Rep. Barney Frank, D-Massachusetts, who will assume his new position when Democrats officially take over the House on Thursday, January 4, blasted the Atlanta-based home improvement chain.
“The action of Home Depot’s board of directors to simultaneously dismiss Robert Nardelli and provide him with $210 million in severance is further confirmation of the need to deal with a pattern of CEO pay that appears to be out of control,” Frank said in a statement Wednesday, January 3.
Later, in a speech at the National Press Club, Frank asserted that corporate boards give too much leeway to the executives they’re supposed to oversee.
“Boards of directors don’t provide any real check on CEOs,” he said. “They don’t stand up to the CEO. They may stand up to the workers.”
In legislation that he intends to introduce later in the congressional session, Frank will propose that shareholders vote on executive compensation packages. Currently, company boards set executive pay.
Most of the shareholders who weigh in will be large funds like the California Public Employees’ Retirement System, Frank said.
“They are sophisticated and thoughtful, and corporations would benefit from their increased participation,” he said.
Soaring executive pay exacerbates growing income disparity, Frank argues. He cited statistics showing that families with incomes below $92,000, or 90 percent of Americans, saw their incomes fall 4 percent after inflation between 2001 and 2004—a time when the economy was expanding.
“Business leaders who are frustrated by the unwillingness of the American voter to be supportive of their agenda for economic growth should look to the contrast of Mr. Nardelli’s consolation prize and the resistance of business to raising the minimum wage,” Frank said in a statement.
He elaborated in his Press Club speech, warning against the “increasing separation of the well-being of the average citizen from overall economic growth.”
Part of the problem is that the economy is often viewed in a Wall Street framework. “If corporate profits go up, that’s a good thing,” Frank said. “If wages go up, that’s a bad thing. That’s the perceived wisdom that I’m trying to change.”
Democrats want to shift the focus to workers. Frank advocates a “grand bargain” between congressional Democratic majorities and the business community, which usually finds Republicans more sympathetic to their causes.
In Frank’s deal, businesses would facilitate unionization, support expanded health care, raise wages and acquiesce to labor and environmental provisions in trade agreements. In return, Democrats would back immigration reform, trade pacts and an easing of rules on foreign direct investment.
Such an agreement would break political deadlock, Frank maintains. “Right now, we’re stalled,” he said. “That’s why the business community should care.”
Several members of the corporate lobby, however, were reticent to comment on Frank’s notion until they learned more about it.
“It’s an interesting theory, which means nothing until there’s specific legislation on the floor,” says Martin Reiser, manager of government policy for Xerox Corp. “It’s a little all-encompassing but at the same time unspecific.”
One area where Frank is explicit is his desire for the government to help those hurt by globalization and technological advances. But he doesn’t advocate eliminating inequality, just reducing it.
“Inequality is necessary in a capitalistic system,” Frank said. “But you do not have to have government reinforce it. You can have government retarding it. The public sector needs to be valued as a partner.”
He also asserts that unions improve quality of life on the job. For instance, he is wary of a Wal-Mart’s new approach to workforce management.
The Wall Street Journal reported on January 3 that the massive retailer will assign duties to workers at times when store traffic is highest, regardless of traditional schedules.
“Yeah, and if you have to pick your kid up at school, that’s tough,” Frank said. “Unions help to protect people’s dignity in the workplace.”