Beware Corporate Psychopaths

They are still occupying positions of power
by Brian Basham - Thursday 29 December 2011

Over the years I've met my fair share of monsters – rogue individuals, for the most part. But as regulation in the UK and the US has loosened its restraints, the monsters have proliferated.

In a paper recently published in the Journal of Business Ethics entitled "The Corporate Psychopaths: Theory of the Global Financial Crisis", Clive R Boddy identifies these people as psychopaths.

"They are," he says, "simply the 1 per cent of people who have no conscience or empathy." And he argues: "Psychopaths, rising to key senior positions within modern financial corporations, where they are able to influence the moral climate of the whole organisation and yield considerable power, have largely caused the [banking] crisis'.

And Mr Boddy is not alone. In Jon Ronson's widely acclaimed book The Psychopath Test, Professor Robert Hare told the author: "I should have spent some time inside the Stock Exchange as well. Serial killer psychopaths ruin families. Corporate and political and religious psychopaths ruin economies. They ruin societies."

Cut to a pleasantly warm evening in Bahrain. My companion, a senior UK investment banker and I, are discussing the most successful banking types we know and what makes them tick. I argue that they often conform to the characteristics displayed by social psychopaths. To my surprise, my friend agrees.

He then makes an astonishing confession: "At one major investment bank for which I worked, we used psychometric testing to recruit social psychopaths because their characteristics exactly suited them to senior corporate finance roles."

Here was one of the biggest investment banks in the world seeking psychopaths as recruits.

Mr Ronson spoke to scores of psychologists about their understanding of the damage that psychopaths could do to society. None of those psychologists could have imagined, I'm sure, the existence of a bank that used the science of spotting them as a recruiting mechanism.

I've never met Dick Fuld, the former CEO of Lehman Brothers and the architect of its downfall, but I've seen him on video and it's terrifying. He snarled to Lehman staff that he wanted to "rip out their [his competitors] hearts and eat them before they died". So how did someone like Mr Fuld get to the top of Lehman? You don't need to see the video to conclude he was weird; you could take a little more time and read a 2,200-page report by Anton Valukas, the Chicago-based lawyer hired by a US court to investigate Lehman's failure. Mr Valukas revealed systemic chicanery within the bank; he described management failures and a destructive, internal culture of reckless risk-taking worthy of any psychopath.

So why wasn't Mr Fuld spotted and stopped? I've concluded it's the good old question of nature and nurture but with a new interpretation. As I see it, in its search for never-ending growth, the financial services sector has actively sought out monsters with natures like Mr Fuld and nurtured them with bonuses and praise.

We all understand that sometimes businesses have to be cut back to ensure their survival, and where those cuts should fall is as relevant to a company as it is, today, to the UK economy; should it bear down upon the rich or the poor?

Making those cuts doesn't make psychopaths of the cutters, but the financial sector's lack of remorse for the pain it encourages people to inflict is purely psychopathic. Surely the action of cutting should be a matter for sorrow and regret? People's lives are damaged, even destroyed. However, that's not how the financial sector sees it.

Take Sir Fred Goodwin of RBS, for example. Before he racked up a corporate loss of £24.1bn, the highest in UK history, he was idolised by the City. In recognition of his work in ruthlessly cutting costs at Clydesdale Bank he got the nickname "Fred the Shred", and he played that for all it was worth. He was later described as "a corporate Attila", a title of which any psychopath would be proud.

Mr Ronson reports: "Justice departments and parole boards all over the world have accepted Hare's contention that psychopaths are quite simply incurable and everyone should concentrate their energies instead on learning how to root them out."

But, far from being rooted out, they are still in place and often in positions of even greater power.

As Mr Boddy warns: "The very same corporate psychopaths, who probably caused the crisis by their self-seeking greed and avarice, are now advising governments on how to get out of the crisis. Further, if the corporate psychopaths theory of the global financial crisis is correct, then we are now far from the end of the crisis. Indeed, it is only the end of the beginning."

I became familiar with psychopaths early in life. They were the hard men who terrorised south-east London when I was growing up. People like "Mad" Frankie Fraser and the Richardson brothers. They were what we used to call "red haze" men, and they were frightening because they attacked with neither fear, mercy nor remorse.

Regarding Messrs Hare, Ronson, Boddy and others, I've realised that some psychopaths "forge careers in corporations. The group is called Corporate Psychopaths". They are polished and plausible, but that doesn't make them any less dangerous.

In attempting to understand the complexities of what went wrong in the years leading to 2008, I've developed a rule: "In an unregulated world, the least-principled people rise to the top." And there are none who are less principled than corporate psychopaths.

Weeding Out Corporate Psychopaths

Thursday, November 24, 2011 by the Toronto Star

by Mitchell Anderson

 

Given the state of the global economy, it might not surprise you to learn that psychopaths may be controlling the world. Not violent criminals, but corporate psychopaths who nonetheless have a genetically inherited biochemical condition that prevents them from feeling normal human empathy.

Scientific research is revealing that 21st century financial institutions with a high rate of turnover and expanding global power have become highly attractive to psychopathic individuals to enrich themselves at the expense of others, and the companies they work for.

A peer-reviewed theoretical paper titled The Corporate Psychopaths Theory of the Global Financial Crisis details how highly placed psychopaths in the banking sector may have nearly brought down the world economy through their own inherent inability to care about the consequences of their actions.

The author of this paper, Clive Boddy, previously of Nottingham Trent University, believes this theory would go a long way to explain how senior managers acted in ways that were disastrous for the institutions they worked for, the investors they represented and the global economy at large.

If true, this also means the astronomically expensive public bailouts will not solve the problem since many of the morally impaired individuals who caused this mess likely remain in positions of power. Worse, they are the same people advising governments on how to resolve this crisis.

To tackle this problem, we must instead examine this rare and curious condition, and why recent corporate history may have elevated precisely the wrong type of people to positions of great power and public trust.

Unfeeling, but not insane

Psychopathy should not be confused with insanity. It is best described by Robert Hare, global expert and psychologist, as “emotional deafness” — a biochemical inability to experience normal feelings of empathy for others.

This shark-like fixation on self-interest means that psychopaths often feel a clear detachment from other people, viewing them more as sheep to be preyed upon than fellow humans to relate to. For instance, psychopaths in prison often use group therapy sessions not as a healing process, but as an opportunity to learn how to simulate normal human emotions.

Studies on twins have revealed that psychopathy shows a strong genetic signature and there remains no effective treatment. Recent research has linked the condition to physical abnormalities in the amygdala region of the brain.

Only a small subset of psychopaths become the violent criminals so often fictionalized in film. Most simply seek to blend in and conceal their difference in order to more effectively manipulate others. This frightening condition has existed throughout human history, though likely in a marginal and socially parasitic way.

While psychopaths are often portrayed by Hollywood as brilliantly clever, a hypothetical race of Hannibal Lecters would likely perish since they lack the ability to trust each other. Put another way, the human race — a relatively weak, slow, hairless tropical primate — has succeeded so spectacularly in every ecosystem on the planet not because we are so bad, but because we are so good.

Most dangerous 1%

The human ability to build social capital means that people can cooperate and trust each other. We can reliably predict the behavior of others even if we have never met them. Social capital is the glue that holds together our communities, complex societies, large institutions and the economy. The one and only superpower possessed by psychopaths is their ruthless ability to spend the social capital created by others.

Scientists believe about 1% of the general population is psychopathic, meaning there are more than three million moral monsters among normal United States citizens. There is emerging evidence that this frequency increases within the upper management of modern corporations. This is not surprising since personal ruthlessness and fixation on personal power have become seen as strong assets to large publicly traded corporations (which some authors believe have also become psychopathic).

However, appearance and performance are two different things. While psychopaths are often outwardly charming and excellent self-promoters, they are also typically terrible managers, bullying co-workers and creating chaos to conceal their behavior.

When employed in senior levels, their pathology also means they are biochemically incapable of something they are legally required to do: act in good faith on behalf of other people. The banking and corporate sector is built on the ancient principle of fiduciary duty — a legal obligation to act in the best interest of those whose money or property you are entrusted with. Asking a psychopath to do that is like recruiting a pyromaniac to be a firefighter.

The folly of mixing psychopathy and senior corporate management has been borne out by recent history. At the end of the last decade, numerous banking institutions representing hundreds of years of corporate financial stability ceased to exist within a few short months due to the reckless acts of a few individuals — none of whom has ever been charged with a crime.

And therein lies the rub. As ruthless as psychopaths are, their pathology dictates that they will ultimately act to the detriment of the organizations and investors they are paid so well to represent.

Fertile for psychopaths: New corporate culture

If this theory is correct, how did this become such a crisis in recent decades? Boddy suggests that corporations have changed from relatively stable institutions where psychopaths would have a difficult time concealing themselves, to highly fluid organizations where it is much easier for them to disappear within the chaos in their wake. Boddy writes:

“(The) whole corporate and employment environment changed from one that would hold the Corporate Psychopath in check to one where they could flourish and advance relatively unopposed. As evidence of this, senior level remuneration and reward started to increase more and more rapidly and beyond all proportion to shop floor incomes and a culture of greed unfettered by conscience developed. Corporate Psychopaths are ideally situated to prey on such an environment and corporate fraud, financial misrepresentation, greed and misbehavior went through the roof, bringing down huge companies and culminating in the Global Financial Crisis that we are now in.”

Boddy is not hopeful that the current round of expensive public bailouts will solve the problem. If psychopaths have in fact installed themselves in the upper reaches of the world’s financial institutions, their genetic deficiency dictates that their greed knows no bounds. They will continue to act in anti-social, remorseless ways, amplified by their enormous corporate influence until the institutions they represent and perhaps the entire global economy collapses. Obviously, more academic research in this area is urgently needed.
Boddy concludes his recent paper with this grim prediction:

“Writing in 2005, this author . . . predicted that the rise of Corporate Psychopaths was a recipe for corporate and societal disaster. This disaster has now happened and is still happening. Across the western world, the symptoms of the financial crisis are now being treated. However, this treatment of the symptoms will have little effect because the root cause is not being addressed. The very same Corporate Psychopaths, who probably caused the crisis by their self-seeking greed and avarice, are now advising governments on how to get out of the crisis. That this involves paying themselves vast bonuses in the midst of financial hardship for many millions of others is symptomatic of the problem. Further, if (this theory is correct) then we are now far from the end of the crisis. Indeed, it is only the end of the beginning. Perhaps more than ever before, the world needs corporate leaders with a conscience . . . Measures exist to identify Corporate Psychopaths. Perhaps it is time to use them.”

Time has come for testing

Boddy’s last statement contains a kernel of hope. If our world has become chaotic due to institutionalized psychopathy, imagine how much better it could be if such dangerously impaired individuals were excluded from positions of power and influence.

Precedence exists for dealing with such situations. Randomized workplace drug testing became the norm in the 1980s. At the time, civil libertarians strongly objected on the basis that it violated personal privacy protections. However, the U.S. Supreme Court decided in 1989 that such testing was constitutional and now about 25 per cent of Fortune 500 companies routinely require their employees to submit to such tests.

Perhaps investors at major financial institutions should require that senior level managers submit to established tests to ensure they are not psychopathic. This is not an issue of civil liberties since the precedent has already been well established regarding drug impairment in the workplace. Likewise, it is not a regulatory issue since private shareholders have every right to demand that executives demonstrate they are not biochemically impaired and therefore unable to carry out their fiduciary duties on behalf of investors. If corporate boards are hiring psychopaths as executive management, they are not carrying out their due diligence and could be held legally liable for their oversight.

Companies should also consider providing employees with specific whistleblower provisions to expose potential psychopaths in the workplace. A 2010 study by Boddy showed that corporate psychopaths caused more than one quarter of all workplace bullying, though they accounted for only one per cent of the workforce.

Besides being traumatic and humiliating to other workers, this bullying is also very expensive. Boddy calculated that bullying by corporate psychopaths cost companies in the U.K. more than £3.5 billion per year in lost productivity and attrition. Extrapolating these results to the United States, these deviant individuals are responsible for more than $35 billion in direct annual losses to U.S. businesses.

Politicians, too?

And what about elected officials? There is no higher standard of trust in our society than standing for public office. Campaigning politicians are expected to submit to almost absurd levels of scrutiny about their private lives, character and personal relationships. Should not candidates begin providing voters proof that they are medically capable of acting in the interests of the public that may elect them?

The Occupy Wall Street protesters demanding an end to the reign of the “1%” may have unwittingly stumbled on the crux of the issue. Science tells us that 99% of humans have normal emotional function. One per cent are psychopaths. We ignore that truth at our peril.

The Class Warfare the Rich Don't Understand

Monday, October 10, 2011 by Al-Jazeera-English
The Masters of the Universe evaded responsibility and defiantly demanded more sacrifice from their victims, says author.
by Heather Digby Parton

"Those who own the country ought to govern it."
                  - Founding father, John Jay

There have been rumblings in the corners of the Tea party movement for some time, but the minute president Obama announced that he was going to ask wealthy Americans to kick in a small bit more in taxes to help pay for some infrastructure improvements in his jobs proposal, the Republicans have been clutching their pearls and gasping for breath like Aunt Pittypat awaiting the arrival of the marauding Yankees.

 

GOP leader Rush Limbaugh called for the smelling salts, saying "If [Obama] would get all of this actually passed, it would represent perhaps a fatal blow to the US private sector ... I don't know how anyone could even argue about the fact that this is on purpose anymore. To boldly lie that it's not class warfare? It is class warfare. Specifically and purposefully class warfare."

Republican economic guru Paul Ryan dolefully declared, "Class warfare may make for good politics, but it makes for rotten economics. We don't need a system that seeks to divide people.

We don't need a system that seeks to prey on people's fear, envy, and anxiety." Indeed. What could be more destructive to the average American than to ask the upper one per cent to kick in what amounts to tip money? The guilt they will feel at such unfairness is bound to create a profound spiritual crisis throughout the land.

A false hope

One would have thought that in 2011, the term "class warfare" would be as out of fashion as Nehru jackets, but after watching the Republicans spend the first two years of Obama's presidency apoplectic over what they defined as hard core socialism put in practice, it stands to reason the old standard would make a comeback. No matter what you call it, rich people complaining about taxes is evergreen. It is also completely ridiculous.

The fact is that the mega-rich have been gobbling up a greater and greater share of the national wealth for several decades now: in 1976 the top 1 per cent of households received 8.9 per cent of all pre-tax income - by 2008, its share had more than doubled to 21.0 per cent. Between 1979 and 2009, the top 5 per cent of American families saw their real incomes increase 72.7 per cent, according to Census data. Over the same period, the lowest-income fifth saw a decrease in real income of 7.4 per cent (by contrast, the 1947-79 period all income groups saw similar income gains, with the lowest income group actually seeing the largest gains). And perhaps most astonishingly, the tax rate for the highest earners was 91 per cent in 1960, 70 per cent in 1980 and only 35 per cent today, the lowest ever with the exception of a couple of years in the late 80s and early 90s.

And it's not as if these people have been suffering during this recession. Unlike the bottom 99 per cent, they've quite smartly recovered from the 2008 unpleasantness. For instance, according to a recent New York Times report, executive pay at 200 big US companies last year went up by an average 23 per cent over 2009 - the median executive salary was 10.8m USD. Meanwhile, the average American family's household net worth declined 23 per cent between 2007 and 2009.

Considering this somewhat ostentatious disparity, one would think that those who are doing well would decide to lay low and quietly count their money so as not to draw undue attention to their good fortune. One might even have expected them to take up good works and be especially generous in order to deflect the anger and resentment that any sentient being could see might result from such blatant unfairness. But no. They have instead waged a public campaign of extravagant whining, complaining incessantly that they are being scapegoated for the nation's economic ills and throwing tantrums at the mere suggestion that they might need to contribute a little bit more in taxes to make up for the carnage their bad bets left in their wake.

Some US Firms Paid More to CEOs and/or Lobbyists Than Taxes

Wednesday, August 31, 2011 by Reuters

by Nanette Byrnes 

 

WASHINGTON - Twenty-five of the 100 highest paid U.S. CEOs earned more last year than their companies paid in federal income tax, a pay study said on Wednesday.

It also found many of the companies spent more on lobbying than they did on taxes.

At a time when lawmakers are facing tough choices in a quest to slash the national debt, the report from the Institute for Policy Studies (IPS), a left-leaning Washington think tank, quickly hit a nerve.

After reading it, Democratic Representative Elijah Cummings, ranking member of the Committee on Oversight and Government Reform, called for hearings on executive compensation.

In a letter to that committee's chairman, Republican Darrell Issa, Cummings asked "to examine the extent to which the problems in CEO compensation that led to the economic crisis continue to exist today."

He also asked "why CEO pay and corporate profits are skyrocketing while worker pay stagnates and unemployment remains unacceptably high," and "the extent to which our tax code may be encouraging these growing disparities."

In putting together its study, IPS chose to compare CEO pay to current U.S. taxes paid, excluding foreign and state and local taxes that may have been paid, as well as deferred taxes which can often be far larger than current taxes paid.

The group's rationale was that deferred taxes may or may not be paid, and that current U.S. taxes paid are the closest approximation in public documents to what companies may have actually written a check for last year.

$16.7 MILLION AVERAGE

Compensation for the 25 CEOs with pay surpassing corporate taxes averaged $16.7 million, according to the study, compared to a $10.8 million average for S&P 500 CEOs. Among the companies topping the IPS list:

• eBay whose CEO John Donahoe made $12.4 million, but which reported a $131 million refund on its 2010 current U.S. taxes.
• Boeing, which paid CEO Jim McNerney $13.8 billion, sent in $13 million in federal income taxes, and spent $20.8 million on lobbying and campaign spending
• General Electric where CEO Jeff Immelt earned $15.2 million in 2010, while the company got a $3.3 billion federal refund and invested $41.8 million in its own lobbying and political campaigns.

Though the companies come from different industries, their tax breaks fall into two primary areas.

Two-thirds of the firms studied kept their taxes low by utilizing offshore subsidiaries in tax havens such as Bermuda, Singapore and Luxembourg. The remaining companies benefited from accelerated depreciation.

Shareholders have responded favorably when companies in which they invest keep a tax bill low through legal methods, thereby benefiting earnings. But Chuck Collins, an IPS senior scholar and co-author of the report, said that is a mistake.

"I think it's an exposure of weakness in a company if their profitability is dependent on their accounting department and not on making better widgets," he said.

In prior reports, Collins said, out-sized CEO pay was often a red flag of bigger problems to come. The IPS has been putting a pay report together for 18 years. Among those whose leaders have made the high pay list in years past, only to have their businesses falter: Tyco, Enron and WorldCom.

Rich Executives Spend Millions For Bodyguards To Guard Them From Populist Anger

Meet World Protection Group Inc.'s private bodyguards, the latest trend in corporate spending.
By Josh Harkinson, Mother Jones
Posted on August 11, 2011

The Primary, tall and flinty with a graying goatee, has decided he's in the mood for shopping, a development that's got David Perez all worked up. I'm sitting with Perez in a Chevy Silverado in downtown Santa Monica. A fit ex-Marine, Perez is in charge of the Primary's six-man protection detail. For 20 minutes, we've been waiting around in a grocery store parking lot, but now the Primary has parked his Porsche 911 Carrera at a shopping strip nearly a mile away. Though Perez already has three "countersurveillance" experts on the scene, he's antsy to join them. His client has a stalker, whom one of the team members had spotted earlier. The Silverado crawls through glacial traffic. "You're driving like an old lady!" Perez barks. "Catch the green!"

Perez and his partner Mike Gomez, a bodyguard resembling The Sopranos' Silvio, finally track down their client at a Barnes & Noble. Two of the countersurveillance guys go back to scouting for menaces, while Perez and Gomez, both of whom are trained sharpshooters and martial-arts experts, step in as the Primary's "close protection" team. Shoppers stare at the entourage, straining to recognize someone famous.

The men form a barrier around their client as he stops to watch a street-magic act, browses racks at Armani Exchange, wanders in and out of a Hooters and past a Gap. And that's when everything goes haywire. The stalker sprints around a corner, trailed by one of the countersurveillance guys. He lunges at the entourage. Gomez wraps the Primary in his beefy arms and yanks him away. The other agent intercepts the assailant mid-lunge and pins him against the wall with his elbows. "He's out of play," says the Primary. The agent and the stalker untangle their arms and laugh.

The entire scenario was a training drill staged by the World Protection Group Inc., an executive protection company with offices in Beverly Hills, New York, and Mexico City. The man playing the Primary, not a real CEO but a former Secret Service agent and narc, asked that I not use his name because, he says, he often works undercover in Mexico. Earlier that morning, he had lectured a group of trainees—WPG employees and freelancers shelling out $575 for the session—about the wide, wide world of corporate security: "You are going to find yourself in places six months or a year from now that you never thought you would get to," he said. On a screen behind him, a well-dressed couple strolled from a Learjet to a Jaguar, framed by a neon sunset.

There are no reliable numbers on the growth of executive protection (EP), but the experts I spoke with say it has expanded at a rapid clip since the 1980s, with dozens of new players breaking into the game. That happens to be the same period during which the top 1 percent of US earners nearly tripled their annual income (PDF). More than a few of them, it seems, have felt compelled to hire men with guns.

I sat down with Kent Moyer, WPG's founder and CEO, in his cramped office. Moyer is trim, balding, and middle-aged. He got into private security back in the early '90s, serving a five-year stint as a bodyguard for Hugh Hefner at the Playboy Mansion. "I could write a book on just the things that I saw," he told me, "but I get paid not to write that book." He was hired, he says, because he could knock heads; he'd placed fourth in the International Okinawan Goju-Ryu Karate-do Federation championship and later trained with Steven Seagal in aikido. For a while, he played B-movie villains, like a neo-Nazi in 1994's Femme Fontaine: Killer Babe for the CIA.

Moyer quickly learned that protecting Hef was less a matter of brawn than of discreet surveillance and detailed planning. By the early aughts he'd launched WPG, with a top Hollywood talent agency as his first client. The collapse of the World Trade Center towers proved a boon for executive protection; soon after, WPG began landing corporate clients, and sales shot up by 40 to 50 percent.

Like most security professionals, Moyer won't name his clients. About 20 percent are celebrities and entertainers, he says, while the rest are wealthy individuals and corporate executives. The firm has protected senators, congressmen, former secretaries of state, and members of the Saudi royal family. As the business grew, Moyer took some time off to attend Wharton's Advanced Management Program. Executive protection "is about more than sending an off-duty cop out with a gun," he explains. "If it came to any kind of semi-organized attack, those guys would get dead real quick, because they don't have any kind of game plan."

In 2009, EP firms discovered a powerful marketing tool in the outrage over bank bailouts. "There has never been this kind of populist anger before," Eden Mendel, director of security consulting at Kroll, a risk advisory firm, told the Financial Times. "When executives are revealed on television with bonuses they become a target." Nearly 80 percent of executives polled by the American Society for Industrial Security agreed that "the need for security has increased in the current economic climate," with "general increases in crime" and "employee layoffs" cited as the biggest threats. Executive protection firms like WPG, 360 Group International Inc., and the Steele Foundation reported revenue spikes of 30 to 50 percent in 2009, despite the recession. "Our business gets better as the economy gets worse," Moyer told me.

The protection boom shows no sign of abating, despite a weaker-than-expected feedstock of anarchy—violent crime in the United States is at its lowest level in decades. Workplace violence, too, remains in a steady decline, says Eugene Ferraro, founder of a security consultancy called Business Controls Inc., which manages workplace-safety hotlines for 23,000 clients. "An executive who has ever really been confronted and their life threatened? That's kind of hard to find," he adds.

So why have top execs (and/or their boards) become such security nuts? One factor involves the need to do business in the developing world—WPG claims it can provide services in 70 countries—but that doesn't explain the domestic demand. Ferraro chalks it up to paranoia. "I get the calls," he says. "They say, 'Oh my God, I read an article in the Wall Street Journal, the sky is falling!'" The tendency of business leaders to "think over the horizon and anticipate problems" is causing them to act like they're in Mexico City or Baghdad, Ferraro says. Besides, why not play it safe when shareholders are picking up the tab? Since 2006, when publicly traded companies began disclosing corporate perks, spending on CEO security has increased an average of 15 percent a year. (Michael Dell's compensation package, for instance, includes $1.2 million for security.)

Another big part of EP's appeal might simply be executive convenience. Protection firms claim that they can save executives an average of 90 minutes a day by conducting "advances" of venues, having cars and elevators waiting, and thwarting unwanted advances from employees, media—whomever. "The neat thing is that we've worked all this stuff out for you," Moyer says. "You don't have to worry about it." If the Primary needs his Starbucks fix, he's likely to sit in a locked car checking email while his protector fetches a Grande.

Moyer prides himself on allowing the hoi polloi to vent their frustrations after being refused an audience with the client. "Even if you are not going to let them meet with your principal, I sit down and talk to them," he says. "That is sometimes all people need." But occasionally it can be hard to know whom to admit into a client's inner orbit. While on the job not long ago, Gomez moved to stiff-arm a thuggish-looking man—it was Jeff Zucker, then president of NBC Universal.

At WPG's training day, Gomez got a second chance to test his power of discernment. Back on Santa Monica's crowded Third Street Promenade, the Primary didn't seem to recognize a smiling man who approached, claiming to know him. Gomez raised his arms to keep the man away, but it was just a diversion. From another part of the crowd, two attackers hurled themselves at the Primary. The agents sprang to meet them with palm jabs and elbow thrusts. Sunglasses were smashed, a cellphone was sent clattering, and bodies hit the pavement as shoppers gawked. Then the men got up and shook hands—the Primary was untouched.

Off to one side, a frail street person was taking it all in. "Hey guys," he beckoned to the pumped-up team members as they headed off to grab lunch. "Can I get you to give a dollar to save the hungry people of Los Angeles?"

We're in Dire Straits When the Only Employment Sector Catching Fire Is in Unpaid Internships

The United States still counts a depressing 24 million unemployed, while the number of exploited unpaid workers keeps growing

By Scott Thill, AlterNet
Posted on May 30, 2011

Here's a particularly nasty sign that the economy is still weaker than Donald Trump's presidential run was: The United States still counts a depressing 24 million unemployed currently hunting for a full-time job, and the only employment sector really catching fire is unpaid jobs and internships, which have steadily increased to fill the undignified void. Whether you're a new college graduate or an unemployed veteran of the pre-recession employment landscape, you're now either fighting for a shrinking pool of new low-paying positions or plenty of gratis gigs where you won't ever see a dime for your earnest blood, sweat and tears.

Last week, the Department of Labor announced a minuscule drop in unemployment insurance claims to 409,000, barely below the annual average's wheelhouse of 412,000 but well above 2011's low of 375,000. For those who graduated college long ago, peak oil and climate change have continued to initiate obvious yet still destabilizing price increases in commodities like food and oil. Health insurance hikes continue unabated and unjustified, and over half of Americans think the housing market is moribund. 

Meanwhile on campus, corporations are still avoiding college job fairs. Escalating tuition costs are said to be inevitable. Perhaps that's just what happens when the University of Chicago decides to host an academic conference on Jersey Shore. Or perhaps Americans who bought into the dream of hard work, ATM housing and paid health care have now devolved to the point that they're indistinguishable from college graduates just entering an anemic job market that shows zero signs of progressing. At this point, the only difference between the two is who eventually moves beyond the increasingly fashionable unpaid job or internship to a paid position.

If the predictable rise in unpaid jobs and internships isn't a sign that the American worker is being undervalued, the Department of Labor's recent decision to hire 250 additional regulators to enforce the Fair Labor Standards Act probably is. Passed in 1938, the FLSA mandated a national minimum wage, overtime for certain jobs and prohibited oppressive child labor. It also formed a cornerstone of Franklin Delano Roosevelt's New Deal social safety net, which is why Republicans in Maine and Missouri are predictably trying to repeal it as you read this. According to these greedy bastards, nothing says true American grit like 14-year-olds working overtime in dead-end jobs during school hours. 

When it comes to paid and unpaid labor, how the FLSA fluctuates between varying state regulations and federal mandates is a mystery to almost anyone unschooled in government or occupational bureaucracy. But one thing seems clear: The U.S. Department of Labor hired its regulators because the system obviously needs regulation.

"Our top priority is protecting the rights of all workers in the American workforce," a spokesperson for the U.S. Department of Labor's Wage and Labor Division told AlterNet. "Clearly, participating in internships, externships and training opportunities are positive and career-building experiences for individuals. But it also means ensuring that employers act responsibly -- and are held accountable when they treat their workers unfairly."

To do that, Labor has encouraged unpaid employees and interns to call 1-866-4US-WAGE if they feel their employers aren't operating in good faith or compliance with national guidelines. The helpful but still ironic recent hiring of additional federal regulators has allowed the Wage and Hour Division to open new district offices across the country, enabling especially younger workers to better report violations "so that they know their rights."

"That's absolutely a priority," the spokesperson added. "The investigators conduct extensive outreach at college campuses and at career centers all over the country. If we were to receive a complaint, we would investigate that complaint. But the fact of the matter is that Wage and Hour Division has not received a single complaint regarding an unpaid internship."

While alarming, that factoid makes sense. As Fortune recently explained in a scary article titled "Unpaid Jobs: The New Normal?" unpaid employment necessarily breeds strange relationships in which employees and employers understand that the former are "going to give their all for nothing." Because of that inequitable arrangement, employees often shirk their uneven responsibilities or give less than their all, especially if the promise of a paid position recedes with every week.

"It's better to have one decently paid person than nine unpaid people who are making it so difficult because they're slacking off or they're difficult to manage," the article quotes one frustrated employer. If unpaid labor truly is the new normal, one wonders how long it will be before the phones at Labor's Wage and Hour Division, which only recently stepped up its workplace regulation, starts ringing off the hook.

"Unpaid internships have a number of problems," Rosy Rickett, cofounder of the UK's Interns Anonymous, explained to AlterNet. "They're elitist, because only the richer can afford to work for free. They devalue labor; having unpaid journalists or architects means that newspapers or architecture firms can undercut competitors. And they are often seen -- by the British government at least -- as a cure-all for youth unemployment figures. Clearly, paid jobs, not unpaid internships, solve unemployment. I'm not sure whether 250 regulators can do the job for the whole of the U.S., but maybe I underestimate them."

Rickett's point is well-taken. While American employees have been mired in a nowhere land pockmarked by a few low-paying jobs and lots of unpaid jobs, American corporate profits have reached an all-time high. Exorbitant executive bonuses are making a comeback. Not a single major bankster responsible for the so-called Great Recession has seen the inside of a jail cell, even though the price tag on bank failures in 2010 alone hit $2 billion and the remaining banks are bigger and more failure-prone than ever. In what world will 250 additional regulators at the Department of Labor be able to adequately regulate workplace injustice or exploitation? Probably the best news to come of this development is that the Department of Labor is hiring at all.

"Not investing time or money in an intern means that we often hear reports of interns not adding value to a company," added Rickett. "Paying a worker means that you invest in them, and are therefore more likely to train them effectively and build up a good working relationship."

According to Amy Potthast, director of Service and Graduate Programs at social and environmental justice employment clearinghouse Idealist.org, that persistent problem is more uncommon to nonprofit organizations that marry their employees and interns' personal goals to their professional ones.

"In the nonprofit sector, where volunteers are usually essential to an organization's human resources capacity, unpaid internships make sense," Potthast explained. "Unpaid nonprofit internships differ from corporate internships in that they take place in a context of positive social and environmental impact. Very often, nonprofit interns pursue opportunities that allow them to build skills while working toward a mission they believe in. Their goals are not simply to learn, to network or to add to their resume, but to also significantly strengthen the community."

The corporate sector has shown that it is mostly uninterested in fortifying such communal bonds. Sitting on record profits, dishing out offensive bonuses and cheaply restricting its hiring, it has illustrated a callous disinterest in the workers who have bailed out its recently failed stratagems. In fact, corporate inaction has become so obvious that even President Obama decided to publicly call bullshit on it.

"It is time for companies to step up," Obama complained on national television in May. "American taxpayers contributed to that process of stabilizing the economy. Companies have benefited from that, and they're making a lot of money, and now's the time for them to start betting on American workers and American products."

But it's going to take more than Obama using the bully pulpit to chastise American corporations or hiring more regulators to force their compliance with employment guidelines to create the sea change he campaigned on. It's going to take fundamental shifts in priorities and policies to awaken the government and public alike to the bleaker, newer normal. It's going to take painful realizations that the American economy, currency and consumption we've enjoyed (and abused) for the last several decades is likely gone for good. Our increasing climate and economic catastrophes demand adaptation.

So the only significant way unpaid labor will be equitable in what's left of late capitalism is if it's accompanied by a secure social safety net that can aid an ailing populace's basic needs. After all, there's a reason the godfather of labor theory Karl Marx regarded surplus labor -- usually, unpaid labor -- as the ultimate source of capitalist profit.

"What would Karl Marx make of this?" Interns Anonymous asked in an insightful analysis called "WWMD: What Would Marx Do?"

"He would laugh in disbelief that the capitalist system has created slaves within its own class. Disbelief that these slaves have been 'culturally enlightened' and supposedly see the flaws in the system, yet continue to submit themselves to exploitation. They are a sub-culture existing within the middle class itself, and they are full of contradictions: Impoverished yet decadent; desperate but unwilling; culturally enlightened yet utterly naive. They are magnets for exploitation."

SCOTUS: Companies are based where execs are

US top court: Companies are based where execs are

• 9-0 ruling a victory for car rental company Hertz
• Breyer says "nerve" center typically at headquarters

By Jonathan Stempel

NEW YORK, Feb 23 (Reuters) - The U.S. Supreme Court said a corporation's principal place of business is where its top executives work, typically at the corporate headquarters, rather than where its products or services are sold.

Tuesday's 9-0 ruling in favor of Hertz Global Holdings Inc (HTZ.N) may limit the ability of parties to pick and choose among courts, including in their own states, to find one with particularly favorable laws or conditions under which to sue.

It is also intended to resolve confusion among lower courts that had adopted many standards to assess where corporations did business in deciding whether to exercise jurisdiction.

In the Hertz case, two California citizens sued the car rental company in California state court for alleged violations of that state's wage and hour laws.

The plaintiffs said Hertz was a California citizen, subject to the jurisdiction of state courts, because of the business it conducted there. They sought class-action status.

Hertz sought to move the case to federal court. It said its core executive functions were at its Park Ridge, New Jersey, headquarters, that it operated in 44 U.S. states and that it did less than 20 percent of its business in California.

A federal district court ruled against Hertz, finding that California was its principal place of business because it did significantly more business there than anywhere else. The U.S. Ninth Circuit Court of Appeals affirmed.

Justice Stephen Breyer, writing for the Supreme Court, disagreed, saying the principal place of business "is best read as referring to the place where a corporation's officers direct, control, and coordinate the corporation's activities."

This, he said, is known as the corporation's "nerve center" and is typically its headquarters.

Breyer said federal courts had adopted a range of increasingly complex tests for where corporations conducted business. He said this task seemed "doomed to failure" given that corporations come in many forms, and do business in many ways and in many regions.

"Courts do not have to try to weigh corporate functions, assets, or revenues different in kind, one from the other," Breyer wrote. "Our approach provides a sensible test that is relatively easier to apply."

The Supreme Court vacated the Ninth Circuit ruling and returned the case to lower courts for further proceedings.

The case is Hertz Corp v. Friend, U.S. Supreme Court, No. 08-1107.