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Barack Obama made national headlines last month when he loudly enlisted in the campaign to get Wal-Mart Stores Inc. to treat its workers better.
The
Chicagoan who would be president — maybe — told members of a union-backed
coalition that they have "a moral responsibility to stand up and fight" the big
retailer. "The battle to engage Wal-Mart and force them to examine their own
corporate values and what their policies and approaches are to their workers . .
. is absolutely vital," the Associated Press quoted the U.S. senator as saying.
I share the sentiment. Companies that pay top execs tens of millions a year while squeezing the little guys on the production line or in the back office are destroying middle-class America.
Which raises a question — not about corporate values but about Mr. Obama's values. Specifically, while Mr. Obama bashes Wal-Mart, why does his wife, Michelle, make $45,000 a year serving on the board of a Chicago-area company that pays its executives a very hefty amount of money while laying off mostly minority workers in an economically deprived area, a company whose No. 1 customer is — you guessed it — Wal-Mart?
The story:
In early 2005, Texas-based Dean Foods Co. spun off its processed-food subsidiary into an independent company, TreeHouse Foods Inc. Stock in Westchester-based TreeHouse began trading on June 15, 2005. Elected to its board of directors on June 6 of that year was Michelle Obama, who receives $30,000 a year plus $1,500 per board or committee meeting she attends. That totaled $45,000 in 2005, according to Mr. Obama's Senate ethics disclosure. Ms. Obama got 7,500 stock options this year, company filings show. At the current price of TreeHouse stock, she has a paper profit of about $60,000 on the options.
Now, I never thought there was that much money peddling pickles, non-dairy creamer, puddings and related goods to grocery stores, which is what TreeHouse does. Apparently I was wrong. In 2005, TreeHouse CEO Sam Reed was one of the highest-paid executives in Illinois. In fact, on Crain's annual Fortunate 100 list of best-compensated execs, Mr. Reed ranked No. 2, with total compensation of nearly $26.2 million, just ahead of Motorola Inc. chief Edward Zander and Abbott Laboratories boss Miles White.
TreeHouse says most of that money is in the form of stock awards granted by Dean at the time of the spinoff. For instance, according to the company's April 21 proxy statement, Mr. Reed will get $12.5 million in restricted stock awards over three years if total returns on TreeHouse stock over that period equal or exceed the average of 22 peer companies.
Still, that sounds like a good deal, given that TreeHouse has gross sales of just more than $700 million a year. Indeed, TreeHouse should have employed "some benchmark that's more challenging" than being average, says Dan Pedrotty, director of the AFL-CIO's Office of Investment.
Mr. Reed also was granted options for at least an additional 833,000 shares of stock, according to the proxy, and three other company officials made at least $10 million each last year, according to the Crain's list.
Amid all that optioning, TreeHouse did something else in 2005: On Nov. 26, it announced plans to close its La Junta, Colo., pickle plant, a move that claimed the jobs of 153 workers, most of them Hispanic — a big blow to a rural town with only 9,500 residents. The jobs paid a starting wage of $11 an hour, good pay for the area. The company blamed slowing pickle sales. But the locals are still furious.
"Prior to the closing, they told us this plant was as efficient as any, that they had hardworking and loyal employees," says La Junta Mayor Don Rizzuto. The firm even spent money on an expansion a few years earlier, and the town paid for needed roadwork. Adds the mayor: "In Chicago, 150 jobs is a pebble on the beach. In La Junta, it's a slice of the beach."
TreeHouse is rumored to be in the market to buy other food firms or to be acquired itself. It has something valuable to offer: According to that April 21 proxy, "For the year ended Dec. 31, 2005, our largest customer, Wal-Mart (including its subsidiaries, such as Sam's Club), represented approximately 11.7% of our net sales."
Ms. Obama, vice-president for external affairs at the University of Chicago Hospitals, says she was asked to join the board — five months after her husband took office — after putting out feelers indicating she'd like to get some corporate management experience. She says Mr. Reed's compensation is benchmarked to that of other food firms and that the firm hopes to expand and hire more workers, many minorities, once it boosts its efficiency.
The Harvard University Law School graduate says she's not cashing in on anyone's fame. "My income is pretty low compared to my peers," she says, meaning other Harvard Law grads. "You wouldn't ask that question if, like some people in politics, we had trust funds and were rich."
Mr. Obama also rejects any suggestion that his family is improperly benefiting from his fame. Although a recent land deal with political insider Tony Rezko raised such questions, Mr. Obama has spent the bulk of his career working as a civil rights lawyer, not as a partner at a lucrative LaSalle Street firm.
On the question of whether there's any hypocrisy in his bashing of Wal-Mart while his wife draws pay from a company that does business with the retailer, he says his views on corporate reform and social justice remain the same regardless of what happens at TreeHouse. Until those views are implemented, he says, "Michelle and I have to live in the world and pay taxes and pay for our kids and save for retirement" just like anyone else.
Meanwhile, Mayor Rizzuto has an offer: He'll pay the airfare for either Mr. or Ms. Obama to come and "look at the people and the town they're affecting." He adds, "If she and her husband are the champion of the little guy, it's amazing what they're doing."
©2006 by Crain Communications Inc.