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Right Wrong to Join Left’s Corporate Blacklisting Campaign
by Brendan Steinhauser
26 August 2003MCI

The Right should not be joining the Left in the blacklisting of MCI.

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blackmail corporations by threatening to create such a dispute if their demands were not met, the Bush administration repealed this executive order.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 contracts. 

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

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