Sirotablog

By David Sirota
Baltimore Sun - 5/23/06 (Permalink)

Money is not a bad thing. And secrecy doesn’t have to be, either. But when the two mix, you can bet someone is going to get bilked.

Look no further than Congress’ corruption scandals and corporate America’s excessive pay packages to know this is the case. Though the situations seem unrelated, they revolve around the confluence of money and secrecy. Lawmakers and executives are making out like bandits while taxpayers and company shareholders are getting ripped off.

In Congress, corruption is emanating from the appropriations committees - the panels overseeing federal spending. Lawmakers there are responsible for “earmarking” federal dollars for specific projects. That powerful privilege to earmark lately has been demonized as the problem. It’s not. It’s the secrecy that is causing the trouble.

Appropriators are allowed to earmark taxpayer money anonymously, meaning they can direct spending without having to take public responsibility for their actions. Lobbyists, of course, know this, and thus lavish committee members with thousands of dollars in campaign contributions in order to get them to anonymously earmark taxpayer dollars to their corporate clients.

This is what former Republican Rep. Randy “Duke” Cunningham of California was convicted of - taking bribes from contractors in exchange for using his position on the House Appropriations Committee to move federal dollars to those contractors.

This is why committee members such as Republican Rep. Jerry Lewis of California, Democratic Rep. Alan B. Mollohan of West Virginia and Republican Sen. Conrad Burns of Montana are under federal investigation. They are accused of trying to quietly use their spending power to move taxpayer cash to campaign contributors and business associates. They may have gotten too careless.

But the problem is clear: Money mixed with secrecy is the real reason most of the pay-to-play scandals ravaging Capitol Hill are coming out of the appropriations committees.

In the corporate world, it is the same thing. Recent headlines document how the CEO of UnitedHealth Group was given $1.6 billion in stock options, the CEO of Pfizer Inc. was given an $83 million pension and the CEO of ExxonMobil Corp. was granted a $400 million retirement package.

The Wall Street Journal subsequently found that companies are quietly footing the bill for their executives’ taxes. And USA Today reports that over the last five years, at the 60 worst-performing companies in America in terms of their market value, executives have pocketed $12 billion. All of this has raised a question from shareholders: How have these executives been able to raid company treasuries like this with such little fanfare?

Again, it is money mixed with secrecy. Because of the government’s lax disclosure laws, the details of many companies’ executive pay packages can be virtually impossible to find in corporate financial filings with the Securities and Exchange Commission. Today, shareholders often have little idea of how much cash their companies’ boards of directors are handing over to executives.

Not surprisingly, ending the corruption that is afflicting the political and corporate world means more disclosure.

On Capitol Hill, appropriators must still be able to direct spending. The power of the purse, after all, is vested by the Constitution in the Congress. But lawmakers should not be able to earmark taxpayer money without attaching their names to the projects they are funding.

If we want to end Congress’ pay-to-play culture, forcing lawmakers to publicly disclose what projects they are supporting would go a long way toward shaming them into better behavior. They would at least have to worry about being caught when they shower their campaign contributors with federal contracts.

Similarly, Congress must pass legislation sponsored by Democratic Rep. Barney Frank of Massachusetts that would force corporations to better disclose exactly what they are paying their executives and then get those pay packages approved by company owners at annual shareholders’ meetings.

The legislation would not strip companies’ ability to pay their executives tens of millions of dollars. It only demands more transparency and more power over decisions by shareholders. At the least, owners of companies have a right to know exactly what expenditures are being made in their name.

U.S. Supreme Court Justice Louis Brandeis once said, “Sunlight is the best disinfectant.” In an age in which politics and business both need to be cleansed of corruption, Justice Brandeis’ words could not be more timely.

David Sirota, a former spokesman for Democrats on the House Appropriations Committee, is the author of “Hostile Takeover: How Big Money and Corruption Conquered Our Government - and How We Take It Back.”