SAG-AFTRA on split earnings: never mind?

Without question the “split earnings” problem was a key factor in the large vote for merger of SAG and AFTRA a little more than a year ago.

One leading NY-based merger advocate wrote frequent comments then and later making this clear. For example, this actor called “split earnings” one of the “concerns that are leading to merger.” And predicted that “there will be sufficient reciprocity in place between P&H and H&R by this time next year – sufficient to virtually end the dilemma of “split earnings” for actors who work under different legacy contracts.” (Bold in original.) He also stated that “merger can force cooperation between the plans.” And that, “union merger would provide a realistic opportunity for the trustees of the current plans to quickly provide that earnings under both plans could be combined for purposes of establishing eligibility in a plan.” (Bold in original.) He also proposed that “cooperative reciprocity” between the pension plans “can alleviate the dilemma of ‘split earnings’.”

And even more recently this same person wrote: “Without merger there is no practical strategy to avoid a members’ earnings being split between the plans.”

(Of course this claim was not true – a reorganization of SAG and AFTRA members into unions that made sense – for example, all performers into SAG and broadcasters into CWA – would have also been a solution and one that made strategic sense from a bargaining perspective, to boot. The larger problem was that SAG lost the war inside the AFL-CIO and without the backing of key AFL officials had no chance in the battle with AFTRA. I made this point to the SAG leadership in 2006, in response to a question from the NED search committee. Unfortunately, inside the SAG Membership First party there remains a hostility to, or misunderstanding of, the wider labor movement that hinders them to this day.)

And in response to a long analysis of the proposed merger by the Hollywood Reporter during the heat of the campaign over merger this same leading SAG figure concluded the article was a “clear, concise and quite accurate accounting of a very thorny time in our history. Kudos to Mr. Handel.” And when challenged again lauded the Handel piece as a “balanced, accurate article.”

What did Mr. Handel write with respect to “split earnings”? I quote here the relevant parts:

In addition, with television work more heavily tilted towards AFTRA while feature work remained under SAG jurisdiction, actors more frequently experienced a “split earnings” problem: with wages divided between two unions, actors can find themselves falling short of both unions’ qualifying thresholds for pension and/or health coverage even if they would have qualified had all work been under a single umbrella. The problem had existed pre-2009, but it appears to have become even more prevalent as AFTRA gained more television jurisdiction.

Advocates for merger say their case is strong: elimination of overlapping jurisdiction in television (and, now, in new media), elimination of the split earnings problem, possible increases in operating efficiency and a decrease in the sort of open warfare that advantages only the studios.


So – again – how did merger come to be front and center today? Credit not only the advocates, but also MembershipFirst. Under their watch – and despite their intentions – the events of 2007-2008 weakened SAG, strengthened AFTRA, accentuated the split earnings problem, allowed the studios to play one union off against the other, and led SAG members to reject intra- and inter-union battles and seek merger instead.

In other words, the split earnings problem, exacerbated by the competition that AFTRA engendered when it was miraculously awarded the lion’s share of cable pilots in the years leading up to the merger vote, was at the heart of the merger campaign. The much more vague claim made by merger advocates about increased bargaining power played an important role as well but was not nearly as crucial to the merger effort, as the words of merger advocates themselves make clear.

Yet now that the merger of the unions has not led to the merger of the pension and health care plans, as predicted by merger advocates, and the split earnings problem persists, merger advocates seem to be under pressure to bury their history.

Thus, the same individual I quoted above has now stated:

“‘Ending split earnings’ was NOT the main reason for voting in favor of merger. The main reason for merger was to have ALL performers’ contracts be under ONE UNION and eliminate jurisdictional competition in negotiations, organizing, and administration of contracts.” (All caps in original.)

With national union elections still underway it seems the advocates of merger are very much on the defensive. So far, merger has not created singular advantages for the union membership.




Esai Morales’ opening shot in SAG-AFTRA election effort

Esai_MoralesThe popular actor Esai Morales, long known as a pro-union (his family and mine share a background in the old ILGWU) and progressive figure in entertainment, has taken his first shot in the ongoing campaign for the presidency of SAG-AFTRA, the newly merged union of SAG and AFTRA. While brief, his video statement has several interesting highlights.

The first and most alarming is the statement that the union is facing a $5 million deficit. The details of this are not laid out but it is consistent with the statements found on actors blogs and elsewhere that the financial condition of SAG’s merger partner AFTRA is far more dire than was understood prior to merger. His use of the word “triage” to describe what he intends to do if he wins office sounded quite dark. It may not make the best campaign slogan even if accurate.

The second highlight is Morales’ emphasis on the need for a strategy that focuses on both the industry and opportunities outside the industry. This could mean a number of things, of course, but hopefully it means Membership First, Morales’ political party, is thinking carefully about the complex environment his fellow actors and broadcasters now face. In theory that was the point of the merger but there has been no sign at all that the current elected or staff leadership has made any serious moves in this direction. Recent press discussions of the success of Netflix and of Google’s new non-union Hollywood studio should point to the areas of concern.

The third highlight is one of Membership First’s longstanding themes: union democracy. Recent reports of SAG-AFTRA trying to shut down actors’ Facebook pages on the eve of the election, potentially in violation of union members’ federally guaranteed free speech rights, is a reminder of the importance of union democracy. The problem is that in the past Membership First has professed an interest in democracy while then making moves that make that impossible. There is, in fact, very little transparency into the way the party itself functions and some indication, which I experienced first hand during my NED candidacy at SAG, that an inner circle runs the party without much input from its adherents.

A serious problem is created by the claptrap governance structure of the new union which has mixed elements of the old SAG and AFTRA, not altogether coherently. The Executive Board remains far too large to be effective in dealing with highly disciplined and better resourced entertainment and media conglomerates. The union membership should reconsider this structure at their upcoming fall convention, the first since the merger.

Morales is a new face to the public when it comes to Hollywood union politics. He certainly comes across as awake and articulate and motivated. That puts him way ahead of the current SAG-AFTRA president, Ken Howard, who apparently has not even been able to sustain a stable professional relationship with Roberta Reardon, the former head of AFTRA, in their first year as co-heads of the new union. But we will wait for a fuller assessment when Howard makes an appearance during the campaign.

Whither the future of SAG and AFTRA benefit plans?

The late Fred Wilhelms, a strong supporter of the merger of the union he once served, AFTRA, with SAG, and someone with many years of experience with employee benefit plans summed up his analysis of the future of the SAG and AFTRA benefit plans like this in 2011:

This is what we know:

The SAG and AFTRA benefit plans can merge.

Merger of the plans is not part of the merger of the unions, but will be a separate process conducted by the plan Trustees, who have a fiduciary duty to promote the best interests of the plan participants,

The structure of the plans, including the determination of eligibility and benefits will be up to the Trustees, and cannot be predicted at this time, although we know that the present value of pension credits earned under the existing plans cannot be diminished through merger.

It will probably take a year until the post-merger health plan is fully functional, and a year and a half until the same can be said about the pension plan.

(Emphasis added.)

It has, of course, already been more than a year since merger and there is little public indication that the benefit plans are on track to meet such a potential goal set forth by Mr. Wilhelms.

Why not? That, too, is not being discussed publicly. Apparently the “journalists” who are tasked by the major industry media that cover the film and TV business are content to wait until the leadership of the union or the studios hands them a story. Yet, it is almost certain that for most members of the now merged SAG-AFTRA the hope, the dream, of merged benefit plans was a huge motivation for supporting the merger.

In fact, the Hollywood Reporter’s Jonathan Handel wrote just a few months ago:

“Reducing and ultimately eliminating the split earnings problem [created by two separate benefit plans] was cited as a key benefit of the merger, which overwhelmingly passed on March 31 last year. Hence the heightened urgency: absent reciprocity, merger opponents will have a powerful plank on which to base their campaign.

“And absent reciprocity, those of the current leadership who decide to run in this year’s elections would have to fall back on pointing out that — as required by federal labor law — the SAG and AFTRA pension and health plans are legally separate from the unions, and are governed by a board of trustees consisting of equal numbers of union and management representatives, making it impossible for union leadership to unilaterally drive the process.”

Of course, a quick perusal of the bulletin boards indicates that the pro-merger wing of the union is doing precisely that. It is almost as if Handel were writing their talking points.

I will only raise again the two questions I posed a few days ago:

1) is the fact that the two “merged at the hip” union leaders who led the union merger – Ken Howard and Roberta Reardon – have now broken their alliance linked to the rumored possibility of weaker financials for AFTRA than was discovered by SAG prior to approving the merger?


2) is that, in turn, causing the trustees of the benefit funds to hold off on resolving the complex issues that are part of the merger process?

Instead of direct, transparent and accountable answers to these straightforward concerns from SAG-AFTRA staff and elected leaders, merger defenders are now on the defensive in the face of the latest concern about the plans: that any actual merger will only occur as a result of additional bargaining in the upcoming 2014 contract talks. But that too was not the kind of uncertainty that SAG and AFTRA members thought they were voting for.

And adding insult to injury, SAG-AFTRA leaders have let this debate needlessly fester on bulletin boards and Facebook and in the “mainstream” media.

Oh, and one more thing, despite having years to prepare for a post-merger world, the SAG-AFTRA staff and leadership is so ill prepared, apparently, that they have delayed contract talks another year when they could have started this year as they have in the past.

Who knows, a year from now, there might not be a SAG-AFTRA after all.

Connecting the dots: what’s really going on at SAG-AFTRA?

Back at the height of the era I was recruited by Yahoo! to head up their mergers and acquisitions legal team. I turned down the offer then because I just did not have faith in the sky high valuation of the stock. And indeed their stock cratered along with the rest of the tech sector. (Under their current leadership I actually think they have a real chance at long term success – we’ll see.)

I recall a very interesting interview I had at the time with the head of their Business Development group. She was probing me for my view of the acquisition process and asked me what I thought the biggest mistake acquirers of other companies make. I said, simply, they always overpay. She agreed. The problem is inherent in the process to some extent because of the information asymmetry – no matter how much diligence you do it is hard to get a real handle on the underlying value of a target company until you actually own it. (Of course, some companies, like Hewlett Packard, seem to go out of their way to overpay.)

She then asked, what’s the second biggest mistake that acquirers make? The failure to integrate successfully the newly acquired team into the existing culture. That, too, can be a difficult process to control and there are some companies – like Cisco – that are famous for doing it well and others – like Dell and HP – who are, well, not.

I thought of that discussion recently in the wake of the myriad of problems that has suddenly beset the new union that came out of the SAG-AFTRA merger. At first glance these problems do not seem related. But let’s lay them out and see if we can “connect the dots.”

First, there was the very unpopular decision to shut down numerous regional offices of the union.

Then, second, there was the stunning announcement that the two union leaders who forged the merger – Roberta Reardon of AFTRA and Ken Howard of SAG – are at odds. Howard has declined to endorse Reardon for Executive Vice President of the union in the upcoming end of summer elections after a decision that Howard would campaign for the sole position as President. (The President is elected in union wide elections in July and August via mail ballot while the EVP is elected at the September convention by union delegates.) Howard is apparently making this move despite opposition from Amy Aquino and Richard Masur, stalwart moderate union leaders from the SAG era, who are considered the key architects of the merger itself.

Third, there is the revival of Membership First, the union caucus based largely in Los Angeles that was the most fervent opponent of merger with AFTRA, which many of their adherents view with, well, contempt. MF was considered all but dead having failed to mount much of a real campaign to defeat merger (other than a late in the game legal action) and had not even run a slate in the last elections. Now they are back with a vengeance. One of their key and best known leaders, Ed Asner, has put his name to a lawsuit over allegations that the union is mishandling payments collected in Europe on behalf of performers. And a second key figurehead in the group, Martin Sheen, is endorsing the popular Esai Morales for President in a challenge to Howard.

Fourth, there is the troubling fact that the hoped for merger of SAG and AFTRA’s health care and pension plans has yet to occur. This was one of the leading arguments for merger because the merger advocates held out the promise that merger would help actors vest in the plans more easily as their credits would count towards only one plan instead of two. Instead of merger, yet another lawsuit has hit the SAG plan over charges that whistleblower Craig Simmons was fired in retaliation for filing a complaint with the Department of Labor.

Well, if one thing is clear, the honeymoon is over and the reality is sinking in. And these are just the problems inside the union. The macro picture the union faces in the broader entertainment and media industry is cloudy at best. Even right wing conservatives see a crisis brewing in Hollywood that they think they can exploit. The impact of disappearing DVD revenue and the rise of digital and online production continues to hollow out the production process and that is starting to make actors look more like unionized auto workers facing competition from Japan and China.

What ties all this together? Well, the rumbling among union activists across the political spectrum is pointing to some indications that the financial condition of AFTRA, particularly among its locals, has turned out to be far weaker than was thought when merger was approved over a year ago. Well, this is no surprise to repeat players in the merger world. As I explained above, the biggest mistake players in M&A make is to overpay. But of course mergers are a relative rarity to unions and they may have not done their homework in advance of the merger.

If the financial problems are real then it could go a long way to explaining the problem the union leadership is now having with the second key step in a successful merger – integration of the two partners. There is always a tendency to overreact in these situations and to think short term, even act in knee jerk fashion. To cut costs without thinking about the overall strategic question. Sure enough, instead of bringing the office shutdown question to the upcoming first convention of the new union, the decision appears to have been made by a small group around the current staff leader of the union, David White.

The shutdown has angered many SAG and AFTRA rank and file members who normally would be hostile to Membership First but MF must feel it at least has a chance to make an argument about an alternative strategy – well, for any strategy! – to those erstwhile opponents.

Bottom line, the table is set for a knock down fight on multiple fronts – in the courts, in the union’s boardroom, in the caucuses emerging in advance of the late summer union elections and the upcoming convention in the fall. Unfortunately, this is doing very little for the union’s bargaining power with their employers. With major contract negotiations coming up next year, the union will have to find a way through this period quickly.

Let’s hope they don’t end up looking like Hewlett Packard!

SAG-AFTRA unity shaken by leadership battle

You would never know it reading this convoluted piece by SAG-AFTRA cheerleader Jonathan Handel but a leadership crisis has hit the newly merged union. SAG veteran and SAG-AFTRA co-president Ken Howard is refusing to back his AFTRA merger partner and fellow co-president Roberta Reardon for the role of Executive Vice President in the upcoming fall elections. The union had decided to move to a single president structure this year.

Handel’s “exclusive” is elusive on the basis for the battle but it likely reflects the huge cultural divisions between the organizations that prevail a year after they cobbled together a controversial merger that followed coercive tactics by the big studios. AFTRA loyalists complain that top staff jobs are now dominated by old SAG staffers which Handel confirms. And SAG loyalists, many of whom were pro-merger, are livid at the shutdown by the union of key regional offices such as Portland.

Meanwhile, Membership First, the so-called “radical” group in the union, has resurfaced and will likely back actor Esai Morales for President.

All of this points to the core problem: what is the vision and strategy of the union for the long term? The industry in which performers work is changing in dramatic ways and the pressure is on to revise business models in the face of new technology. But decisions by the union leaders like the regional office closures and staff restructuring are justified only on the basis of cost savings with no connection to union strategy.

Union apologists will inevitably say the strategy is a secret but this leadership war suggests there is an intellectual vacuum at the top of the new organization. Perhaps we now know why the member benefit plans have yet to merge – with the union merged in name only it may make sense to wait and see if this entity will survive.

SAG-AFTRA Co-President Ken Howard to Run Separately From Slate Exclusive – The Hollywood Reporter.

SAG-AFTRA Alert: Apple to pay 5 Million € in unpaid taxes on 2011 iPads sales

Maybe SAG-AFTRA should sue Apple for unpaid French royalties instead of just being sued by Ed Asner et al.

Apparently Apple has not been up to date paying what it owes to cultural talent for all those iPads it sells in the EU.

Meanwhile in France: Apple to pay 5 Million € in unpaid taxes on 2011 iPads sales.

SAG-AFTRA getting hit from all sides

As I posted a few days ago, the former Membership First group now calling themselves United Screen Actors Committee, sued SAG-AFTRA over the question of foreign royalty payments. I have just obtained a copy of the complaint and you can read it here. Once I have a chance to digest it, I will see if there is anything worth discussing. I have already made my major point: there may be a problem here, even a big one, but lobbing law suits against their own union does not turn the SAG-AFTRA ship in a new direction. That requires a vision and a strategy. It’s not clear that the new USAC intends to put forward such a vision.

Meanwhile, the incumbent pro-merger SAG-AFTRA leadership is under pressure from its own ranks over the question of closing regional offices. The latest salvo is a letter from Governor Kitzhaber of Oregon in defense of the SAG-AFTRA office in Portland, which SAG-AFTRA NED David White has said must close.

Critics have pointed out that these offices play an important strategic role for SAG-AFTRA and any decision about them should be part of a wider debate about the future of the union at its upcoming convention.

They are right.

Yet another lawsuit against actors’ union

Where there is smoke there may, indeed, be fire, but the former SAG “radicals” behind this lawsuit can’t win back control of the union by suing it. This move suggests the lack of a real strategy and vision for the former “Membership First” group within the old SAG, now members of the merged SAG-AFTRA.

SAG-AFTRA Sued For Witholding Foreign Residuals And Rewarding Officials; UPDATE: Union Says “Without Merit” –

Local producers back SAG-AFTRA presence in Oregon

imagesIt is not widely understood but the labor movement in America has always depended for its survival on support from a certain layer among employers. This idea might come as a shock to many on the so-called “left” for whom the “boss” is always, like in a Snidely Whiplash cartoon, the enemy. But in the real world of building a strong democratic labor movement, in a culture that prizes a dog eat dog version of capitalism, winning over some segment of the employers is critical to union survival and even success.

How does a union do that? By making an argument that unionization can help build a stronger and more resilient industry because of higher labor standards such as better working conditions and improved pay. There is a wider benefit to these improvements felt beyond the pocket book of individual union members. A strong labor movement means a strong economy and that helps employers, too.

In other words, a strong labor movement helps win the battle against the “race to the bottom” in labor standards.

Over many years, SAG has done a good job in this regard in many of its markets. One example, apparently, is to be found in Oregon as evidenced by this OpenLetterToDavidWhite from Tom McFadden of the Oregon Media Production Association to David White, the NED of SAG-AFTRA.

Mr. McFadden writes: “we feel that growing and maintaining the U.S. share of business means supporting and protecting labor standards while holding performers to the standards of professionalism that our industry requires in those locations where the business is protected.”

Such support from an association that represents employers as well as labor is relatively rare and raises an important question: what is the connection between the decision to shutter numerous SAG-AFTRA offices and the union’s strategy to improve the conditions for their members? Does the current SAG-AFTRA leadership understand how to engage employers in fighting a race to the bottom in working conditions?

No public explanation is available which is fine, of course, since it may be appropriate to keep that strategy under wraps. But the problem is that much of the dissent about the shutdowns is coming from well known union activists. That suggests there is no clear connection to a strategy.

Some union activists argue that the shutdown proposal should have been brought to the upcoming union convention for debate. That makes a lot of sense because it would have allowed the union to debate the idea openly. Unfortunately, it is not the approach taken by the current union leadership. Perhaps Snidely has gotten to them already.

New SAG-AFTRA bureaucrats strike against local union autonomy

Nashville based long time SAG activist Cece Dubois makes an important point in responding to a SAG-AFTRA decision to shut numerous local offices: this is a decision that should have been made at the upcoming union convention. But transparency and accountability are not, apparently, values critical to the recently merged unions. Other reports indicate that open opposition is now breaking out with merger supporters now claiming they would have opposed merger had they realized the impact on key locals like Portland.

As I have said several times here and in the debate about union mergers, it is easy to cut costs through a merger but it is harder to make the case that mergers will increase revenues, either for the union or for the members. There is no indication for example that the SAG-AFTRA NED David White, not a trade unionist by nature or background but a former studio lawyer, ever considered ways to use the existing offices to organize new members and to increase SAG-AFTRA leverage in the industry.

SAG activists around the country struggled for many years to spread SAG’s pro-union gospel to areas other than NY or LA especially as the entertainment and media industries spread business to new areas like New Mexico. During the 2000 commercials strike the branch offices were critical in gaining support from other parts of the labor movement, including support from the UAW in places like Nashville. (Nashville will retain one staff member after heavy lobbying.)

The labor movement itself will be that much poorer without the presence of SAG-AFTRA in these cities.

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