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June 05, 2003

Labor Shows Business How to Deal With Scandal

The business press had a field day with the AFL-CIO's mini-corporate scandal at the Ullico insurance company, where a bunch of labor leaders made insider deals. A bunch of rightwingers thought they had a rod to beat labor with and show "everybody does it", but instead it's shown the opposite.

Top union leaders like John Sweeney have allowed no slack for those involved; the head of Ullico was ousted and tough new management brought it. Those who personally benefitted from the deals (even though it's not clear any laws were broken in this case) have been told to cough up the money.

As Business Week has admitted:

When it comes to good governance, Corporate America can learn a useful lesson from, of all places, the labor movement...What's notable, is that after months of internecine battles, AFL-CIO President John Sweeney and other labor leaders who sat on Ullico's board moved decisively to clean up the mess. They ousted CEO Robert Georgine and put directors on notice that they'll have to pay back the profits they made. That could amount to at least $6 million.

These actions stand as a model for other large companies. It's painfully clear today that corporate boards rarely fulfill their designated role as watchdogs over the CEO. Complacent directors allowed apparently illegal abuses to occur at a string of companies, from Enron to Tyco International...

The problem, of course, is that many boards remain clubby conclaves with little desire to check egregious CEO behavior. Ullico's board was perhaps even more inbred than most, since many of the directors Sweeney confronted are leaders of unions that elected him and pay dues to the AFL-CIO.

Yet Sweeney and a few others, such as Laborers' Union President Terence O'Sullivan, who has since been named Ullico's new CEO, defied the institutional taboos and took on their chums.

Let's be clear here-- this scandal amounted to $6 million (yes, not billions as with corporate ripoffs) and this was the worst financial abuse the corporate press could find about unions. And the labor movement has decisively cleaned it up, something that still cannot be said about most of corporate America.

Forget all the propaganda about "corrupt" unions-- it's lies. Like any institution involving tens of millions of people, thousands of locals run semi-autonomously, and billions of dollars flowing, there are of course individuals who break the law in their own self-interest.

But as an institution, labor unions are far more law-abiding, far more honest, far more honestly run than the corporate types who propagandize against them.

Posted by Nathan at June 5, 2003 11:55 AM