Contracts Can’t Be Broken—Unless They Involve Union Workers

AFL-CIO Blog
by Tula Connell, Mar 18, 2009


Contracts can’t be broken. We learned that lesson well over the past few days when AIG honchos swore that despite being bailed out by $173 billion in taxpayer funds, they couldn’t break the sacrosanct contractual bond that guaranteed billions in bonuses to the same top executives who brought the insurance giant to its knees.

But we also were taught another lesson in these months of financial chaos: Contacts can’t be broken—unless they involve unionized autoworkers.

Tim Rutten at the Los Angeles Times really hits the mark today when he writes:

What we’re essentially being asked to believe is that employment contracts involving hardworking men and women on Detroit’s assembly lines are somehow less legally binding—less “sacred” in the current rhetorical argot—than those protecting a bunch of cowboy securities traders living in Connecticut. [snip]

For years, the smart guys on Wall Street have convinced a growing number of Americans that organized labor is an impediment to economic progress, an unacceptable “cost” in a globalized system of production, a quaint social fossil from the era of mills and smokestacks. If there’s a lesson to be gleaned from the current crisis, however, it’s that when the chips are down, organized labor is a far more responsible social actor than the snatch-and-run characters who fancy themselves financiers.

Who re-negotiated their contracts in the face of a taxpayer bailout? Not AIG CEOs. It was the autoworkers who agreed to put their middle-class wages on the line to help out the struggling industry. So far, not one AIG CEO has stepped up to the plate to return that $1 million or so bonus. (AIG bigwigs aren’t alone in soaking up taxpayer money for personal fun—a video clip here by Brave New Films lists more CEOs on the taxpayer dole and urges people to take action on March 19.)

When General Motors (GM) and Chrysler asked for government support in December, Sen. Bob Corker (R-Tenn.) pushed a pay cut amendment in the Senate that called for slicing the autoworkers’ wages to those paid to nonunionized workers. So, Bob, your fans are waiting breathlessly to hear you call for AIG billionaires to give back their bonuses. Or, as a columnist in Corker’s home state puts it:

Paging Bob Corker! Explanation please! [snip]

So, to make sure I have this right, we can give $185 billion to AIG and we have to uphold their employment contracts with 80 people, but we can’t give 1/5th that amount to General Motors unless they abrogate their employment contracts with 100,000 workers.

Yes, taxpayers own 80 percent of AIG. But we can’t seem to stop AIG execs from getting bonuses. After all, AIG CEO Edward Liddy and the company’s apologists argue, AIG knew it needed to keep its people. The implication here is that financial wizards who run a global company into the ground are more valuable than the blue-collar men and women who aren’t paid seven-figure salaries and whose jobs involve creating tangible products like, say, automobiles. Meanwhile, AIG bonus information so far includes:

* $200 million in bonuses.
* 73 AIG employees receiving bonuses of $1 million each, almost all of the employees…responsible for creating the exotic derivatives that caused AIG’s near collapse.
* Some of those receiving the bonuses are not U.S. citizens.

A CNN poll released today shows the American public increasingly fearful that the nation’s economic downturn will mirror the Depression. Asked whether Depression-era circumstances could reign in the next 12 months, 45 percent of those polled reported that was likely. That’s an increase from 38 percent who responded in the same fashion in December.

As AFL-CIO President John Sweeney says, “These outrageous bonuses are yet another example of an economy that has become fundamentally imbalanced.”

All of the power is concentrated in the hands of the very few at the very top and the gap between CEOs’ and workers’ pay continues to grow. That is why we need to pass the Employee Free Choice Act.

Passing the Employee Free Choice Act will allow workers to have a voice at work, lift their standard of living and build stronger communities as well as stronger families.

A Gallup poll released in recent days found 53 percent of the U.S. public supports the Employee Free Choice Act, which was reintroduced in the U.S. Congress last week. Why? Because we need a stronger middle class. One with contracts that are sacrosanct.

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