The Labor Department heeded union complaints against greater transparency by moving to rescind financial disclosure rules. This was at the top of the AFL-CIO’s “To Do List” for the Obama Administration.
Union officials complain about financial disclosure and transparency requirements. But they have few qualms with imposing those same requirements upon others.
In a January 2009 appearance at the World Economic Forum in Davos, Switzerland, SEIU President Andy Stern called for greater responsibility, transparency, and accountability – for corporations, of course. Stern even participated in a workshop on restoring trust in corporations while in Davos. He followed up in The Washington Post‘s online forum (ironically, the topic of discussion was leadership) where he criticized executives for not taking “responsibility.” Yet, Stern remains deafeningly silent on demanding the same accountability and transparency for unions.
Union Hypocrisy on Disclosure
The Laborers’ International Union of North America argues that stronger disclosure rules “in no way warrant the violence they will do to the careful balance Congress struck in the LMRDA between the right of union members to have the information necessary to govern the affairs of their unions and the legitimate interest unions have in preventing their confidential information from being readily available to management and its agents.”
It is the same “violence” that unions utilize to criticize corporations. They love to make hay out of executive compensation. Unions would not be able to make their case without the financial disclosure data that is required by law and made available to the public. That information is available at the Securities and Exchange Commission’s website. If sifting through 10-K’s is unappealing, try Yahoo! Finance.
Sure would be nice to have the same for union officials, right? According to union officials, it’s necessary for corporations to report their financial practices, but it’s not acceptable for unions to have to disclose financial (mis)management.
Union Hypocrisy on Compliance
Unions also argued that complying with the transparency requirements is difficult and time consuming. It reminds me of watching OJ try to put on the gloves (He just couldn’t do it!).
UNITE HERE used the excuse that disclosing critical financial details “created a serious administrative burden” and imposed a “steep financial cost to our members.”
AFSCME complained that it spends $120,000 to comply with LM-2 disclosure rules, despite the fact that AFSCME reported over $193 million in total receipts in its 2008 LM-2 disclosure. That’s just .06 percent of their annual budget.
This feigned outrage pales in comparison to the billions spent every year by corporations. An AMR Research survey showed that companies spent over $32 billion in 2008 on corporate governance, risk management, and compliance. Spending on Sarbanes-Oxley alone totaled $6.2 billion.
Another survey found that the average annual cost for companies with market capitalization over $75 million to comply with Sarbanes-Oxley was $1.7 million. A different survey found that the average cost of compliance with Sarbanes-Oxley for companies under $1 billion in annual revenue increased by 171 percent to $2.8 million per year between 2001 and 2006.
Incidentally, unions supported Sarbanes-Oxley, which increased and established new accounting and financial reporting standards for corporations. AFL-CIO leader John Sweeney actually led a union rally near the New York Stock Exchange to denounce “corporate pirates” and call for greater responsibility and transparency to the American public. Both are admirable attributes for corporations, but apparently not good enough for unions to practice.
If billions in costs and mountains of paperwork are good enough for corporate America, is it too much to ask for a modicum of accountablity and transparency from unions?
Some Complaints Are Too Good To Be True
If you only listened to the unions, you too might conclude that proper disclosure and accountability were Sisyphean tasks. And maybe that’s not a surprise with the excuses we’ve come across in union-submitted comments to the Federal Register advocating for less transparency.
The United Union of Roofers, Waterproofers, and Allied Workers take home the trophy for best excuse against transparency and disclosure. The union actually suggested that providing additional detailed information “may be too much for the union member to comprehend and may result in misunderstanding.” Their conclusion: union members should hear this information in a meeting with officials. They also assert that it’s merely a “theory of the Department [of Labor]” that stronger disclosure and transparency requirements will discourage embezzlement and financial mismanagement.
See below the fold for the rest.
“As a result of the new filing requirements AFSCME and approximately 100 of its affiliated labor organizations who file the Form LM-2 were required to expend significant resources – economic and personnel – to ensure compliance.”
“While AFSCME favors meaningful disclosure, it opposes the disclosure of information that is inconsistent with the underlying goals of the LMRDA, is so burdensome that it threatens to undermine its ability to effectively represent workers, invades the privacy of its officers, members and employees or unjustifiably requires a level of financial accountability greater than that applied to America’s corporations or other comparable institutions.”
“Most labor organizations have now filed reports under the 2003 Rule for three years: 2005, 2006, and 2007. This would be an opportune time for the Department to explore the predictions and assumptions it made back in 2002 and to attempt to discern whether the majority, or even a sizable plurality, of theclass of persons the Department professed to be most interested in helping in 2002 – ordinary union members – have, on balance, benefited from having a portion of their dues diverted to compliance with the Department’s annual reporting requirements and away from the provision of representational services, organizing new members, and strengthening strike funds.”
“The 2009 rule imposes new itemization requirements that substantially increase the recordkeeping and reporting burden on Form LM-2 filers. The rule adds nine new schedules to that form for itemizing various types of receipts, thereby increasing the number of schedules from 20 to 29. AFL-CIO Comments 9-12. In addition, the rule changes the reporting requirements for two of the existing schedules (schedules 3 and 4) to effectively require itemization of transactions involving investments and fixed assets. Id. at 5-6. Finally, the rule imposes additional reporting requirements with regard to officer and employee benefits and expenses (schedules 11 and 12). Id. at 6-9.”
“The burden imposed by DOL’s 2002 changes to the LM-2 Form is enormous. BAC’s Form LM-2 for 2007 was 447 pages long. In contrast, its 2004 report, the last filed under the prior rules, was 78 pages long. The effort that goes into tracking and reporting the additional information required each year has consumed a great deal of staff time. The itemization requirements, in particular, are onerous. Cur finance department is required to dedicate the equivalent of an entire full-time staffperson, year-round, to perform functional coding of invoices, expense reports, etc.”
“Moreover, preparing the form itself consumes about four staff person months from initial export and sorting of the data in Excel to uploading or entering the data into the form itself, to signing and transmitting the form electronically.”
“In this recent round of rulemaking, DCL similarly failed to engage in a reasoned process. We are on the verge of again wasting millions of dollars — at a time when no entity can spend such sums lightly. Thus, it is critical that the new rule be rescinded, and that no further rulemaking be undertaken until the affects of the 2002 changes have been analyzed.”
“First, it imposed substantially increased reporting and recordkeeping obligations on unions filing the LM-2 form, without sufficient justification.”
“Compliance with the 2003 rule required a substantial undertaking by LM-2 filers, both in terms of staff time and accounting and software costs necessary to comply with the new recordkeeping and reporting requirements under the rule. It was necessary for the IBEW and other LM-2 filers to purchase new accounting software, and required a huge expenditure of staff time. … To demonstrate the mammoth effect of those changes on the IBEW, its LM-2 in paper form went from fifty pages to almost five hundred.”
“In sum, as costly as the revised 2005 form was to unions, the 2009 changes are a quantum leap above those.”
“Union members presently have all financial information available that enables them to be responsible, informed, and effective participants in the governance of their labor organizations. This financial information is available at their regularly scheduled union meetings, available through interaction with their union officers, and available by visiting their respective union offices. … Most union members are very informed about the governance of their labor organizations. The proposed revisions to Form LM-2 would duplicate information which is already available to the rank and file. Furthermore, the proposed revisions will be an added burden to the resources of the members in carrying out their objectives.”
“The Department has also stated that these revisions will discourage embezzlement and financial mismanagement. This is a theory of the Department. The Department has not quantified how the existing Form LM-2 has discouraged embezzlement and financial mismanagement.”
“The additional detailed information proposed in the revised LM-2 may be too much for the union member to comprehend and may result in misunderstanding. The best method, in my opinion, for the member to be informed is to hear and understand the information and basis for a transaction at a regularly scheduled union meeting and/or in direct communication with the union officers. It is not accomplished by reading it over the internet and not fully understanding what is being read. The additional information required will be a burden on the labor organization since this information is already provided to its members.”
“The isolated and exceptional examples and speculation offered to justify these burdensome changes in no way warrant the violence they will do to the careful balance Congress struck in the LMRDA between the right of union members to have the information necessary to govern the affairs of their unions and the legitimate interest unions have in preventing their confidential information from being readily available to management and its agents.”
“To this end, LIUNA contends that most union members are content to seek information from their union about its financial affairs rather than have comprehensive financial data about their organization, including job-targeting programs, available to the public, free of charge on a government-funded searchable database that facilitates the work of anti-union consultants.”
“As we set forth in our July 7, 2008 comments, TCU has already expanded considerable time and effort necessary to comply with the 2005 modifications of the LM-2 form. While the amount of resources necessary to do so are readily available from TCU and the other affected labor organizations, the DOL continues to underestimate the cost of compliance and ignores the actual experience of TCU and others.”
“The 2003 rule implemented sweeping changes in labor organization reporting requirements that created a serious administrative burden for UNITE HERE and our affiliates, at a steep financial cost to our members. These costs have not even been measured by the Department of Labor.”