Tag Archives: Economic plan

U.S. companies criticized for cutting jobs rather than investor payouts

By Alwyn Scott, Ross Kerber, Jessica DiNapoli and Rebecca Spalding

NEW YORK/BOSTON (Reuters) – U.S. companies laying off workers in response to the coronavirus pandemic but still paying dividends and buying back shares are drawing criticism from labor unions, pension fund advisers, lawmakers and corporate governance experts.

While most U.S. companies are scaling back payouts after a decade in which the amount of money paid to investors through buybacks and dividends more than tripled, some are maintaining their policies despite the economic pain.

Royal Caribbean Cruises Ltd <RCL.N>, Halliburton Co <HAL.N>, General Motors Co <GM.N> and McDonald’s Corp <MCD.N> have all laid off staff, cut their hours, or slashed salaries while maintaining payouts, according to a Reuters review of regulatory filings, company announcements and company officials.

“This is the time for large companies to try to help, for systemic reasons, to keep things flowing,” said Ken Bertsch, executive director of the Council of Institutional Investors. The council’s members include public pension funds and endowments that manage assets worth about $4 trillion.

Royal Caribbean, which has halted its cruises in response to the pandemic and borrowed to boost its liquidity to more than $3.6 billion, said it began laying off contract workers in mid-March, though the moves did not affect its full-time employees.

The company has not suspended its remaining $600 million share buyback program, which expires in May, or its dividend, which totaled $602 million last year and is set quarterly.

“We continue to take decisive actions to protect (our) financial and liquidity positions,” Royal Caribbean spokesman Jonathon Fishman said. He declined to comment specifically on the layoffs or shareholder payouts.

While Royal Caribbean’s rival Carnival Corp <CCL.N> has also laid off contract workers, it has suspended dividends and buybacks as it raised more than $6 billion in capital markets to weather the coronavirus storm.

UNEMPLOYMENT SURGE

Goldman Sachs analysts forecast this week that S&P 500 companies would cut dividends in 2020 by an average of 50% because of the fallout from the coronavirus pandemic.

For a graphic on S&P 500 shareholder payouts from 2009 to 2018, please click on: https://reut.rs/349G2JV

While there has been criticism of companies maintaining investor payouts, only those receiving financial support from the U.S. government under a $2.3 trillion stimulus package are obliged to suspend share buybacks.

Layoffs contributed to U.S. unemployment skyrocketing last month. Jobless claims topped 6.6 million in the week ended March 28 – double the record set the prior week and far above the previous record of 695,000 set in 1982.

Companies say job cuts are necessary to offset a plunge in revenue but their critics say they should consider turning off the spigots to shareholders before letting employees go.

“If companies are paying dividends and doing buybacks, they do not have to lay off workers,” said William Lazonick, a corporate governance expert at the University of Massachusetts.

Workers at franchised McDonald’s restaurants say they are getting fewer shifts since dining areas were closed in March, leaving only carry-out and drive-through services open.

Alma Ceballos, 31, who has worked at a franchised McDonald’s near San Francisco for 14 years, said she could not pay her rent after her schedule was cut to 16 hours from 40 and her husband, a janitor at Apple Inc’s <AAPL.O> Cupertino, California, campus was laid off.

McDonald’s, which has suspended buybacks but maintained its annual dividend, worth $3.6 billion in 2019, told Reuters its staffing and opening hours were not related to “making a choice between employees and dividends”.

About 95% of its U.S. restaurants are run by franchisees who decide staffing. McDonald’s said it was offering rent deferrals and other help to keep franchises open and employing workers.

“McDonald’s could commit to 30 days of income for all workers,” Mary Kay Henry, president of the labor union SEIU which has 2 million members, said in an interview with Reuters. “Corporations need to pay their fair share here.”

‘IT’S JUST WRONG’

General Motors has halted normal production in North America and temporarily reduced cash pay for salaried workers by 20%. It paid its first-quarter dividend on March 20 and has a month before declaring its next dividend, a spokeswoman said, adding that GM would assess economic conditions before deciding.

“Our focus in the near term is to protect the health of our employees and customers, ensure we have ample liquidity for a very wide range of scenarios, and implement austerity measures to preserve cash,” spokeswoman Lauren Langille said.

Oilfield services firm Halliburton furloughed about 3,500 workers in its Houston office starting on March 23, according to a letter sent to the Texas Workforce Commission obtained by Reuters. It has also cut 350 positions in Oklahoma.

Halliburton cited disruption from the coronavirus as well as plunging oil prices as the reason for the furlough. In March, it paid its first-quarter dividend to shareholders as planned.

A Halliburton spokeswoman declined to comment on the furlough and the company’s dividend policy.

Some of the companies laying off workers while still paying out shareholders, such as General Motors, signed an initiative last year from the Business Roundtable, a group of chief executives, pledging to make business decisions in the interest of employees and other stakeholders, not just shareholders.

Large asset managers such as BlackRock and Vanguard have cited managing “human capital” as a priority for companies in which they invest. Yet they have been reluctant to publicly press companies to avoid layoffs during the crisis.

Vanguard told Reuters it “recognizes the need for companies to exercise judgment and flexibility as they balance short- and long-term business considerations”.

BlackRock did not respond with a statement when contacted for comment.

“Profits should be shared with the workers who actually create them,” U.S. Senator Tammy Baldwin, a long-standing critic of share buybacks, told Reuters in an email.

“It’s just wrong for big corporations to reward the wealthy or top executives with more stock buybacks, while closing facilities and laying off workers.”

(Reporting by Alwyn Scott, Jessica DiNapoli and Rebecca Spalding in New York and Ross Kerber in Boston; Additional reporting by Hilary Russ in New York; Editing by Greg Roumeliotis and David Clarke)

U.S. to unveil ‘economy first’ approach to Mideast peace at Bahrain conference

FILE PHOTO: A footbridge leads from the Western Wall to the compound known to Muslims as the Noble Sanctuary and to Jews as Temple Mount, in Jerusalem's Old City June 2, 2015. REUTERS/Ammar Awad/File Photo

By Matt Spetalnick and Stephen Farrell

MANAMA/JERUSALEM (Reuters) – The first stage of President Donald Trump’s Middle East peace plan will be launched in Bahrain on Tuesday at a conference the White House touts as a bid to drum up $50 billion in investment but which Palestinians deride as an “economy first” approach doomed to fail.

The two-day international meeting, led by Trump’s son-in-law Jared Kushner, has been billed as the first part of Washington’s long-delayed broader political blueprint to resolve the Israeli-Palestinian conflict, to be unveiled at a later date.

But neither the Israeli nor Palestinian governments will attend the curtain-raising event in the Bahraini capital Manama.

And there will be close scrutiny as to whether attendees such as Saudi Arabia and other wealthy Gulf Arab states show any interest in making actual donations to a U.S. plan that has already elicited bitter criticism from Palestinians and many others in the Arab world.

Bahrain, a close American ally and home to the U.S. Navy’s Fifth Fleet, has been making preparations for weeks.

Though the event is supposed to focus on economics, Gulf Arab states hope it will also be used to show their solidarity with the Trump administration over its hard line against Iran, a senior Gulf diplomat said on condition of anonymity.

Under the plan, donor nations and investors would contribute about $50 billion to the region, with $28 billion going to the Palestinian territories – the Israeli-occupied West Bank and the Gaza Strip – as well as $7.5 billion to Jordan, $9 billion to Egypt and $6 billion for Lebanon.

Among 179 proposed infrastructure and business projects is a $5 billion transport corridor to connect the West Bank and Gaza.

“I laugh when they attack this as the ‘deal of the century’,” Kushner told Reuters, referring to the lofty nickname that Trump’s peace plan has assumed over the last two years.

“This is going to be the ‘opportunity of the century’ if they have the courage to pursue it.”

Kushner, a senior Trump adviser who like his father-in-law comes from the world of New York real estate, is presenting his plan in a pair of slick pamphlets filled with graphs and statistics that resemble an investment prospectus; in fact, he has repeatedly called it a “business plan.”

PEACE TO PROSPERITY

Expectations for success are low. The Trump team concedes that the economic plan – billed “Peace to Prosperity” – will be implemented only if a political solution to one of the world&rsquo;s most intractable conflicts is reached.

Any such solution would have to settle longstanding issues such as the status of Jerusalem, mutually agreed borders, satisfying Israel’s security concerns and Palestinian demands for statehood, and the fate of Israel’s settlements and military presence in territory in Palestinians want to build that state.

Hanging over the entire initiative are persistent questions about whether the Trump team plans to abandon the “two-state solution” – the long-standing international formula to bring about peace by creating an independent Palestinian state living side-by-side with Israel.

The United Nations and most nations back the two-state solution and it has underpinned every peace plan for decades.

But the Trump team – led by Kushner, Trump’s Middle East envoy Jason Greenblatt and U.S. Ambassador to Israel David Friedman – has consistently refused to commit to it, keeping the political stage of the plan a tightly guarded secret.

Israeli Prime Minister Benjamin Netanyahu, a close Trump ally, has his own domestic problems, facing an election, and possible corruption charges after a long-running police investigation. He denies any wrongdoing.

“We’ll hear the American proposition, hear it fairly and with openness,” Netanyahu said on Sunday. Although no Israeli government ministers will attend, an Israeli business delegation is expected.

But Palestinian leaders have boycotted the workshop, and are refusing to engage with the White House – accusing it of pro-Israel bias after a series of recent Trump decisions. Kushner told Reuters “some” Palestinian businessmen would be present but declined to name them.

Palestinian President Mahmoud Abbas, whose Palestinian Authority exercises limited self-rule in the Israeli-occupied West Bank, was scathing about its prospects of success.

“Money is important. The economy is important. But politics are more important. The political solution is more important,” he said.

Hamas, the Islamist militant group that controls Gaza, has found itself in rare agreement with its arch-rival Abbas.

“The Palestinian people only and no one else can represent the Palestinian cause,” Hamas official Mushir al-Masri said.

He said the Trump approach “seeks to turn our political cause into a humanitarian cause, and to merge the occupation into the region.”

Kushner said that even without the Israeli and Palestinian governments represented, the presence of Israeli businessmen and journalists with their counterparts from the Arab world would be significant at a time of rising tensions with Iran.

“People realize that the real threat to that region is Iran and their aggression, and Israel and a lot of the other Arab states have a lot more in common today than they did before,” he said.

David Makovsky, a Washington-based Middle East expert, agreed that although the principal focus of the event was the Israeli-Palestinian conflict, “Iran is higher on the chain of interest right now.”

But Makovsky, who the White House has invited as an observer, said the Trump/Kushner plan would ultimately succeed or fail on how it addressed the big underlying issues, not the money. “No one believes you can solve this thing economically without addressing the political issues.”

(Writing by Stephen Farrell. Additional reporting by Nidal al-Mughrabi in Gaza and Rami Ayyub in Ramallah.)

U.S. hopes for ‘good deliverables’ during Trump’s China visit

U.S. Secretary of Commerce Wilbur Ross meets Chinese Premier Li Keqiang at the Zhongnanhai state guesthouse in Beijing, China, September 25, 2017.

By Christian Shepherd

BEIJING (Reuters) – The United States hopes there will be some “very good deliverables” when President Donald Trump visits China, U.S. Commerce Secretary Wilbur Ross said on Monday, striking an upbeat tone amid trade tensions between the two countries.

Trump will likely visit China in November as part of a trip that will take him to an Association of Southeast Asian Nations (ASEAN) summit in the Philippines and an Asia-Pacific Economic Cooperation (APEC) summit in Vietnam.

China’s relationship with the United States has been strained by the Trump administration’s criticism of China’s trade practices and by demands that Beijing do more to pressure North Korea to halt its nuclear weapons and missiles programs.

Meeting in Beijing, Ross told Chinese Premier Li Keqiang he and his delegation had been greeted very warmly which augurs well for Trump’s forthcoming trip to meet Chinese President Xi Jinping.

“We are looking forward to a very good session including a lot of American CEOs and we hope there will be some very good deliverables,” Ross said, in comments in front of reporters.

Li told Ross that the two countries’ common interests far outweighed their differences and their economic and trade relationship had enormously benefited both countries and the world.

“China is the world’s largest developing country while the United States is the world’s biggest developed country,” Li said.

“In addition to that, China and the United States are the largest trading partners with each other, so I think it is fair to say that our common interests far outweigh our differences and divergences,” he added.

“Over the years, economic and trade relations between our two countries have always served as a ballast for our overall bilateral relationship and also these important trade and economic relations have benefited enormously our two peoples as well as the whole world.”

State media quoted Li as further saying that China hopes the United States will give fair treatment to Chinese companies’ investments there, as well as ease restrictions on high-tech exports.

Meeting earlier in the day, Chinese Commerce Minister Zhong Shan told Ross that there was huge potential for cooperation and China was willing to “manage and control” disputes, the ministry said in a statement.

China was willing to create good conditions for Trump’s visit and ensure his trip was fruitful, Zhong added.

Xi and Trump met for the first time in person at Trump’s Mar-A-Lago estate in Florida in April. Trump has since played up his personal relationship with Xi, even when criticizing China over North Korea and trade.

The two sides launched a 100-day economic plan at that meeting, including some industry-specific announcements such as the resumption of American beef sales in China.

There has since been limited progress on trade relations.

Ross’s visit comes at a time of heightened trade tensions between the United States and China following Trump’s decision earlier this month to block a Chinese-backed private equity firm from buying a U.S.-based chipmaker.

In August, Trump authorized an inquiry into China’s alleged theft of intellectual property – the first direct trade measure by his administration against Beijing.

During his campaign, Trump vowed repeatedly to declare China a currency manipulator once in office but in April backed off from that threat.

Trump’s administration has also repeatedly called on China to do more to rein in North Korea and has threatened new sanctions on Chinese banks and other firms doing business with Pyongyang.

China says it is already doing all it can to pressure North Korea and that those countries directly involved in the stand-off on the peninsula should take responsibility for resolving tensions.

There was no mention of North Korea in the comments Li and Ross made in front of reporters.

 

(Reporting by Christian Shepherd; Writing by Ben Blanchard; Editing by Nick Macfie)