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IBEW Applauds DNC Decision to Drop WMUR Sponsorship of Next Debate

IBEW leaders are applauding the decision of the Democratic National Committee and the New Hampshire Democratic Party to drop television station WMUR as a co-sponsor of the next Democratic presidential debate scheduled for December 19. 

“The right to collectively bargain has been a key part of every Democratic Party platform for more than a half a century,” said IBEW International President Lonnie R. Stephenson.   “WMUR management’s refusal to meet in good faith with its employees stands in gross violation of that principle so I’m pleased that DNC chair Rep. Debbie Wasserman Schultz and N.H. Democratic Party Chair Ray Buckley have taken this step.”

Nearly two dozen members of IBEW Local 1228 have been resisting efforts to strip them of their retirement benefits. Management has ignored the union’s request for negotiations.

All three Democratic candidates – Hillary Clinton, Martin O’Malley and Bernie Sanders – have called on WMUR, which is owned by Hearst Media, to hold negotiations before the scheduled debate.

“We’re grateful for the support we’ve gotten from the DNC and from the candidates themselves,” said Local 1228 Business Manager Fletcher Fischer. “We hope this puts us one step further towards a fair resolution of the issue.”

WMUR Union Workers To Picket Arrival Of Senator Bernie Sanders At WMUR Studios, Tomorrow

Fair Contract With WMUR

IBEW Local 1228 members at the NH Democratic Party’s JJ Dinner last Sunday

Sen. Bernie Sanders is considered by many to be the true “labor supporter” among the Presidential primary candidates. Sen Bernie Sanders walked the picket line with workers in Iowa.  Last year, he joined FairPoint workers on the picket line during their months long strike.

WMUR Channel 9 studio staff Directors and Production Technicians formed a union to improve their wages and working conditions at the Hearst Corporation owned station. The Station is demanding these 22 workers lose their pension simply because they formed a union. There are already 12 other WMUR employees in a Hearst Union Pension Plan that these workers could be moved into, but WMUR and Hearst refuses. They insist on taking away the pensions of the people who put on their daily news shows every day of the year, some of them working for the station for 20 years or more.

In early November, Sanders sent a letter to Jeff Bartlett, President and General Manager of WMUR-TV, hinting that failure to reach an agreement with the IBEW local that represents WMUR production staff could be detrimental to the Presidential Debate that WMUR is sponsoring on December 19th.

IBEWLocal1228--WMUR--PressRelease--20151130

In the press release touting Sanders support the IBEW local 1228 stated:

“The Union is in talks with the Democratic National Committee to alert them to both the pension situation and the candidates’ positions of support. The Union is asking for the candidates and the Democratic Party to intervene with ABC to remove WMUR from sponsoring or having any other involvement with the debate, including pre and post-debate interviews.”

Considering that the debate is only two-weeks from Saturday, would this be considered a pre-debate interview?

Tonight the facebook page “Fair Contract with WMUR,” a page created by the WMUR union members, announced that they plan to picket the arrival of Senator Sanders for his “Political Up Close” interview.

Members of the IBEW Local 1228 will be picketing, at the arrival of Senator Bernie Sanders at WMUR-TV for the taping of Political Close Up. Tomorrow December 4th starting at 8:15 am, please join your brothers and sisters in their fight against Hearst Corporation and WMUR TV.”

What will Senator Sanders do?  Will he show up, meet with picketers and then refuse to be interviewed by WMUR until the station resolves this contract dispute?

Be at the WMUR-TV Broadcast Center, 100 South Commercial Street, at 8:15 on December 4, 2015, to see exactly what Senator Sanders will do.  


UPDATE: Click Here to read the follow up story on Senator Sanders meeting with IBEW members and working to bring both parties together

APWU 230 and IBEW 2320 Endorse Colin Van Ostern For Governor

50 NH State Representatives, 2 Local Labor Unions Endorse Colin Van Ostern for Governor

 Today 50 New Hampshire State Representative and two local labor unions announced their support of Colin Van Ostern for Governor of New Hampshire, building the campaign’s grassroots momentum after more than 500 community & business leaders endorsed Van Ostern in October.

“It’s absolutely critical that the people of New Hampshire have a Governor who is fighting every day for the people of our state – and for an economy that works for all of us, not just those at the top,” said Colin Van Ostern. “Building a brighter future for the people of New Hampshire and winning in 2016 will take a strong grassroots team and people-powered campaign, and I’m proud that’s what we are building.”

This week the executive boards of the International Brotherhood of Electrical Workers local 2320 and American Postal Workers Union local 230 both voted to endorse Colin Van Ostern for Governor, throwing the weight of their 1,000+ members behind his campaign.

Additionally, fifty New Hampshire State Representatives have now joined in support of the campaign. View the list here: http://vanostern.com/nh-legislators-for-colin-van-ostern/

Colin Van Ostern is a New Hampshire business leader, education innovator, dad, and Executive Councilor running for Governor in 2016.  He lives in Concord with his wife Kristyn, two sons, and black lab.  Learn more at www.vanostern.com

CWA Petitions Pennsylvania Public Utility Commission to Investigate, Fine Verizon for Appallingly Dangerous Conditions

p 13 top left Chester Co Honeybrook Rte 10 & Woodland

Image courtesy of CWA

 Verizon’s Systemic Neglect of Telephone Infrastructure Leads to Broken Poles, Sagging Cables, Ungrounded Conduit, and Abandoned Equipment That Pose Hazards to Public Safety

PUC Has Received Thousands of Complaints of Inadequate Service; Customers Unable to Receive Medical Calls, Call 911 

WASHINGTON- The Communications Workers of America (CWA) today filed a petition with the Pennsylvania Public Utility Commission calling on the PUC to open an investigation into unsafe conditions at Verizon locations throughout the state. 

Image courtesy of CWA

CWA, in the course of representing its almost 5,000 Verizon workers throughout Pennsylvania, examined Verizon’s equipment in areas of the state where Verizon has not built its new fiber network (or FiOS) and only offers service through traditional copper wiring.  The investigation documented hundreds of dangerous locations that include poles designated for removal that are not stable (and in some cases broken), portions of old poles suspended in the air, terminals and other equipment not attached to poles, cables hanging dangerously low due to broken lashings that have not been replaced, plastic coverings and splice boxes placed over damaged cable and other equipment that pose a risk of insect and animal infestation and that are not properly grounded, damaged cabinets that pose a risk of insect and animal infestation, and similar conditions that pose a risk to CWA members and the public.

“Everyday, CWA members put themselves at risk climbing poles that can fall at any minute or fixing equipment that has become a home for rats and other dangerous infestations due to Verizon’s unwillingness to maintain its, equipment,” said CWA District 2-13 Vice President Ed Mooney. “Despite a billion dollars in profits every month, Verizon refuses to spend the money necessary to keep the public and its employees safe. Customers are paying every month for telephone service that’s reliable. They deserve better than this.”  

Image courtesty of CWA

Image courtesy of CWA

“AARP supports the call for an investigation of Verizon’s operations in Pennsylvania. We know that telephone service is a basic necessity, allowing older people to maintain social contact, preserve health and safety, and call for assistance in an emergency,” said Bill Johnston-Walsh, AARP Pennsylvania State Director.  “Many consumers rely on their landline service during extreme weather or other emergencies.  When the power goes out, they need to be able to communicate. AARP also encourages consumers to take advantage of advanced technologies. The Commission’s should use its investigation to ensure that Pennsylvania consumers enjoy the finest, affordable, universal, reliable and high quality telecommunications system in the nation.”

In its investigation so far, the union documented more than 200 examples in 13 counties where Verizon is failing to provide safe facilities by refusing to 1) replace damaged, bent, and broken poles; 2) repair or replace damaged cross-connect boxes and remote terminals; 3) repair or replace damaged cable; and 4) properly control falling trees and vegetation near its facilities.  The union is calling on the PUC to use its authority to conduct a public, on-the-record investigation into whether Verizon is meeting its statutory obligation to provide “adequate, efficient, safe, and reasonable service and facilities.”

Image courtesy of CWA

Image courtesy of CWA

Since 2012, the PUC has received more than 6,000 complaints of inadequate service.  Because the PUC often transfers customers to Verizon before taking a complaint, the real number of complaints is even higher.  Many of these complaints document multiple days without service over several months, and have led to missed medical calls and an inability to call 911 in emergencies.

The union says that the dangerous conditions are due to Verizon’s systemic underinvestment in its traditional landline network.   In July, Verizon admitted in a letter to the FCC that it had only spent $200 million over the last seven years to maintain its copper landline network in Pennsylvania, ten other states and the District of Columbia.  CWA also asked the PUC to order Verizon to take immediate actions to correct these dangerous conditions throughout the Commonwealth, and to fine Verizon for what appear to be willful failures to safely maintain its equipment.  According to CWA’s petition, the PUC has the authority to fine Verizon up to $1,000 per day for each safety violation.

Letter To Editor: Unions Should Push To Bury Northern Pass Lines

letters to the editor

I am puzzled by the IBEW’s and other labor unions’ support for above-ground transmission lines on the Northern Pass project. I urge labor to reconsider its positon and advocate for full burial of the transmission line because full burial is in the best interests of labor.

I have a Ph.D. in history and specialize in labor and legal history. My grandfather and father were both members of the Boston Pipefitters union, and I am currently a union member. I was also a union organizer in Boston in the 1970s. I view things from a labor perspective and care about the interests of workers.

I support full burial of the Northern Pass transmission line because, among many reasons, it is the best alternative for workers and New Hampshire. In the draft Northern Pass Transmission Project Environmental Impact Statement, the Department of Energy found that burial of the entire transmission line pursuant to Alternative 4a will create nearly twice as many annual construction jobs over three years and 65% more permanent full-time jobs, will have almost double the economic impact from construction and 61% more in total economic impacts, and will generate 97% more statewide annual property tax revenues than the proposed above-ground line under Alternative 2 (DEIS, 4-5, 4-6). The adjustments that Northern Pass has made to Alternative 2 by increasing the amount of line buried will not significantly alter the above numbers and still fall far short of the economic advantages of 4a. From a labor and economic perspective, full burial is the best option for union and non-union workers alike.

It is my hope that labor will look closely at the advantages of 4a and insist that Northern Pass bury the entire transmission line.

Linda Upham-Bornstein,
Lancaster, NH 

Buying (and Selling) the Future on Wall Street

Verizon as a case study of why our economy doesn’t work, part six

The “ah-ha!” moment came during a conversation with a friend. What we realized: the way we usually talk about the stock market doesn’t match the reality of our modern economy. Things we assume about stock ownership often aren’t really true.

NYSE_09_26_1963_US_News_World_Report

New York Stock Exchange, 1963 (Photo by US News and World Report via Library of Congress)

Start with the basics: what is a share of stock? Most of us think “Investors give a business money and get back shares of stock that give them a fractional ownership of the company.”

But try applying that concept to Verizon, and it doesn’t fit. Verizon stockholders buy and sell shares on the open market – and none of that money goes back to the corporation. The money that investors pay when they buy stock… goes to the investors who sold the stock.

So buying stock isn’t “an investment in the company”… it’s an investment in the stock itself. If you later sell that stock for more than you paid for it, that profit is what’s known as a “capital gain.” If you sell it for less than you paid for it, that’s a “capital loss.”

Stock ownership does give shareholders a “fractional ownership of the company.” But what does that mean? There are more than 4 billion shares of Verizon stock outstanding.  If you own one of those shares, you don’t have rights to any particular network router or mile of transmission line.  Instead, you own slightly less than one-four-billionth of the corporation’s “stockholder’s equity.”  That means if the corporation were to be liquidated tomorrow, you – along with all the other stockholders – would share whatever remained after the corporation’s assets were sold and its other debts were paid.

And that’s probably when, if you were a stockholder, you would start remembering the $49 billion in long-term debt that Verizon acquired in 2013.

And that’s probably when you’d realize that Verizon’s corporate balance sheet shows less than $12.3 billion in “total stockholder equity.” And there are more than 4 billion shares of stock outstanding.

Which means each share of stock represents less than $3 in stockholder equity.

VZ stock chart

Verizon Share Price

Verizon has been trading above $40 a share since… April Fool’s Day 2012. (Back when there were less than 3 billion shares outstanding and the balance sheet showed stockholder’s equity of about $11.76 per share.)

That’s a huge difference between the per-share value of stockholder equity and the per-share price stockholders have been paying… for years now.

So… what else are stockholders buying? (in addition to that minuscule percentage of a relatively small amount of stockholder equity)

Each share also confers the right to receive a dividend, when and if the corporation issues dividends.  And – no surprise – Verizon has been issuing steadily-increasing dividends for more than a decade.  At this point, it’s issuing dividends that total more than $2.20 a year.  With shares trading between $40 and $45, that means stock purchasers can expect to make back – in dividends – about 5% a year on their investment. Which is way more than the rest of us can get in bank interest right now, if we put money into a savings account.

But although those dividends represent a whopping big “return on investment” – there’s still the risk that you could lose money on the stock itself.  Think about it: if you bought a share of Verizon stock last October, you paid about $49 a share. Since then, you’ve received about $2.20 in dividends. But the price of each share of stock has dropped to about $44. So even though you’ve received 5% in dividends… if you sold the stock now, you would still have “lost” about $2.80 per share.

So corporate executives pay a whole lot of attention to share prices.

VZ_Exec_Comp_Program_from_ProxyFor two reasons. First, because executives’ compensation is largely “pay for performance.” For Verizon executives, 90% of compensation is “incentive-based pay.” And what’s the objective? “Align executives’ and shareholders’ interests.”

Second reason: because most corporate executives own a lot of stock in their company.

VERIZON SHARES OWNED by executivesAs of this past February, when stock incentives were awarded, Verizon’s top 10 executives reported owning a total of more than 645,000 shares of corporate stock – worth, at the time, $49.31 per share… or, more than $31.8 million.

But Verizon stock is now trading at about $44 per share. That means those same executives’ shares are now worth only about $28.4 million.

So is it really a surprise that corporations spend trillions of dollars buying back their own stock, to bump up share prices?  Is it really a surprise that corporations borrow money to pay dividends and fund buybacks?

I don’t see anything here that provides an incentive for corporate executives to grow a company long-term.  Nothing that provides an incentive to pay employees a fair wage.  Nothing that provides any incentive to “create jobs” (no matter how low the tax rate goes).

The only incentives are: to keep stock prices high and to pay dividends. (And an incentive for corporate executives to take as much money as they can, however they can, while it’s still available.)

And so for the rest of us, the economy doesn’t work.

— — — — —

retirement eggWondering why you should find time to care about this, with everything else that’s going on right now?

Because of that huge difference between the per-share value of shareholder’s equity and the actual price per share.

And what happens during recessions.

And the fact that almost everybody’s retirement money is – in one way or another – invested in the stock market.

Here in the Granite State, the NH Retirement System lost 25% of its value in the last recession.

In June 2007, before the Wall Street meltdown, the NHRS had $5.9 billion in investments, including
•  $29.7 million of stock in Citigroup, Inc.
•  $23.5 million of stock in American International Group, Inc. (AIG)
•  $14.0 million of bonds issued by Federal Home Loan Mortgage Corp. (Freddie Mac)
•  $13 million of bonds issued by Federal National Mortgage Association (Fannie Mae)

Two years later, when the recession was in full force,
•  Citigroup stock had plunged to only about 6% of its former value
•  AIG stock was worth only about a penny on the dollar and
•  Freddie Mac and Fannie Mae had both been placed into federal conservatorship

That’s what happens to stock values, during recessions.

Remember hearing about the Detroit bankruptcy? Which supposedly was triggered by unsustainable public employee pension costs? The Detroit pension systems were fully funded, as of June 2008. Then the recession hit.

All those defined-contribution 401(k)s? Across the country, families lost an estimated $2 trillion (with a T) of their retirement savings when stock values plummeted during the last recession.

Artificially-high stock prices hurt almost everybody, in the long run.

— — — — —

Yes, there’s more.

Smashed Piggy Bank RetirementVerizon’s balance sheet includes $24.6 billion of “goodwill” and $81 billion of “intangible assets.” And if you factor those out, Verizon has “net tangible assets” of minus $93.4 billion. That’s what most of us would think of as a negative net worth… of about minus $23.35 per share. While investors are paying about $44 per share to buy the stock.

The good news, from the investors’ perspective: they’re not personally liable for that $116 billion in long-term corporate debt. If – and this is purely hypothetical – if Verizon were to declare bankruptcy and default on that debt, stockholders would not be expected to pitch in $23.35 per share to satisfy the corporations’ creditors.

The bad news is, somebody out there would take that loss… and retirement systems across America invest in corporate bonds. (At last report, the NH Retirement System owned more than $433 million worth of corporate bonds.  Can’t tell, from here, whether any of those include Verizon.)

— — — — —

Photo by Stand Up to Verizon via Flickr

Photo by Stand Up to Verizon via Flickr

If you want to support the 39,000 Verizon employees who have been working without a union contract since August 1st, you can sign the petition here.

Stand Up to Verizon is on Facebook here.

Part one of this “Verizon as a case study” series is here.  It focuses on Verizon’s $5 billion stock buyback last February, and the short-term bump in stock prices which followed.

Part two of the series, showing how Verizon executives benefited from that $5 billion buyback, is here.

Part three, looking at the disconnect between Verizon’s reported profits and the dividends it pays its stockholders, is here.

Part four, about phantom stock and how Verizon executives are avoiding taxes by investing in imaginary assets, is here.

Part five, about how Verizon is borrowing money to pay stockholders and executives while demanding givebacks from unions, is here.

This is part six.  And yes, there will be more.

Verizon Borrows Money To Pay Stockholders And Executives While Demanding Givebacks From Unions

Verizon as a case study of what’s wrong with our economy, part 5

Photo by Stand Up to Verizon via Flickr

Photo by Stand Up to Verizon via Flickr

It’s a math problem, instantly recognizable by anybody who’s tried to balance a family budget lately.

But it’s also a morality problem.

Here’s the thing:

  1. Verizon reports annual income of $54,287 per employee. BUT
  2. This past February, Verizon indulged in a stock buyback equal to about $28,000 per employee. AND
  3. Verizon continues to pay out, in annual dividends to stockholders, more than $50,000 per employee.

Between buybacks and dividends, there’s a lot more money being “distributed to stockholders” than the company reports as income. That’s the math problem.

Which is depressingly reminiscent of the business practices of the private equity industry, documented back in 2012. “Bain, and some other private equity companies …had companies paying dividends using borrowed money, not profits.” (Read “What Mitt Romney Taught Us about America’s Economy” here.)

And Verizon has accumulated a substantial amount of debt, along the way. Right now, the corporation has long-term debt equal to about $655,000 per employee. And its Morningstar credit rating is only BBB (“moderate default risk”).

But the dividends it pays out to shareholders keep ratcheting higher… always higher. (And yes, Verizon CEO Lowell McAdam is a substantial shareholder, getting dividends worth more than a half-million dollars a year.)

Instead of cutting dividends to grow the business, Verizon has borrowed money – putting itself in debt at least through 2055.

Just this month, the corporation announced another increase in the dividend rate. While the corporation’s employees were working without a contract. Because Verizon wants givebacks from its employee unions.

Again: Verizon is increasing the amount of money paid to shareholders at the very same time it is insisting on employee givebacks.

Yes, there’s a morality problem here.

———-

Anybody else see the Brookings study, earlier this week, “Would a significant increase in the top income tax rate substantially alter income inequality?”

As I see it, the researchers totally missed the point.

When you’re talking about the macroeconomic effects of tax rates, the big effect has nothing to do with the amount of revenue produced.

Instead, policymakers (and researchers) need to focus on how various tax rates influence decisions made on the micro level.

Anyone who lived through the Eisenhower era of 90% tax rates knows that CEOs make very different decisions when 90% of their income is going to the federal government. (For instance, they’re not anywhere near as likely to borrow money to pay themselves a stock dividend, if 90% of that dividend is going to the federal government.)

———-

If you want to support the 39,000 Verizon employees who have been working without a union contract since August 1st, you can sign the petition here.

Stand Up to Verizon is on Facebook here.

Part one of this “Verizon as a case study” series is here.  It focuses on Verizon’s $5 billion stock buyback last February, and the short-term bump in stock prices which  followed.

Part two of the series, showing how Verizon executives benefited from the $5 billion buyback, is here.

Part three, looking at the disconnect between Verizon’s reported profits and the dividends it pays its stockholders, is here.

Part four, about phantom stock and how Verizon executives are avoiding taxes by investing in imaginary assets, is here.

This is part five.

Part six calculates that — because of all the dividends and long-term borrowing — each share of Verizon stock now represents less than $3 in stockholder equity (even while it’s trading at more than $40 a share); read it here.

And yes, there will be more in the series.  Please check back.

How Do CEOs Make Millions When The Company Goes Belly Up? Investing In Imaginary Assets

Verizon as a case study of what’s wrong with our economy, part 4

Enron play London

Photo by Tilemahos Efthimiadis via Wikimedia Commons


Remember Enron?

Remember when George Bush selected Enron executive Thomas White to be Secretary of the Army? Remember how, when he left Enron, White received a $13 million payment for “phantom stock”?

That was early in the biggest corporate meltdown in history (at the time).  And when analysts tried to reconstruct what went wrong, Enron’s “phantom stock” program was part of the explanation.  “According to documents provided by Enron to the IRS, in 2000, approximately 1,673 employees participated in the program.” “Enron’s SEC filings reveal that some payouts under the phantom stock plan were huge.”

Wondering what “phantom stock” is?

Well… it actually isn’t. Because it’s imaginary. It doesn’t exist.  In the terminology of Verizon’s “Executive Deferral Plan”… it’s just “hypothetical.”

Ah yes… as I was researching this series, I stumbled over traces of Verizon’s phantom stock.

For instance, according to SEC filings, Verizon Director Richard L. Carrion “owns” more than 98,500 shares of Verizon’s phantom stock. “Each share of phantom stock is the economic equivalent of one share of common stock and is settled in cash. The shares of phantom stock become payable following the reporting person’s termination of service as a director.” As of last week, Carrion’s phantom shares were “worth” more than $4.3 million. Which, under a 2004 tax law, apparently isn’t subject to taxation until the money is actually paid to Carrion. After “termination of [his] service as a director.”

And apparently, until the money’s paid out, Verizon’s phantom shares remain so hypothetical that not only are they not taxed

…but I couldn’t find any accounting for them, as a long-term corporate liability, in either Verizon’s 2014 Annual Report or its 2015 proxy statement.

Hopefully, I just missed it. Hopefully, the shareholders have some way of knowing exactly how much “economic equivalent” is out there as a standing liability for future payment.  Because when I added up all of the directors’ phantom stock I could find in the SEC filings, it totaled more than 400,000 shares — which would be worth more than $18 million at last week’s stock prices.

And Verizon doles out lots of phantom stock – not just to directors, but also to Verizon employees.

For instance, Verizon CEO Lowell McAdam. According to SEC filings, McAdam “owns” more than 278,900 phantom shares of Verizon stock. What’s that worth? I have no idea.  According to the filings, the phantom stock McAdam “owns” is the economic equivalent of only “a portion” of the corresponding shares of Verizon stock. How big a “portion”? I have no idea. I couldn’t find that anywhere, either.

VZ phantom stock - employee officersBased on what I could find, 10 Verizon employees who report their ownership to the SEC together “own” more than 1.5 million phantom shares. All reported as “deferred compensation” – payable in the future – but I couldn’t find any record of how much Verizon’s total long-term liability is, for all these “hypothetical” shares.

I couldn’t even find out how many people “own” phantom stock through Verizon’s “Executive Deferral Plan.” Although “a company’s officers and directors” are required to file ownership disclosures with the SEC, other top- and mid-level executives aren’t required to do so. (And remember, Enron reportedly had about 1,673 executives in its phantom stock program.)

And it gets worse.

That Executive Deferral Plan (EDP) also offers “a ‘Moody’s’ investment fund that provides a return that mirrors the yield on certain long-term, high-grade corporate bonds.” (page 8)   But again, this isn’t an actual investment in an actual investment fund.  No, remember, this Plan “is not funded and has no trust or assets to secure your benefits.” (page 17) Because, Verizon tells its executives, “If the EDP were funded by a trust, you would be subject to immediate income tax on your vested Plan benefits.” (also page 17)

Instead, this Plan seems to be just a bookkeeping mechanism. The Plan summary explicitly says: “the investments referred to in the Plan are hypothetical in nature… the Plan administrator will track the performance of the investments that correspond to the hypothetical investments in your EDP account, and the value [of] your EDP account will be adjusted to reflect the gains (and losses) of the investments corresponding to the hypothetical investments in your account.” (also page 17)

But I couldn’t find out how much money – total – is hypothetically “invested” in this hypothetical “Moody’s” fund. I couldn’t find out how many executives participate. So what’s the long-term liability to Verizon’s bottom line?

And it gets worse. There are apparently still other hypothetical investment options. From the Plan Summary: “[Y]ou can elect to have your EDP account treated as if it were invested in any of the hypothetical investment options that mirror the performance of the investment options that are available under the Verizon Savings Plan for Management Employees or the Verizon Business Savings Plan for Management Employees, whichever applies to you.”

But the bottom line liability? How much is owed to Verizon executives under this Plan? I couldn’t find it. Anywhere.  (If you can find it, please leave me a note in the comments!)

Remember that one Enron executive, Thomas White, received $13 million for his phantom stock… and there were 1,670 other enrollees in that company’s program.

Now… I’m not trying to draw an analogy between Enron and Verizon. But the “phantom stock” thing really caught my attention.

And it makes me uncomfortable that Verizon – which has about 178,000 working families depending on it for paychecks – is run by executives who are willing to put millions of dollars of their own money into “hypothetical” investments…

…just to delay taxation on I can’t tell how much executive compensation…

…at the same time Verizon is insisting on concessions from its employee unions.

And it’s not just Verizon. It’s corporations throughout our economy.

Big bucks to executives (who are using all kinds of imaginative ways to avoid taxation)… while working families are expected to give money back, to improve the corporate bottom line.

It’s why our economy isn’t working, for anybody but the folks at the very, very top.

—————

If you want to support the 39,000 Verizon employees who have been working without a union contract since August 1st, you can sign the petition here.

Stand Up to Verizon is on Facebook here.

Part one of this “Verizon as a case study” series is here.  It focuses on Verizon’s $5 billion stock buyback last February, and the short-term bump in stock prices which  followed.

Part two of the series, showing how Verizon executives benefited from the $5 billion buyback, is here.

Part three of the series, looking at the disconnect between Verizon’s reported profits and the dividends it pays its stockholders, is here.

This part four.

Part five, about how Verizon is borrowing money to pay stockholders and executives while demanding givebacks from unions, is here.

Part six calculates that — because of all the dividends and long-term borrowing — each share of Verizon stock now represents less than $3 in stockholder equity (even while it’s trading at more than $40 a share); read it here.

And yes, there will be more in the series.  Please check back.

Read more about how US tax policy encourages profit-taking — even profit-taking that bankrupts corporations — in “What Mitt Romney Taught Us about America’s Economy” here.

 

“Dividend” is Just Another Word for Payout

Verizon as a case study of why the economy doesn’t work, part 3

2015-07-25_Mass_Rally_Stand_Up_To_Verizon

Photo by Stand Up To Verizon via Flickr

Once upon a time, dividends were how corporations distributed excess profits to shareholders.  But with the 2003 Bush tax cuts, things changed. The tax code began giving preferential treatment to dividends.  And then dividends themselves changed. Now they are nothing more or less than “a sum of money paid regularly by a company to its shareholders.”

The connection between profits and dividends got lost. Now dividends can be paid out of cash reserves… or funded by long-term borrowing. Where the money comes from doesn’t seem to matter all that much. The only thing that seems to matter is: that the money goes to the stockholders who expect it.

I stumbled over this ugly truth – again – while looking at stock buybacks, particularly those done by Verizon. Why do corporations do stock buybacks? One of the reasons given is: to reduce the number of shares outstanding, in order to increase the value of the remaining shares. Fewer shares should mean each share is worth more, right? But when I looked closely at Verizon’s latest huge stock buyback, well… the post-buyback price bump disappeared in about a month. (And of course, all the trillions spent on buybacks before September 2008… didn’t keep the stock market from crashing then.)

So then there’s the other reason given, why to do stock buybacks. Reducing the number of shares through a buyback increases the “earnings per share” metric. (Same earnings divided by fewer shares makes the EPS bigger). And, the second part of that reasoning goes, companies that have higher “earnings per share” can afford to give out higher dividends, which keeps stockholders happy.

Except.

When I looked at Verizon’s EPS, and compared it to corporate dividends… I didn’t see any correlation whatsoever. Here’s what it looks like, for the past five years.

Verizon eps vs dividends 5 years.You’ll notice that Verizon’s $5 billion buyback – announced and then mostly completed this past February – didn’t change their 2015 Q1 dividend (which was declared on March 6) and it didn’t change their 2015 Q2 dividend.  Nope.  Despite that $5 billion buyback, the quarterly dividend remained exactly the same as it was on September 4, 2014.  Even massive losses in 2011 and 2012 didn’t change the dividend. (How does a corporation lose $1.48 per share and still pay a $0.515 dividend? And the CEO still keeps his job? And the stock price doesn’t dive?)

Click on the image to see the same comparison over the past decade.

Here’s what I saw: the earnings per share bounced around, but the dividends stayed roughly the same. Dividends grew – with surprising regularity – but there didn’t seem to be any correlation whatsoever between earnings and dividends. Just a nice steady upward line on dividend payments.

Again, this isn’t just Verizon. I’ve seen the same pattern of steadily growing dividends in lots of other large corporations. Walmart. Boeing. FedEx. McDonald’s.

Steady increase in dividends, no matter what. Pretty much ever since the 2003 change in our tax laws.

Even through the Great Recession, dividends kept increasing. Ratcheting upward, ever upward.

But no correlation whatsoever – that I could see – with stock buybacks.

Not even the $5 billion stock buyback Verizon did in February.

Here’s the thing that still irritates me, about that buyback. In February 2014, Verizon’s Chief Financial Officer ruled out any buybacks for at least a couple of years. Instead, Verizon was supposed to be paying back debt—including the $49 billion of debt it had added less than five months before. That was the “biggest company debt offering ever…more than double the previous issuance record of $17 billion (by Apple, Inc.).” A deal that was “about the size of all outstanding obligations of the Slovak Republic.” A deal that was really, really expensive because of its size and the corporation’s low credit rating.

Yes, in those circumstances, it would indeed seem financially prudent to focus on paying back debt.  But instead, Verizon raised its dividend again. And did a $5 billion buyback in February 2015. And then came after its employee unions, looking for wage, benefit and job security concessions.

Back when Verizon’s CFO was ruling out buybacks, the corporation had $114 billion of debt.

Now, after that $5 billion buyback, the corporation has $120 billion of debt (as of June 30, 2015).

And – after shoveling all that money out the door to stockholders – the corporation still insists on concessions from its unions.

I did a little math. Verizon has about 177,300 employees (most of them are not represented by a union). If the corporation had spent that $5 billion on its employees – rather than buying back its own stock – Verizon could have given each and every employee $28,200.

And then I did a little more math.  Despite the February buyback, Verizon still has more than 4 billion outstanding shares of stock.  That means each of the quarterly dividends it has issued this year has cost the corporation more than $2.2 billion. That’s more than $50,000 per employee that Verizon will transfer to stockholders through dividends, this year alone.

And the corporation is demanding givebacks from its employees’ unions.

Money going to the top of the economic pyramid, rather than to working families – that’s why our economy doesn’t work anymore.

———

If you want to support the 39,000 Verizon employees who have been working without a union contract since August 1st, you can sign the petition here.

Stand Up to Verizon is on Facebook here.

Part one of this “Verizon as a case study” series is here.

Part two of the series, showing how Verizon executives benefited from the $5 billion buyback, is here.

This is part three of the series.

Part four, about phantom stock and how Verizon executives are avoiding taxes by investing in imaginary assets, is here.

Part five, about how Verizon is borrowing money to pay stockholders and executives while demanding givebacks from unions, is here.

Part six calculates that — because of all the dividends and long-term borrowing — each share of Verizon stock now represents less than $3 in stockholder equity (even while it’s trading at more than $40 a share); read it here.

And yes, there will be more in the series.  Please check back.

Read more about how US tax policy encourages profit-taking — even profit-taking that bankrupts corporations — in “What Mitt Romney Taught Us about America’s Economy” here.

Verizon Proves Exactly What Is Wrong With Our Economy

Cui Bono (Who Benefits)?
Verizon as a case study of why the economy doesn’t work, part 2

 

Telephone Lineman repairing hurricane damage - FEMA photograph_by_Marvin_NaumanWho benefits when executives decide to spend corporate funds on stock buybacks?

In my last post: In February, Verizon announced it was buying back $5 billion of its own stock. The repurchase was mostly done within days, but the subsequent “bump” in stock price lasted less than a month. (BTW, Verizon shares are now selling for about 6% less than when the buyback was announced.)

Compared to other companies, Verizon doesn’t usually indulge in stock buybacks all that much.

Its annual reports show that the corporation keeps reauthorizing the repurchase of up to 100 million shares – but most of the time, that authorization just sits on the books and isn’t used. In five out of the past seven years, Verizon didn’t buy back any stock whatsoever. The corporation bought back only about one-tenth of one percent of its stock in 2013. And in 2014, the Chief Financial Officer even “ruled out stock buybacks for at least two or three years as it aims to slash debt.”

And then came 2015.

Yes, less than a year after the CFO “ruled out” stock buybacks, the corporation went ahead and bought back stock anyway – $5 billion dollars worth, and almost all of it purchased within days of the announcement.

Piecing the together the timing…

For ten of its executives, Verizon has a “long-term incentive plan” that includes periodic awards of “restricted stock units” (RSUs). SEC Form 4s show their receipt of RSUs from the 2012-14 incentive cycle. The way the plan works, each RSU can be exchanged for one share of common stock. And according to the Form 4s, most of the executives converted their RSUs into shares of Verizon common stock on February 13, 2015.

And yes, February 13th was pretty close to the peak of the post-buyback “bump” in the stock prices. Verizon shares closed at $47.86 on February 5th, the day the buyback was announced. But on February 13th, the RSUs were converted to Verizon stock at a per-share price of $49.31. That’s a buck-forty-five difference. Per share.

Adding up all the RSUs that were reported on the various Form 4s: Verizon awarded its executives more than 350,000 shares of common stock on February 13th – worth a combined total of $17.36 million.

But those same shares would have been worth only $16.85 million, at the February 5th closing price.

That’s more than a half-million-dollar difference, caused by that buck-forty-five bump in share prices.

Verizon’s incentive program also includes an option to divert the value of RSUs into executives’ deferred compensation accounts.

  1. Executive VP Daniel Mead diverted the value of almost 3,000 RSUs into his deferred comp account. The share-price difference between February 5th and February 13th meant Mr. Mead’s account was credited with an extra $4,300.
  2. Executive VP Craig Silliman diverted the value of all his RSUs into his deferred comp plan. The share-price difference meant that Mr. Silliman’s account was credited with an extra $17,600.

Mr. Mead also took advantage of the post-buyback price bump, by selling all the Verizon stock he owned on February 12th – at a price of $49.70 a share. That was almost two bucks above the February 5th closing price. Mr. Mead made almost $46,000 more on that sale than he would have, if he had sold the same stock on February 5th.

Adding up all those little differences… that (relatively small) post-buyback bump in stock prices meant more than $600,000 to the Verizon executives who received RSUs on February 13th.

For Verizon CEO Lowell McAdam, the difference in buyback prices amounted to almost $150,000 of additional value for his RSUs. (It’s good to be the boss: he gets a lot of RSUs.)

Is this why Verizon changed course and bought back stock even after announcing that it wouldn’t?

Verizon could have used that $5 billion for a whole lot of other things. Like, funding a contract for the tens of thousands of its employees who are now working without one.

Buybacks are a problem throughout our economy. Since the “end” of the Great Recession, corporations have spent more than $2.4 trillion on stock buybacks – providing short-term increases in stock prices, but little or nothing else. Really. I looked. I asked around. I did not find any research or academic studies showing that stock buybacks provide long-term benefits to corporations. (If you know of anything, please let me know in the comments section.)

Looking back a decade, I can’t help but notice: except for that little tiny repurchase in 2013, the last time Verizon indulged in buybacks was before and during the Great Recession.

In 2006, Verizon spent $1.7 billion on stock buybacks. At the beginning of 2006, Verizon shares were trading at about $27 per share; by the end of the year, they were trading at about $35. That was a huge bump in stock prices… but it didn’t last.

In 2007, Verizon spent $2.8 billion on buybacks. That year, the share price went from about $35 to about $40 at the end of the year. A decent bump, but…

During 2008, Verizon stock prices tumbled to as low as $22 a share, even while the corporation was spending $1.3 billion on buybacks. Stock prices closed out the year at about $31 a share… but tumbled again in 2009.

What else was going on during that time? Verizon approached its unions about early bargaining – but the corporation insisted on givebacks, so the unions walked away from the table in December 2007. The contract wasn’t settled until August 2008, when Verizon was faced with the prospect of a strike by its 65,000 union workers.

Here’s what hurts:

Verizon spent almost $6 billion on buybacks, leading up to the last recession; yet they started negotiations by demanding givebacks.

At the time, Verizon had 65,000 union workers; and union negotiators’ biggest concern was job security.

Now, that contract covers only about 38,000 union workers – and Verizon is once again spending billions on buybacks at the same time it is demanding worker givebacks.

And I couldn’t find anything – not one thing! – that would show there was any long-term corporate benefit from all those billions spent on buybacks.  As far as I can tell, it was all just “money down the drain”… money that could have made a huge difference to the families of Verizon workers.

And looking at the problem economy-wide? Yes, corporations spent trillions on stock buybacks before the last recession.  Trillions of dollars that could have made a huge difference to millions of families across America.

But all that money didn’t prevent the 2008 stock market crash.

————–

Still with me? Are you trying to figure out why, if the stock prices bounce around so much, it would matter to Verizon executives whether their shares were worth a buck-forty-five more or less on the day they acquired them?

Here’s why it would matter: it will minimize future taxes. Somewhere down the road, when those executives sell those shares, they will probably have to pay capital gains taxes. “Capital gains” is the difference between the price at acquisition and the price the shares sold for. So: the higher the share price at acquisition, the lower the capital gain, and the less taxes the executive will have to pay.

And yes, right now Verizon stock is selling much, much lower than it was back in February. But those executives don’t have to sell their stock any time soon. They can afford to wait – years, if necessary – until the stock prices rise again.

They’re not trying to figure out how to pay their bills, with no job security. And their employer isn’t demanding givebacks.

————–

H/T to economist William Lazonick, whose research first introduced me to the problems of buybacks.  Read his “Profits without Prosperity” here.

Part one of this “Verizon as a case study” series is here.  It focuses on Verizon’s $5 billion stock buyback last February, and the short-term bump in stock prices which  followed.

This is part two of the series.

Part three, looking at the disconnect between Verizon’s reported profits and the dividends it pays its stockholders, is here.

Part four, about phantom stock and how Verizon executives are avoiding taxes by investing in imaginary assets, is here.

Part five, about how Verizon is borrowing money to pay stockholders and executives while demanding givebacks from unions, is here.

Part six calculates that — because of all the dividends and long-term borrowing — each share of Verizon stock now represents less than $3 in stockholder equity (even while it’s trading at more than $40 a share); read it here.

And yes, there will be more in the series.  Please check back.

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