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Chicago-sized test of wills

Thursday, July 5, 2012

CHICAGO — The title of the nation’s largest labor union — the National Education Association — seems calculated to blur the fact that it is a teachers union. In this blunt city, however, the teachers union candidly calls itself the Chicago Teachers Union. Its office is in the Merchandise Mart, a gigantic architectural Stonehenge, which resembles a fortress located on the Chicago River, which resembles a moat. Which is appropriate.

Unions are besieged, especially public-sector unions, particularly teachers unions, and nowhere more than here. Teachers unions have been bombarded with bad publicity, much of it earned, including the movie “Waiting for ‘Superman,’ ” and have courted trouble by cashing in on sentimentality, cloaking every acquisitive demand in gauzy rhetoric about how everything is “for the children.”

Still, have sympathy for Karen Lewis, 58, a Dartmouth graduate who is a daughter of two African-American teachers. She taught chemistry for 22 years until becoming president of the 26,502-member CTU. Her job is to make life better for her members, not to make life easier for Mayor Rahm Emanuel, with his roughneck’s reputation and stevedore’s profanity, whose ideas are as admirable as his manners are deplorable.

He thinks that improved schools, including more charter schools, might arrest the exodus to the suburbs of parents whose children are ready for high school, so he wants a longer school year and school day. America’s school year (about 180 days) is one of the shortest in the industrial world, and while middleclass children may leaven their summers with strolls through the Louvre, less privileged children experience “summer learning loss.” Remediation requires the first few weeks of the fall term, which effectively further shortens the school year. And Chicago’s school day is the shortest of any large American district.

The CTU wants a pay raise — 30 percent — proportional to Emanuel’s 90-minute increase in the school day and 10-day increase in the school year. He has canceled a 4 percent raise and offers only 2 percent. He says benefits the CTU has won — e.g., many teachers pay nothing toward generous pensions they can collect at age 60 — could in just three years force property taxes up 150 percent and require classes with 55 students.

Even discounting Emanuelean hyperbole, whose fault is this? Just as foggy rhetoric about corporations’ “social responsibilities” obscures the fact that a corporation’s responsibility is to maximize shareholder value, blaming unions for improvident contracts ignores the fact that a union’s principal task is to enhance members’ well-being — wages, benefits, working conditions. Unions can wound themselves by injuring their industries (e.g., steel and autos), but primary blame for improvident contracts with public employees belongs to the elected public officials who grant them.

Anyway, money — salaries and pensions — may not be the most problematic point of contention. It might be teacher “accountability,” including merit pay, and identifying failing schools and teachers. Lewis says, “We can’t choose the children that come into our classrooms.” Chicago schools are 86 percent black and Hispanic, and low pupil performances strongly correlate with household incomes.

Teachers unions, however, have painted themselves into a corner by insisting that spending is the best predictor of educational performance — increase financial inputs and cognitive outputs will rise. In the last 50 years, real per pupil spending nationwide has tripled and the number of pupils per teacher has declined by a third, yet educational attainments have fallen. Abundant data demonstrate that the vast majority of differences in schools’ performances can be explained by qualities of the families from which the children come to school: The amount of homework done at home, the quantity and quality of reading material in the home, the amount of television watched in the home and, much the most important variable, the number of parents in the home. In Chicago, 84 percent of African-American children and 57 percent of Hispanic children are born to unmarried women.

The city is experiencing an epidemic of youth violence — a 38 percent surge in the homicide rate, 53 people shot on a recent weekend, random attacks by roving youth mobs. Social regression, driven by family disintegration, means schools where teaching is necessarily subordinated to the arduous task of maintaining minimal order.

Emanuel got state law changed to require unions to get 75 percent of the entire membership rather than a simple majority to authorize a strike. Some people thought this would make strikes impossible. The CTU got 90 percent to authorize. Lewis’ members are annoyed, and are not all wrong.

George Will’s column appears Thursdays and some Sundays. Reach him at georgewill@washpost.com.

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Faedrus     10 months, 2 weeks ago

"Just as foggy rhetoric about corporations’ 'social responsibilities' obscures the fact that a corporation’s responsibility is to maximize shareholder value..."

This is typical Will, with opinionated stated as fact.

Actually, the phrase "a corporation’s responsibility is to maximize shareholder value" cannot be found in the Bible, the Declaration of Independence, the US Constitution, the writings of Plato or Aristotle, or anything written by Albert Einstein.

They in fact were written in a short article by Milton Friedman, who was just a person, like the rest of us.

In reality, the goal of a corporation is whatever the broader community legislates it to be.

For example, if it's legislated to make the air cleaner, corporations will make the air cleaner.

Mr. Will, unfortunately, forgets that the rest of us can think, and some perhaps even better than Mr. Will.

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Norm     10 months, 2 weeks ago

"the phrase "a corporation’s responsibility is to maximize shareholder value" cannot be found in the Bible, the Declaration of Independence, the US Constitution, the writings of Plato or Aristotle, or anything written by Albert Einstein."

That's all true, but it is found in US corporate law.

"In reality, the goal of a corporation is whatever the broader community legislates it to be."

No, it isn't. The goal of a corporation is to maximize shareholder value. The community can regulate the corporation, but that doesn't change its goal. There was a time when incorporation was a rare privilege, granted to benefit some community purpose, but that was long ago.

"In the United States, government chartering began to fall out of vogue in the mid-19th century. Corporate law at the time was focused on protection of the public interest, and not on the interests of corporate shareholders. Corporate charters were closely regulated by the states. Forming a corporation usually required an act of legislature. Investors generally had to be given an equal say in corporate governance, and corporations were required to comply with the purposes expressed in their charters." {wiki}

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Norm     10 months, 2 weeks ago

Mr. Will identified the answer, but he passed right over it:

"low pupil performances strongly correlate with household incomes."

Higher wages for blue-collar workers.

"much the most important variable, the number of parents in the home."

^^ Another factor that is strongly correlated to income.

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Faedrus     10 months, 2 weeks ago

Mr. Will, as is often the case, is confusing correlation with causation.

In Scandinavia, for example, pupil test scores are higher on average than those in the US, as are the percentage of out-of-wedlock births.

So, the problem isn't out-of-wedlock births, but rather the quality of the schools in the US in those neighborhoods with a high incidence of out-of-wedlock births.

Such neighborhoods are typically poor, but not always minority.

For example, poor, majority-white schools in Appalachia also have relatively poor test scores and graduation rates.

And, how are schools in poor districts often funded? Through local property taxes, local bonds, etc.

Bingo.

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Faedrus     10 months, 2 weeks ago

Norm, what is a corporation's responsibility in France, Germany, or Pakistan? Is it to maximize shareholder value?

Not necessarily. It is to maximize the public good per the laws of France, Germany, or Pakistan.

In Pakistan, for example, it is common for companies to provided funds toward what in the U.S. would be viewed as simple charities, in part because the public sector is so weak and inefficient.

And, what exactly is shareholder value? And, who decides, exactly what value is? Is it the price of a share on any given day, or over a number of years? Or, is value in a specific dividend over a specified number of years?

I own shares in hundreds of companies, and not one has ever asked me what I value, and how they are to maximize it.

And, some companies specifically aren't created to provide maximized monetary reward to shareholders, but rather specify in their charter that X% each year will go to charity, or toward some other public good.

And, some investment companies and mutual funds invest only in companies which further a societal goal. Or, they will not invest in specific firms which may be viewed as unhealthy to society, a practice followed by Warren Buffett's Berkshire-Hathaway.

So, Mr. Will's statement is incorrect. He merely parroted Milton Friedman, and then hoped that his readers would just take a pass. :)

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Faedrus     10 months, 2 weeks ago

Additionally, some firms are not created to maximize shareholder value, but rather to maximize employee compensation -

As outlined in detail in "Liar's Poker" and "The Big Short", by Michael Lewis.

For example, in the 1980s and '90s, investment banks took themselves public, but kept the same bonus system of incentives which they had in place as private companies.

They then grew their firms using shareholder money, growing the income stream substantially, but continued paying themselves bonuses as if the firms were private -

As opposed to paying the shareholders instead via dividends.

The results: Rich employees!

The shareholders: Not so much.

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