What Drives Us Crazy about Bank of America’s Chad Gifford

Globe business columnist Shirley Leung, on whom we can always rely to be highly attuned to the sensitivities of corporate executives, recently shared with us what drives retiring Bank of America board member Chad Gifford crazy — “big-bank bashing.”

Gifford, who’s stepping down as chairman of Bank of America’s board with an eight-figure retirement package, plans to devote his retirement years countering the impression that some of us (notably Senator Elizabeth Warren) have gotten that big banks bear an enormous amount of responsibility for the currently precarious financial condition of what we once referred to as America’s middle class.

While conceding that in 2008, the banking industry “made some mistakes,” Gifford insists that’s not the whole story. “Bigger isn’t always bad,” he explained.  “Banks need to be well-capitalized to handle the increasingly complex transactions of their clients.”

And, as Bank of America vice chairman Anne Finucane pointed out to Leung in further defense of bigness, Bank of America now gives away $12 million locally — more than its earlier incarnation, FleetBoston, donated. (Which is all very nice, but considering that FleetBoston had $200 billion in assets before merging with Bank of America, and Bank of America now has $2.1 trillion in assets, it’s rather less impressive than it first appears.)

And something the Bank of America folks did not pass on to Leung.  In addition to the $12 million annual local donation, Bank of America is also the source of $5.6 million in one-time funds to be distributed to legal assistance programs in Massachusetts. This extra funding is not a charitable donation, but instead, as Massachusetts Lawyers Weekly (sub. req.) reports, it is part of the settlement between Bank of America and the U.S. Department of Justice under which the bank will pay $17 billion in penalties and partial restitution for the financial fraud it committed in the years leading up to the Great Recession of 2008 (and beyond). The settlement includes the bank’s admissions that it sold billions of dollars of residential mortgage-backed securities without disclosing important facts about the dubious quality of the securitized loans and that it originated risky mortgage loans and made misrepresentations about the quality of those loans to Fannie Mae, Freddie Mac and the Federal Housing Administration.  The additional funding for legal services is welcome, but of course it will not even begin to repair the damage inflicted on homeowners and their tenants, many of whom continue to struggle to put the consequences of the bank’s fraud behind them.

And that’s what drives us crazy about Chad Gifford and Bank of America.

Who’s Going to Get Fulfilled at Amazon’s New Fulfillment Center?

Amazon is coming to Fall River. The on-line giant announced yesterday that it will occupy a million-square-foot building that’s going to be built on the Fall River-Freetown line. The new warehouse, which in Amazon-speak carries the name “Fulfillment Center,” will join 50 or so similar facilities around the country.

So who among us can look forward to being fulfilled by the Fulfillment Center?

For starters, Amazon customers in Massachusetts, who can look forward to next-day delivery of their $600 premium foosball table with enamel screen-printed graphics or their Natura Bisse Oxygen Cream (immediately softens the most dehydrated skin, $88 for a 2.5 ounce jar).

Second, Amazon itself, which in addition to its profits gets more than $6 million in state and local tax breaks for choosing the Fall River site.

Third, Governor Charlie Baker, who’s pretty excited about it all (as is the predominantly Democratic Fall River area legislative delegation).

Anybody out there who’s not going to be so fulfilled?

Well, construction companies in Massachusetts, which lost out on the building contract.  That went instead to a company from East Rutherford, N.J.

And the people who will be working in the new Fulfillment Center? Amazon is promising 500 full-time jobs at an average salary of $35,000. Which might well sound good to people in Fall River right now, where the unemployment rate remains stubbornly high. But that average salary will still leave a Fall River family of four about $25,000 short of what they need to live on (and 500 jobs is only half the number of jobs Amazon was promising Fall River a year ago).

Then there’s the issue of the working conditions at Amazon’s Fulfillment Centers. The Allentown, Pennsylvania, Morning Call newspaper has been covering the working conditions at Amazon’s nearby Lehigh Valley Fulfillment Center for the past five years. Anybody contemplating an Amazon job in Fall River and anybody who is unequivocally keen on Amazon’s arrival in the state might want to take a look at the Morning Call‘s stories about life in an Amazon warehouse: punishing productivity quotas that result in the firing of workers unable to meet them and injuries to many who try (keep in mind that workers must cover a warehouse that’s the size of 21 football fields); a management structure in which the real employer is not Amazon itself, but a temporary help agency called “Integrity Staffing Solutions,” which can take advantage of laws that limit its liability for unemployment insurance and can help reduce the risk of encroachment by labor unions through constant employee turnover; triple-digit temperatures in the warehouse during the summer (on this point, Amazon was at pains to say that it had arranged for paramedics to be in ambulances parked outside the warehouse to treat the severely dehydrated).

If you take another look at Governor Baker’s enthusiastic comments about Amazon’s arrival, you’ll notice that he’s very excited to help Amazon meet all its needs — and that the Massachusetts residents who will be working there are a mere afterthought:

“Our collaboration and partnership with Amazon is a good example of where the state has worked with, and will continue to work with, companies and help them meet their needs for everything from tax incentives to training new employees to permitting so that they can continue to grow in the Commonwealth.”

Points for honesty.

In Other Sunu-news…A Question of Journalistic Ethics

Hey, you journos out there — a question:

A columnist pens a denunciation of new federal policy. The new policy also happens to be contrary to the interests of a former client. Is disclosure required?

I’m asking, of course, for John E. Sununu, the former New Hampshire Senator whose opinions appear bi-weekly in the Globe. Sununu is a man of many interests, including those of the lobbying firm Akin Gump, where he serves as Adjunct Senior Policy Advisor. His op-eds have attracted the attention of media watchdogs who have pointed out numerous instances in which he has failed to disclose that his opinions coincide with the opinions of those who are paying him.

For instance, a Sununu column in support of the Keystone Pipeline failed to disclose that a company interested in building the pipeline is a client of Akin Gump. And more recently, as Media Matters reported, a Sununu column excoriating President Obama on the issue of net neutrality (“Obama’s bureaucrats reach ever deeper into the economy, pursuing expensive and unnecessary regulation of the internet”) neglected to mention that its author is the “highly-paid honorary co-chair of Broadband for America, an organization whose members have included major broadband providers and has been heavily funded by the National Cable & Telecommunications Association.”

The Globe has seemed deeply uninterested in investigating the alleged infractions, but after this most recent failure to disclose and after some prodding by Dan Kennedy and BlueMassGroup, the Globe announced that Sununu will not write about the internet and, in any column about the presidential election, he will disclose that he supports Republican candidate John Kasich.

These two modest constraints still leave a lot of room for possible conflicts, which brings us to the September 14th column, “Obama Promotes Shell Game in Student Loan System,” in which Sununu vigorously decries new federal policies on student loans. The money quote: “With borrowers awash in a sea of debt, and the system taking on record defaults, the president and his allies blithely concoct different ways for those borrowers to walk away from their obligations.”

The new regulations come in response to widespread abuses by for-profit educational institutions over the past decade: “exorbitant tuition, aggressive recruiting practices, abysmal student outcomes, taxpayer dollars spent on marketing and pocketed as profit, and regulatory evasion and manipulation”:

  • Pell Grants to for-profit schools increased from $1.1 billion in the 2000-2001 school year to $7.5 billion in the 2009-2010 school year.
  • These schools receive most of their revenue from the federal government in the form of federal student grants and loans, including $32 billion in 2009-2010.
  • Students at for-profit institutions typically have poor outcomes. Many are unable to obtain employment.
  • Overall, the 12 percent of students at for-profit schools nationally account for about 48 percent of all student loan defaults.

The new policies that Sununu disapproves of require these schools to provide information to prospective students about the costs of their programs and the graduation rates, earnings and educational debt load of those who enroll. In addition, students at one of the largest of the for-profit schools, Corinthian Colleges, Inc., which sold or closed (without notice) all of its locations between February and April of this year following numerous enforcement actions, would be eligible to apply for some form of forgiveness or forbearance of the debts they had incurred — or as Sununu put it, to “walk away from their obligations.” The multiple lawsuits — by the federal government and by many states, including Massachusetts — led to the school’s bankruptcy filing in May.

So you can guess where this is going. Last year, as part of an effort to derail the Obama administration’s plans to regulate these for-profit schools, Corinthian Colleges hired the lobbying firm Sununu is associated with, Akin Gump, paying the lobbying firm $120,000. This year, with Corinthian having shuttered its schools and declared bankruptcy, it is apparently an Akin Gump client no longer.

One hopes to the contrary, but fears that for both Mr. Sununu and the Globe, this is the end of the story.

Boston 2024: “Gullibility, What’s Your Policy?”

By now it’s clear to everybody that Boston 2024 is having a public relations crisis over its plan to bring the Olympics here. You’re having a public relations crisis when you need to reverse yourself all of a sudden and come out in favor a public vote on the wisdom of your proposal. You’re having a public relations crisis when you have to retract the $7,500 daily rate promised to former Governor Deval Patrick for schmoozing the members of the International Olympic Committee. And you’re definitely having a public relations crisis when the communications director for the U.S. Olympics Committee offers up this tepid defense of your Twitter output: “Pretty sure they were not deliberately promoting the nazi agenda.”

Fortunately for the Boston 2024 team, its members include specialists in public relations work, such as the marketing firm Hill, Holliday. And fortunately for the rest of us, a preview of the kind of PR blitz we may soon expect in support of Boston 2024 is already available on the Hill, Holliday website. Here they are tooting their horn about a successful marketing campaign they undertook for Liberty Mutual Insurance Company (not coincidentally, another member of the Boston 2024 team) a couple years back. I quote from it at some length because — I just could not help myself.

Making a Challenger Brand a Leader

Liberty Mutual…needed a resonant idea that would impact awareness and consideration, magnify its media investment, and drive growth – particularly online.

Liberty Mutual was founded on the belief that the employees were responsible for “helping people live safer and more secure lives.” Internal interviews of everyone from the CEO to the call-center reps confirmed a resounding desire to do the right thing rather than the easy thing. This shared value of responsibility became our resonant idea. It also meant we had found our best customers: “The Responsible Ones” who shared the same values and culture as Liberty Mutual itself.

By going beyond the demographical information to connect the consumer to Liberty Mutual via a shared value of responsibility, we struck a chord that has generated familiarity, fame, and favorability.

Kicking off in 2006, the campaign, tagged with “Responsibility, What’s Your Policy?,” launched with TV, print, a new Web site, and digital focused on people “doing the right thing” versus the easy thing.

The campaign struck a chord and the client was surprised and delighted by hundreds of letters and e-mails thanking them for the effort celebrating responsibility. Customers recognized themselves, employees rallied to the idea, and prospects became customers based on their alignment with this shared value. When it became clear that stakeholders wanted to further engage in this idea, we created a platform for them to continue the conversation.

The ResponsibilityProject.com launched in 2008 and became a program where consumers could seek Liberty Mutual out. We directed people to the site and blog where rich, compelling stories and videos about responsibility were brought to life…

Ah, yes, some favorable press involving compelling stories about responsibility and doing the right thing rather than the easy thing. That sounds just like what Boston 2024 is in the market for about now.

Which brings us to the question of what else was going on at Liberty Mutual during the time that Hill Holliday was orchestrating the “Responsibility, What’s Your Policy?” pitch. As it happens, we know a fair amount about that, thanks to former Globe columnist and current Globe editor Brian McGrory. It seems that most of the time the executives at Liberty Mutual were doing the easy thing rather than the right thing. In a series of nine columns written during two months in 2012 (a sampling of these columns: here, here and here), McGrory detailed Liberty Mutual’s lavish corporate ethic: $50 million in compensation for its CEO, a top-nine executive payroll that exceeded that of the Boston Red Sox starters, $200,000 in compensation for each member of the Board of Directors, five private jets for flights to luxury vacation homes, etc., etc., and all this money coming from the hundreds of thousands of Liberty Mutual policy holders. Then, as now, the Liberty Mutual executives were among a group of friends circulating enormous riches. During the administration of Governor Deval Patrick, now Boston 2024’s ambassador to the International Olympic Committee, the state gave a $22.5 million tax break to Liberty Mutual to build its new headquarters in Boston. Liberty Mutual awarded the contract to renovate its CEO’s executive suite (woven silk wallcoverings from the Netherlands, personal exercise room, price tag $4.5 million) to Suffolk Construction, whose CEO, John Fish, is now the Chairman of Boston 2024. And, back to where we started, the public relations contract with Hill, Holliday, whose CEO is the co-chair of Boston 2024’s public relations and marketing committee.

You get the picture. Boston 2024 is in serious need of a resonant idea right now. Therefore, we’ll soon be hearing of one homespun value or another that will be said to animate our would-be Olympians. If it’s as good as “Responsibility, what’s your policy?” was for Liberty Mutual, maybe the folks at Hill, Holliday will be bragging about it in a few years. Or maybe we’re smarter than that now.

Dear Boston 2024: Just Be Your Rich, Well-connected Selves

After their initial public relations effort was panned as the work of a secretive, hubristic cabal, the folks who want to bring the Olympics to Boston in 2024 have gone back to the huddle to plan a relaunch. Here’s a suggestion, Boston 2024: just be yourselves. For example, let’s see more of the honesty you showed in that pitch you made to wealthy executives, urging them to join the elite Founders 100 Club (admission, $50,000):

Supporting Boston 2024 brings with it the opportunity to network and develop relationships with the businesses, entrepreneurs, and wealthiest individuals in New England – groups who are already working together to bring the Olympic Games to Boston.

As you said elsewhere in that pitch, investing in the Olympics is a smart opportunity. So why not say a little more about why? Like who those “wealthiest individuals in New England” who are already on the Olympics bandwagon are? Just for starters, we know that at least seven of them belong to the wealthiest one-tenth of one percent (measured by Forbes Magazine at $3.8 million annually — “the point at which one achieves orbital velocity and starts to escape earth’s monetary gravitational field”):

  • Bill Teuber, Executive Vice President, EMC Corporation: $6.0 million in 2013
  • Ron Sargent, Chairman and CEO, Staples Corporation: $10.8 million in 2013
  • David Long, Chairman and CEO, Liberty Mutual: $10.9 million in 2013
  • Roger Crandall, President and CEO, Mass Mutual Financial Group: $11.4 million in 2013
  • Jeffrey M. Leiden, Chairman, President and CEO, Vertex Pharmaceuticals: $13.1 million in 2013
  • Joseph L. Hooley, President and CEO, State Street Corporation: $15.8 million in 2013
  • Joseph M. Tucci, Chairman, President and CEO, EMC Corporation: $16.6 million in 2013.

(Not for nothing does Boston’s income inequality score rank us very high among U.S. cities.)

Also, Boston 2024, you should chat up the networking possibilities. After all, one of the reasons the U.S. Olympic Committee picked you over the three other U.S. cities was, to quote the Globe, “the deep interlocking involvement” of political and business leaders here, which the USOC likes because it “gets things done.” Of course, the give-and-go play (Deval Patrick to Richard Davey to Deval Patrick) will probably never be surpassed as a classic of the genre, but it’s just one example. Consider these other deep interlocking involvements:

  • Doug Rubin is a Boston 2024 Member and Founding Partner of Northwind Strategies, which has done lobbying work for Suffolk Construction (John Fish, Boston 2024 Member and President of Suffolk Construction);
  • Karen Kaplan is a Boston 2024 Member and President and CEO of Hill Holliday, which has done public relations work for Liberty Mutual Corporation (David Long, Boston 2024 Member and CEO of Liberty Mutual);
  • David Manfredi is a Boston 2024 Member and Founder and Principal of Elkus-Manfredi Architects, which has provided architectural services for State Street Corporation (Joseph Hooley, Boston 2024 Member and State Street CEO), Vertex Pharmaceuticals (Jeffrey Leiden, Boston 2024 Member and Vertex CEO), and Bentley University (Gloria Larson, Boston 2024 Member and Bentley University President);
  • John Fish is a Boston 2024 Member and President of Suffolk Construction, which built the David Koch Center for Integrative Cancer Research at MIT (Israel Ruiz, Boston 2024 Member and Executive Vice President at MIT), and which has provided construction services for Harvard University (Katie Lapp, Boston 2024 Member and Executive Vice President at Harvard), Vertex Pharmaceuticals (Jeffrey Leiden, Boston 2024 Member and Vertex CEO), Hill Holliday (Karen Kaplan, Boston 2024 Member and President of Hill, Holliday), and Liberty Mutual (David Long, Boston 2024 Member and President of Liberty Mutual).

So to conclude, Boston2024: When you relaunch, just be yourselves. Not so much talk about “living legacies,” “powerful global experiences” and especially “transparency.” You got to your lofty places making money together and that’s one of the reasons why the U.S. Olympic Committee picked you. No sense trying to hide it.

(March 25: Post edited to reflect the fact that the U.S. Olympic Committee, not the International Olympic Committee, chose Boston.)

Boston 2024: Dispatch From High Up Mount Olympus

I’m up here on Mount Olympus to check in on the gods who are behind the effort to bring the 2024 Olympic games to Boston. The air is a little thin for those of us who are oxygen breathers, but the ambrosia is quite fine.

From up here, you can spot Massachusetts in the distance as an “international beacon for drawing the best and brightest around the globe each year and as a cradle of innovation where you assemble to dream of, and plan for, a better future for all of us.”  Each day, these gods busy themselves  working “closely and collaboratively to better understand the intersection of our city and its citizens in planning a better tomorrow.” The gods say this job starts with “our greatest asset — our people,” so I thought it would be interesting to see the esteem with which some of them have held “our people” of late.

First up, Joseph “Jay” Hooley of State Street Corporation, who is the co-chair of the Boston 2024 Innovation and Technology Committee.

State Street Corporation, a large financial services company with headquarters in Boston, might be familiar to you from the Congressional debate on the Dodd-Frank financial services reform bill in 2010. State Street and other banks persuaded Senator Scott Brown, whose vote was critical to the bill’s passage, to champion a successful effort to loosen the so-called Volcker Rule, which prohibited banks from gambling in the market for their own profit (where the winnings might come, say, from the pockets of their own clients). Senator Brown said at the time that his advocacy on behalf of State Street and other banks would “protect Mass. jobs.” In the years since that statement, State Street has eliminated 2,960 jobs, including many from its Boston headquarters. Meanwhile, the compensation package for CEO Hooley has risen to $15.5 million.

Lest you think that Mr. Hooley’s company has not been responsible for creating any jobs, remember that the city of Boston granted State Street a tax break of $11.5 million, which led to Mr. Hooley’s decision to construct a new waterfront office building in South Boston. That construction project gave temporary employment to about 800 construction workers. Those workers were the employees of Suffolk Construction, whose president, John Fish, also happens to be the Chairman of Boston 2024.

Please pass the ambrosia back.

Our Corporate Citizens: Electric Utilities Edition

Earlier this month, the state’s Supreme Judicial Court pulled the plug on a legal challenge electric utility companies had brought to fines that the state had imposed on them.

The fines were levied because the utilities failed to respond adequately to power outages resulting from a pair of whopper storms late in 2011. The biggest companies bringing the suit were NStar and National Grid. The Court upheld fines against those companies totalling just under $20 million.

Here’s more of the story, which may lead you to conclude that the utilities wasted their own money — and ours — by pursuing this case.

A few years back, in December 2008, New England suffered a fierce ice storm. The Fitchburg, Massachusetts area was particularly hard hit and some customers there were without electricity for up to two weeks. The state documented the utility company’s extremely poor response, noting that there was no state law allowing for fines to be imposed on utility companies acting unacceptably slowly in restoring power.

And almost as fast as you could say “upskirting,” the Legislature went to work. They compared the experience of the Fitchburg customers to a nightmare, compared the utility company to the Three Stooges, and passed a law directing the state to establish standards of acceptable performance for restoring electric service and to impose fines on companies violating those standards.

Fast forward to 2011. In August of that year, Hurricane Irene hit. NStar customers were without electricity for six days and National Grid customers for seven. Then in October, a snowstorm dropped at least a foot of snow across most of the state, and once again, NStar customers lost power for six days and National Grid customers for nine. The state reviewed the utilities’ performance in restoring service after the two storms, concluded that it was inadequate, and levied fines against them.

The utilities challenged the fines in court with the extremely implausible argument that, in directing the state to impose fines when standards of acceptable performance were not met, the Legislature intended that the state should look to the utility companies themselves for those standards. The appropriate question, according to the utility companies, should be — what is “fair and prevailing utility practice.” That’s right. The utilities asserted that the legislative intent of the law was that the Three Stooges be left in charge.

The Court’s seven justices patiently explained what is obvious to the rest of us: the Legislature intended the state to enforce its own standards of acceptable performance, not the standards of the utilities: “a practice that every utility follows,” the Court wrote, “may still be unreasonable where it fails adequately to restore service following a storm in a safe and reasonably prompt manner.” It might be said that the Court showed restraint in not concluding its opinion with “Manifestus!!” (Latin for “duh!!”).

It may seem to you that this entire exercise was a waste of the Court’s time and the utilities’ time as well. The utilities would likely respond that they owed it to their shareholders to put up a fight (plus, their legal costs can be deducted as a business expense from their taxes). In case you are wondering about the amount of money those shareholders are paying their CEO’s, the combined annual salaries of the NStar and National Grid CEO’s last year were $15.5 million, just about three-quarters of the amount of the fines the companies contested. Something to think about the next time your electricity bill goes up.