How Inequality Hurts

‘Zero Tolerance’ on Workplace Slaughter?

Windfall rewards give CEOs an incentive to put worker lives at risk. To see all workers safe, our most recent mining tragedy reminds us, maybe we need to end those windfalls.

By Sam Pizzigati

In a perverse sort of way, CEOs like Don Blankenship, the chief executive at Massey Energy, the owner of the West Virginia mine where 29 coal miners died last week, perform a vital public service. They lay bare, with their brutal behavior and chilling candor, just how deadly our current corporate order can be.

Before last week, at least outside West Virginia, Blankenship toiled in relative obscurity. That would suddenly change once reporters, after the explosion at Massey’s Upper Big Branch mine, asked the CEO about the mine’s long history of safety violations. Americans the nation over shuddered at his response.

“Violations,” the Massey chief unapologetically pronounced, “are unfortunately a normal part of the mining process.”

At Upper Big Branch, we soon learned, “normal” meant plentiful. Mine safety officials last year cited the mine for over 500 violations — and 53 more just last month. In the two months before Monday’s blast, the mine’s methane levels had run so dangerously high that miners had to evacuate three separate times.

Overall, adds the Washington Post, “significant” safety violations at Upper Big Branch have been running “11 times the national average.”

signupMassey under CEO Blankenship isn’t just racking up safety violations. The coal company, the nation’s fourth largest, is aggressively appealing citations to court, part of an industry-wide counterattack against new federal safety rules enacted in 2006, after 12 miners died in the West Virginia mining town of Sago.

In 2009, Massey collected 50 serious safety violations and appealed 37, a pattern, Rep. George Miller charged at a recent hearing, that threatens to “render the federal efforts to hold mine operators accountable meaningless.”

Massey CEO Blankenship has, over the years, devoted substantial time and treasure to keeping mine operators unaccountable. In 2004 he spent $3 million to knock an incumbent off the West Virginia Supreme Court. The Blankenship-blessed winner went on to supply the decisive vote in the state high court rulings that negated a $50 million jury verdict against Massey.

Labor leaders consider Blankenship the “main reason” why West Virginia’s mines face little union oversight, on safety or anything else. Once 95 percent organized, the state’s mines now run overwhelmingly nonunion.

For environmentalists, Blankenship ranks as the nation’s fiercest promoter of stripping away mountaintops to get at coal seams. As a U.S. Chamber of Commerce director, the Massey top exec has also emerged as a key ringleader among climate change deniers.  

Meanwhile, the members of Massey’s corporate board of directors remain absolutely tickled with Blankenship’s “performance” as CEO. Late this past December, they signed him to a new two-year pay deal.

The old deals hadn’t been too shabby. In 2005, Blankenship pulled in nearly $34 million, “roughly four times the industry standard,” notes the New York Times. He followed that up, according to Associated Press reports, with over $17.5 million in 2006 and $23.7 million more in 2007. Blankenship’s take-home would dip to $19.7 million in 2008, and Massey hasn’t yet released figures for 2009.

The new deal dishes Blankenship $83,222 per month in base salary for 2010 and 2011, as much as $10 million more each year in cash incentives, plus a tidy pile of “performance-based” stock incentives, not to mention retirement benefits and perqs “including, but not limited to, use of the Company’s airplanes.”   

These outsized rewards give Blankenship all the wherewithal he needs to continue distorting the democratic process in West Virginia and Washington. More importantly, these indecently lavish rewards give Blankenship a continuing incentive to behave indecently, to put miners at risk by cutting corners to speed production and meet his “maximum bonus” metrics.

Safety, to be sure, does appear as one of the “performance” standards in the pay deal Blankenship signed in December. In fact, safety has been one of his “performance” benchmarks almost all along. That sounds somewhat responsible, on the part of the Massey Energy board of directors, until you look more closely.

In 2007, for instance, safety turned out to count for only 10 percent of the criteria Blankenship needed to meet to grab his pay incentives. All the other criteria involved pumping coal out fast and maximizing corporate earnings.

And Massey’s safety standard itself, “Non-Fatal Days Lost,” doesn’t exactly qualify as a “zero tolerance” stance against death in the mines. This “NFDL” standard merely multiplies “the number of employee work-related accidents times 200,000 hours, divided by the total employee hours worked.” Death doesn’t factor in.

In other words, miners can die and Blankenship’s “performance” can still shine.

That’s the magic — and the horror — of “performance-based” executive pay. Enhance shareholder value, all else will be forgiven.

Sam Pizzigati edits Too Much, the online newsletter on excess and inequality published by the Washington, D.C.-based Institute for Policy Studies. Too Much appears weekly. Read the current issue or sign up to receive Too Much in your email inbox.

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Discussion

2 comments for “‘Zero Tolerance’ on Workplace Slaughter?”

  1. Funny, we lower the rich’s taxes,
    the theory is they will reinvest
    in jobs. THE THEORY DOESN’T WORK
    DOES IT!!

    Posted by Becky in Indiana | April 13, 2010, 9:32 pm
  2. Thank you for making this case so clearly and forcefully.

    Posted by Brad | April 20, 2010, 10:23 am

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