Candidates and groups
on the left have long made attacks on corporate America a staple of their
populist appeals. Whether it is Jesse Jackson shaking down corporations for
minority contracts, Ralph Nader blasting big business on environmental issues,
or the perennial management-labor disputes, the battle between the left and
business interests remains at the forefront of American politics. What is
new, however, is conservatives taking up the cause.
Washington Post columnist James Glassman, former U.S.
Congressman and MSNBC commentator Joe Scarborough, and Citizens Against Government
Waste, all traditionally advocates of free market policies, are stealing
a page from the left's anti-business playbook in joining with the Communications
Workers of America (CWA) and the liberal National Consumer League to pressure
the General Services Administration (GSA) to terminate all federal contracts
with MCI, formerly known as Worldcom. Senator Susan Collins (R-Maine) launched
an investigation into these contracts in early June and the GSA officially
opened its own inquiry on June 30.
The CWA remains upset that its attempts to organize MCI's workforce several
years ago were rejected by the company's employees, and would like the federal
contracts redirected to MCI's unionized competitors. Organized labor and
liberal groups must be pleasantly surprised at their new and strange bedfellows
in this campaign, as only a few years ago conservative Republicans fought
against this politicization of federal contracts.
In the final days of the Clinton administration, an executive order was issued
at the behest of organized labor to authorize the GSA to blacklist corporations
from receiving federal contracts who had any legal or ethical problems, even
if they did not affect their ability to perform federal contracts. Thus,
a company that had been sued for sexual harassment or was involved in a labor
dispute could be barred. After leading business groups complained that this
rule was overly broad and could allow labor unions to blackmail corporations
by threatening to create such a dispute if their demands were not met, the
Bush administration repealed this executive order.
Currently, for a federal contractor to be suspended, there must be adequate
evidence of infractions that affect the present responsibility of the firm
or individual to conduct future business with the government. This standard
properly restricts the GSA's inquiry to wrongdoing that impairs a company's
ability to perform federal contracts. For example, the GSA recently determined
Enron, because its assets are being liquidated, could not receive federal
Now, the GSA must decide whether to take the same action against MCI, which
has won $772 million in federal contracts. However, while Enron's liquidation
makes it unable to perform federal contracts, neither critics on the left
or the right have alleged the same with MCI.
To the contrary, MCI continues to perform these contracts without interruption,
including one to build a wireless network in Iraq. The company filed a reorganization
plan on April 13, which was preliminarily approved by over ninety percent
of its creditors. The company also agreed on May 19 to pay $500 billion to
shareholders in a settlement with the Securities and Exchange Commission.
This is the largest compensatory award to shareholders ever paid by a non-brokerage.
More importantly, the company has brought in a new CEO and Board of Directors,
purging former CEO Bernie Ebbers and all other officials who misled shareholders.
No one would seriously propose discriminating against applicants for federal
jobs who have gone through personal bankruptcy. Similarly, if all companies
that have uncovered and corrected past wrongdoing are to be barred in perpetuity
from receiving federal contracts, many of the most respected American corporations
would have to be blacklisted. Such a policy fails to recognize that companies
are collections of people that change over time and punishes current employees
and shareholders for the sins of former executives.
Ultimately, American corporations can and should be held accountable in court
for violations of the law, including the recently adopted Sarbanes-Oxley
accounting reforms. If such regulations need strengthening, changes should
be considered by Congress or state legislatures.
Government agencies overseeing contracting, such as the GSA, should not impose
their own open-ended standards on corporations that make it more difficult
for a company to successfully complete the court-supervised reorganization
process, which benefits creditors, employees, and shareholders. Whether pushed
by liberals or conservatives, regulation through contracting that extends
beyond an assessment of a company’s ability to perform interferes with existing
structures through which the legislative, executive and judicial branches
of government regulate business, burdens the economy by adding uncertainty
to the business environment, and fails to allow for the most efficient use
of public funds.
Brendan Steinhauser is a Fellow at the Austin, TX-based American Freedom Center.