Off-Topic Column – Parcel Taxes, Bain, Romney, Executive Pay

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yudof-2Executive Pay For UC and CSU

In the past, executive pay limits have not been successful, but given the renewed focus on fee hikes, the Occupy movement and student protests, there is a good chance the latest effort by Senator Leland Yee to introduce legislation to prohibit pay raises for top university administrators during bad budget years, or when student fees are increased, will be successful.

According to the release from the Senator’s office, the bill will also prohibit incoming executives from earning more than 105 percent of their predecessors’ pay. UC and CSU have historically given new administrators more than double-digit pay hikes. In May 2009, the UC Board of Regents approved a $400,000 salary for UC Davis Chancellor Linda Katehi, which equated to a 27 percent hike from her predecessor.

Part of the problem is that last time, then-Governor Arnold Schwarzenegger vetoed Senator Yee’s previous legislation to stop executive pay hikes, despite overwhelming bipartisan support in the Legislature.

“The exorbitant executive pay practices of the CSU Trustees and UC Regents are appalling and reinforces the perception that they are completely out of touch,” said Yee. “UC and CSU are public institutions designed to serve California’s students and not to be a cash cow for executives.”

“Once and for all, it is time to stop these egregious compensation practices and restore the public trust,” said Yee. “I am looking forward to passing this bill and Governor Brown signing it into law.”

Last year, when the CSU Board of Trustees raised fall tuition by 12 percent, they also awarded the new president of San Diego State a $400,000 salary – $100,000 more than his predecessor.

In July 2011, the UC Board of Regents raised tuition by 9.6 percent (on top of an 8 percent increase already approved for the fall semester), while also giving the head of the UC San Francisco Medical Center a nearly $200,000 raise, bringing his yearly base salary to $935,000, with a retention bonus of $1 million over four years.

Senator Yee’s legislation would prohibit such pay increases for top administrators at CSU – including the chancellor and campus presidents – within two years of a tuition hike or within two years of the university not receiving an increase in their budget allocation. The bill will also stipulate that incoming executives can only receive five percent more than their predecessor. While the bill mandates the changes at CSU, due to UC’s constitutional autonomy, the Legislature can only recommend that the Board of Regents adopt the policy stipulated in the bill.

Senator Yee, who voted against the state budget cuts to education, has long fought the executive compensation decisions by UC and CSU. In 2007, Yee passed SB 190 to ensure compensation decisions were made during a public session of the Regents and Trustees. Prior to the law, UC and CSU often made such decisions behind closed doors without public input.

“Time and time again, rather than protecting the needs of students and California families, the Regents and Trustees line the pockets of their top executives,” said Yee. “While these public administrators are making more than the President of the United States, many Californians are struggling. We deserve better.”

The Bain of Romney’s Existence

From 1988, everyone remembers the Willie Horton ad that so devastated Michael Dukakis, but few remember that it was actually one of his primary opponents, the then relatively obscure Albert Gore, who first raised the issue.  Likewise in 2004, the Swift Boat issue was first raised in Democratic primaries, before campaigners turned it into a huge issue.

Defenders of Mitt Romney may argue that the 30-minute attack video “When Mitt Romney Came to Town” is one-sided.  It probably is.

Mitt Romney will still be the Republican nominee, mainly because there is no one else there.  The Republicans may always nominate their front-runners, but the fact is if you think back over the last fifty years, you will be hard-pressed to come up with a Republican nominee as weak as Romney, and Romney would have lost to all of them in the nomination process.

The amazing thing about the attacks in this video is that the attacks on Mr. Romney are not based on ethical problems or some sort of personal association with a shady figure, but instead, they represent a critique on Bain’s business model – almost an attack on the entire form of free market activity that Mitt Romney along with other Republicans advocate.

As blogger and columnist Nate Silver put it, the ad adopts “what appears to be a documentary style, but they present a one-sided view of the role played by private equity companies like Bain Capital, characterizing them as greedy and as lining the pockets of the wealthy at the expense of the working class.”

He adds, “Were it not for the couple of clips of Mr. Romney speaking French, one would be shocked to learn that the ads had been produced by Republicans, rather than by a liberal filmmaker.”

The remarkable aspect of this attack is how much it steals from Karl Rove’s play book.  The strength of Mitt Romney was assumed to be his private sector record of success, and this takes that success and attempts to turn it into a negative.

The Obama campaign seized on this line of attack quickly.

“Romney closed over a thousand plants, stores and offices, and cut employee wages, benefits and pensions,” Obama campaign aide Stephanie Cutter wrote in a memo addressed to “interested parties.” “He laid off American workers and outsourced their jobs to other countries. And he and his partners made hundreds of millions of dollars while taking companies to bankruptcy.”

Suddenly, commentators are recognizing that the liabilities of Mitt Romney extend far beyond the lukewarm support of the Republican evangelical base.  Mitt Romney is awkward with his wealth and attempts to portray himself as an everyman, when it is obvious that he is not.

We shall see where this goes, but as one strategist mentioned earlier this week, the Bain ad points to a blueprint where Mr. Obama can seize on the financial distress in the Midwest and make headway where many thought he would be doomed.

School Parcel Tax Issue

In a week full of bizarre stories, probably the top one was the fact that the Yolo County Clerk Freddie Oakley lacked the power to ask a court to remove ballot language which was misleading and, more importantly, completely irrelevant.

“The law doesn’t permit me to sue myself,” the clerk told the Vanguard.  “In a school board election I can’t.  In a county election I can ask for a writ of mandate against arguments that are false and misleading.  But only in county elections – the law is not consistent.”

Freddie Oakley said that she plans to meet with Assemblymember Mariko Yamada and request for her to sponsor legislation that would make these laws consistent.

So, good friend and predecessor Tony Bernhard comes to the rescue to file the case.  Not a huge deal, but unnecessary, or it should be.

That is the start of the craziness.  Ordinarily, the case would have been heard on Thursday morning by Judge Dan Maguire.  But Judge Maguire is being challenged by Deputy District Attorney Clinton Parish for his Judgeship.  So he is in the middle of a campaign.

Because of that, he has collected a list of endorsers, one of whom is School Board Member Richard Harris.  Based on that, Jose Granda, one of the challengers to the ballot measure, questioned whether the judge could be fair.

So Judge Maguire recused himself and the case moved over to Judge Samuel McAdam.

That is an interesting move, anyway.  The Vanguard, when Judge McAdam was appointed, questioned that appointment but several prominent community members came to his defense – strangely enough, each of them with very strong ties to the school district.

In 2010, the Vanguard launched Yolo Judicial Watch which monitors and covers the courts.  Since that time, the most frequent judge in Yolo County that people complain about is not any of the judges that preside over criminal matters, but rather Judge McAdam.

It is not even close and we do not even cover family law.  Complaints range from simple unfairness in custody and family law situations to allowing unsupervised visits between children and registered sex offenders.

We shall see what comes of this.  Assistant County Counsel Dan Cedarborg believes that there is compromise language that could accommodate the needs of everyone.

The Enterprise reports he told the judge, “We have some proposed compromise language that we think would meet the concerns of Bernhard and the county clerk (Oakley), rather than deleting the whole paragraph.”

Personally, it looks like the issue is irrelevant and they should stick to reasons to oppose the parcel tax rather than trying to turn the election process into an issue – where I think about everyone is comfortable with mail-in ballots at this point.

—David M. Greenwald reporting

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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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12 thoughts on “Off-Topic Column – Parcel Taxes, Bain, Romney, Executive Pay”

  1. Mr Obvious

    As for the Romney / Bain issue, I hope the general public is smart enough to realize that some times you have to close, reorganize, or piece out a company. Sure some people lost jobs but sometimes it created jobs. If the companies were losing money they would have been closed without Bain. The President also tried to be a venture capitalist and failed. Remember Solyndra? Who invests that much money into a company that you know is going to fail? Is there really any question as to who gets the upper hand here?

  2. E Roberts Musser

    What I have seen is a scorched earth policy starting to develop for election campaigning in this country. In effect, the Republicans are “eating their own”. The public is sick of such attack ads, and wants done with them. They do not resonate well with citizens, IMO. Gingrich’s momentary popularity and rise in the polls was as a result of his remaining above the fray of attack mode for a brief while, as other candidates viciously went after each other. Those that resorted to vicious attacks went down in flames – Rick Perry for one.

    The public is not particularly interested in what a candidate feels is wrong with other candidates, but is more interested in what that candidate is going to do to address the country’s problems…

  3. Rifkin

    [i]”… the fact is if you think back over the last fifty years, you will be hard-pressed to come up with a Republican nominee as weak as Romney, and Romney would have lost to all of them in the nomination process.”[/i]

    David, this is total, complete, utter nonsense. If Romney wins his party’s call–I agree that he likely will–he will not be the weakest Republican on the national ticket for president. He will not be among the bottom three in the last fifty years.

    By far the weakest GOP nominee since 1962 (using your parameter) was Barry Goldwater. Although Goldwater’s position on civil rights and his muscular hawkishness on Vietnam look stupid in retrospect, most of the conservative platform espoused by Goldwater eventually became standard Republican policies in later years. But in 1964, backed by a lot of nuts (such as the Birchers) and racists (especially, but not exclusively in the South), Goldwater was far out of touch with the views of the average American. That was what made him so weak.

    He was a good speaker (though not so good when compared with one of his strongest supporters in 1964, the actor Ronald Reagan, who was still making money as a paid spokesman on TV shows), but Goldwater’s speeches only excited his core supporters and left the rest of the country cold. He was viewed by the vast majority as “too extreme.” That view made Goldwater the single weakest candidate of either major party in all of the 20th Century.

    The next weakest Republican was Richard Nixon in 1968. He was a failed presidential candidate 8 years prior, when he was the sitting, but not beloved vice president. In 1962, two years removed from the Eisenhower Administration, he was walloped in his run for governor of California. From 1962 to 1968, Nixon was largely seen as a loser. Public opinion polls in that period rated him very low. He rose to fame as a strong anti-Communist in the late-1940s. His peak of fame was his successful “kitchen debate” with Nikita Kruschev in 1959, which Nixon won largely on the grounds that Krushchev proved what a jack#ass he himself was.

    The shocking thing, of course, is that Nixon won the presidency in 1986 with just 43.4% of the popular vote. Nixon’s victory was the culmination of the implosion of the Democratic Party. My guess is that if Robert Kennedy had not been killed (notably by an Arab terrorist whose hatred of Jews and Israel drove him to insanity) RFK would have easily been elected president in ’68. But Nixon got lucky. The Democrats settled on VP Humprehy, who was too liberal for the South (which largely opted for Wallace) and too conservative for the youth and the leftists.

    The third weakest Republican nominee of this period was Bob Dole in 1996. He won the nomination largely on the grounds that he was the next batter up. But Dole had a serious problem. He had been for most of his many years in Washington the ultimate dealmaker, insider and moderate. His party by 1996 hated three types of Republican politicians: dealmakers; insiders; and moderates. So Dole tried to run as a born-again conservative. He carried around a copy of the Constitution and quoted the 10th Amendment, which seemed very much at odds with all of his previous career (most notably against his major achievement with the Ameericans with Disabilities Act that greatly expanded Washington’s power over state and local government). He half-heartedly ranted against Hollywood values. But worst of all for Dole, he was old and lethargic by 1996. He quit the Senate in the middle of the race, mostly recognizing that he no longer had the energy to campaign and serve the people of Kansas. His only popular appeal was that he would have been the last of the WW2 generation to be our president. But that was not enough. He ultimately (and literally in Chico) fell off the stage, waging one of the worst campaigns of my lifetime.

    It’s too early to know how good or bad Romney will look in November. For now he does not look that strong. He looks like he could be a Bob Dole of 1996, since his record and philosophy seems to have diverged from his campaign platitudes. But he is, at least, a lot younger and more attractive than Dole. And he faces a president who is much less popular with a worse economy.

  4. Rifkin

    [i]”… Obama campaign aide Stephanie Cutter wrote in a memo addressed to ‘interested parties.'[/i] [quote] ‘He laid off American workers and outsourced their jobs to other countries. And he and his partners made hundreds of millions of dollars while taking companies to bankruptcy.’ [/quote] Does anyone honestly believe that?

    Think about this for a moment: if all that a private investment group did was to ‘take companies to bankruptcy,’ then how did Romney and his partners become so wealthy? How is it that to this day Bain is a very successful enterprise?

    The notion that Romney should feel bad or that he deserves criticism because he outsourced jobs is likewise ridiculous. All private companies are in business to make money. If the companies Bain bought were not making profits because they were spending too much on labor or not marketing their products successfully or they were overly thick with middle-managers, then the new owners of these companies had the responsibility to cut costs where they could. That is essentially what Bain did. It is what all good managers of mature companies do. (Very young companies in new industries are often different, because they don’t yet know what jobs need to be done in-house and which should be done by outsiders, and they don’t always know which products will be moneymakers and which will be losers. As long as the demand for their sector is still lifting all boats, they can thrive despite inefficiencies.)

    Think about Bain’s tactics if you were running your own company here in Davis, before you go off half-cocked thinking Bain did something wrong.* Say your company is a shoe store. One of your significant costs is paying for your accounting and bookkeeping services. You need someone who knows all of the laws and so on whom you can trust to take care of your payroll accounting. You also need someone to manage your accounts payable and accounts receivable. You also need inventory management. And you need to keep good tract of all of your expenses and income for tax purposes.

    When you bought the business, it had two accountants and three bookkeepers doing all of the financial work. This was costing you $300,000 per year. Your business was barely breaking even and you needed to cut some costs in order to make a profit. A consultant came to you with an idea: outsource all of your financial services to an outside firm which would charge you $100,000 per year. That would not only save you $200,000, but that savings would all be profit.

    If you made that decision to outsource those jobs, do you think you would deserve the kind of criticism that Romney is getting for his work at Bain?

    [i]”… the Bain ad points to a blueprint where Mr. Obama can seize on the financial distress in the Midwest and make headway where many thought he would be doomed.”[/i]

    Criticizing Bain may well help Obama. However, this election will turn on the general state of the economy. It is getting better and most new polls reflect that. The question will be (in Novemeber) if it has improved enough for Obama voters to turn out to re-elect their man, or if it is seen as so weak that anti-Obama voters will turn out to de-elect the president. Barring any major gaffes, I don’t think this election will be about Romney. It will mostly be about the incumbent.

    *Clearly with any companies that Bain bought and Bain’s actions led to the death of those companies, Bain’s management can be blamed. Either they bought the wrong companies in those cases or they ran them incorrectly. But the point still holds: Bain made a lot of profits; thus they didn’t operate incorrectly too often.

  5. David M. Greenwald

    Rich:

    I simply disagree. Goldwater was weak nationally but he would have walked all over Romney in a party primary, same with Nixon.

    I compare Romney this year to Kerry in 2004. Democrats thought they had that race won, they thought Bush was dead, Kerry was the strongest in a weak field, but in the end, kerry for a variety of reasons was handily defeated. I see this year playing out similarly.

    I also agree with you on a secondary point, the economy will decide this election. The economy grew at 200,000 last month, if that continues, Obama will win easily. On the other hand, if Europe collapses and the economy goes back down, obama is dead. However, with a middle ground economy, we get a relatively competitive race that will still hinge an individual state-by-state race and that is where this issue matters because it will make it much more difficult for Romney to win key battle ground states in the Midwest.

  6. Frankly

    Too bad Bain didn’t buy and reorganize Hostess Corporation.

    So, when Bain – or any other private equity firm – buys a company and then reorganizes it to make it profitable, they get blamed for the resulting job loss.

    However, when unions take down a company like Hostess (too high labor costs are cited as a primary cause of the company’s bankruptcy), who gets the blame?

    I agree with Elaine. On principle I am disgusted with the GOP party running these types of attack ads. However, I also see it as a positive strategy for the Party in general. The media has its money-making cycle and old news is not profitable. Romney’s Bain history is prime ammunition for Obama’s class warfare campaign strategy. His people have it locked and loaded ready to launch. However, Republicans know that Romney is going to win the primary and so by playing the Bain story now, it will take away much of the impact Obama could gain enflaming class anger and shifting blame on Romney for Obama’s failure to enact policy to create jobs.

    Private equity firms serve a valuable service to the economy and American workers. They help prevent the economic cancer of bloat and inefficiency that would otherwise plague many companies growing complacent. During the years of great global economic expansion between about 1975 and 2008, about 15% of jobs were destroyed every year. Some of these deleted jobs were caused by private equity moves. Others were the result of economic changes, market changes and failed companies. However, during this same period total jobs grew by about 2% per year.

    What is the alternative?

    Obama is just now – after his hyper expansion of government business – starting to talk about federal agency consolidation. Might the resulting job loss from this consolidation be Obama’s own “Bain” moment during the election?

  7. Frankly

    On Executive pay for UC and CSU…

    I have worked in both the private and public sector. My experience is that highly-compensated employees in the private sector generally eat their public-sector equivalents for lunch. Note that we do not see many highly compensated public-sector employees make the move to the private sector. The reason no private company would hire them (that is unless they have political connections to help secure government contracts), is that their compensation expectations exceeds their performance capabilities.

    I have absolutely ZERO problems with any person working in the private sector making as much money as they can as long as they do it legally and ethically. What I bristly at is market compensation and benefits or greater paid to any person working in a taxpayer risk-subsidized business. Apparently this view is 180 degrees from a typical liberal Democrat template for demonizing private wealth, and turning a blind-eye to the obscene pay and benefits given to people that will always have their mistakes and poor performance wholly or partially covered by the American taxpayer.

    Looking at UC management performance… having the benefit of advanced knowledge of the reductions in state funding and still failing to make operational changes to protect price impacts to the customer… they would have been fired long ago by their Boards. Instead, they give themselves raises.

  8. Rifkin

    TYPO: [i]”The shocking thing, of course, is that Nixon won the presidency [b]in 1986[/b] with just 43.4% of the popular vote.”[/i]

    Make that 1968, not 1986.

  9. Rifkin

    [i]”I simply disagree. Goldwater was weak nationally but he would have walked all over Romney in a party primary, same with Nixon.”[/i]

    That argument does not make your case. You said “you will be hard-pressed to come up with a Republican nominee as weak as Romney.” The weakest nominees have been those who:

    A) were too extreme or whose positions were out of touch with the views of the general public (as Goldwater was in 1964 and McGovern was in 1972 and to a lesser extent as Mondale* was in 1984) or

    B) were terribly ineffectual campaigners (as Dukakis was in 1988 and Dole was in 1996) or

    C) those who were seen as damaged goods before the election (as Nixon was in 1968 and to some extent as Ford was in 1976 and Carter was in 1980).

    I am not saying that Romney is some perfect candidate. I do think it hurts him that his record as a moderate governor of a liberal state is at odds with his campaign rhetoric that he is a true conservative. But by no means have you made the case that Romney is:

    A) too extreme for the general public. I think, especially if the economy is in poor shape in November, a majority of voters will be looking for a different approach than the free-spending, borrow us into bankruptcy that has been Obama’s approach. I think at this point, most people don’t think Obama knows what he is doing with regard to the budget and taxes and so on and they might be inclined to revert to a person who promises to be a fiscal conservative;

    B) an ineffectual campaigner. I think the truth is just the opposite: Romney is a good speaker with good energy. It helps that he is good looking, too. I would still rate Obama as a better campaigner. But Romney is better on the stump than anyone else in the Republican field by a long shot this year;

    C) that Romney is damaged goods. His healthcare plan hurts him among only a small segment of very conservative voters. Those people will still come out for him in November, because those folks really hate the current president. I thought his Mormon faith would hurt him in the primaries, but that does not seem to be the case. It is true that many Evangelical Christians hate the Mormon religion. But those who do seem to believe he is their best choice for president. Americans are the least prejudiced people in the world–no other multi-ethnic, multi-racial country comes close to us in that regard. America will elect a president of any race or ethnicity, and with the exception of a Muslim (for the time being), they will elect a person of any monotheistic religion (including a Jew), as long as the person does not seem to be weird. (Romney, and Huntsman for that matter, seem perfectly normal.)

    *Mondale in 1984: he was too liberal for most Americans that year. He was a Great Society Democrat, running at a time when most of the free world, led by Britain and the USA, were re-emphasizing private enterprise, deregulation, free trade and economic competitiveness. That said, Mondale was in the mainstream of his party. But his party had fallen out of touch with most Americans when he was their standard bearer. Part of the reason he lost 49 of the 50 states was his philosophy. But most of the reason was that the economy was in good shape for the first time in a long time in 1984 and America did not want to get rid of Reagan as long as times were good.

  10. E Roberts Musser

    [quote]Obama is just now – after his hyper expansion of government business – starting to talk about federal agency consolidation. Might the resulting job loss from this consolidation be Obama’s own “Bain” moment during the election?[/quote]

    Good one Jeff!

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