Pension promises should be sacred
Too little thought is given to whether companies can afford the price
THERE ARE promises and then there are promises. There are the kind of promises like when I respond "We'll see ..." to my children's requests. But there are some promises in this life that have to be kept. One of the top five promises that should be kept is a fully funded pension. Never in our recent history has that promise looked more in doubt.
Employees keep the promise of a fully funded pension close to their hearts. Workers commit years of their lives to a company's success. In exchange they get a salary, medical care and the promise that the company they have poured heart and soul into will also help support them in retirement. But that seems to be changing.
Companies seeking greater profitability shed their pension promises like clothes they've outgrown. The airline industry, soon to be followed by the automobile industry, push off their pension responsibilities to the taxpayer, in the form of the underfunded Pension Benefit Guaranty Corporation. This will result in pensions reduced to a fraction of what was promised. Don't get me wrong, the fault is not only corporate America's; everyone in the system needs to take responsibility for this mess.
Harold de Costa, a retired union leader and friend, once told me that you can't negotiate with a company that's broke. That's a profound statement. All too often, union and corporate negotiators have been willing to agree to lucrative pensions, promising large payouts sometime in the future. They dangle the promise of a fat, juicy pension to the membership to gain the membership's approval and stay in control of the union.
Likewise, corporate executives brag about keeping down wage and benefit increases, and hide future pension costs, appeasing their directors and stockholders to stay in power. While the people in charge of the unions and companies get to enjoy the spoils of being in control, little thought is given to whether the corporation can afford the costs of its pensions in the long term.
With more baby boomers retiring, the financial responsibility of those promises is too clear. Like the federal budget and Social Security deficits, the underfunding and wholesale divestment of pensions has a devastating impact on people right now. Employees have been forced to change their expectations, plans and lives. What people were counting on, building their future around and giving up part of their lives to insure is now gone, or will be shortly.
In the 21st century, labor and management, in both private and public sectors, must negotiate pension benefits realistically. They shouldn't promise and hold out a benefit that employees find out later doesn't exist. It is the duty of stockholders, taxpayers and union members to make sure that whoever leads their organization, the promises made to employees are kept and those promises are grounded in real costs, not some seductive hint of a promise on the horizon.
During the next 10 years, there will be much turmoil, conflict and litigation over pension promises. Our resources should not be focused on the avoidance of responsibility. We should do what we as Americans have always done in times of hardship. Corporate executives, union and political leaders and the rest of us need to tackle this problem head on.
Corporate practices, accounting, benefit, pension, bankruptcy laws and union practices need to change. Employers need to commit to the long-term success of the corporation instead of the next quarterly report. Unions should negotiate realistically and take into account the corporation's longevity, so that the promise of a pension will be fulfilled.
Both corporate and union executives need to understand that peoples' lives and well-being depend on the decisions they make. We need to change our perspective and deal with this important promise in real time and in real dollars. It's a promise that has to be kept.
Hong, a labor lawyer in Hilo, is a former chief negotiator for the Lingle administration and former regent of the University of Hawaii.