The American Dilemma and How We Can Fix It

BAD COMPANY

 

As most of you who have been following for any amount of time realize, I have a low opinion of the laws which are typically enacted in Washington. But in 1974 Congress passed a statute which was actually needed.

Its acronym, ERISA stands for the Employees Retirement Insurance Security Act. It was an effective measure which made significant and positive changes in how the workers of this country were treated under their company-sponsored retirement plans. It also provided for the establishment of IRA’s.

Prior to the date of the enactment of this legislation, most people in the labor force were dependent on two sources of retirement income. The first was their employer’s defined- benefit plan (pension) and Social Security. For the first of these, their employer was responsible for fully funding the expected pension benefit. We all are familiar with how Social Security works.

A typical pension plan called for an employee to work for his company for either a twenty-five year period (to receive a reduced benefit) or to work for thirty years to receive the full retirement benefit. (This is not unlike the formula used by those in government service, the military or the formula that Social Security has adopted).

There was, however, a problem which the Congress unearthed and was the fundamental reason that ERISA came into existence. There were a number of companies which (to use a legalistic phrase) had a “pattern and practice” of terminating employees a year or two before they were qualified to receive their pension benefits. In those days, a person was not “vested” until he had fulfilled the number of years of service to reach at least his early retirement benefit.

So let’s take the case of an individual who began working for his company fresh out of high school at age eighteen. He puts in twenty-four years with his company and is now age forty-two. Suddenly, his supervisor starts writing him up for infractions against company policy. (Strange because this employee has an exemplary record of service and has never before been cited for any violations).

The number of infractions mount and finally the company has “cause” for his dismissal. And so he is fired and has no retirement benefit at all and at age forty-two has to find another position. Even assuming that he is able to secure employment with another company he will have to work until at least age sixty-seven to qualify for a pension with his new employer – assuming that company even has a plan.

There is no question that a significant number of companies “manufactured” reasons to terminate long-term employees. The reason can best be described by the terms greed and heartlessness.

ERISA provided the American worker with a greater degree of security by providing that, after certain numbers of years of employment, he was entitled to receive at least a partial vesting in his or her pension plan. The employee no longer had to wait twenty-five or thirty years to receive a benefit.

One of the most egregious of these offenders prior to the enactment of ERISA was a client of mine. The people with whom I dealt were not the decision makers who constructed the unwritten policy to fabricate grounds for these early terminations. They were hard working people who did their jobs and were as upset as I to learn that their company regularly engaged in these unwarranted firings.

At the time I learned they were abusing their employees in this way, my business had few clients. Every month with us was touch. We needed every client and every dollar of income that we could find. But given their corporate culture, I explained that we could no longer do business. I couldn’t conscientiously recommend any of our job applicants to work for them.

We have a natural tendency to categorize things in groups. It simplifies our way of looking at life. Some believe that businesses are the ultimate good – others that they epitomize the root of all evil. In fairness, probably neither view is completely informed or realistic.

We all know people who are kind and giving and others who are hateful and selfish. Businesses are nothing more than a collection of people. There is not a company in America or throughout the world which doesn’t employ both kinds of these people. But when those who set policy are solely fixated on bank balances to the exclusion of human capital, then it is just to describe their organization as “bad company.”

 

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Tag Cloud

%d bloggers like this: