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Wednesday, November 28, 2012

Getting Employees to Lobby: Fix the Debt

How far a boss can ethically become involved in an employee’s political role as a citizen is a question perhaps more important than whether a business should make demands regarding what an employee does in the privacy of his or her own home (e.g., smoking or drinking products that are legal). It would obviously be objected, for example, were a supervisor to insist on accompanying a subordinate into the voting booth to verify the vote. What about pressuring an employee to lobby as a private citizen in the company’s interest without being paid for that work? Is it even work when it is “voluntarily” done on “off-time”? Finally, would it make a difference if the issue held systemic importance—meaning if it were vital to the country itself or at least the economic system—and the particular stance being advocated by the boss had value in solving the systemic problem (i.e., not just in the company’s interest)?
 
                 Federal U.S. deficits as a percentage of GDP from 1792 (2012-2016 projected). Notice that the projections take the deficits down from 2008-2010 levels. Notice also 1960-2010 as differing significantly from the "episodic" pattern in the 1792-1930 period. Why?
 
As 2012 wound down, Congress and the American president found themselves embroiled in difficult negotiations to avoid the across-the-board budget cuts and the end of the Bush tax-breaks scheduled to begin with the new year. Both sides were using the media to (over)dramatize what was at stake, even calling the scheduled deficit-reduction a “fiscal cliff”—as if $500 billion in 2013 out of an economy of annual GDP of over $16 trillion were a cliff rather than an impediment to growth. Into that hypertrophy, CEO’s were making their positions known in meetings with Congressional leaders and the president.
Morgan Stanley’s CEO, James Gorman, sent an email to his company’s 16,000 financial advisors and branch managers in the U.S. urging them to contact their members of Congress to urge them to reach “a bipartisan compromise” on a deficit-reduction deal that would override the across-the-board cuts and the end of the tax breaks across all income levels subject to federal income tax. “No issue is more critical right now for the U.S. economy, the global financial markets and the financial well-being of our clients,” he wrote, “which is why I am asking you to participate in the democratic process and make your voice heard.” The CEOs of Caterpiller and Honeywell International also urged their respective employees to pressure their representatives in Congress to reach a compromise.
On the one hand, that Gorman explicitly asks his employees to participate suggests that the request is extrinsic to the employees’ jobs. No employee could be penalized for refusing, and the CEO did not have the right to verify a particular employee’s “participation.” Moreover, participation in the democratic process pertains to citizens, and is thus extrinsic to the role of employee at a company. That is to say, it could be argued that a boss has no business involving himself what, if anything, an employee does in the democratic process—that domain being off limits. The pressuring could be viewed in terms of that process as one citizen trying to pressure others to do his will politically—something any citizen on the receiving end has a right to be without. This stance can be modified, or mediated, however, by the substance of the request.
That no “issue is more critical right now for the U.S. economy [and] the global financial markets” means that the value of the request is not merely to the company or even its customers—there is a larger stake involved. The larger element implies a civic duty of sorts, which even CEOs—being human after all—can feel and act on with a sense of higher calling than merely protecting their jobs and companies. Were an asteroid heading for Earth, no one would complain should the CEO of even an asteroid-destruction company urge his or her employees to pressure members of Congress to act on the threat—even if it would mean that the company gets a lucrative contract as a result. Of course, if the “fiscal cliff” rhetoric were outsized relative to the actual threat at hand, the play for democratic participation would be over-played from this standpoint and employees should feel any civic obligation in turn. In fact, employees could refuse their CEO’s request as a way of “just saying NO” to the constructed theatrics in Washington.
Beyond the question of “higher purpose,” the substance of the CEO’s favored remedy is also relevant to whether he or she is “crossing the line.” In general, the more partisan the intimated or explicit recommendation to be lobbied, the more suspect the attempt to pressure employees to participate in the democratic process on the issue at hand. Gorman was on pretty solid ground in this respect, urging only that a bipartisan deal be reached. Better still, he could have suggested that employees use their own judgment in recommending particular solutions but urge their members of Congress to be sure to come to a deal at the end of the day.
However, if the “fiscal cliff” rhetoric was exaggerated theatrics designed by politicians to get more attention, Gorman’s assumption that the important thing was that a deal be reached could have been wrong. From the standpoint of reducing the federal deficit in 2013, the “cliff” could be preferable to any deal likely to come at the end of 2012. Such a deal could be a two-parter that would have less overall impact on the deficit. In this case, Gorman should have urged his employees to pressure their federal representatives not to compromise on deficit-reduction, even if that means “going over the cliff.”
Perhaps the least legitimate plea for participation is that which is highly partisan or self-serving. Were Gorman to urge employees to support President Obama’s position on tax rates, for example, the employees could rightly object to their boss’s interference into their politics. As an example of a self-serving position, Lloyd Blankfein—the CEO of Goldman Sachs who had told a journalist that Goldman was doing “God’s work”—was urging Congress to cut entitlement programs to the poor while retaining subsidies (including in taxation) for business including Goldman Sachs. He told CBS, “You’re going to have to do something, undoubtedly, to lower people’s expectations of what they’re going to get.” Of course, the Wall Street executive was referring to other people.
Blankfein was taking part in the “Fix the Debt” group, the CEO members of which were publicly urging cuts to Social Security, Medicare and Medicaid to reduce the federal deficit for 2013. Whereas those CEOs had amassed personal retirement assets averaging more than $9.1 million, less than 60 percent of the publicly-traded companies represented offered pension plans for their employees at the time. Of the 41 companies that did, the Huffington Post reports that 39 of them had not contributed enough to their workers’ pension funds to enable the plans to pay out their anticipated obligations. For the CEOs to be advocating austerity for others—while the executives’ own companies slacked on pensions for their employees even as they received government subsidies (including tax deductions)—without also advocating austerity for themselves—such as by reducing subsidies to business and corporate deductions—goes beyond garden-variety selfishness to include a certain callousness toward others. Were those CEOs also pressuring their employees to “participate in the democratic process” to “Fix the Debt,” those employees would have been fully justified ethically and politically to “just say NO.”
Besides the point that those who can afford to do with less should not demur from placing their chits on the table too when it comes to reducing the deficit, cutting sustenance-benefits from the most vulnerable could be argued to be ethically unfair, if not sociopathic, particularly from the perspective of Rawls’ theory of justice. From the standpoint of this theory, Blankfein’s prescription is simply a reflection of his standpoint. It follows that employees could justifiably object to pressure from Blankfein to “participate in the democratic process” so the bank could continue to get its subsidies while citizens who are the most vulnerable, including fired bankers whose unemployment compensation expires, take the hit.
In short, a boss urging his or her employees to participate in the democratic process is a controversial question. Generally speaking, employers should regard their employees’ democratic participation as being in another domain from that of their work. More generally, that which pertains to a person’s employment role should not encroach onto other domains in a person’s life, and an employer should respect the limitations. However, extenuating circumstances can modify or mediate this stance. Most significantly, the more dire a problem is to the system as a whole, the more legitimacy a boss has in encouraging employees to “participate” in a solution. However, even in such a context, the more partisan and/or self-serving the stance being advocated is, the less legitimacy the employer has in applying the pressure.

Sources:

Damian Paletta and Kristina Peterson, “CEOs Flock to Capital to Avert ‘Cliff,” The Wall Street Journal, November 28, 2012.

Christina Wilkie, “’Fix The Debt’ CEOs Underfund Employee Retirement, Demand Cuts For Elderly,” The Huffington Post, November 27, 2012.

Ethan Rome, “Goldman Sachs CEO Lloyd Blankfein Wants Seniors to Get Less,” The Huffington Post, November 27, 2012.