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The Hypocrisy of the Bell Scandal

by: Robert Cruickshank

Fri Jul 30, 2010 at 09:15:00 AM PDT

As I predicted, the story of high-salaried city officials in a small city in LA County is being used to call into question all public employee salaries, from the people who empty the park trash cans, put books on the shelves, teach your kids, to the people who make sure all this is done within the budget. This SacBee article on a recent League of Cities meeting is a good example of how the local government feels they're on the defensive:

"For city managers, it's kind of like the Rodney King beating," said Winters City Manager John Donlevy, who is on the League's city manager executive committee. "It had to be one of the most reprehensible things done. City managers are charged with being the fiduciary of the public trust. Cities have to live within their means and I don't care how good (they are), nobody should be paid close to a million dollars."

The scandal in the city of 37,000 comes at a vulnerable time for California cities. Trust in public officials has eroded, particularly when the discussion turns to those with high salaries. In addition, as cities and counties use layoffs and wage concessions to balance their budgets, labor unions are accusing public agencies of protecting bloated management staffs at the expense of the rank and file.

I'm sure everyone would probably agree that $800,000 to run a small city like Bell is a bit much. But the focus on city salaries seems more than a little hypocritical when compared to the far larger, much more widespread, systematic robbery of the middle-class by the CEO class, who get paid exorbitant salaries even when they fail.

Carly Fiorina, candidate for US Senate, took a $21.4 million payout when she was fired from HP after having destroyed that company.

As to Meg Whitman's exorbitant salary, Jerry Brown made the obvious connection while on Neil Cavuto's Fox News show recently:

CAVUTO: You sound like your Republican opponent, Meg Whitman. It's almost word-for-word what she says.

BROWN: Well, no, you'll -- listen, wait a minute, this lady gave herself $120 million and then they had to lay off 20 percent of the employees. She had a private jet that flew her around for 200 hours on private...

CAVUTO: Yes, but she wasn't on the tax-payer's dime, you know what I'm saying?

BROWN: No, but that was shareholders, and shareholders are really the citizens of the corporation. So, look, she is flying around on a private jet. She has almost 100 employees paying -- spending $500,000 a day. It's the only business that I know of that has no limit. There's no sense of cost containment. And that's not a good preparation to take over California which is $19 billion in the hole.

Cavuto's response is revealing: he thinks it's perfectly OK for a CEO to rob the shareholders and employees, paying them lower dividends and wages in order to enrich themselves, but when it comes to public employees, how dare they make anything other than poverty wages.

Jerry Brown was absolutely right to call out this hypocrisy. CEOs make hundreds of times what their average employees make, a form of systematic robbery that has contributed to the wage stagnation and economic imbalances that helped produce the recession.

And both Fiorina and Whitman support extending the Bush tax cuts for the wealthy, with Whitman wanting to worsen the state budget deficit with a capital gains tax cut that would further enrich her wealthy friends while forcing more teacher layoffs.

Therein lies the true hypocrisy of the Bell scandal. A few city managers are making high six figures and suddenly it's the end of the world for local government - but failed CEOs take home ridiculous amounts of money at the expense of their shareholders and employees while their companies suffer and struggle, while these CEOs fire tens of thousands of workers so they can have more money to finance their campaigns for office, and we're supposed to see it as the natural order of the world?

I don't think so.

Robert Cruickshank :: The Hypocrisy of the Bell Scandal
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I see your point, but... (0.00 / 0)
the old adage applies: Two wrongs don't make a right.

"I'm sure everyone would probably agree that $800,000 to run a small city like Bell is a bit much."

Call that the understatement of the century. Given that the Governor's salary is something like $200,000, the Bell city manager salary simply cannot be justified or explained away. It's the level of gross abuse that made this a story. A city manager making even $100,000 would probably have not made the news and I wouldn't call that "poverty wages".

As far as the hypocrisy charge goes, I get it, to an extent. But nobody forced HP to give Fiorina that severance package. The shareholders of E-bay are probably well aware of Meg's compensation and can dump her anytime they see fit.

Defending against austerity measures or advocating modest tax increases on the wealthy is one thing. But this sort of government waste story is the kind of thing that resonates with people of all political stripes cause it's so extreme and obviously off-kilter. Seriously. Throws these guys to the wolves. They have zero to do with good and responsible governance.  

They are being thrown to the wolves (0.00 / 0)
The Bell officials in question have resigned and might not receive their pensions. The city council is going to be next, either by resignation or recall.

My point is that much more egregious and indefensible salaries are routinely handed out to CEOs and nobody says a damn thing. We're supposed to act like it's normal.

Who's going to throw the eBay board to the wolves? Where's all the hemming and hawing about "good and responsible governance" at large corporations?

That's my point. There's a basic hypocrisy here. One city overpays its manager - when the hundreds of other CA cities don't - and suddenly it's symptomatic of local government problems. Yet our whole economy is thrown into ruin by channeling wealth to CEOs instead of to job creation and higher wagers for workers, and we all just collectively shrug.

You can check out any time you like but you can never leave

[ Parent ]
Very well put Robert! (0.00 / 0)

[ Parent ]
To the extent (0.00 / 0)
that anybody might try to extrapolate from the salary of the Bell city manager to ordinary public employees receiving ordinary compensation, it would be an unsupportable linkage. However, you don't seem to have presented any evidence of that having actually happened. The comparison that is being drawn is of excessively compensated executives in both the public and private sector. To the extent that someone claims that such practices are defensible for the private sector and not for the public sector, that does qualify as hypocrisy. You seem to me to have your apples and oranges a bit mixed up here.


[ Parent ]
Why isn't anyone pointing out the analogy (8.00 / 1)
Between Bell and a corporation?

The CEO (City Manager) and Board of Directors (City Council) give themselves exhorbinant salaries and benefits while CUTTING the jobs, pay, and benefits of the people who actually do the work.

And e-Meg wants to run California more like a corporation?

[ Parent ]
I thought I did earlier... (0.00 / 0)

[ Parent ]
The real business conflict (0.00 / 0)
Also goes unreported.

We hear about the conflict between management and labor, where management is trying to "contain costs" and labor is trying to get a living wage for their work.

But, the real conflict in business is between owners and management.  SEC regulation is designed to protect owners (shareholders) from rapacious management.  Disclosure laws are so the owners can know what their managers are doing.  Trading restrictions are so management can't game the price of the company against the owners' interests.  The last 30 years has been a gradual shift in power away from owners to that of management...

Remedies (0.00 / 0)
I guess I don't look to good or bad here.  I look for remedies.  If the people of Bell think that $800K for a City Manager is too much or that the salaries of the councilmembers is too high, there is a remedy: recall.

If shareholders think that executive compensation is too high, there are two remedies: sell the stock or vote out the directors at the next shareholders meeting.  If I lived in Bell I would be organizing a recall campaign and probably a charter amendment as well.

But I don't live in Bell.  So I'm not too worried about it.

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