Looting the corpse of capitalism

Yeah, I remember capitalism. I remember the fables that company officers have a fiduciary responsibility to manage the company for the benefit of the shareholders. Yeah, right. From the Economist, The bonus racket:

In its last three years, Bear Stearns paid $11.3 billion in employee compensation and benefits. According to its 2007 annual report, Lehman Brothers shelled out $21.6 billion in the three years before, while Merrill Lynch paid staff over $45 billion during the three years to 2007.

And what have shareholders got from all this? Lehman’s got nothing (the company went bust). Investors in Bear Stearns received around $1.4 billion of JPMorgan Chase stock, now worth just half that after the fall in the acquirer’s share price. Merrill Lynch’s shareholders got shares in Bank of America (BofA) which are now worth just $9.6 billion, less than a fifth of the original offer value. Meanwhile, Citigroup paid $34.4 billion to its employees in 2007 and is now valued by the stockmarket at just $18.1 billion.

So the “employees” got five or ten times as much as the shareholders. But, you say, doesn’t that mean that we got that money because we are employees? Nope.

For the last decade these companies and most others have been getting rid of all the “rank and file” employees they can, and replacing them with cheap foreign labor. Fifteen years ago most workers were Americans. Now the executives and middle management are American, but a huge percentage of the rest are guestworkers, except where whole operations have been offshored. (The janitors and such are often illegal workers now.) Most of the “employees” who are getting so much more than the shareholders are the CEO and top executives.

At a typical Fortune 500 corporation such as those listed above the project manager and a lead tech may still be American workers, but most the the rest of the staff, the analysts, the programmers, the systems administrators, the database administrators are now mostly contract workers rather than permanent staff. And the contract workers are mostly guestworkers. At my last gig, I was brought in on contract to a major financial services firm (not one of the above) to work on a major project. I found myself in a room of 90 people. Two of us were Americans, me and a secretary to handle the paperwork. All the rest were guestworkers, mostly from India, but the rest from a wide variety of countries. And that is the “new normal”. Not one was brought in because they had unique skills, and nearly all of them ended up getting canned after a few weeks because they couldn’t do the job they claimed. But they were brought in because they were being paid half as much as the standard wage for American workers. And all the money that was saved on employee expenses became bonuses for the upper management. Just look again at the Economist article. Who got the money and who got the shaft?

They don’t care about the shareholders, they don’t care about the quality of the products they create, they don’t care that when they lay off their workers that those workers they lay off can no longer buy their products. They care only about getting as much as they can get before it all comes crashing down.

And the time for it to all come crashing down is just about now…

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2 Responses to Looting the corpse of capitalism

  1. cacophonix says:

    “Now the executives and middle management are American, but a huge percentage of the rest are guestworkers, except where whole operations have been offshored.”

    Do you have a reference for this claim? Some sort of numbers would be good. What is a “huge percentage”? Is it 90%? 50%? 1%?

  2. numen says:

    Nobody dares do a real study because those who would fund it would not like to publish the results. All I have are my own experiences.

    1) Financial services company: one American project manager, one American lead tech, one American lead analyst, one perm H1B, and four contractors: me, and three H1Bs. That’s 50%. As I said, I was in a room with me and 90 H1Bs, that’s a rather high percentage, although it changed as the H1Bs got fired and eventually most were replaced with Americans after a succession of H1Bs did not have the advertised skills.

    2) Credit card company: When I started in 1998 the contract staff was 15% guestworkers and 85% Americans, and when I was dumped three years later the percentages were reversed. When I was brought back a year and a half later, after five months 80 Americans (nearly all the remaining American contractors) were replaced by offshores. That meant about half the permanent staff were H1Bs (or L1s) and nearly all the contract staff (here or offshore).

    3) Multistate electric utility. About 20% appeared to be guestworkers, including the guy I was brought in to substitute for while he spent a month in India getting married.

    My subjective impression is that the larger the corporation the more guestworkers and offshores. Most of them will be contract staff, because the corporation can avoid any responsibility for following legal constraints such as prevailing wage.

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