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Managing Public Opinion

BY Rick Berman

Has anyone told Big Labor about truth in advertising? Apparently not, given the union movement’s loud promotion of “products” such as minimum-wage laws that don’t improve earnings, health-insurance mandates that undermine health care, and union contracts that don’t protect jobs from the bankruptcies they provoke.

If any retailer tried to pull something similar in an ad campaign, it would be busted faster than you can say “FTC.” But there’s no Better Labor Bureau, so unions get a free pass.

Organized labor’s latest dubious product is mandatory paid sick leave, which sounds great (who doesn’t want sick days off on his or her employer’s dime?) until you read the fine print: “May result in your having no job at all.” The Service Employees International Union is hawking this proposal in Ohio and West Virginia. Gullible lawmakers could very well take the bait. The idea might find even more success if sent to the public for a direct vote.

Paid-sick-leave ballot initiatives in 2008 will help Big Labor in two ways. First, they take the proposals out of the hands of comparatively sober and compromise-prone legislatures, and plop them into the public’s lap. More importantly, people drawn to the polls by the chance to vote themselves a free lunch will drive up the left’s overall election turnout.

So what will businesses do? If we look at what’s currently on the table, the answer is “not much.”

Local and state trade associations standing against union organizers are underfunded. Worse, they wage campaigns that are intellectually honest but not likely to challenge labor’s emotional appeal on issues like wages and benefits.

Past performance suggests future results: In 2006, the business community lost minimum-wage initiatives in all six states targeted by organized labor and its allies. In all but one of those cases, business lost badly. The average yes/no margin was 36%.

In that one case, Colorado, business lost by a much smaller margin—just 53% to 47%. Why so much less? Business out-spent labor, two to one. With a little more assistance, provided a little earlier, business could’ve won, especially if the political climate had not been as difficult as it was in 2006.

The moral of the Colorado story is that public opinion can be managed. But we must start early enough and commit enough money to overcome the public’s bias. Public sentiment about labor issues need not spin out of control. For the retail industry, money invested in keeping public opinion on its side shouldn’t be viewed as a special expenditure. It’s just insurance, after all. Every retailer budgets for insurance to protect physical assets. (If you do business in Colorado, I’m sure this new law has already cost you much more than you invested in trying to stop its passage.)

Businesses are reluctant to budget for strategic insurance. That’s money invested as an insurance policy against threats posed not by acts of God but by unscrupulous manipulators of public opinion.

Organized labor employs master manipulators. Chief on their agenda, even above mandated paid sick leave, is the cynically misnamed Employee Free Choice Act (EFCA). That bill would slant the rules of union organizing to labor’s advantage. EFCA would allow unions to end the traditional secret-ballot election in favor of an open card-signing process, making it much easier for unions to pressure employees into joining.

By conservative estimates, labor unions would double their membership rolls and bring in at least $5 billion in new dues annually if EFCA became law. And even if a given retailer doesn’t become unionized under a new recruiting system, the practical effect of EFCA could amount to the same thing: Labor’s massive expansion would flood the move-ment’s political treasury with forced dues. All that money will be plowed right back into politics, where Big Labor will use it to “benefit” employees at the expense of employers and employees alike.

In the current economic climate, the last thing you want to hear is a crazy new idea to spend money. But strategic insurance—money spent on hedging the risk of massive new government mandates— isn’t a new idea. It’s nearly identical to the asset-protection insurance that retailers buy every month.

Fires, floods and earthquakes are all foreseeable risks. So are anti-business ballot initiatives. Just pick up a newspaper. In every case, the cost of doing nothing outweighs the cost of insurance.

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Lampert, the Eli Manning of retail?

BY CSA STAFF

HOFFMAN ESTATES, Ill. The New York Giants triumph over the highly favored New England Patriots in the Super Bowl earlier this month, has become an example of coming from the bottom to win it all. Sears Holdings chairman Edward Lampert is one of the latest to use the Giants win, even going as far to compare himself, and the leaders of his company, to quarterback Eli Manning.

The Giants analogy, and Eli Manning comparison, is applied mainly to the company’s Kmart division. In a letter to investors, posted on the Sears Holdings investor relations Web site, Lampert said during Kmart’s bankruptcy in 2002, the unit was “like an undrafted free agent who nobody thought had a chance to play in the big leagues.” Lampert went on to say, “Like Eli Manning, we know what it’s like to be underestimated and questioned, but we intend to keep working on our game to achieve our full potential.”

Sears Holdings reported net income of $426 million, or $3.17 per diluted share, for the fourth quarter ended Feb. 2, compared with net income of $811 million, or $5.27 per diluted share, for the fourth quarter ended Feb. 3, 2007. For the fiscal year ended Feb. 2, 2008, net income was $826 million, or $5.70 per diluted share compared with net income of $1.5 billion, or $9.58 per diluted share, for the fiscal year ended Feb. 3, 2007.

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Circuit City investor seeks to replace board

BY CSA STAFF

RICHMOND, Va. Circuit City Stores today acknowledged that it has received two proposals from shareholder Wattles Capital Management regarding its board of directors. Wattles holds approximately 6.5% of the outstanding shares of the company’s common stock.

Circuit City reported that Wattles proposed the idea of replacing the company’s Circuit City 12-member board of directors with its own nominees. Circuit City said its board of directors will review carefully the shareholder’s proposals and the qualifications of the nominees in accordance with its fiduciary duties, mindful that the proposal would give the shareholder absolute control of the entire board, which would be disproportionate to its relative ownership of the company’s shares.

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