a combination of elementary financial criteria and on-site research, conceded that he could not prove that a no-layoffs policy led to profits and growth for the group. But he did see something valuable in the strategy of the 10 companies, which included innovators like Nucor Steel, the minimill operator, and Ryanair, the low-cost European airline.

"They know that if they use layoffs," he said, "they're going to end up with a work force that's going to be more concerned about themselves than about increasing productivity."

But the picture is not so simple, according to Peter Cappelli, a Wharton School professor who runs the Center for Human Resources at the University of Pennsylvania.

"If you look just broadly at whether companies that lay off do better, the answer appears to be no," Professor Cappelli said. But, he added, "the ones that lay off the most are already the ones that are in the most trouble."

In the past, manufacturers responded to cyclical downturns in sales by making temporary layoffs, usually concentrated among blue-collar workers. Often members of unions, the workers were usually rehired for the same jobs when business turned up again.

Many other companies, except those about to collapse, often chose to retain their workers on the theory that layoffs and rehirings were both costly.

Absorbing the expense of wages and benefits allowed the companies to remain ready to take advantage of orders for new business.

But increased competition and investor demands have made companies more aggressive about cutting costs. At the same time, structural changes in the economy — among them, declines in unionization and the rise of information technology — have made the labor market more fluid, a trend Professor Cappelli expects to continue. Starting more than a decade ago, with waves of layoffs that also aimed for white-collar workers, many companies began to reconsider the traditional thinking.

The trade-off is a serious matter at the Goldman Sachs Group, whose financial businesses are people intensive. "You want to cut enough excess capacity in down markets to be cost effective, but you don't want to cut so deeply that you can't respond when markets turn up" a Goldman executive said. "Management has certainly been aware of how fine a balance it is."

The company has interspersed at least seven rounds of cuts with several spurts of job growth in the last 15 years. Early this year, the company anticipated trimming about 5 percent of its work force. When business conditions continued to sour, Goldman decided to reduce its numbers by 13 percent, including layoffs and voluntary terminations — its biggest cuts ever.

Though Mr. Jennings' group of productive companies may not make use of layoffs, those that have done so recently appear to perform no worse than the market. According to news reports, 38 publicly traded companies based in the United States all made more than 1,000 layoffs in the fourth quarter of 2001. From January of this year through last week, their share prices dropped by 22 percent on average — exactly the same loss suffered by the Standard & Poor's 500-stock index.

In some industries, making job cuts is not a choice. More airlines and telecommunications companies, faced with a steep drop in demand, might have failed if not for hundreds of thousands of layoffs in the last two years. And for many companies outside those hard-hit industries, cutting jobs has always been an important component of strategic change.

The long-troubled Sears, Roebuck & Company — which has steadily lost ground for years to Wal-Mart and other discounters — has cut jobs several times. In the late 1980's, it pared down its bureaucracy. In 1993, it cut about 50,000 positions and wound down its catalog sales unit.

"Most of the downsizing has been predominantly due to a shift in business model, rather than directly related to the economy," a spokeswoman for Sears, Peggy A. Palter, said. About a year ago, the company announced thousands more job cuts as it transformed its sales floors.

"Our customer has told us that she's not willing to pay for a higher level of service," Ms. Palter said. "So we've changed our service level in the stores, moving more towards self-service in the smaller ticket items."

Though a slumping economy may not have caused of all Sears's cuts directly, she added, it still played a role. "Obviously, the economy is one of the factors that changes our customers' perception of what they want from the retailer."

While several experts endorsed downsizing as part of a strategic plan, as Sears has, they differed on the merits of making layoffs simply to cope with temporary slackness in demand. Even with a faster-moving labor market, hiring good people back may not always be easy.

"We don't think that it's a good idea to focus a very high percentage of your organization on leveraging the flexible labor market," said Mark W. Womack, an executive vice president for Celerant Consulting Group. "It's definitely a superior strategy to figure out where your company wants to be in the next couple of years," he said, "and build the right organization, processes and system that align together to take you towards your mission."

Xerox, another long-troubled company that has been repeatedly battered by foreign competitors, has tried to follow that model. The company made 9,000 layoffs in 1998, predicated on a massive revamping, and announced another 2,400 last month in an effort to save money.

"In the past two years, we've been in the process of a pretty major turnaround," a spokeswoman for Xerox, Christa B. Carone, said. "Part of that strategy was looking at ways that we could streamline our business model, which did mean exiting some businesses and eliminating some redundancies. The net result of that is the company did return to profitability, and we've had improving operations over the past couple of years."

Professor Cappelli echoed the principle of Mr. Womack's argument: "If the cuts are part of a restructuring plan where you're doing other stuff as well," he said, "then it's more likely to help." But Professor Cappelli's research on the subject found that companies that reduce their work force for strategic reasons reap fewer benefits than those that lay off workers to deal with excess capacity. The latter type of job cut, he said, "clearly seemed to help."

Mr. Womack advised caution, especially in industries where talented employees are still a scarce commodity, like pharmaceuticals. His firm recently advised a multinational drug manufacturer. "They have to be quite careful about who they let go," Mr. Womack said, "and what's their recruitment plan and what's their retention plan."

In fact, attracting the most skilled workers may be more difficult in economically uncertain times than in booms. In the past decade, Professor Cappelli explained, companies looking for top talent often sought to hire from outside rather than promoting or training their own. Yet these days, a valuable worker may need significant inducements to leave another position.

"If you're offering me a job — and even if it's a slightly better job than I've got now — if I think the economy is going to go down, I would absolutely rather stay put," Professor Cappelli said.

That hiring problem may worsen, if demographic forecasts hold true. "We're simply not generating the kind of labor force growth that we have in the past," said Sylvester J. Schieber, director of research at Watson Wyatt, a supplier of professional services. Though the "attract and retain" philosophy may have suffered some blows lately, he predicted that it would return to prominence as higher economic growth led to tighter labor markets.

Xerox is already anticipating that return. While the company cut positions, both in the tight labor market of the late 1990's and in the weaker recent climate, some employees urged management to save more jobs by cutting everyone's pay equally. But Anne M. Mulcahy, Xerox's chief executive, insisted on maintaining salaries and bonuses for the most productive workers.

"The labor market has changed," Ms. Carone said, "but our strategy for keeping our best people, even during tough times, has not."

(12/19/02) - The good citizens of Pennsylvania have done it again.

Back in 1776, they hosted at Liberty Hall in Philadelphia a gathering of people radicalized by the predations of the East India Company. The world's first multinational corporation then held a virtual stranglehold on commerce and politics in North America, and brazenly used British troops as its enforcers. On the first week of December, 1600, when she created the East India Company, Queen Elizabeth I became the first CEO monarch, and by 1776 King George II was following in her footsteps with his sizeable holdings in and open advocacy of corporate rule.

The American colonists were offended by the idea they should be vassals of a corporation and a kingdom that supported and profited from it. Thomas Jefferson wrote the Declaration of Independence, which explicitly stated that humans were born into this world endowed by their Creator with certain rights, that governments were created by humans to insure only humans held those rights, and "That whenever any form of government becomes destructive of these ends, it is the right of the people to alter or abolish it…"

Stating flatly that "it is their right, it is their duty," to alter their government and thus claim their unique human rights, 56 men defied the East India Company and the government whose army supported it by placing their signatures on the Declaration of Independence, saying, "with a firm reliance on the protection of divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor."

Thus began America's first experiment with democracy.

The first week of December of that same year, Thomas Paine wrote in a pamphlet he published a few weeks later that, "Tyranny, like hell, is not easily conquered… What we obtain too cheap, we esteem too lightly: it is dearness only that gives every thing its value. Heaven knows how to put a proper price upon its goods; and it would be strange indeed if so celestial an article as FREEDOM should not be highly rated."

Exactly 226 years later, another small group in Pennsylvania also met in early December to sign a document that claimed the same right - their duty - to alter their government in a way that would restore the democracy the original Founders were willing to fight and die for. The democratically elected municipal officials of Porter Township put their signatures to an ordinance passed unanimously on December 9, 2002. It reads, in part:

"A corporation is a legal fiction created by the express permission of the people…;

"Interpretation of the U.S. Constitution by the Supreme Court justices to include corporations in the term 'persons' has long wrought havoc with our democratic processes by endowing corporations with constitutional privileges intended solely to protect the citizens of the United States or natural persons within its borders;

"This judicial bestowal of civil and political rights upon corporations interferes with the administration of laws within Porter Township and usurps basic human and constitutional rights exercised by the people of Porter Township; …

"Buttressed by these constitutional rights, corporate wealth allows corporations to enjoy constitutional privileges to an extent beyond the reach of most citizens;

"Democracy means government by the people. Only citizens of Porter Township should be able to participate in the democratic process in Porter Township and enjoy a republican form of government therein;…"

And then, with an audacity and willingness to take on overwhelming multinational corporate power similar to that displayed by the Founders, the elders of Porter Township said that "Corporations shall not be considered to be 'persons' protected by the Constitution of the United States or the Constitution of the Commonwealth of Pennsylvania within the Second Class Township of Porter, Clarion County, Pennsylvania."

It became the law of that land five days later.

In 1773, the East India Company had claimed the "right" to participate in the political processes of England and, with wealth and power greater than the average citizen, got passed for themselves a huge tax reduction on tea and an overall tax rebate so large they could undersell and wipe out their small Colonial competitors. The response of the entrepreneurial colonists to the Tea Act of 1773 was the Boston Tea Party revolt against that transnational corporation, setting the stage for the Declaration of Independence and the beginnings of what Lincoln called "government of the people, by the people, for the people."

Similarly, in 2000, one of the largest sludge hauling corporations in the United States sued Porter Township, claiming that as a "person" the corporation had rights equal to the citizens of the township, and therefore they couldn't "discriminate" against the corporation under the due process and equal protection clauses of the 14th Amendment, which was passed after the Civil War to free the slaves.

Porter Township, supported by a coalition including the Pennsylvania Farmers Union, the Pennsylvania Association for Sustainable Agriculture, The Sierra Club, the AFL-CIO, the United Mine Workers of America, Common Cause, the Program on Corporations, Law, and Democracy (POCLAD), the Community Environmental Legal Defense Fund (CELDF), and other pro-democracy groups, fought back. They bluntly asserted that - as it was from the founding of this nation until the bizarre Santa Clara County v. Southern Pacific Railroad Supreme Court case in 1886 - only humans are entitled to human rights in their community.

In the law they passed on December 9, 2002, they explicitly said, "The judicial designation of corporations as 'persons' grants corporations the power to sue municipal governments for adopting laws that violate the purported constitutional rights of corporations. For example, in September 2000, Synagro Inc. filed a federal lawsuit against Rush Township (Centre County) Supervisors, forcing the Township to spend tens of thousands of taxpayer dollars to defend its health-related sewage sludge testing ordinance against claims that the ordinance violated the corporation's constitutional rights."

The implications of this are staggering. For example:

Before 1886, it was a felony in most states for corporations to give money to politicians or otherwise try (through lobbying or advertising) to influence elections. Such activity was called "bribery and influencing," and the reason it was banned was simple: corporations can't vote, so what are they doing in politics? Their concern is making money, and they don't need clean air to breathe or fresh water to drink; leave them to making money and leave the administration of the commons to We, The People.

Before 1886, it was a crime in most states for corporations to own others of their own kind. The need to keep corporations from becoming so large that they could usurp democracy was so clear to the Founders that Jefferson and Madison proposed an 11th Amendment to the Constitution that would have banned "monopolies in commerce," restricting each company to performing a single purpose, making it responsible to its local community, and barring it from owning other corporations. The amendment didn't pass because everybody at the time knew that the states already had such laws in place.

Before 1886, only humans had full First Amendment rights of free speech, including the right to influence legislation and the right to lie when not under oath. Now corporations have claimed that they have the free speech right to influence public opinion and legislation through deceit, and a case based on a multinational corporation asserting this right is poised to go before the Supreme Court as you read these words. That corporation reserves the right to fire and even prosecute human employees who lie to it, however.

Before 1886, only humans had Fourth Amendment rights of privacy. Since then, however, corporations have claimed that EPA and OSHA surprise inspections are violations of their human right of privacy, while at the same time asserting their right to perform surprise inspections of their own employees' bodily fluids, phone conversations, and keystrokes.

Before 1886, only humans had Fifth Amendment rights against double jeopardy and the right to refuse to speak if they'd committed a crime. Since 1886, corporations have asserted these human rights for themselves: the results range from today's corporate scandals to 60 years of silence about the deadliness of tobacco and asbestos.

Before 1886, and following the Civil War, only humans had Fourteenth Amendment rights to protection from discrimination. Since then, corporations have claimed this human right and used it to stop local communities from passing laws to protect their small, local businesses and keep out predatory retailers or large corporations convicted of crimes elsewhere.

Porter Township has fired the first shot in the New American Revolution with this first binding law denying corporate personhood. It's a revolution that will be fought not with guns but in the courts, in the voting booths, and on the battlefield of public opinion. (Far from harming corporations, returning human rights solely to humans will lead to an entrepreneurial boom in America - only a small handful of very large corporations abuse these rights to deceive people, hide crimes, or make politicians violate the will of their own voters. The millions of ethical corporations will thus be freed from the tyranny of the few while democratic government will be returned to its citizens.)

As Thomas Paine - another Pennsylvania resident - wrote on that 1776 December night and published 2 days before Christmas, "Let it be told to the future world, that in the depth of winter, when nothing but hope and virtue could survive, that the city and the country, alarmed at one common danger, came forth to meet and repulse it."

Thom Hartmann is the author of "Unequal Protection: The Rise of Corporation Dominance and the Theft of Human Rights," a book containing a version of the above ordinance customized for each of the 50 states. www.unequalprotection.com. He holds the copyright to this article, but grants permission for reprint in print, web, and email media as long as this credit is attached.

Time magazine's persons of the year are three whistle-blowers: Sherron Watkins of Enron, Cynthia Cooper of WorldCom and Coleen Rowley of the F.B.I.

They deserve to be celebrated. After all, thanks to Ms. Watkins and Ms. Cooper, Jeff Skilling, Ken Lay and Bernie Ebbers have been indicted, and the politicians who did their bidding have been disgraced. Thanks to Ms. Rowley, incompetent officials at the F.B.I. and C.I.A. have been removed from their posts, and we've had a searching inquiry into what went wrong on Sept. 11.

Oh, I'm sorry. None of that actually happened. The bravery of the whistle-blowers was real enough, but Time seems to be celebrating what should have been, not what was.

This past year brought shocking revelations about how American institutions, from corporations to government agencies, really operate. But the whistle-blowers haven't been rewarded; Time makes it clear that Ms. Cooper and Ms. Rowley are personae non gratae in their organizations. And those on whom the whistle was blown have mostly gone unpunished. Last week one F.B.I. official singled out by Ms. Rowley — he blocked an investigation that might have averted Sept. 11 — received a special presidential award.

I'm a history buff, so the events of 2002 made me think of a historical parallel — the English peasant rebellion of 1381. The rebels very nearly took London, but were turned aside by King Richard II, who promised to end the oppression of the common people by the aristocracy. As soon as the danger had passed, however, he made it clear that promises to little people don't count. "Villeins ye are, and villeins ye shall remain."

During the late spring and summer, amid corporate scandals and tales of F.B.I. ineptitude, Americans received many promises of reform. But once the political danger had passed, all those promises — even, incredibly, the promise that families of victims would get to choose one member of the Sept. 11 commission — became non-operational. Villeins ye are . . .

Yet some good guys did win victories.

Time named New York's attorney general, Eliot Spitzer, "crusader of the year." Mr. Spitzer's achievement shouldn't be overstated; he didn't "save capitalism," as some would have it. The $1.4 billion settlement he wrung out of the securities industry was a small fraction of what investors lost on highly touted stocks, stocks that insiders knew were worthless. And while the settlement requires that investment banks pay for some independent stock research, it probably won't be enough to erase suspicions that analysis is slanted in favor of big customers.

But Mr. Spitzer achieved far more than anyone else, and more than anyone could have expected. With no help from federal regulators, who should have been taking the lead, he used the limited powers of his office — the power to investigate and to publicize the outrages he found —— brilliantly. It's a tribute to his effectiveness that powerful congressmen tried to shut him down, by inserting language into reform legislation that would have stripped state attorneys general of the right to carry out Spitzer-type investigations. (What about states' rights? Oh, that only applies when states want to, well, you know.)

You also have to admire Mr. Spitzer's style. Key to his success was the discovery of incriminating internal communications. Addressing an investment industry dinner, he told the audience, "It is wonderful to be here this evening, because I really want to put faces to all those e-mails."

So I'm glad that Mr. Spitzer has gotten his due. But let me put in a plug for another group of good guys who haven't gotten their due: California's long-suffering electricity regulators.

Back during the crisis of 2000-2001, those regulators were ridiculed for saying that energy companies were manipulating the market. Nobody except an Op-Ed columnist or two believed them. But over the course of 2002, as incriminating memos and tapes came to light, they were fully vindicated. As with Mr. Spitzer, the compensation they have recently managed to extract — $1.8 billion in refunds — falls far short of the tens of billions looted from the public. But also like Mr. Spitzer, they've done very well given the lack of cooperation, and often active hostility, from Washington.

If truth be told, 2002 was a very good year for cynics. But it's the day before Christmas, so let's be thankful for our gifts: the good guys who made a difference.

NEW YORK (Reuters) - Companies have gotten used to paying big bucks to keep their retired executives in lavish lifestyles, but the practice has become much harder to justify in the wake of public criticism over the cost of such perks.

Perks for retired corporate officers became a hot-button issue a few months ago, when the wife of former General Electric Co. Chief Executive Jack Welch filed divorce papers against the legendary business leader.

The documents show Welch was receiving flowers, wine and laundry services at a GE-owned apartment in Manhattan, along with sumptuous meals and satellite TV at his stable of residences.

Welch, one of the most lionized CEOs in corporate America, lost some of his luster after the embarrassing disclosures and later renounced more than $2 million in perks provided by GE.

Compensation experts say the scrutiny surrounding the episode is likely to put a chill on over-the-top retirement benefits.

The details of Welch's package, coming after a wave of other Wall Street scandals that showcased new heights of executive greed, did little to improve the image of corporate America.

"Compensation committee members are asking questions they never asked before," said Jan Koors, vice president at Pearl Meyer & Partners, a consulting firm specializing in executive compensation.

Koors said any changes in post-retirement benefits and perquisites will only become apparent as old contracts expire and new ones are put in place.

"The spotlight is on compensation committees for the foreseeable future," said Howard Golden, a senior consultant at Mercer Human Resources Consulting.

ABSENCE OF REGULATION

Whether that will last in the absence of new regulations remains to be seen. Some experts doubt there will be a sea change in the willingness of boards to sign off on lavish retirement packages.

"There's not enough movement right now to influence how corporations enter into arrangements with executives," said Judith Fischer, managing director of Executive Compensation Advisory Services, a research firm in Alexandria, Virginia.

Paul Hodgson, senior research associate at the Corporate Library watchdog group, said Welch's perks were probably typical for high-profile CEOs.

International Business Machines Corp. said Louis Gerstner, its outgoing chairman and former CEO, will keep his access to the company's New York City apartment, along with company planes, cars, offices, and financial planning for 20 years. Use of the apartment and planes is subject to availability.

But retirement may not be such a lavish affair for Gerstner's successor, Samuel Palmisano. A company spokeswoman said the current CEO does not have an employment contract, which is typical of IBM executives.

Gerstner, who rarely talks to the press, has said little about his package.

Asked if he thought it would be affected by the criticism of large CEO retirement packages that has followed disclosures about Welch, Gerstner replied, "Not a bit. Not a bit."

PROXY STATEMENT RULES

Part of the problem, experts say, is that regulations governing disclosure are vague and, some fear, open to abuse.

The U.S. Securities and Exchange Commission requires companies to list the value of executives' perks and benefits as "other annual compensation" in the annual proxy statement. If any item accounts for more than 25 percent of the total, it must be identified.

Even so, that threshold allows companies to avoid disclosing the kind of details that enraged GE shareholders -- such as their having to foot the bills for Welch's flowers, wine, and expensive dinners.

"When a company does not feel it is being required to fully disclose arrangements with its executives, that's the kind of atmosphere that can encourage abuses," said Executive Compensation Advisory Services' Fischer.

Although companies must include information about executive compensation packages in the proxy statement every year, those expenses are not listed after an executive retires. They are simply included in the company's other employment expenses.

Compensation and corporate governance experts agree that substantive change is unlikely without new regulations handed down from the SEC.

The SEC is conducting an informal investigation into GE's disclosure of the Welch perks, but has not indicated that it plans to revise its regulations.

"I'm not aware of any kind of formal proposal before the Commission to change the rules at this point," SEC spokesman John Heine told Reuters. Following SEC policy, he declined to comment on the GE investigation.

Editor's Note: The Committee for Economic Development is a non-profit, non-partisan research and policy organization of 250 business leaders and educators who have long called for campaign finance reform. They are also the people who have been asked to make the largest political donations, including so-called soft money contributions, which was banned in the federal campaign reform bill passed this past summer.

The group filed a ‘friends of the court’ brief to support the soft money ban. That ban has been challenged. Below are excerpts from that brief detailing their experience with soft money and its problems.

(12/3/02) – CED’s trustees, who are past and present chairmen, presidents, senior executives of major American corporations and university presidents, have direct experience with being solicited by party leaders and elected officials for ever increasing corporate soft money contributions...

As CED’s trustees are all too aware, businesses have been making ever larger soft money contributions with ever increasing frequency for one of two reasons: either to secure tangible benefits in the form of political access or influence, or to avoid retribution in the form of adverse governmental action on issues that directly affect solicited businesses. Put differently, these contributions, typically made in response to high-pressure solicitation by Members of Congress, party leaders and others, are motivated by stark political pragmatism, not by ideological support for either party or their candidates...

"That access runs the gamut from attendance at events where they have opportunities to present points of view informally to lawmakers to direct, private meetings in an official’s office to discuss pending legislation or a government regulation that affects the company or union.... Business leaders believe -- based on experience and with good reason -- that such access gives them an opportunity to shape and effect government decisions and that their ability to do so derives from the fact they have given large sums of money to the parties." Gerald Greenwald, Chairman Emeritus of United Airlines...

Members of Congress also have acknowledged the crude "access for sale" character that soft money has acquired. For instance, [Democratic] Senator Carl Levin [of Michigan] has stated:

"The parties advertise access. It’s blatant. Both parties do it. Openly. Invitation after invitation sells access for large contributions. From 1996: For a $50,000 contribution or for raising $100,000 a contributor gets: Two events with the President. Two events with the Vice President.... Monthly policy briefings with key administration officials and members of Congress.... One invitation in 1997 to a Senatorial Campaign Committee event promised that large contributors would be offered "plenty of opportunities to share [their] personal ideas and vision with" some of the top leaders and senators..."

The pervasive practice of giving money to both sides of the aisle exposes the fundamentally self-protective motives that drive corporate soft money contributions.... As Edward Kagan, the former chairman of the global board of directors of Deloitte Touche Tohmatsu and the campaign finance reform co-chairman of CED, noted in a newspaper editorial, "The threat may be veiled, but the message is clear: failing to donate could hurt your company..."

As business leaders, we are concerned about the effects of the campaign finance system on the economy and business. Americans identify "special interests" principally with corporations. A vibrant economy and well functioning business system will not remain viable in an environment of real or perceived corruption.... We wish to compete in the marketplace, not in the political arena.