Walmart Case: Supreme Court Aids The Powerful

Peter S. Goodman
First Posted: 06/21/11 12:59 PM ET Updated: 06/21/11 05:47 PM ET

Thank the Supreme Court for one thing: In its appalling decision in the Walmart gender discrimination case handed down Monday, the justices supplied future historians with a brilliant symbol of how the United States has essentially become a giant gated community enjoyed by the powerful, with most of the citizenry living outside and struggling to nourish themselves. Walmart is nothing if not a monument to the benefits of mass organization, an exemplar of all the good things that can be extracted by those who assemble themselves into a single large-scale entity. As the largest retailer on earth, the company is generally able to dictate the terms of trade with the thousands of merchants who keep the shelves of its stores stocked with cut-rate goods, tapping factories in China and middlemen traders in Latin America. Walmart has a habit of placing multiple orders with multiple factories for the same products, then forcing each to accept lower prices at the last minute or walk away with nothing. By dint of its scale, it is able to capture the lowest prices for just about everything, from shipping to labor to contracting services. At its global procurement office in the southern China boomtown of Shenzhen, Walmart makes representatives from surrounding factories sit together in a bare-bones waiting room before they get a chance to negotiate with the retailer's agents. Should the reps balk at Walmart's price, they know that the buying agent can just step out into the waiting room and find someone else from another factory -- someone desperate enough to deliver for whatever the company is paying. This is the power of being not only huge but organized into one entity. Strip away the myriad technicalities, and what the Supreme Court essentially decreed this week is that Walmart's employees -- or really any group of people who happen to work for a colossal corporation -- are not entitled to organize themselves similarly to enhance their power to pursue their own interests.

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The court ruled that female workers may not be considered a class for the purposes of a lawsuit in which they accuse the company of years of gender discrimination, because they worked in many different stores in many different American communities, making their experiences effectively individual. "Respondents wish to sue for millions of employment decisions at once," Justice Antonin Scalia wrote in the lead opinion for the court in the five votes to four decision supporting the giant retailer. "Without some glue holding together the alleged reasons for those decisions, it will be impossible to say that examination of all the class members' claims will produce a common answer to the crucial discrimination question." As if to underscore the absurdity of this disparity, Scalia noted that Walmart has a written policy barring discrimination: The mere act of writing this down at headquarters somehow confers immunity against claims of a breach of that policy -- not that there's any glue providing coherence to the experience of workers as a class! In other words, the fact that they happen to work for a single enormous employer whose decisions are so consequential that they alone can influence the prices of certain commodities does not amount to a common experience -- not in the minds of the most powerful arbiters in the land. Rather, each Walmart is its own separate unit, for the purposes of the lawsuit. Walmart gets to be a behemoth when it is setting the prices for the patio furniture and volleyball sets that it purchases from factories in Mexico and China, but when its employees want to band together to address alleged abuses in the court system, suddenly the Walmart corporation might just as well be a collection of little mom-and-pop shops that happen to have the same name. The court suggested that the Walmart workers could pursue relief to their claims by filing their own individual lawsuits, but that is no option for low-wage employees who typically earn so little that many rely upon food stamps, say labor experts. (Another wonderful American story: Taxpayers subsidizing giant, publicly traded corporations by keeping their low-wage employees alive. But I digress.) For the workers, this legal "solution" amounts to the equivalent of asking Walmart to negotiate directly with every factory that produces its products on an individual basis, and not impose the price by wielding the power of its scale. For the labor movement, this is a distressing development. Another crucial weapon in a diminishing arsenal -- the class action lawsuit -- has been effectively blunted, even as corporate employers gain new powers. Last year, the Supreme Court decreed that corporations can essentially funnel as much money into political campaigns as they choose, unlike individuals. The realities of increasingly global trade has added to the options that management can employ as it arbitrages labor costs across every community, putting workers in Detroit in direct competition with their counterparts in Shenzhen. And for American society writ large, the decision is nothing short of a disaster, a formal affirmation from the Supreme Court that huge corporations enjoy special rights denied to the people who depend on their wages to pay their bills. Not lost on anyone is the simple fact of widening inequality, with increasing shares of the spoils of American commerce accruing to a narrowing group of people. Chief executives of huge companies are seeing their pay soar, while rank-and-file employees watch another year go by with essentially no raise -- if they are fortunate enough to be employed at all.

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We are indeed becoming more like a gated community for the wealthiest Americans, with manicured lawns for those on the inside, and dumpster diving for the working class - -yes, class, a designation that exists by dint of economic reality, no high court affirmation required. The Supreme Court just reinforced the front gate.

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As Executive Pay Soars, Worker Pay Stagnates

Peter S. Goodman First Posted: 06/15/11 01:26 PM ET Updated: 06/15/11 03:51 PM ET

First Posted: 06/15/11 01:26 PM ET Updated: 06/15/11 03:51 PM ET NEW YORK -- What a glorious day to be an American worker! Pay is skyrocketing, the Great Recession is hardly a memory and leaders in Washington are putting labor concerns at the front and center of their agendas -- provided you are a worker who happens to be at the top of the corporate organizational chart. In the latest sign of the growing disconnect between reality as enjoyed by corporate chieftains and that experienced by pretty much everyone else, compensation for chief executives of publicly traded companies in the S&P 500 last year leaped by more than 28 percent compared to 2009, according to a new survey from Equilar, a research firm that tracks executive pay. Among those enjoying perches at the top of the pyramid, according to a table on Equilar's site: John G. Stumpf, chairman and chief executive of Wells Fargo, the bank recently accused in a confidential federal audit of cheating taxpayers in its handling of foreclosed homes, pulled down $17.6 million; Lloyd Blankfein, overseer of Goldman Sachs, the banking giant that has become synonymous with malevolent Wall Street shenanigans, took home $14.1 million; and Jeffrey Immelt, chief of General Electric, netted $15 million in pay last year and is now tasked with helping President Obama create American jobs. How is that going, by the way? Unemployment remains stuck at 9.1 percent, and even those people with jobs are predominantly consumed with a struggle to hang on, rendering upward mobility a fantastical aspiration in many homes. During 2010, while executives at major publicly-traded corporations were enjoying their 28 percent pay boost, the average rank-and-file American worker saw weekly pay increase by less than 1 percent, after accounting for rising prices, according to Labor Department data. You may be tempted to shrug this off as more of the same, and you would have the facts on your side. The average weekly earnings for rank-and-file employees now sits at roughly the same
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place it did at the beginning of 1980, after adjusting for inflation. Several caveats go into absorbing this data: among them, the fact that millions of women and millions of immigrants entered the workforce, tending to pull wages down. Yet the compensation numbers merely add the official stamp to a painfully apparent trend: the breakdown of the basic American middle class opportunity. An awful lot of people have gotten up early, gone off to work, brought home as much as they could for their families and -- over the last three decades -- found themselves sliding backward. The latest snapshot of the chief executive pay picture also underscores a more recent vintage truth that should be disturbing for anyone intent on trying to avoid another financial crisis: The number of short-term measures used to determine executive compensation actually increased slightly in 2010 compared to the year before. Have we learned nothing from our near slide into the abyss? The financial crisis of 2008, which made an already weak job market punishingly bleak while putting taxpayers on the hook for speculative bets made by bankers, was about many things, but one of its biggest causes was a failure to get the incentives straight in our economy. How did huge mortgage companies like Washington Mutual and Countrywide wind up scattering so many terrible loans that they eventually ran out of money and required expensive rescues? Simple: Their chief executives were handsomely rewarded for making their stock prices go up in the short term, and the markets applauded any sign of growth in loan volumes. So the banks paid obscene commissions to mortgage brokers who wrote loans to anyone capable of signing the documents, and the volume grew and the stocks climbed, and the executives collected their bonuses and cashed their stock options. Major investment houses bundled these crummy loans into complex investments and traded them with abandon, greasing their own short-term profits and triggering higher pay for executives -- and generating even more demand for fresh bundles of crummy loans. (And a lot of regular people felt compelled to avail themselves of these easy money mortgages because -- as we have seen -- their paychecks were failing to keep up with the costs of housing, health care and education.) And when the whole predatory-lending-as-economic-engine scheme collapsed in a disastrous heap, sowing unemployment, spreading a foreclosure and leaving the broader economy discombobulated, the executives hung on to their pay. The rest of us paid the full freight through lost jobs, lost retirement savings, lost homes, lost confidence. And now here we are, three years later, all of this well understood by anyone who is paying attention, and yet the short-term incentives through which executives are compensated is on the increase. It's as if we are inviting the speculators to try it again. Much of the cash that landed in executives' pockets was enabled by trade in exotic investments known as derivatives, which functioned as de facto insurance policies, covering potential losses on the great bales of mortgages Wall Street was trading during the housing boom. With outstanding loans seemingly backed up by insurance, investment banks were free to pour even more capital into the mortgage market. This turned out to be bogus, of course. There was no insurance, because the companies selling the policies, such as the American International Group, were not setting aside real dollars in preparation for actually having to pay up. (This is how the taxpayer wound up bailing out AIG at a price exceeding $175 billion, but that happened so long ago that there seems no reason to bother ourselves with it, or so it seems in Washington.) Congress wound up putting a provision into the Dodd-Frank financial regulatory reform bill that mandated new rules on derivatives, including the requirement that they be backed up with actual reserves. The work of writing the new rules fell in part to the Commodity Futures Trading Commission. (That regulatory agency is headed by Gary Gensler, who played a key role in
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deregulating derivatives while he served in the Clinton Treasury, aiding his boss, Larry Summers, and their hero, Alan Greenspan. But, again, ancient history! In contemporary Washington, convicted pyromaniacs get to come back and run the fire department.) On Tuesday, alas, the commission delayed writing the new rules by six months, leaving derivatives -- the instruments at the center of the last crisis -- as free to trade as ever. Surely, they are busy inside the CFTC. Surely, they have lots of demands on their time, important meetings to take and other areas of concern to address. But doesn't the public have the right to demand action on this piece of business? Absent a convincing reason otherwise, shouldn't derivative regulation jump the queue, given how this lack of regulation ended up the last time? Nearly three years have passed since the public was forced to accept that the same banks whose reckless gambling created the crisis needed an immediate bailout or the world would blow up, and here is the situation that confronts us: The banks are logging profits, the executives of major corporations are counting huge increases in pay and the whole economic system seems as juryrigged and vulnerable as ever. Ordinary working people are still waiting for the tiniest slice of the spoils, while the people who are getting the biggest share -- the executives -- are left free to gamble, with regular people still on the hook for their losses. What a glorious time, indeed. Just probably not for you.

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Walmart: Too Big To Sue

Lila Shapiro First Posted: 06/20/11 08:33 PM ET Updated: 06/20/11 08:38 PM ET

As the Supreme Court on Monday derailed claims of gender discrimination by scores of women workers at Walmart stores, the American labor movement absorbed yet another substantial blow. In recent years, class-action lawsuits have been employed by workers -- particularly lower-wage workers -- as a substitute for the force that collective bargaining once held in an era of broader union representation: By banding together in large-scale lawsuits, workers have effectively organized themselves into unified, powerful voices, gaining leverage in negotiations with management. But as it decreed that the Walmart employees were not entitled to be treated as one class -because they worked in so many different places under myriad bosses -- the Supreme Court effectively reinforced the advantages of corporate scale, said legal experts. "Respondents wish to sue for millions of employment decisions at once," Justice Antonin Scalia wrote in the leading opinion for the court in the 5-4 decision denying claims that the workers amount to a unified class. "Without some glue holding together the alleged reasons for those decisions, it will be impossible to say that examination of all the class members claims will produce a common answer to the crucial discrimination question." In short, Walmart successfully immunized itself against legal action aimed at rectifying alleged abuses through the very same feature that makes it so powerful to begin with: its status as the largest retailer on earth, large enough to dictate the terms of commerce, say labor experts. "In a sense the court has said, the banks we have were too big to fail, with Walmart we have too big to sue," said Ken Jacobs, the chair of the labor Center at University of California-Berkeley. "Basically if you're saying that the overall corporation is off the hook for what local managers are doing, that removes the incentive for corporate headquarters to really pay attention and to set up structures to make sure you do have the law being followed." Walmart has denied any wrongdoing and emphasizes that its corporate policy forbids discrimination, encourages diversity and ensures fair treatment. "Walmart has a policy: Their policy is not to discriminate," said Fatima Goss Graves, vice president for education and employment at the National Women's Law Center. "Anyone who has been in the modern workplace knows that most employers have policies that say don't discriminate. What matters is what's happening in practice." The Walmart decision landed only three days after workers at a Target store outside New York City failed in their bid to gain the representation of the United Food and Commercial Workers Union. Labor advocates portrayed that effort as a crucial campaign in a larger attempt to organize workers in the growing -- and typically low-paying -- retail industry. Together, the Supreme Court decision and the Target vote underscored the diminishing tools for employees to seek redress of their grievances and press for greater rewards for their work, say labor advocates.
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"The class-action lawsuit was really a substitute for unionism," said Nelson Lichtenstein, a labor historian at the University of California, Santa Barbara who has written two books about Walmart. "By blunting that weapon, the Supreme Court has truly left millions of American workers without recourse." He mentioned several key examples of workers gaining ground through class-action suits: In 1994, in what was at the time called the largest race discrimination case in civil rights history, Shoney's Nashville restaurant chain was forced to pay more than $134 million in a class-action suit brought by employees to settle race discrimination charges. In 1996, Microsoft paid $97 million to settle a class-action suit brought by workers who said they had been misclassified as temporary and freelance. In a 1997 class-action suit -- the first class-action sexual harassment lawsuit brought in the U.S. -- female employees working at a mine in Minnesota accused the company of discrimination and won. Walmart employs 2.1 million workers worldwide and is one of the largest employers in the United States. Last year, the big-box retailer was the world's largest public corporation by revenue. Class-action suits were previously the best tool a worker had to fight discrimination at work. While individual suits are expensive and can be exceedingly difficult to prove, a class-action vehicle allowed workers to band together to fight the corporate powers that be. The Supreme Court's ruling doesn't prevent individuals -- or, say, a group of employees at a single store -- from suing their employers for discrimination. But low-wage workers employed by large corporations typically lack the resources required to pursue a lawsuit, making the classaction a particularly fruitful avenue. "We're talking about access to the courts: Very few people other than the super rich can afford the costs of litigation," said John Coffee, a law professor at Columbia University who specializes in class-action suits. "There are other mechanisms to fight discrimination: unions or a tight job market which gives workers leverage. But the employer has all the leverage in today's weak job market, and unions aren't quite the same force they used to be." The latest blow to the labor movement comes amid broad discontent over the widening gap in American economic fortunes, with the wealthiest people continuing to pull away from the rest of the population. In the wake of the Great Recession, retail wages have remained stagnant, with a median hourly pay of $10.94 according to the labor Department. Meanwhile, corporate profits and CEO compensation have sharply rebounded. Walmart has never been unionized. But the content of the women's complaints, Lichtenstein said, were once the bread and butter of union collective bargaining agreements: equal pay and equal raises for employees. Beginning in 2001, more than 100 female employees accused Walmart -- which pulled in $14.1 billion in profits last year despite lagging U.S. sales -- of paying its female employees less than men in equivalent positions and favoring men in promotions at 3,400 U.S. stores since late 1998. "This ruling really ensures the continuation of a kind of slow grinding immiseration of the whole private service sector workforce," Lichtenstein said. "And it's it's very difficult to see any remedy."

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