A bigger pie doesn’t mean you are getting a slice

The kerfuffle between executives and shareholders of The Coca-Cola Company seems to have been smoothed over, at least for now, but no matter how much the two sides wrangle over the pie, they do agree on one crucial detail: Employees deserve nothing.

Lest we dismiss the recent plan hatched by Coca-Cola’s management to transfer to itself at least US$13 billion as a fight in which we have no dog, it does provide a case study of the mindset of corporate and financial elites, and the power of Wall Street. This is a company accused of involvement in a string of human-rights violations in countries around the world and racial discrimination in the United States, and routinely lays off employees despite raking in billions of dollars per year in profits.

The $13 billion dispute is this: Coca-Cola management proposed earlier this year to issue hundreds of millions of stock and stock options to its higher-level executives. For 2014 alone, the stock grants would have been worth about $13 billion. Enter a money-management firm that owns a couple of million shares. Loudly complaining that those billions belonged to it and other shareholders, the money-management firm’s chief executive officer declared:

“In effect, the Board [of directors of Coca-Cola] is asking shareholders for approval to transfer approximately $13 billion from all of our pockets to the Company’s management over the next four years.”

Fire and ice on Colombia volcano Nevado del Huila (photo by Martin Roca)

Fire and ice on Colombia volcano Nevado del Huila (photo by Martin Roca)

Coca-Cola’s management blinked last week, but earlier defended its stock grant by saying that the stock grants “are within industry norms.” But we need not run out of tissues crying over this transfer of wealth away from needy financiers, because Coca-Cola announced that it is reducing its previous plan. Just what the company plans to give its executives is not clear from its October 1 press release, but it did have this to say:

“Consistent with our past practice, 100% of the proceeds from stock option exercises by employees will be used to repurchase shares, minimizing dilution. This is separate from, and in addition to, our normal share repurchase program.”

What that finance-speak means is that the profits of the company won’t be spread thinner because it will buy back stock in exchange for the stock it will issue its top executives. Wall Street won this round. Coca-Cola will be using some of its profits to buy back shares from existing shareholders. This is a common practice whereby a company offers to buy stock at a premium to the trading price, giving an extra payday to those who sell and leaving the profits to be divided by among a smaller group.

Money rains upon speculators

How much largesse is rained upon financiers? According to a report by Bloomberg, the companies of the S&P 500 Index will spend $914 billion on stock buybacks and dividends this year, or 95 percent of their earnings. (Those earnings are after the multimillion-dollar payouts executives pay themselves. Oops, sorry, after the payouts granted by their cronies on their hand-picked board of directors.) Bloomberg reports that S&P 500 companies are sitting on “$3.59 trillion in cash and marketable securities and they’ve raised almost $1.28 trillion in 2014 through bond sales.”

That represents quite a pile of profits. Coca-Cola has spent billions of dollars in recent years buying back its stock. The company has plenty of money, reporting almost $45 billion in net income during the past five years. A capitalist’s profits (including the large portion shared with financiers) are created through paying employees much less than the value of what they produce. So what did Coca-Cola’s employees get for producing this wealth enjoyed by executives and speculators? The back of the hand for the most part.

Having earned “only” $8.6 billion in net income for 2013, a slight drop from a year earlier, Coca-Cola announced it would cut its annual expenses by $1 billion by 2016. Undoubtedly, a savings of that size will have to include layoffs. Already, Italian workers struck last month over a plan to eliminate 12 percent of their jobs; workers at the company’s partially owned Australian affiliate have been handed a pay freeze for 2015 with new hires starting at 40 percent less; and 1,200 Spanish jobs were eliminated by closing four plants in defiance of a court order.

All this is before we get to the many human-rights abuses in which Coca-Cola is accused. In the past, the company made big profits operating in Nazi Germany and apartheid South Africa.

More recently, the company and its business affiliates have been repeatedly accused of using paramilitary death squads to kidnap, torture and assassinate union leaders. The company denies any involvement. But being an organizer in Colombia is dangerous work — of the 213 union leaders murdered worldwide in 2002, 184 died in Colombia. In the previous 15 years, almost 4,000 Colombian trade unionists were murdered.

Child labor, violence and smuggling are it

Workers seeking to join unions in Colombia are routinely fired and threats against union activists continue on a steady basis. The activist group Killer Coke has compiled a country-by-country list of outrages in various countries, including thousands of children, as young as eight-years-old, used as labor on El Salvador sugar-cane farms that supply the company; multiple kidnappings and murders of union officials at a bottling plant in Guatemala; and, in the Philippines, the use of outsourced labor to avoid paying benefits and accusations of “smuggling” sugar into the country to avoid taxes and undercut local sugar producers.

The $13 billion that the executives and the financiers were fighting over did not fall out of the sky.

The point here isn’t that Coca-Cola is a uniquely evil company. Its arch-rival PepsiCo Inc. is spending $8.7 billion this year alone in stock buybacks and dividend payouts to make financiers happy. In the past, it was a major investor in Burma during the military régime that routinely used its citizens, particularly from ethnic minorities, as slave laborers. Pepsi exchanged its income there for Burmese agricultural products that could be sold at a profit outside the country — products often produced on the military junta’s slave-labor farms that were taken by force.

Finance capital is both whip and parasite, applying relentless market pressure to force companies to squeeze ever higher profits and extracting more wealth for itself. This is what the holy grail of “efficiency” actually means. Industrialists and financiers fight over which gets the bigger piece of the pie, but they agree they deserve the whole pie. The rest of us can shut up and get back to work. Did you vote for this?

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31 comments on “A bigger pie doesn’t mean you are getting a slice

  1. This is so much more than an outrage. Words fail me in attempting to describe what reading about this has done to me, emotionally. What can we do to even make a dent in the ever growing scandalous doings of corporations? We are never going to stop buying their products and if we did, that would mean even more rank and file layoffs as if what is happening to the rank and file isn’t bad enough. It’s like, “damned if you do, damned if you don’t. But I am seriously at a loss in even trying to come up with a ‘get out of this mess’ card.

    Corruption is just so entrenched in our society as is scandalous doings of corporations all across the board and across the world. It seems nowhere is safe from the shenanigans of the corporate boardroom and the utter disdain for workers and their plight. It’s almost like a contest to see which corporation can outdo the other one in how badly they treat their employees and how vile they are in their business dealings. Killing union organizers, child labor, kidnappings, smuggling and all of this is happening from Guatemala to the Philippines and elsewhere and of course, nothing is done about any of it.

    So again I ask, “what is to be done about all of this?” “What can we do and what difference can we make?” Because individually, nothing comes to mind and unfortunately, ‘collectively’, attempting to do anything doesn’t come to mind either for the simple reason that we hardly ‘collectively’ do anything.

    …and as always SD, well done!!

    • Alcuin says:

      It might not sound like much, Shelby, but opting out of purchasing Coca-Cola products (and there are many, besides beverages) is one thing that can be done. It isn’t a boycott, per se, because here I’m suggesting that opting out as much as possible from the consumer culture is the only way to respond to the depredations of capital. Capitalism depends on consumption; that much should be clear to anyone, so opting out is the way to create a new economic system. We need to be conscious of how we spend our hard-earned money so that we don’t reward our oppressors.

      • nicl says:

        Correct, all that average citizens can do is not buy ANYTHING from large corporations. Corporations are destroying the world economies and the environment.

      • Alcuin, I am all for ‘opting out’ and I do that as much as possible. We all need to return to the ways of our ancestors who were almost completely self-sufficient and who used the barter system when they needed something they couldn’t make. We were more village like and not so spread out with everyone now needing a vehicle to make a run to the grocery store or make a run to purchase everything, thus propping up capitalism to no end. As much as we like to think of what we have now as progress, it is anything but. However, I do not think that ‘opting out’ is going to catch on because people have become so accustomed to simply getting in the car and driving and purchasing cheap food or cheap junk that they know is made in some sweatshop everywhere, but that is what is done.

        And then there are millions who already work at low wage jobs who just can’t afford to ‘opt out’ and must make use of dollar stores that are now equipped with really cheap food products and other things to purchase. The corporations are so evil because they have made the majority of the world’s people effusive consumers, dependent on them in one way or another and we refuse to ‘co-operate’ with each other to even attempt to form ‘co-ops. Yes, there are some out there, but not that many and even though urban gardening is catching on, it’s still fairly small in numbers. I’m trying to be hopeful in thinking that all is not lost, but it’s kind of hard when you look around and the status quo continues on.

        • The task is enormous, no doubt. And if I had the answer, I would have already told everybody. Maybe the best thing is for all of us to retain our optimism, our belief that a better world is possible.

          At the risk of repeating myself too many times, our current capitalist world can’t endure, so we will have to change, whether by choice or having it forced on us by the physical limitations of nature.

        • Alcuin says:

          I’m with SD on this one – all we can do is retain our optimism and work towards a better world. We are going to be forced to change and the process will not be pretty. Those who have will fight to the death to keep their privileges and those who don’t will take the brunt of the force but they will fight, too. It will be a matter of survival. It isn’t going to be pretty. Not at all. The deniers will become increasingly shrill and the fundamentalists will know that the end of the world is nigh, with Jesus’ appearance just around the corner. Could it all be avoided? Sure. But humans, for the most part (along with most every other species of life), are not pro-active. So we will be bent by the will of nature instead.

          • Alcuin, I can get behind that! …and you are SO right! We are not ‘pro-active’ and I have stated that times too numerous to count!

            Thanks Alcuin. I appreciate the follow-up comment.

      • Of course, if you have any concern for your health, you shouldn’t be pouring be pouring the equivalent of battery acid down your throat in the first place. Coca Cola is just one of many companies who make a killing while helping to make the medicinal and health complex billions of dollars from our suffering each year.

    • Purple Library Guy says:

      Well, some Argentinean factory workers have a slogan:
      Occupy, Resist, Produce!

  2. Debra says:

    Such greed disgusts. Thanks for the reminder to opt out of purchasing their products — the majority of which are a kind of slow poison anyway.

  3. Crony capitalism at its finest.

  4. Jeff Nguyen says:

    I’d like to buy the world a coke and have 7 billion people simultaneously pour their bottles down the drain…repeatedly.

    • But, Jeff, that would corrode all the pipelines …

      • tubularsock says:

        And unfortunately end up in the ocean and mix with the Fukushima radioactive mess and produce a toxic ooze that would incircle the earth and cause a sucking noise much like a siren that would call all of the the children into the sea and drown ……. OR NOT.

        • OK, we can’t pour all the Coca-Cola down the drain. Maybe we can isolate as much as possible in a remote location, put rows of razor wire around the site and put hazardous-material signs warning everyone to keep out. But could this cause a critical-mass meltdown?

  5. Pierre Menard says:

    This reminded me of reading an article in LeMonde diplomatique about gum arabic (aka E414) and it’s use in soft drinks like Coca Cola (among other uses, such as newspaper ink, chocolate, sweets,…) Unfortunately the article isn’t available for free in English. What I found instead, is an article in The Guardian:

    http://www.theguardian.com/sustainable-business/gum-arabic-soft-drink-supply-chain

    Considering that the world depends on this stuff, it’s interesting to know that at least 50% of it come from Sudan, mainly the Darfur area.
    After America had imposed sanctions on the country, following the genocide in that area, the Sudanese ambassador in Washington basically threatened to cut of the supply of gum arabic (this was in 2007).

    http://www.washingtonpost.com/wp-dyn/content/article/2007/05/30/AR2007053002157.html

    So in all the trade embargoes imposed on Sudan, there are exceptions for E414. And once it reaches Europe, it’s place of origin mysteriously disappears, and it can be shipped and used anywhere and by anyone, without the need for a bad conscious.

    What really bothers me the most, about reading and knowing about these things, is going outside and feeling like in a nightmare, with no way to wake up. I definitely don’t want to stop informing myself, but it’s quite a challenge to do so, as it grows darker every day.

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