The 10 Worst Corporations of 2008

What a year for corporate criminality and malfeasance!

As we compiled the Multinational Monitor list of the 10 Worst Corporations of 2008, it would have been easy to restrict the awardees to Wall Street firms.

But the rest of the corporate sector was not on good behavior during 2008 either, and we didn’t want them to escape justified scrutiny.

So, in keeping with our tradition of highlighting diverse forms of corporate wrongdoing, we included only one financial company on the 10 Worst list.

Here, presented in alphabetical order, are the 10 Worst Corporations of 2008.

AIG: Money for Nothing

There’s surely no one party responsible for the ongoing global financial crisis. But if you had to pick a single responsible corporation, there’s a very strong case to make for American International Group (AIG), which has already sucked up more than $150 billion in taxpayer supports. Through “credit default swaps,” AIG basically collected insurance premiums while making the ridiculous assumption that it would never pay out on a failure — let alone a collapse of the entire market it was insuring. When reality set in, the roof caved in.

Cargill: Food Profiteers

When food prices spiked in late 2007 and through the beginning of 2008, countries and poor consumers found themselves at the mercy of the global market and the giant trading companies that dominate it. As hunger rose and food riots broke out around the world, Cargill saw profits soar, tallying more than $1 billion in the second quarter of 2008 alone.

In a competitive market, would a grain-trading middleman make super-profits? Or would rising prices crimp the middleman’s profit margin? Well, the global grain trade is not competitive, and the legal rules of the global economy– devised at the behest of Cargill and friends — ensure that poor countries will be dependent on, and at the mercy of, the global grain traders.

Chevron: “We can’t let little countries screw around with big companies”

In 2001, Chevron swallowed up Texaco. It was happy to absorb the revenue streams. It has been less willing to take responsibility for Texaco’s ecological and human rights abuses.

In 1993, 30,000 indigenous Ecuadorians filed a class action suit in U.S. courts, alleging that Texaco over a 20-year period had poisoned the land where they live and the waterways on which they rely, allowing billions of gallons of oil to spill and leaving hundreds of waste pits unlined and uncovered. Chevron had the case thrown out of U.S. courts, on the grounds that it should be litigated in Ecuador, closer to where the alleged harms occurred. But now the case is going badly for Chevron in Ecuador — Chevron may be liable for more than $7 billion. So, the company is lobbying the Office of the U.S. Trade Representative to impose trade sanctions on Ecuador if the Ecuadorian government does not make the case go away.

“We can’t let little countries screw around with big companies like this — companies that have made big investments around the world,” a Chevron lobbyist said to Newsweek in August. (Chevron subsequently stated that the comments were not approved.)

Constellation Energy: Nuclear Operators

Although it is too dangerous, too expensive and too centralized to make sense as an energy source, nuclear power won’t go away, thanks to equipment makers and utilities that find ways to make the public pay and pay.

Constellation Energy Group, the operator of the Calvert Cliffs nuclear plant in Maryland — a company recently involved in a startling, partially derailed scheme to price gouge Maryland consumers — plans to build a new reactor at Calvert Cliffs, potentially the first new reactor built in the United States since the near-meltdown at Three Mile Island in 1979.

It has lined up to take advantage of U.S. government-guaranteed loans for new nuclear construction, available under the terms of the 2005 Energy Act. The company acknowledges it could not proceed with construction without the government guarantee.

CNPC: Fueling Violence in Darfur

Sudan has been able to laugh off existing and threatened sanctions for the slaughter it has perpetrated in Darfur because of the huge support it receives from China, channeled above all through the Sudanese relationship with the Chinese National Petroleum Corporation (CNPC).

“The relationship between CNPC and Sudan is symbiotic,” notes the Washington, D.C.-based Human Rights First, in a March 2008 report, “Investing in Tragedy.” “Not only is CNPC the largest investor in the Sudanese oil sector, but Sudan is CNPC’s largest market for overseas investment.”

Oil money has fueled violence in Darfur. “The profitability of Sudan’s oil sector has developed in close chronological step with the violence in Darfur,” notes Human Rights First.

Dole: The Sour Taste of Pineapple

A 1988 Filipino land reform effort has proven a fraud. Plantation owners helped draft the law and invented ways to circumvent its purported purpose. Dole pineapple workers are among those paying the price.

Under the land reform, Dole’s land was divided among its workers and others who had claims on the land prior to the pineapple giant. However, wealthy landlords maneuvered to gain control of the labor cooperatives the workers were required to form, Washington, D.C.-based International Labor Rights Forum (ILRF) explains in an October report. Dole has slashed it regular workforce and replaced them with contract workers.

Contract workers are paid under a quota system, and earn about $1.85 a day, according to ILRF.

GE: Creative Accounting

In June, former New York Times reporter David Cay Johnston reported on internal General Electric documents that appeared to show the company had engaged in a long-running effort to evade taxes in Brazil. In a lengthy report in Tax Notes International, Johnston reported on a GE subsidiary’s scheme to invoice suspiciously high sales volume for lighting equipment in lightly populated Amazon regions of the country. These sales would avoid higher value added taxes (VAT) in urban states, where sales would be expected to be greater.

Johnston wrote that the state-level VAT at issue, based on the internal documents he reviewed, appeared to be less than $100 million. But, he speculated, the overall scheme could have involved much more.

Johnston did not identify the source that gave him the internal GE documents, but GE has alleged it was a former company attorney, Adriana Koeck. GE fired Koeck in January 2007 for what it says were “performance reasons.”

Imperial Sugar: 14 Dead

On February 7, an explosion rocked the Imperial Sugar refinery in Port Wentworth, Georgia, near Savannah. Days later, when the fire was finally extinguished and search-and-rescue operations completed, the horrible human toll was finally known: 14 dead, dozens badly burned and injured.

As with almost every industrial disaster, it turns out the tragedy was preventable. The cause was accumulated sugar dust, which like other forms of dust, is highly combustible.

A month after the Port Wentworth explosion, Occupational Safety and Health Administration (OSHA) inspectors investigated another Imperial Sugar plant, in Gramercy, Louisiana. They found 1/4- to 2-inch accumulations of dust on electrical wiring and machinery. They found as much as 48-inch accumulations on workroom floors.

Imperial Sugar obviously knew of the conditions in its plants. It had in fact taken some measures to clean up operations prior to the explosion. The company brought in a new vice president to clean up operations in November 2007, and he took some important measures to improve conditions. But it wasn’t enough. The vice president told a Congressional committee that top-level management had told him to tone down his demands for immediate action.

Philip Morris International: Unshackled

The old Philip Morris no longer exists. In March, the company formally divided itself into two separate entities: Philip Morris USA, which remains a part of the parent company Altria, and Philip Morris International. Philip Morris USA sells Marlboro and other cigarettes in the United States. Philip Morris International tramples the rest of the world.

Philip Morris International has already signaled its initial plans to subvert the most important policies to reduce smoking and the toll from tobacco-related disease (now at 5 million lives a year). The company has announced plans to inflict on the world an array of new products, packages and marketing efforts. These are designed to undermine smoke-free workplace rules, defeat tobacco taxes, segment markets with specially flavored products, offer flavored cigarettes sure to appeal to youth and overcome marketing restrictions.

Roche: “Saving lives is not our business”

The Swiss company Roche makes a range of HIV-related drugs. One of them is enfuvirtid, sold under the brand-name Fuzeon. Fuzeon brought in $266 million to Roche in 2007, though sales are declining.

Roche charges $25,000 a year for Fuzeon. It does not offer a discount price for developing countries.

Like most industrialized countries, Korea maintains a form of price controls — the national health insurance program sets prices for medicines. The Ministry of Health, Welfare and Family Affairs listed Fuzeon at $18,000 a year. Korea’s per capita income is roughly half that of the United States. Instead of providing Fuzeon, for a profit, at Korea’s listed level, Roche refuses to make the drug available in Korea.

Korean activists report that the head of Roche Korea told them, “We are not in business to save lives, but to make money. Saving lives is not our business.”

Auto Bailout: Ecological Sustainability Before Economic Viability

Thank you, George Bush. The federal government is finally acting to protect the auto industry from failure.

The $17.4 billion in loans for GM and Chrysler is not going to be enough to rescue the industry — but it will keep these companies going until the next administration takes office.

The Big Three will be back for more money soon, and Congress and the Obama administration will have an opportunity to structure an appropriate bailout package.

A very unfortunate consequence of the Congressional debate over the bailout, and the subsequent Bush administration handling of the issue, has been to raise the near-term viability and short-term profitability of the industry as the overriding objective of any bailout.

That’s an unrealistic and undesirable goal. Much better would be to focus on long-term ecological sustainability.

A quick return to profitability is unrealistic, because whatever the deep structural problems of the industry (and they are legion), the proximate cause of its revenue shortfall is the collapse of auto sales and the deepening recession. U.S. auto sales are down by more than a third over the last year, crushing U.S. and Japanese automakers alike. As long as the recession persists, the automakers are going to struggle.

The emphasis on rapid return to viability is undesirable on at least two counts.

First, from Democrats and Republicans alike, it is associated with unfair demands for new rounds of concessions from auto workers. These demands ignore three decades of steady concessions from auto workers, including terms in the 2007 contract that start many new workers at $14 an hour. These demands imply the abrogation of promises made to retired workers, including by slashing existing health insurance benefits and possibly pension payments.

And the demands suggest — explicitly from President Bush and Congressional Republicans — that unionized workers reduce their wage levels to those of non-unionized workers in Japanese company-owned plants in the United States. Not only does this aim to destroy the benefits of unionization, it pushes down the wage structure of working families at a time when economic recovery depends on increasing the buying power especially of debt-burdened low- and middle-income consumers.

The emphasis on viability also threatens what must be the highest priority regarding the auto industry, which is to transform it into providing modes of transportation that do not imperil planetary well-being.

It is true that the long-term viability of the companies certainly rests on their ability to transform their product mix, sell much more fuel efficient cars at a reasonable cost, and undertake major investments in transformative technologies. Ultimately — and in the not-so-distant future — this must mean abandoning the internal combustion engine.

But current market realities are different. In the short term, gas prices are low, and the consumer love affair with hybrids is over (or at least suspended). The Big Three aren’t good at making fuel efficient cars that make them money, and it will take work, time and money for them to learn. And transformative technologies will require major new investments in R&D, and then physical plant; companies being pushed to turn around their balance sheets in a matter of months are in no position to do this.

The United States needs its auto industry. The economic cost of failure to the industrial Midwest and the entire country would be overwhelming. The direct costs to the government (health insurance, unemployment benefits, lost tax revenues) would by far outweigh the costs of bailout. A collapse of the industry would transform the recession into depression. It would vastly worsen the situation on Wall Street. It would worsen the U.S. trade deficit, which is a major source of long-term concern for well-being and even functioning of the global economy.

And the country needs an auto industry for positive reasons: It needs to be able to manage its own transportation needs on an ecologically sustainable basis.

The country, and the world, needs a revolutionized transportation sector. This crisis is the opportunity to achieve that transformation. But it will be an opportunity lost if success is measured by short-term “economic viability” of the Big Three.

When they come back to Washington, the primary demand on the auto companies should not be to show their plan for viability. It should be to work with the government (or under the government, or for the government) to develop a plan to change their product mix and for steady and long-term investments in new technology. Implementing such a plan will take time and large-scale investments, and much of money inevitably will have to come from the public. The government should impose very strict fuel efficiency performance standards, to be followed by medium-term requirements to sell zero-carbon emission cars. The government should have an ongoing role in monitoring and directing auto company investments to ensure these objectives are met. To level the playing field, these contractual arrangements should be accompanied by new fuel efficiency and carbon-free regulatory standards applying to all carmakers.

The financial crisis, the deepening recession and the climate crisis each in their own way require abandoning a belief that unregulated markets can best measure (and reward or punish) economic success. Detroit does need to find a way to be economically viable over time, but the preeminent need is to ensure that auto manufacturing is viable for the planet.

The Nasty Class and Anti-Union Bias of Auto Bailout Opposition, or the Wall Street-Detroit Double Standard

Nancy Pelosi says the Congressional Republicans are playing Russian Roulette with the economy by refusing to agree to an auto industry bailout.

But for that metaphor to work, you have to add that they’ve loaded the gun with six bullets.

The only hope is that someone — Treasury Secretary Henry Paulson or Federal Reserve Chair Ben Bernanke — will come in and prevent the trigger from being pulled. Luckily, it appears they are ready to do so. A statement from the Bush administration this morning signaled that it would find a way to keep the Big Three automakers in business until next year, when a more comprehensive bailout and industry restructuring package can be worked out.

What is remarkable about the Senate Republican refusal to agree to a $15 billion loan deal for the auto industry is that they are not serving any corporate interest. A collapse of the U.S. auto industry would be bad not just for the Big Three, and the supplier networks and auto dealers, but pretty much every sector of the economy, including Wall Street.

Earlier this week, U.S. Chamber of Commerce President and CEO Thomas J. Donohue urged that “Congress must immediately authorize bridge loans to America’s carmakers to prevent the collapse of the U.S. auto industry and the devastating impact it would have on the economy, American workers, and national security.”

The motives for the Republicans appear to be narrow political calculation that the public is tired of industry bailouts (a foolish political read, because if the Republicans permit the auto industry to fall into recession-worsening bankruptcy, they will pay a political price for at least a generation); a hypocritical claim that they oppose government intervention in the economy (contradicted by everything from Republican-approved state tax breaks for Honda and Toyota assembly plants to Ted Stevens’ earmarks, from public insurance and loan guarantees for the nuclear industry to subsidies for weapons exporters); and a vicious anti-unionism and anti-working class bias.

The Republicans say the failure to reach a Congressional deal on the auto bailout rests with the United Auto Workers, who refused to reduce wage scales to match those of non-unionized workers in Japanese auto company plants in the United States.

Actually, Japanese plant wages have always been close to those of the UAW, and the UAW has agreed to cut wages for many new workers almost in half — with many new jobs starting at $14 an hour. (GM says that, for these new hires, overall per-employee costs will decline from the totally misleading $78 per hour to $26 an hour.) But there’s no logic in chasing non-union wages down as a way to be competitive, because the non-union employer can always unilaterally lower them below those reached through collective bargaining.

There is a special cruelty and nastiness in the idea that unionized auto workers, who do very dangerous, physically demanding work with minimal opportunity for creative expression, are excessively compensated or enriched by unreasonably generous health insurance plans.

Here are a few points of comparison with an industry where physical demands and workplace safety hazards are minimal, and where white-collar employees brag about how they are free to be innovative. Like the U.S. auto industry, Wall Street has also fallen on very hard times due to spectacular mismanagement.

+ Auto worker compensation makes up a small cost of manufacturing a car — less than 10 percent. So, you can slash wages as much as you want, but you won’t bring costs down much. By contrast, as you would expect in a service industry, compensation makes up a huge portion of costs for the financial sector. The New York state comptroller lists employee compensation costs as equivalent to more than 60 percent of 2007 revenue for the 7 largest financial firms headquartered in New York City. At Goldman Sachs, employee compensation made up 71 percent of total operating expenses in 2007.

+ UAW contracts give workers the right to retire after 30 years of laboring, with pensions and healthcare. This week, Goldman Sachs announced that, given the hard times, it was considering raising its retirement requirement to the industry standard of the rule of 60 (from Goldman’s current 55). Under that rule, you can retire with nice benefits after any combination of age and service totaling 60. So, if you’ve done 15 years service at age 45, you’re eligible.

+ In 2007, average wage and benefit costs per employee at Goldman Sachs were $661,490. Even using misleading and wildly inflated auto industry claims, UAW workers cost $150,000 a year.

+ Congress has allocated $700 billion to bailout Wall Street, but the overall total is higher by an order of magnitude. Including all of the loans, investments, swaps, guarantees and more, the federal government (including the Federal Reserve) has doled out more than $7 trillion to Wall Street. The auto industry said it was looking for $34 billion, Congress was debating $15 billion, and analysts say the auto companies might ultimately need something like $100 billion.

Most of those funds — for both Wall Street and Detroit — are various kinds of loans that will be paid back, many accompanied by the right to make money if beneficiary stock prices rise in the future.

But some of the money for Wall Street is almost certain to be lost. Notably, the government has agreed to accept losses up to $250 billion on a $306 billion pool of Citigroup mortgage-related assets that are certain to show major losses. So, the government is on the hook to Citigroup, with the certain prospect of enormous losses that are likely to be more — just for this one financial behemoth — than the total amount the auto industry will seek in loans.