Contribution #11: Obama Freezes Payroll

Chapter 14 is focused on Collective Bargaining and Labor Relations and a decision made today by President Barack Obama, shows the role of a union and the cost saved to American peoples by de-unionizing labor. The National Treasury Employees Union is vehemently against President Obama’s decision to freeze pay increases for nearly 2 million federal government employees. The President of the NTEU said that they plan on fighting the measures taken by Obama, in Congress.
‘The administration had examined pay levels, "and the data we get back indicates that high-skilled workers in government are slightly underpaid. Lower-skilled workers are slightly overpaid relative to the private sector," Obama said. "And that's not surprising," he added, "because it's a unionized workforce" in government, while the private sector typically is not.’
The proposed cuts will save American taxpayers roughly $30 billion over the next five years. At the end of the chapter, I also learned that it is illegal to strike at the federal level of the public sector and most states. However, this hasn’t prevented work stoppages in state and local governments. Therefore, in regards to the Obama administration’s new policy, we should not fear a strike of our national government, but do expect the NTEU and the American Federation of Government Employees to file grievances and fight for this to be reversed in Congress.

Contribution #10: Labor Unions and Collective Bargaining in the NFL

Reading about Labor Unions in Chapter 14 only increased my own premonitions about what is going to happen to the NFL. The book talks about how effective labor unions have the power to bargain in relation to management. The right to strike is a power tool of labor unions, but it has to be a collective idea from the labor force. In the case of the NFL, the players have a high magnitude of bargaining power over the management because of the costs that are imposed on management without viable labor. While it is true that labor costs in the NFL are going up, I find it hard to believe that the owners of teams will be willing to sit on all the costs of stadiums and not make money for an entire season. Considering that the NFL’s Player Association is so large, owners would also have a hard time finding a quality product that people would still want to watch on Sundays. However, this is where labor relations and collective bargaining gets exciting. The players also know that they would rather play football than bag groceries or be a gym teacher, so they have to find some middle ground to help decrease costs of the owners, whose ultimate goal is to make themselves filthy rich. Another thing to take away from this Chapter is the negotiation process. I view the process as a form of distributive bargaining because the union wants a larger share of the pie, but management also wants to reduce costs because they say they are too much of their profits. My guess is that this will turn into some form of integrative bargaining where players will get more pay, while rookie’s pay will be drastically reduced. That type of agreement might be enough of a middle ground for the owners as well as the players in relieving some of the pressure in agreeing to a new collective bargaining agreement. However, if the owners want to move to an 18-game schedule then they better be prepared to increase wages or else find another incentive for players to make them feel like the beating they take is worth it.

Contribution #9: Bear Stearns’ Brutal Fallout

The story that leads into Chapter 13 is a prime example of investment in your own company’s stock gone bad. Since the fall of Enron, and the collapse on Wall Street, many employees have seen their entire life savings plummet. Even a well diversified portfolio can come crashing down when the stock market takes a nose dive, but imagine if your portfolio included upwards of 50 percent or more of your own company’s stock and suddenly your employee benefits are wiped away because of an unhealthy merger or a hostile takeover with your company. The goal of HR Managers is to inform employees about the certain benefits that come with their job and the potential risk involved with limiting themselves, in terms of stock, to their own company. Employee benefits are supposed to live up to their name, but if the employee is unaware of the potential risks involved with receiving and not receiving some benefits, it can be detrimental to themselves and their families. Many employees of private companies don’t have to fear the risk involved with company stock, so they are more concerned with social security, family-friendly plans, and retirement packages. Usually, those are set in stone with the terms of the contract and provide a worry free benefit to their employees. In the long run, it’s important for employees to understand their benefits packages and use them to the fullest extent, which must be communicated by the HR Managers.

Contribution #8: Google's "One-to-One" Exchange Program

In Chapter 12, there is an article about Google and how in 2009 they issued an exchange program that would allow employees to exchange their stock options that were “underwater.” This means that since Google, as most companies did in the stock market, took a significant hit in stock price, the employee stock options were essentially worthless. The main point of stock options is to provide incentive to employees and increase retention of key executives and employees. Google therefore allows employees to exchange their current stock for the current market value of the stock. The employees benefit from this because if this stock option matures back to the previous stock price that was 58 percent more than what it currently is, they will receive more compensation. In doing so, this allows Google to retain those crucial employees and continue to recruit the best. However, Google does take a financial hit for this decision. It was estimated that they would accrue a $460 million expense in order to satisfy their employees. I found this to be a telling measure of what Google thinks of its employees and the ethical standards which it upholds. Of course the expense was eye-popping, but then I looked up Google’s current financials and found that in the last 12 months they have sales over $27 billion and income over $7 billion. Not surprisingly, the employees who took part in the exchange program see a stock price of $616 today. I think I would be more than willing to go to work for Google.

Contribution #7: Executive Pay Hits China's Radar

Reading the article about the Chinese issue of executive brought to my attention the inequality of skill-based pay, but also reinforced my ideas regarding the subject. While it does seem unfair that these Chinese CEOs of publicly owned companies are making astronomical amounts in comparison to the Chinese urban pay average and even more than government workers. Politically, I am a Republican so I believe that these people are deserving of their pay so long as they warrant it. Just because the discrepancy is exceedingly disproportionate doesn’t mean that executives should give up their pay. As was stated in the article, in order to keep the best and highly skilled workers, they need to be paid accordingly. However, I do not disagree with the fact that measures could be taken to increase the minimum wage in China, but that is why China has a competitive advantage globally, their low labor costs. There is little China can do when it is stuck between a rock and a hard place, that is China’s reality and market competition; when it expects to maintain its status as a leader in the global market. The use of skill-based pay, with some profit sharing bonuses on top of that, helps to retain the most knowledgeable CEOs in China, preventing them from going elsewhere in the world.