WASHINGTON -- The nation's largest labor union federation on Friday threatened to challenge the powerful chairman of the Senate Banking Committee in the 2014 elections, if he allows a key set of new executive pay regulations be weakened.
The surprising remark occurred during a panel discussion moderated by The Huffington Post at the Social Investment Forum Conference. The summit was attended by hundreds of socially conscious investors ranging from religious groups like the Unitarian Church to high-profile investment houses like Mesirow Financial.
During the panel, a top technocrat on the Banking Committee, General Counsel Dean Shahinian warned that investors may have to accept a weaker-than-anticipated version of new disclosures on CEO pay mandated by last year's Wall Street reform bill. Shahinian also acknowledged that his boss, committee chairman Sen. Tim Johnson (D-S.D.), would be willing to re-open last year's landmark legislation and rewrite some aspects of the law if bipartisan political consensus about some measures could be established.
AFL-CIO Special Policy Counsel Damon Silvers immediately interrupted Shahinian: "I think Senator Johnson needs to think about his political future," he said. The audience of potential campaign contributors let out an audible gasp.
Shahinian responded that Silvers' comment was "inappropriate" for the panel, but the union lawyer did not apologize.
Instead, he instructed Shahinian to consider "the recent personal history of Blanche Lincoln." The AFL-CIO is widely credited with ruining any chance the former Democratic senator from Arkansas had of winning reelection in 2010. Walmart, the world's largest retailer. is headquartered in Lincoln's state, and the labor union had repeatedly objected to her positions on key workers' rights issues.
Unable to win over Lincoln, the AFL-CIO spent millions of dollars supporting progressive Democratic challenger Bill Halter in the 2010 primaries. Halter lost the primary, but the divided Democratic base caused Lincoln to suffer a landslide loss in the general election.
At the Friday panel, Silvers vowed to provide the same treatment to Johnson -- one of the most Wall Street-friendly Democrats in the Senate -- if he does not make sure that Dodd-Frank remains intact.
Johnson is not well-loved by consumer advocacy groups in Washington, who worry that his close ties to the banking industry would make it difficult for Democrats to back financial protections for households. About one-fifth of all Johnson's campaign cash from 2003 to 2008 came from the financial, insurance and real estate industries, according to the Center for Responsive Politics. And Johnson's state is home to the "South Dakota loophole," which lets credit cards and other lenders evade state regulations. Eight of the 12 major pay-day lenders, according to a letter Johnson wrote to the Federal Deposit Insurance Corporation, are also headquartered there.
"I like Dean, but what he said was just stupid," Silvers told HuffPost after the event.
Before his position on Johnson's committee, Shahinian worked under former Banking Committee Chair Chris Dodd (D-Conn.) during last year's financial reform debate. Earlier in the panel, Silvers made a special point of acknowledging Shahinian's work on the Dodd-Frank bill, noting that many Washington insiders frequently refer to the bill as "Dodd-Frank-Shahinian."
The heated exchange between the two was prompted by a discussion of the ratio of executive pay to that of other workers. As a result of the law, companies will have to directly compare the compensation of top officers with the median salary of its employees in reports to shareholders.
But executives are now pressuring the Securities and Exchange Commission to exclude various classes of workers from the required calculation, in an effort to make the ratio between CEO pay and rank-and-file laborer wages appear lower. Shahinian suggested that some categories of workers, including part-time workers, may not reflect a fair reading of the bill.
Silvers rejected that view, noting that investors can't select which of a company's operations to buy into, but must invest in "the whole company." He further stated that the AFL-CIO will not accept any move to re-legislate the issues signed into law by Dodd-Frank for any reason. Other financial reform advocates have previously expressed concern that Wall Street interests will pressure lawmakers to reopen the bill over relatively minor issues, and use that as a wedge to defang critical reforms.
Shahinian later hedged his previous phrasing, saying that Johnson does not personally support altering Dodd-Frank.
Silvers' open threat to back a primary challenger against Johnson comes on the heels of a May speech by AFL-CIO President Richard Trumka, who cautioned that Democrats could not take the support of organized labor for granted in the 2012 elections.
"We will spend the summer holding elected leaders in Congress as well as the states accountable on one measure: Are they improving or degrading life for working families?” Trumka said. "Our role is not to build the power of a political party or a candidate. It is to improve the lives of working families and strengthen our country."
While the AFL-CIO has vocally backed many of the Obama administration's top legislative initiatives, including the health care reform bill and the Wall Street overhaul, the president has not fought aggressively for labor's top priority, the Employee Free Choice Act. That bill would make it easier for workers to organize into labor unions. After repeatedly pledging support for EFCA during the 2008 campaign, Obama has not gone to the mat for the bill since entering office, critics say. Indeed, the legislation has not yet received a congressional vote under the president's watch, despite having Democratic control of both chambers for his first two years in office.
Organized labor's influence within the Democratic Party has deteriorated significantly since the 1970s, but unions continue to provide an enormous amount of on-the-ground campaign support and get-out-the-vote help for the Party during elections, serving a role akin to that of conservative churches in the Republican Party. If labor chooses to sit out races or openly oppose votes on key candidates, the electoral prospects of those Democrats will be significantly diminished.
The labor movement has been strengthened of late by high-profile public opposition to the policies of Republican Gov. Scott Walker in Wisconsin. Protests to defending state workers have sparked a series of efforts to recall Republican members of the state legislature who backed anti-union bills.
This article has been updated to clarify that the AFL-CIO is a federation of labor unions, not a union itself.