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The Business of Change: Can Business Schools Make Companies Ethical?

Co-published by Fast Company
Questions about what business students are learning usually emerge after egregious examples of malfeasance, although today’s students are definitely more likely to at least hear discussions about corporate responsibility.

Megan Kamerick

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Harvard Business School classroom photo by HBS1908.

In 2008 and 2009, people wondered whether business schools should have borne some of the blame for ethical lapses at collapsing firms.


Co-published by Fast Company

Corporate misanthropes are nothing new, but Martin Shkreli is a special case.

He became one of the most hated men in America for a while when he gained the rights to a lifesaving drug and then boosted the price by 5,000 percent, basically because he could. That wasn’t illegal, just casually cruel.

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Shkreli got an undergraduate business degree at Baruch College and some see him as a model for millennials to learn what not to do in business. But what lessons do business students learn from the “Pharma Bro” or corporations that behave badly?

Will in-depth analysis of Uber’s hiding a massive data breach teach newly minted MBAs to stand up for what’s right in their first jobs? If they’re faced with pressure to produce sales at all costs, will they succumb to temptation to follow the path of Wells Fargo and create false customer accounts?

A Deloitte survey finds millennials are generally pro-business, but think big corporations could be doing more to address society’s ills.

Questions about what business students are learning usually emerge after egregious examples of malfeasance. In 2008 and 2009, people wondered whether business schools should have borne some of the blame for ethical lapses at collapsing firms. Similar questions arose around the bankruptcies of Enron and WorldCom earlier that decade, and a recent book looks back at the role Harvard Business School played in the growth of corporate greed in the 1980s.

Business students today are definitely more likely to at least hear discussions about corporate social responsibility and ethics mixed in with classes on finance and management. Corporate social responsibility generally means actions taken by companies to measure, and take responsibility for, their effects on the wellbeing of the environment and the larger society.

This shift is being driven in part by the students themselves. A survey by Deloitte found millennials are generally pro-business, but think big corporations could be doing more to address society’s ills.

“It’s become a foundational expectation for what schools do,” says Dan LeClair, an executive vice president with the Association to Advance Collegiate Schools of Business, the main accrediting organization for business schools. “Business schools are starting to realize that their purpose in education is not just to solve problems for business, but to solve problems for business in the context of society.”

In its accreditation standards, LeClair’s organization notes business schools must “demonstrate a commitment to address, engage and respond to current and emerging corporate social responsibility issues.” Those include “diversity, sustainable development, environmental sustainability and globalization of economic activity across cultures.”

USC’s Paul Adler rejects the idea that this generation is more socially conscious than previous ones and calls corporate-responsibility gestures “window dressing.”

Paul Adler, however, rejects the idea that this generation is more socially conscious than previous ones. A professor of management and organization at the University of Southern California’s Marshall School of Business, Adler sees several forces at work, including a challenging labor market that makes it more difficult for college graduates to find a path in this world.

“They’re bringing some degree of frustration and some eagerness to find a way to do good through the vehicle of business,” he says.

Also, the MBA has become the de facto training ground for those who want to manage anything, he says, and that’s brought people into business schools who in the past might have pursued something like a public administration degree.

“In many ways, this reflects the rise of the market as an ideology in our society today,” Adler says. “The legitimacy of the nonprofit sector or public sector as a vehicle for social change is much less today than it was 40 years ago, so people are desperately looking for ways for the business sector to become a vehicle for positive change.”

Adler is extremely skeptical of that possibility.

“There are very, very few of these for-profit corporations that really have made of their [corporate responsibility] functions anything more than window dressing,” he says.

And yet top schools have moved heavily into this space. The University of Pennsylvania’s famed Wharton School (graduates include Elon Musk and J.D. Power III, and it boasts a long list of accomplished business leaders) is typical. There, all MBA students must take either Responsibility in Business or Responsibility in Global Management — courses that explore, among other things, students’ personal conceptions of what it means to be a responsible leader through negotiation simulations, group projects and discussions designed to help them reflect on their own values and behavior. Undergrad business majors must take one of two courses on legal studies and business ethics, and the school’s social impact initiative offers courses, fellowships and research on impact investing (the idea of “doing well by doing good”).

Silicon Valley-connected Stanford has been ahead of the curve on corporate social responsibility and environmental sustainability.

For their part, Columbia University’s MBA students have three class sessions on ethics as part of their orientations. They focus on value-based leadership, corporate social responsibility and corporate governance, says Bruce Kogut, director of the school’s Sanford C. Bernstein & Co. Center For Leadership and Ethics. And at Harvard University, all MBA students must take the Leadership and Corporate Accountability course in their second semester, to learn about the systems that leaders use to promote responsible conduct by companies and their employees. They use case studies to explore ethical issues at actual companies.

“Rather than presenting the students with clear-cut, black and white issues, the course focuses on the sort of gray issues that come across the transom of decision-making executives on a regular basis,” says a Harvard spokesman.

Perhaps not surprisingly, given its liberal Bay Area location and Silicon Valley connection, Stanford University has been ahead of the curve on corporate social responsibility and environmental sustainability (practices and decisions designed to protect, rather than harm the natural world).

“We’ve basically been doing it since the 1960s,” says Neil Malhotra, director of Stanford’s Center for Social Innovation.

The center began as the Public Management Program, launched by Dean Arjay Miller, to develop business leaders who could address social challenges. There are now over 30 classes related to social innovation, Malhotra says, and a required class on business ethics.

It’s all a big shift from the 1980s, when Harry Van Buren was getting his undergraduate degree. Today he holds the Rust Professorship in Business Ethics in the Anderson School of Management at the University of New Mexico.

“There wasn’t any discussion of these issues at all,” Van Buren says. “I took the very first business ethics course Syracuse University ever offered in 1989.”

An ethics course has been required for UNM undergraduates and graduates for more than 20 years, he adds, incorporating issues around social responsibility, sustainability, ethics and diversity. Students must write analyses of business decisions that address the processes and outcomes from those decisions in ethical terms.

The Anderson School also houses the Daniels Fund Ethics Initiative, which serves as a resource on business ethics education for higher education institutions across New Mexico.

“I think students gain an appreciation of how the decisions they make have implications, positive and negative, for stakeholders,” Van Buren says, referring to customers, employees, government and society at large, as opposed to only focusing on shareholders with a financial stake in a company.

At the University of Colorado, Boulder, the Leeds School of Business has an entire Center for Education on Social Responsibility. Much of the growth toward a social responsibility focus was driven by the Leeds family, says Mark Meaney, the center’s executive director.

“They wrote into the agreement that all business students – undergraduates and graduates – enjoy an immersive experience in ethics, social responsibility, diversity and sustainability,” he says.

Each freshman must take a course called the World of Business that incorporates those four pillars, and as sophomores they must take courses in ethics and social responsibility.

McGill University’s Henry Mintzberg argues that getting an MBA from a prestigious school fosters a hubris that can cause managers to be disconnected from what they’re managing.

About 10 percent of the students pursue a certificate in socially responsible enterprise; MBA students can graduate with an emphasis in sustainable operations. Meaney is also the North American chair of the Principles of Responsible Management Education — an initiative involving the United Nations and about 650 business schools worldwide designed to create more responsible managers. All signatories must submit a report every two years outlining their progress on those principles; the organization has delisted schools from PRME membership for not following that requirement.

A survey of students at schools that are signatories to the PRME principles found many students want more emphasis on issues like ethics and corporate responsibility. About 45 percent felt their schools were not doing enough in this area and 28 percent wanted more coursework on topics such as ethics and environmental sustainability.

The study’s author, Debbie Haski-Leventhal of Australia’s Maquarie University, found that 19 percent of responding students were willing to sacrifice future salary to work for an employer who cares about employees, the community, the environment and ethics.

“Students are saying clearly and loudly that their business schools should be doing more in this space,” she says. The question is what happens after graduation? The skeptical Paul Adler recalls how a former student went to work in supply chain management for a large corporation. After the 2012 Tazreen Fashions factory fire in Bangladesh, her company first denied any of its products were manufactured there, but eventually it came out they were.

“So there was a big discussion in the organization — ‘We have to do something about this,’” Adler says. “She assumed there would be some kind of action.”

There wasn’t, and when the Rana Plaza building collapsed a year later, killing more than 1,000 workers, it became clear the company’s suppliers were still involved in unsafe factories in the country. So, disgusted and demoralized, she left.

“She was with a whole group whose mission was to ensure suppliers were behaving according to the company’s code of conduct, and [was] constantly overruled by the finance guys. I don’t think that’s an unusual experience.”

Adler adds that unless you have funders like the Leeds family who want it, or companies demanding it when they come recruiting graduates, or lawmakers pushing for it at public schools, then fundamental change won’t happen. But can business schools make someone ethical? Henry Mintzberg, Cleghorn Professor of Management Studies at McGill University in Montreal, has argued that the very idea of the MBA is flawed. He contends getting a degree from a prestigious school actually fosters a certain hubris that’s unjustified and often causes managers to be disconnected from what they’re managing, and that can be destructive. He also doubts that debating ethics in a classroom prepares students to face real ethical quandaries in the work world.

The University of New Mexico’s Van Buren says business schools can’t make someone ethical, but they can expose them to important ideas.

“They can help students be aware there are social expectations facing businesses, and indeed all organizations,” he says. “And this sort of teaching challenges the shareholder-centric paradigm that typifies a lot of business school coursework.”

One recent graduate from UNM’s business school, Ronak Bhatt, is working as a controller for a health company and says his education served him well.

“What I’m carrying forward into my profession and every interaction I’m having is the ability to think [things] through: How is my decision going to impact all stakeholders and what are the negative external consequences we didn’t see?”

Some graduates find the sweet spot of social responsibility by simply doing their own thing.

When she was at the Harvard Business School, Sarah Endline was involved with Net Impact, which brings together students interested in how to make positive impacts on society. She graduated in 2001 and went to work for Yahoo, but eventually launched her own company, Sweetriot, which promises to fix the world through chocolate with a commitment to fair trade and supporting nonprofits.

“The ideals of Net Impact apply to any industry – being a great team player, impacting the community, caring about the world around you,” she says. “I don’t consider that just one industry.”

Debbie Haski-Leventhal remains optimistic about change in business schools and in business.

“I don’t know of any perfect company,” she says. “But I see more and more companies taking some of these issues very seriously.”

Change, she adds, tends to happen slowly.


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Labor & Economy

Randy Shaw on Los Angeles’ Lost Housing Generation

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What: Randy Shaw discusses his book, Generation Priced Out.
When/Where:  Skylight Books, Los Angeles; Saturday, Nov. 17, 5 p.m.


 

When I began writing my new book on the pricing out of the working and middle class from urban AmericaGeneration Priced Out: Who Gets to Live in the New Urban America — the first place I turned to after the Bay Area was Los Angeles. I grew up in Los Angeles. I try to closely follow its land-use politics but was shocked to see how even neighborhoods like Boyle Heights faced displacement and gentrification. I also learned that Venice, which I always thought of as a progressive bastion, was filled with homeowners opposed to affordable housing in their neighborhood. The deeper I looked, the more I found the reasons for Los Angeles’ worsening housing and homelessness crisis: The city was not effectively protecting tenants and its rent-controlled units, nor was it building enough new housing.

Generation Priced Out tells the stories of those on the front lines of the Los Angeles housing crisis. Mariachis facing eviction from Boyle Heights describe their struggle to stay in their homes, and I defend the “by all means necessary” tactics of tenant groups battling displacement. I describe the struggle by Venice Community Housing to build housing for the homeless on a parking lot, a plan vigorously resisted by homeowners. I discuss the enormous power of the city’s affluent homeowner groups, and how they aggressively stop the building of new apartments. I also assess how Mayor Eric Garcetti and other city officials have responded to the crisis and explain why they must do more.

I’ll be talking about my book and the L.A. housing crisis at Skylight Books, Saturday, November 17 at 5 p.m. I look forward to a great discussion and hope to see you there.

Randy Shaw is director of San Francisco’s Tenderloin Housing Clinic and the editor of BeyondChron.org. His prior books include The Activist’s Handbook: Winning Social Change in the 21st Century and The Tenderloin: Sex, Crime and Resistance in the Heart of San Francisco.


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Election 2018

Los Angeles’ Measure B Is a Moonshot Aimed at Creating a Public Bank

A baby step toward establishing municipal banking in America’s second-largest city would be a giant leap for this national movement.

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Photo by Jonathunder

A ballot measure in support of creating a public bank in Los Angeles could serve as a referendum on an idea that has gained traction in cities and states across the country since the 2008 financial crisis.

“To have a resounding ‘Yes’ vote from Los Angeles, which is one of the most powerful opinion centers of the world, would be tremendously historic,” says Trinity Tran, co-founder of Public Bank LA, an advocate for Measure B, which would amend the city charter to allow the city to establish a municipal bank.

But Measure B is a baby step in what promises to be a lengthy process to set up a municipal bank whose stated purpose is to provide the nation’s second-largest city with a socially responsible and cost-effective alternative to Wall Street banks.

More Ballot Measure Stories Here

The movement for public banks draws inspiration from the success of a 99-year-old public bank in the red state of North Dakota and from Germany’s network of over 400 regional public banks (or Sparkassen), which advocates say provided significant funds for the development of that country’s renewable energy sector.

Since the Great Recession, over 20 U.S. states have introduced bills to establish state-owned banks or to study their economic feasibility. New Jersey Democratic Governor Phil Murphy, a former Goldman Sachs executive, successfully campaigned for his current job on the promise of creating a state-owned bank. And California’s gubernatorial frontrunner Gavin Newsom has made the formation of a state bank that would fund infrastructure, student loans and housing part of his platform as well.

Pot profits for deposit? (Photo: Pandora Young)

A lack of resources is one motivation for city and state leaders’ interest in public banking, said Deborah Figart, a distinguished professor of economics at Stockton University in New Jersey.

After the Great Recession, “we really became much more aware of unmet infrastructure needs,” said Figart, who conducted an economic impact study for the proposed New Jersey bank. The American Society of Civil Engineers gives the U.S. a D+ grade for the state of its roads, bridges and other infrastructure — “practically a failing grade,” she noted. Meanwhile, local governments devote a significant portion of their budgets to paying interest on bonds that go to Wall Street banks and finance companies at a time when interest rates are on the rise.

In Los Angeles, the push for the bank emerged from grassroots activists who demanded that the city divest from San Francisco-based Wells Fargo, whose aggressive sales practices resulted in more than three million deposit and credit card accounts being opened without customers’ knowledge.

“We knew that it wasn’t really divesting if we were going to move our money to another predatory extractive bank,” said Tran. “So we introduced public banking early on in the campaign as a permanent solution to housing the city’s public finances.”

Last year, the city paid $1.1 billion in interest to bondholders, which in turn funds “wars and pipelines and private prisons,” said Tran, who would rather see tax money put to work to address city needs like housing and clean energy. Her banking advocacy began four years ago when she started meeting with fellow activists in Koreatown coffee shops. As of October 20, “Yes on B” supporters had raised $10,128 for the measure, according to the Los Angeles City Ethics Commission. No committee has been formed to oppose the measure.

There are critics, however. Rob Nichols, president and CEO of the American Bankers Association, writing in The Hill, fears that the public bank proposal would suffer from a “scattered business focus” and fall under “undue political influence” that would result in risky loans that would damage the public purse.

“It’s easy to make the banks the bad guy,” said Stuart Waldman, president of the Valley Industry and Commerce Association. But “it’s not easy to run a bank,” and a municipal bank would require significant start-up capital. “This is public money, so if they lose public money, if they realize that it doesn’t work, that hurts every person in L.A.”

The Los Angeles Times editorialized that the measure was one of “the most ill-conceived, half-baked ballot measures in years” and urged a no vote, in part, because the measure does not articulate a vision or plan for the bank.

But if the proposal on the ballot lacks detail, it’s because city officials have not wanted to invest in a business plan and feasibility study while the city is still prohibited by its charter from operating a bank, City Council President Herb Wesson told a news conference in October.

Wesson assured reporters that there was “no way on God’s green earth” the city would move to create a municipal bank without a subsequent citywide vote on a more detailed plan, and the ballot argument in favor of the measure that goes to every city voter says as much. For now, voters are only being asked to remove a legal hurdle in the charter that prevents the city from establishing a municipal financial institution.

Proponents of public banking regularly point to the Bank of North Dakota as a model. The Progressive-era institution was created in 1919 out of frustration with a banking system that was putting the squeeze on farmers. The bank was initially greeted with suspicion by a national press corps anxious about a Bolshevik incursion into the finance sector. But the bank, now very much part of the state’s business establishment, has seen record profits for 14 consecutive years. Because it steered clear of the volatile derivatives market, the Bank of North Dakota avoided the upheaval many financial institutions suffered when the housing market tanked in 2008.

“It’s partly because you have civil servants in charge rather than folks whose paychecks depend on how much money the bank makes in a quarter,” Sam Munger, director of external affairs for the State Innovation Exchange, told The American Prospect.

Considered a “banker’s bank” with a $4.9 billion loan portfolio that supports agriculture, business, homeownership and higher education, the Bank of North Dakota does not compete with other financial institutions.

“It’s not a bank for regular household customers, for car loans, credit cards and mortgages,” said Figart. “It is a bank for accepting public deposits and lending mostly to the public sector or public-private partnerships.”

Wesson has talked about L.A.’s municipal bank as a place where the cannabis industry could park its cash since pot is illegal under federal law. Such a move could restrict the bank’s ability to make federal wire transfers, but the L.A. activists who back the initiative see other uses for the bank.

“For our organization, it was never about cannabis; it was always about neighborhood issues,” says Gisele Mata, housing organizer of Alliance for Californians for Community Empowerment, a community-based non-profit that has been part of the coalition advocating the bank.

Public Bank LA leaders envision Los Angeles’s municipal bank playing a similar role to that of the Bank of North Dakota, but focusing on the city’s priorities. “It would start as a banker’s bank for the city, refinancing city debt and trying to consolidate the investment away from Wall Street and harmful extractive industries,” co-legislative director David Jette told KPCC-FM in October.

Public Bank LA, he added, also envisions the municipal bank “partnering with local credit unions and community banks” to fund housing, small businesses, low-interest student loans, renewable energy projects and, eventually, credit for the underbanked. The bank could also fund infrastructure projects more cheaply than commercial banks by avoiding the interest and fees that go to commercial banks, according to advocates.

Many hurdles remain before an L.A. bank could become operational. State and federal laws do not currently provide a regulatory framework for the formation of public banks, according to an August report by the city’s Chief Legislative Analyst’s office. The city must come up with a source of collateral for the bank and an oversight structure, and receive approval from the California Department of Business Oversight.

But a modern public bank can be made from scratch. In April, the Federal Reserve approved a public bank for American Samoa in the South Pacific, after the Bank of Hawaii abandoned the geographically remote U.S. Territory.

The North Dakota and American Samoan banks may be rare cases for now, but Figart believes that “in the next five years, there will be” more public banks, and “in the next 10 years, there certainly will be more.”


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Election 2018

Will Proposition 11 Mean Less Rest for Ambulance Crews?

Supporters describe Proposition 11 as necessary to ensure public safety, but EMT workers describe grueling 12-hour shifts in which crew members can often go eight hours without having a chance to stop for food.

Gabriel Thompson

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California’s Proposition 11, which seeks to rewrite California’s Labor Code as it relates to rest and meal breaks for private-sector ambulance employees, might appear to be a strange ballot measure, even for a state that has seen its share of odd propositions. It has no opponent listed on the state’s official voter guide, and the only backer of the proposition, American Medical Response, is a company headquartered in Colorado, which has spent $22 million to secure the bill’s passage. Prop. 11 seems like it must have an interesting backstory, and it does.

More Ballot Measure Stories Here

That story begins with a California Supreme Court ruling in 2016, Augustus v. ABM Security, which found that private security guards were required to be given uninterrupted rest breaks by their employer. Guards for ABM had been instructed to keep their pagers on during breaks and to respond to calls for assistance, a practice that the court ruled was in violation of state labor law.

Like security guards, the state’s private sector emergency medical technicians (EMTs) and paramedics are on call during breaks — and they have filed lawsuits against private companies, including American Medical Response, over the practice. According to the California Legislative Analyst, those suits, after Augustus, are likely to be successful. The analyst’s report estimates that to be in compliance with Augustus and offer uninterrupted breaks to their employees, companies would need to hire about 25 percent more ambulance crews, at a potential cost of more than $100 million per year. Then there’s the class action lawsuit against AMR, which is the largest private ambulance company in California. Prop. 11 seeks to nullify the lawsuit.

Prop. 11 comes after last year’s failure of Assembly Bill 263, which sought a solution to emergency workforce staffing. The bill, which was supported by the union that represents emergency medical services (EMS) workers, and opposed by AMR, would have created a carve-out in the labor code for private ambulance companies, allowing them to require workers to be on call during breaks and respond to emergencies that demand the use of sirens and emergency lights. “We wanted to create a policy that protects workers’ rights, allows a little bit of [time] to get meals, but still protects public safety,” said Jason Brollini, the president-executive director of United EMS Workers, a local of the American Federation of State, County and Municipal Employees. (Disclosure: AFSCME is a financial supporter of this website.)

What the proposed bill wouldn’t have done was shield AMR from previously filed lawsuits now before the court. “We weren’t willing, through the stroke of the pen, to take away the ability of workers to seek redress in court,” Brollini said.

Supporters describe Proposition 11 as necessary to ensure public safety and provide lifesaving assistance. “If Prop. 11 does not pass, first responders will not be able to keep their radios on during breaks, putting patient care at risk,” said Marie Brichetto, a Yes on Prop. 11 spokesperson. “Prop. 11 would simply continue the longstanding practice of paying private EMTs and paramedics to be on-call during breaks — just like other first responders, including police and fire.”

Brollini disputed the notion that response times will increase if Prop. 11 fails, noting that such times are mandated by contracts between private companies and the counties they serve. “There is not a provider in the state that is going to turn their radios off,” he said. “What we do need is some kind of relief.”

Although his union didn’t file paperwork in time for its opposition to Prop. 11 to be included in the state’s voter guide, Brollini says his own opposition is grounded in his 25-year career as an EMT worker, most of it spent working in an AMR ambulance. He described grueling 12-hour shifts in which workers can often go eight hours without having a chance to stop for food. Unlike police or firefighters, he said, they frequently don’t have stations at which to recuperate, exacerbating an already heavy workload.

In 2015, a survey published in the Journal of Emergency Medical Service found that first responders are 10 times more likely to attempt suicide than the general public. And a joint report in 2017 by the University of California, Berkeley and UCLA’s Labor Center reported that one-third of California’s EMTs and paramedics are low-wage workers, defined as earning less than $13.63 an hour, or two-thirds of the state median.

“We want to see our companies profitable,” Brollini said, “but we don’t want it to be at the expense of the worker’s mental and physical health.”


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Election 2018

Are Prop. 10’s Big-Money Foes Making California’s Housing Problem Worse?

Co-published by The American Prospect
Topping the list of corporate anti-rent control donors are some of the country’s largest landlords — many funded by Wall Street investment dollars — whose bottom lines could be negatively affected by Prop. 10’s passage.

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All photos by Jessica Goodheart.

A significant amount of No on Prop. 10’s $65 million war chest comes from large, publicly traded real estate investment trusts.


 

Co-published by The American Prospect

One of California’s most hotly contested ballot measures, Proposition 10, would repeal the 23-year-old Costa-Hawkins Rental Housing Act that restricts a city’s ability to apply rent control to post-1995 construction and exempts single-family homes from regulation. Proposition 10’s opponents claim it will worsen the state’s housing crisis, which has left teachers, blue-collar workers and retirees struggling to keep roofs over their heads. To that end, the No on Prop. 10 campaign has deployed an ensemble of small property owners, non-profit housing developers and veterans as spokespeople against the measure.

More Ballot Measure Stories Here

However, topping the list of No on Prop. 10’s big donors are some of the country’s largest landlords — many funded by Wall Street investment dollars — whose bottom lines could be negatively affected by Prop. 10’s passage. The No campaign’s $65 million war chest is more than two-and-a-half times as much as the $25 million raised by Prop. 10 supporters, according to the California Secretary of State’s office. A significant amount of the No funding comes from large, publicly traded real estate investment trusts like the ones highlighted on a recent tour held by tenant activists in downtown Los Angeles.


Despite their affordable housing message, some No on Prop. 10 donors have long records of opposing efforts to include affordable housing in their developments.


New York-based Blackstone Group heads the list of these donors, contributing $5.6 million to defeat the measure which, if passed, would let cities enact laws to stabilize rent increases on a broader range of buildings and limit how much a landlord could increase rents when a new tenant moves in. Invitation Homes Inc., the investment vehicle created by Blackstone in 2016, owns more than 80,000 single-family homes nationwide and kicked in almost $1.3 million.

Despite their affordable housing message, these and some other No on Prop. 10 donors have long records of opposing efforts to include affordable housing in their developments, or employ business models that critics claim exacerbate the housing crisis. Some focus on high-end rentals that tenant advocates say do little to address the affordability crisis plaguing California’s job-rich urban areas. Others have been criticized for raising rents on the properties they acquire in an effort to pump up hefty returns for investors.

Also Read “California Workers and Retirees Are Unwittingly Financing an Anti-Rent-Control Campaign”

Steven Maviglio, a spokesperson for the campaign to defeat Proposition 10, claims that real estate investment trusts (REITs), which earn money for their shareholders through rental income and property value increases, only account for a tiny percentage of the state’s residential rental market. “REITs own .004 percent of California’s rental housing,” he wrote in an email, a statistic he attributes to the California Apartment Association.

On an August call with investors, Invitation Homes CEO Fred Tuomi argued that increasing housing supply — as opposed to regulating rents — was the answer to the affordability crisis facing California, where more than half of renter households pay more than a third of their incomes toward housing. “We just need more supply when it’s needed and, most importantly, where it’s needed and [at] the price points that it’s needed,” Tuomi said.


Equity Residential CEO: “Regardless of [Proposition 10’s] outcome, we will continue to fight attempts at the local level to enact rent control.”


But increasing the supply is not part of the business model of Invitation Homes, which focuses on property management and acquisition. In the aftermath of the 2008 housing collapse, the company scooped up tens of thousands of foreclosed single-family homes, mainly near Sunbelt cities, crowding out mom and pop landlords, imposing steep rent increases on tenants, and skimping on maintenance in order to generate large returns for investors, according to a report released early this year by the Alliance of Californians for Community Empowerment (ACCE) and two other advocacy organizations, and a separate Reuters investigation published in July.

In a written statement to Capital & Main, Invitation Homes countered that its residents “give us high ratings for customer service” and “stay 50 percent longer compared to the apartment industry,” adding that the company invests $22,000 per home in renovations. (Maviglio said that No on Prop. 10’s other corporate donors had no comment for this story.)

On October 10 in downtown Los Angeles, about 60 housing activists, replete with colorful T-shirts and noisemakers, held a “tour of the housing tyrants” that included stops at luxury apartments they said were owned in whole or in part by Blackstone Group and Essex Property Trust — two companies that are helping to fund the effort to defeat the rent control measure. The marchers’ “The rent is too damn high” chant attracted the attention of office workers and drivers stuck in lunchtime traffic.

Sheri Eddings, who is 55, joined the battle for rent control in response to letters she received from Invitation Homes demanding $500 rent increases after her two-year leases expired, first in 2015 and then in 2017. Each time, Invitation Homes has been willing to negotiate with her to reduce the increase, she says. But she would like to be able to count on staying in the South Los Angeles County neighborhood where her grandchildren live. “I don’t know what’s going to happen in 2019,” she said at the tenant action.

One stop on the activists’ tour was Essex Property Trust’s owned Gas Company Lofts, which offers studios for about $2,000 per month and two-bedroom apartments for more than $3,500. To date, the San Mateo-based real estate investment trust has donated $4.8 million to defeat Proposition 10.

The vast majority of the company’s more than 60,000 apartment units are located in the Bay Area and Southern California. During an August 2 quarterly earnings call, Essex CEO Michael Schall told investors that the company would be “favoring market rents instead of favoring occupancy” for the next year, suggesting the company is choosing to leave units vacant in the hope of locking in higher rents.

Public policies, says ACCE’s Amy Schur, are only encouraging high-end housing where developers “can make the most money” instead of “ensuring that they contribute toward addressing housing needs of the state, which include housing that average working families can afford.” ACCE is part of the coalition advocating for passage of the ballot measure and was an organizer of the October 10 tour.

Another big Wall Street donor, Chicago-based Equity Residential, has so far invested more than $3.7 million to the No on Proposition 10 campaign. The REIT is focused on acquiring, managing—and, to a lesser extent, developing — housing in walkable urban markets favored by millennials, according to its filings with the Securities and Exchange Commission.

The company’s leadership has engaged in local and statewide rent control battles before. Equity Residential’s board chair is billionaire Sam Zell, whose heavily leveraged acquisition of the Tribune Co. was followed by bankruptcy and mass layoffs. His Equity LifeStyle Properties, another real estate investment trust (formerly Manufactured Home Communities), began to acquire mobile home parks across California more than two decades ago, and proceeded to bring costly legal actions against small cities that housed the parks in an effort to do away with local rent control laws. The leadership of its sister company, Equity Residential, apparently shares that combative spirit.

These Corporate Landlords Have Each Donated
More than $2 Million to Defeat Proposition 10

ContributionContribution
Blackstone Group*$5,575,497
Essex Property Trust$4,816,200
Michael K. Hayde, including Western National Group & Affiliated Entities$4,761,840
Equity Residential$3,724,900
AvalonBay Communities Inc.$3,006,100
Geoffrey H. Palmer, owner of G.H. Palmer and Associates$2,000,000

Source: California Secretary of State, downloaded October 22.

*Invitation Homes Inc., created by and partially owned by Blackstone Group, contributed another $1,286,250 to the effort to defeat Proposition 10.

“Regardless of the outcome [of Proposition 10], we will continue to fight attempts at the local level to enact rent control,” president and CEO David Neithercut told investors on a call this past July, during a discussion about Costa-Hawkins. About 45 percent of the company’s 79,000 apartments are located in California.

Interestingly, on that same call Neithercut proposed “inclusionary zoning” as part of an alternative “basket of solutions” to the state’s affordable housing crisis. Such zoning requires developers to set aside a certain number of units in their projects for low-income tenants.

Neithercut’s endorsement of inclusionary zoning might signal a shift for Equity Residential, which sought to wriggle out of a requirement that it keep a portion of a downtown San Francisco building’s units affordable five years ago. The company attempted to raise the rents on 33 low-income occupants of apartments on Geary Street, a move that would “almost certainly have forced many tenants from their homes,” had not the city of San Francisco sued, according to a statement issued at the time by city attorney Dennis Herrera, who settled with Equity for $95,000. (The company had reneged on an agreement with the city to keep a percentage of units affordable when the complex was built in exchange for tax-exempt bond financing for the project.)

Meanwhile, No on Prop. 10 donor Geoffrey Palmer’s hardball lawsuit against the city of Los Angeles resulted in a 2009 court ruling that for eight years discouraged cities from adopting inclusionary zoning laws. That prohibition ended with the so-called Palmer fix last year, a state bill that restored cities’ ability to require set-asides if they also offered developers alternative ways to comply with the law. (Palmer, who is well known in Southern California for his fortress-like apartment complexes with Italianate names like the Medici and the Lorenzo, is an avid Donald Trump supporter and has given $2 million to defeat Proposition 10.)

Perhaps it’s not surprising to find major landlords opposing Proposition 10. But will the ballot measure upend the housing market as they contend?

Anya Lawler, policy advocate for the Western Center on Law & Poverty, a Proposition 10 supporter, says rent control is an important tool for tenants but downplays any disruptive impact the repeal of Costa-Hawkins would immediately have in California. Proposition 10’s passage won’t guarantee the enactment of any local law, she says, nor will it be a cure-all for California’s housing woes, which have been decades in the making.

“Rent control ordinances need to be negotiated locally because every housing market is different, and communities have different needs,” says Lawler, who adds that stakeholders, including property owners, will need to be consulted. The idea that the repeal of the Costa-Hawkins law will lead to “draconian rent control policies” is not rooted in “political reality.”

Lawler’s sentiments are echoed by corporate housing executives, at least in their conversations with their own investors. Asked if his company would redline cities due to a rent control, Essex’s Schall stressed, during his August 2 call, that “rent control is only one factor” that the company considers when making investment decisions.

“We’re going to seek areas that have the best dynamic – the best supply-demand dynamic,” he said. “And right now we believe that’s in California, in the various markets that we’re in.”


Capital & Main’s contributors include groups supporting Proposition 10. This website is not funded by commercial entities that stand to profit from the outcome of the ballot initiative.

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Video: Rising Rents Force a Choice Between Eating or Shelter

According to the U.S. Department of Agriculture, 15 million American households experienced food insecurity at some point in 2017.

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Why Many Millennials Still Live at Home

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Is Goldman Sachs’ New Fund Really Just Greenwashing Stocks?

Critics are questioning the motives behind a banking giant’s socially responsible investment strategy.

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Photo by Chris Hondros/Getty Images

Even as Goldman Sachs markets itself as a champion of social responsibility, it is helping CEOs block key environmental and social justice reforms proposed by their shareholders.


 

Co-published by The Guardian

When Goldman Sachs and billionaire Paul Tudor Jones announced a partnership three months ago to help socially conscious investors support “just business behavior,” they promised that their new index fund would generate solid returns for savers while directing their investment dollars towards truly humane companies.

“Capitalism should be a positive force for change,” said Jones in a press release announcing the fund, which is designed to track an index of socially responsible companies identified by his nonprofit JUST Capital. “Its future will be driven by a new definition of corporate success that is aligned with the values and priorities of the public.”


 Socially responsible investing (SRI) offers
Wall Street an image makeover in a time of growing public distrust in the financial system.


The partnership comes as pension funds, university endowments and other institutional investors increasingly seek to put their financial weight behind ethical and sustainable corporate behavior — and as Goldman Sachs tries to shed its reputation as a “vampire squid.” So far, the rebrand seems to be working: The JUST fund debuted in June to rave reviews from the financial press and ended its first day of trading with over $250 million in assets, making its launch one of the most successful in recent history.

However, a Capital & Main review of corporate documents shows that some of JUST’s largest investments are in fossil fuel firms that have been sued for suppressing global climate research, Wall Street behemoths fined for defrauding investors, a social media platform accused of helping rig elections and a tech industry giant criticized for paying its workers starvation wages.

Table Graphic: Chase Woodruff

Moreover, proxy voting records reveal that even as Goldman Sachs now markets itself as a champion of social responsibility, the firm has been using its existing stakes in many JUST fund companies to help CEOs block key environmental and social justice reforms proposed by their shareholders. Those initiatives range from gender pay gap and diversity initiatives to corporate governance reforms; from efforts to increase lobbying transparency to prohibitions on doing business with companies tied to genocide and other human rights violations.

Meanwhile, in the months before JUST fund’s launch, Goldman was slammed for blocking a human rights resolution at its own company — and one of Goldman’s key lobbying groups in Washington was working to shape Republican legislation that would make it far more difficult for shareholders to file environmental, human rights and other socially minded initiatives in the future.

“You shouldn’t be able to, with a straight face, invest in the Dakota Access Pipeline with your left hand, and with your right hand tell people that you’re doing responsible investing,” Lisa Lindsley, Capital Markets Advisor for the shareholder advocacy group SumOfUs, told Capital & Main. “The compartmentalization is very hypocritical.”

Through a spokesperson, Goldman Sachs declined to comment on the process by which its equity funds vote on shareholder proposals, and how that process may differ with the JUST fund — which, as a newly launched fund, has not yet participated in proxy voting for any of the companies in which it holds stock.

“Ethically Motivated Versus a More Greenwashing Approach”

Goldman’s new fund spotlights socially responsible investing (SRI) — a financial strategy that represents Wall Street’s more affirmative answer to negative or exclusionary “screening” tactics like divestment from fossil fuel producers and tobacco firms.

While a recent directive by the Trump administration has been viewed by some experts as an effort to limit SRI strategies, the market for such investments remains strong. According to the Forum for Sustainable and Responsible Investment, U.S.-based assets managed using SRI strategies more than doubled to $8.7 trillion between 2012 and 2016, and now account for more than one in five dollars under professional management in the country.


Goldman’s hostility toward many SRI initiatives is illustrated by its votes on resolutions at the companies now in its JUST fund.


The rise in SRI investment comes amid questions about whether corporate boards are adequately evaluating environmental and social justice concerns when they look at their company’s long-term financial prospects. PwC’s 2017 survey of corporate officials found “that directors are clearly out of step with investor priorities in some critical areas” and the report added that “one of these areas is environmental issues.”

High-profile initiatives like the JUST fund are a chance for the industry to tout its eagerness, as Goldman Sachs executive Timothy O’Neill put it in a press release, to “[allow] investment to flow toward a more sustainable and equitable future, while seeking to generate attractive returns for investors.”

The trend has given Wall Street an opportunity for an image makeover in a time of growing public distrust in the financial system: According to a Gallup poll conducted last month, fewer than half of Americans under 30 report having a positive view of capitalism, a 12-point drop in just the past two years.

For some activists and investors, though, the rapid expansion of the market for SRI-branded financial products has raised concerns about greenwashing — the practice by which companies market themselves as socially or environmentally responsible without actually adopting business practices that meet those goals.

“Putting the word ‘ethical’ or ‘sustainable’ in the name of a fund does not make it so,” said a report by British investment advisory firm Castlefield, whose recent reports documented how some environmental funds include investments in fossil fuel firms. “It is increasingly important to differentiate between those funds genuinely responding to customer demand for a sustainable approach and those which use terms like ethical, Socially Responsible Investment or stewardship in their name but include companies such as British American Tobacco or Shell in their key holdings.”

Goldman’s Record on Socially Responsible Investing

Amid surging interest in SRI funds, Goldman’s JUST U.S. Large Cap Equity ETF aims to convince investors that the company is serious about injecting a spirit of ethics and morality into its financial strategies. To that end, the fund says it directs money only into companies that are ranked highly by JUST Capital.

The 426 companies featured in the JUST index were selected on the basis of their performance across seven different criteria, including labor practices, customer service and environmental impacts. Goldman itself ranks in the top tenth of the JUST rankings, despite the company being attacked for supporting the fossil fuel industry and also being fined $5 billion in 2016 by the Department of Justice for “serious misconduct in falsely assuring investors that securities it sold were backed by sound mortgages, when it knew that they were full of mortgages that were likely to fail.”

Whether Goldman’s new JUST fund represents a step in a larger shift towards socially responsible investment remains to be seen. Baruch College’s Jared Peifer says that one way to judge a firm’s commitment to social responsibility is to watch how it deals with resolutions brought by shareholders, whereby investors attempt to force management to adopt socially responsible policies.

“There is variance to the degree that SRI funds are ethically motivated versus a more greenwashing approach,” Peifer told Capital & Main. “Is the fund dialoguing with management? Issuing shareholder proxy votes, voting on others? If so, that seems like a more ethically motivated fund to me, because they are exerting additional effort many other funds do not bother with.”

In recent years, Goldman executives have been fighting off SRI resolutions at their own company, including initiatives that have asked management to more transparently disclose their political lobbying and create a human rights committee to review the company’s policies regarding doing business with governments engaged in censorship and repression. Only three months before Goldman announced the JUST fund, Goldman successfully pressed the Securities and Exchange Commission to bless its move to block shareholders from voting on a resolution asking the company to honor indigenous peoples’ rights.

“The company’s extraordinary no action request shows the notable lengths that the Company is willing to go, and to stretch credulity, in order to prevent its directors from shouldering fiduciary obligations on indigenous and human rights,” wrote shareholder proponents at the time.

Last year, Goldman was lauded by Share Action, an SRI activist group, for switching its position and using its holdings to support a series of climate-change-related shareholder initiatives. In its proxy voting guidelines, Goldman says it will generally vote for proposals asking companies to report on “policies, initiatives and oversight mechanisms related to environmental sustainability, or how the company may be impacted by climate change.”

However, those guidelines do not make the same commitment when it comes to initiatives requiring companies to actually reduce their carbon emissions. The guidelines also say the company will generally vote against “proposals requesting increased disclosure of a company’s policies with respect to political contributions.” The company further says it will vote to remove representatives of employees or organized labor from a company’s board if they are overseeing company audits or executive compensation, and if there is no legal requirement for them to be in that position.

Goldman Votes Against Resolutions at JUST Fund Companies

Goldman’s hostility toward many SRI initiatives is illustrated by its votes on resolutions at the companies now in its JUST fund.

For example, there is Chevron Corporation, which ranks as the JUST fund’s 17th-largest holding as it faces accusations that it is trying to intimidate environmentalists and avoid cleaning up pollution in the Amazon rainforest.

In May, the oil giant’s shareholders were asked to vote on a slate of seven proposals, including a requirement for the company’s board to nominate a director with environmental experience; the preparation of a report on transitioning to a low-carbon business model; increased transparency relating to lobbying activities; and stronger prohibitions on Chevron’s interests overseas from doing business with governments that are complicit in genocide or crimes against humanity.

As shareholders in Chevron, 14 different Goldman Sachs Asset Management (GSAM) funds voted on these proposals. The majority of funds voted in support of just one, a request for the company to prepare a report on its efforts to minimize methane emissions. In every other case, the funds unanimously or overwhelmingly opposed the proposals.

Proxy-voting records from dozens of shareholder meetings reviewed by Capital & Main show a similar pattern. In rare cases, Goldman funds did vote in favor of some shareholder reforms, including the preparation of a report on the gender pay gap at Facebook and Google. At several pharmaceutical companies, including AbbVie, Amgen and Eli Lilly, Goldman funds supported increased accountability for executives regarding high drug prices.

Such votes, however, were few and far between. Of the 10 companies that make up the largest share of Goldman’s JUST fund, eight considered shareholder-proposed reforms that were overwhelmingly opposed by Goldman-managed funds at their most recent annual meetings. The proposals included prohibitions on offshore tax avoidance schemes, increased transparency on lobbying activities and requirements that companies appoint an independent board chair — a governance model that advocates say leads to more responsible corporate behavior. The remaining two companies, Microsoft and Visa, did not consider any shareholder proposals.

At JPMorgan, the recipient of JUST’s fourth-largest investment, Goldman funds voted unanimously against a requirement for the company to release a report on its investments in PetroChina, a firm that activists accuse of helping to fund crimes against humanity due to its ongoing business relationships with oppressive regimes in Syria and Sudan. Goldman made that move despite its own proxy voting guidelines saying the company would “generally vote for proposals requesting a report on company or company supplier labor and/or human rights standards and policies, or on the impact of its operations on society.”

Eighteen of the 19 Goldman funds with shares in JPMorgan also voted against an effort to prohibit the accelerated vesting of awards for executives who enter government service, a practice often criticized for fueling the revolving door between Wall Street and financial regulators.

A shareholder proposal to the board of pharmaceutical manufacturer Johnson & Johnson, expressing concern that the company’s compensation practices “may insulate senior executives from legal risks” relating to the opioids crisis, recommended that opioid-related litigation costs be factored into executive pay. All 16 Goldman funds with stock in Johnson & Johnson voted to defeat the proposal.

Goldman asserts that its fund is designed to invest in firms that rank well in JUST Capital’s ratings. But even that assertion is not what it seems.

Because the index features companies ranked in the top half of their respective industries, it includes dozens of firms in sectors like energy and financial services that score poorly overall. For example, the fund invests in both National Oilwell Varco, a drilling equipment firm, and Entergy, a Louisiana utility, despite the fact that the companies rank 626th and 676th, respectively, among the 875 companies evaluated by JUST Capital.

“Every industry is represented at approximately the same weight as [in] the Russell 1000,” said JUST Capital’s Hernando Cortina, referring to the best-known index fund tracking the largest publicly traded companies. Cortina added that the JUST fund is designed to feature responsible companies “while providing diversified equity exposure to every industry.”

Lisa Lindsley of SumOfUs said the situation spotlights how socially responsible investing is seen on Wall Street not as a values-based cause, but as yet another way to trick investors into believing that the investment industry has reformed itself a decade after the financial crisis.

“The reason they’re going into this is that there’s money there. It’s all driven by greed,” she said. “It’s pretty easy to do some greenwashing and call yourself a responsible investment manager.”

As Goldman now markets its JUST fund, it remains unclear whether the company will change its proxy voting or its posture towards shareholder resolutions in general. Those resolutions, though, could be more rare, if congressional Republicans pass their legislation that would make it more difficult for shareholder resolutions to qualify for a vote. Federal records show that the American Bankers Association — which lists Goldman Sachs as a member — has been lobbying on that bill, which critics say could undermine the SRI movement.

“Shareholder proposals play an important role in ensuring that owners get a say in how their companies are run, and in setting the broader agenda across the market,” wrote Dimitri Zagoroff of the shareholder advisory firm Glass Lewis. “Making it harder for shareholder proposals to be resubmitted from year to year would make it that much harder for proponents to refine their ideas and build a coalition of support. This often takes several years, both to generate interest in the underlying topic, and to convince other shareholders that the specific proposal offers the appropriate means of addressing the topic.”


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Medi-Cal Home-Delivers a New Prescription: Healthy Meals

California’s Medically Tailored Meals pilot program could lead the medical industry, and especially insurers, to include nutrition as part of overall health care.

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One study showed that patients who received three medically tailored meals per day had a
50 percent lower rate of hospitalization.


A $6 million Medi-Cal pilot program launched in April may demonstrate what many in the health care field have reported anecdotally: That tailored nutrition can improve health for chronically ill patients and lower medical costs. The three-year Medically Tailored Meals (MTM) pilot provides free curated, low-sodium meals brought through in-home visits for 1,000 patients who suffer from congestive heart failure — a group with some of the highest rates of hospital readmissions.

Meals will be delivered by registered dietitians from six California nonprofits in the Food is Medicine Coalition: Project Angel Food (Los Angeles County) Project Open Hand (San Francisco), Ceres Community Project (Sonoma County), Mama’s Kitchen (San Diego), Food For Thought (North Bay Area) and Health Trust (San Jose). The funding was included in Senate Bill 97, a budget bill approved in June 2017 by the California Senate.

The program is already showing results, according to Richard Ayoub, CEO of Project Angel Food. Ayoub points to three out of four clients who have avoided a hospital stay during the pilot’s first 30 days. In a YouTube video, one of Project Angel Food’s pilot study patients, Candice, explains how she’s already enjoying better health through three daily prepared meals.

“For years,” Ayoub says, “we’ve known that what we do here helps people live longer and happier, and now we’re seeing results that are quantitative. We can see health care systems saying, If it was good for congestive heart failure maybe it will be good for renal disease, maybe it will help keep people off dialysis.”

The Medi-Cal pilot is modeled off a small 2013 study led by Philadelphia-based nonprofit MANNA (Metropolitan Area Neighborhood Nutrition Alliance). That study showed that patients who received three medically tailored meals per day had a 50 percent lower rate of hospitalization and 37 percent shorter stays for those who went to the hospital, compared to a control group. On average, patients had a 31 percent reduction in health care costs, which equaled $13,000 per month per patient.

Sue Daugherty, MANNA’s CEO, said four companies that administer Medicaid in southeastern Pennsylvania have signed contracts with MANNA to deliver specially tailored meals for selected patients with diabetes and cancer, and she’s hoping that the California study will lead her state’s Medicaid agency to include medically tailored meals as part of treatment.

“The big barrier is getting folks to realize we’re not talking about just food,” Daugherty said. “When people hear ‘food’ they start shutting down and thinking ‘entitlement,’ and forever. What we’re doing is something that a health care provider will prescribe.”

Daugherty added that food is often an afterthought among medical providers, and that when a diet is prescribed, little thought is given to how patients will access that food and pay for it. With the exception of the four Pennsylvania providers, food is not included in any medical plans.

Richard Seidman, M.D., chief medical officer of L.A. Care Health Plan, one of the public agencies that administers Medicaid insurance in L.A. County, said he hopes that if the pilot program is as successful as the MANNA study suggests, California lawmakers will expand it.

“With nearly 13 million people receiving Medi-Cal benefits, it’s not a giant leap to suggest that food insecurity is a barrier to good health for many, not just those with chronic conditions,” Seidman wrote in an email.

Seidman and other supporters say if the pilot is as successful as they expect, it could lead the medical industry, and especially insurers, to include nutrition as part of overall health care.


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Los Angeles’ Burdened Renters

For more information, read Jessica Goodheart’s story on squeezed Los Angeles tenants, “The Rent’s Getting Too Damn High!”


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Do Incarcerated Firefighters Deserve a Path to Employment?

Since 1983 six inmate firefighters have died while working on fire containment. Today they are paid $2 per day — and an extra $1 when fighting active fires.

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Cal Fire crew photo by Justin Sullivan/Getty Images

California estimates that the Conservation Camp inmate-training program saves state taxpayers up to $100 million per year through firefighting and responses to other emergencies.


 

As California’s wildfire season grows ever longer and more intense, the state has relied heavily on thousands of prisoners, including women, to battle blazes alongside approximately 6,000 professional full-time and seasonal firefighters. Prisoner advocates, however, point out that these inmates’ criminal records prevent them from working as firefighters almost anywhere in California after their release.

Critics of the inmate program also say prisoners risking their lives to battle dozens of fires every year should get more out of the program than their current $2 per day and the additional $1 they receive whenever fighting active fires. The state’s Cal Fire firefighters earn between $3,273 and $4,137 per month, plus benefits, not counting overtime, according to a Cal Fire spokesperson. California has been using inmate firefighters since World War II, when the workforce for Cal Fire was depleted.


Approximately 3,700 inmates work at fire camps and about 2,600 of those are qualified to work on the front lines of active fires.


When Laura Weigand applied to California’s Conservation Camp, the program that trains inmates to fight wildfires, she knew it would be an uphill battle, literally. She was 43 when she joined the camp in 2009, twice the age of most of the women in pre-camp endurance trainings. One endurance test – hiking two miles straight uphill in 45 minutes – felled plenty of younger women, but Weigand was the first to the top of the hill, which meant she had her choice of camps to complete her trainings. She picked Malibu.

Two weeks after she completed training, she was working alongside Cal Fire firefighters to put out the Crown Fire, earning a fraction of what professional firefighters made for the same amount of risk. But she said she didn’t feel exploited because she went into the program to get away from the prison grounds.

“The days flew by, because there were different experiences. Even though it was not good pay it was better than you get in prison,” she said. But a foot injury threatened her limited freedom.

“I was hiking on a broken metatarsal bone for two years and was afraid to tell them about it because I didn’t want to get kicked out of the program.”

Weigand eventually became a “swamper” or trainer of other incarcerated firefighters. She estimated that she trained about 300 women before she left prison in 2012.

A Cal Fire inmate hand crew head to the fireline on a brush fire. (Photo:  David Toussaint/Getty Images)

The California Department of Corrections and Rehabilitation (CDCR), cooperating with the California Department of Forestry and Fire Protection (Cal Fire) and the Los Angeles County Fire Department, operate 44 conservation camps across the state, including three female camps. Camp populations range from 80 to 160 inmates working and learning in minimum-security facilities, supervised by correctional staff. When they’re working on an active fire, Cal Fire staff supervise them.

CDCR says approximately 30 percent of applicants who volunteer for the program successfully complete the curriculum. Not all inmates are eligible. Those who have committed more serious crimes, such as arson, rape or other sex offenses are disqualified.

Overall, there are approximately 3,700 inmates working at fire camps and approximately 2,600 of those are qualified to work on the front lines of active fires, according to CDCR. As of August 31 there were just over 1,100 inmate firefighters across 123 crews deployed to the Carr, Mendocino Complex, Hirz, Cooks, Cherae, Stone, Cache and Holy Fires.

After being released in 2011, Weigand didn’t apply to be a professional firefighter because she was above most fire departments’ threshold age. But Weigand, who now works at Social Model Recovery Systems, a substance abuse and mental health nonprofit, says even if she were younger, she probably couldn’t have gotten such a job, because most local and county firefighting jobs require an emergency medical technician (EMT) license, and most former inmates, even those convicted of lower level felonies, can’t obtain that.

In an email, a Cal Fire spokesperson said the department doesn’t require an EMT license for employment, but admitted that many fire departments throughout the state have at least the expectation of an EMT license for employment.

Such a barrier doesn’t make sense to Romarilyn Ralston, who was imprisoned 23 years and served as a fire camp swamper and clerk for Cal Fire while incarcerated. Now, as a member of the Los Angeles chapter of the California Coalition for Women Prisoners, and program coordinator for Project Rebound at California State University, Fullerton, she’s advocating for raising state employment opportunities for former inmates who made it through the Conservation Camp program.

Ralston told Capital & Main that, even though the program offers valuable training, the lack of EMT training at the camps, as well as the seeming prohibition against hiring former felons for many firefighting jobs statewide, amounts to “an exploitation of prison labor.”

“They should be paid at least the minimum wage, which is $15 in L.A. County,” Ralston added. “They’re putting their lives on the line and saving California hundreds of millions a year.”

The CDCR has estimated that the Conservation Camp program saves California taxpayers between $90 million and $100 million per year through firefighting and responses to other emergencies. Those who make it through the program, when not fighting active fires, may also be asked to clear firebreaks, maintain parks and clear fallen trees and debris. Since 1983 six inmate firefighters have died while working on fire containment, according to CDCR.

Recently California has taken steps to ease restrictions on former felons, though none of the measures would mandate local emergency medical services authorities to allow them to earn EMT licenses.

As part of the 2018 budget bill, Governor Jerry Brown expanded employment opportunities for former inmate firefighters through the Ventura Conservation Camp (VCC), in Ventura County. The program is for parolees only, and the first group of 20 is set to begin training this fall.

An omnibus safety bill, AB 1812, approved by Governor Brown in June, would allow graduates of approved fire camp training to apply for lower-level emergency medical responder (EMR) licenses, though not for EMT licenses.

California’s legislature is taking other small steps toward lowering the employment bar for incarcerated firefighters and other ex-cons seeking professional employment.

Assembly Bill 2293, in its original version would have, with certain conditions, prevented the authority licensing paramedics and EMTs from denying certification to anyone with a criminal record. But faced with strong opposition from the Emergency Medical Services Administrators Association of California, and the National Association of Emergency Medical Technicians, who said hiring those with criminal histories could pose a public safety risk, AB 2293 was amended down to a data reporting bill, according to California Assemblywoman Eloise Gómez Reyes (D-San Bernardino), who assisted in crafting both versions of the bill.

“We decided to address a glaring deficiency, which is the lack of data [on who is being denied jobs],” Gómez Reyes said of AB 2293, which now heads to an uncertain future on the governor’s desk.

Today, Gómez Reyes added, the state only has anecdotal data on many former prisoners being denied EMT certification or jobs based on their criminal past, but no hard numbers yet. “We’re trying to see in what circumstances are people being given these licenses, and what we suspect are the majority of circumstances of people being denied because of past offenses. Whatever decision we make in the future is going to be based on accurate data.”

Another bill, AB 2138, authored by Assemblymen Evan Low (D-San Jose) and David Chiu (D-San Francisco), would ease licensing restrictions for former inmates in a variety of occupations, but not firefighters. That’s still an important step, according to David Fathi, director of the American Civil Liberties Union National Prison Project, because its passage could remove some “arbitrary” barriers to employment.

“In many states there are over 100 occupations that former prisoners can’t pursue,” Fathi said. “One of the best predictors of successful reentry is securing and keeping stable employment. And yet as a society we go out of our way to make it difficult for prisoners to get a job when they get out. This is especially absurd when the prisoner has learned the skill in prison.”

Fathi points to a neighboring state, Arizona, which last year eased restrictions on ex-cons from becoming professional firefighters, as well as to a study from Arizona State University, which showed that states with larger employment barriers for felons have higher recidivism rates.

“Employment disqualification for former prisoners should be the rare exception,” Fathi said, “and it should be based on an individualized assessment of the risk posed by the particular person — not simply upon a criminal conviction.”


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