The Take: Railroads Sound the Whistle on Labor Shortages


Perspective by SAP News

July 18, 2022

What’s News

U.S. President Joe Biden on Friday signed an executive order creating an emergency board to help settle disputes between major freight rail carriers and their unions. But thwarting a strike will not resolve an industry crisis: a severe labor shortage.

SAP’s Take

North America’s major freight railroads — BNSF, Canadian National Railway, Canadian Pacific Railway, CSX Transportation, Kansas City Southern Railway, Norfolk Southern Railway and Union Pacific Railroad — are suffering labor shortages equal to those of the air travel industry.

Bulk commodities, such as energy, agriculture, automobiles, and components, account for more than half of the freight moved by trains. Rail carriers transport 27.9% of U.S. freight, second to the 39.6% delivered by road, according to the U.S. Department of Transportation.

While retiring engineers and track workers account for a major part of the labor attrition, past layoffs and demanding schedules are also part of a very complicated problem.

“In the railroad industry, folks were let go,” said Timothy Motter, SAP solutions manager for the travel and transportation industries. “Now that those folks have been let go, they don’t necessarily want to come back. Railroad work is very difficult.”

Loop Capital, an investment bank that follows the railway industry, estimates that the industry is short about 4,100 workers, or about 9.4% of the needed workforce.

“Retention and hiring are not easy in the logistics industry in general, especially if you’re telling someone that they can’t go home, and that their schedule is up in the air every day,” Motter said.

Port delays have made scheduling for intermodal shipping — whereby shipping containers are loaded from one form of transportation to another — even more of a nightmare.

“Delays in getting containers through the port system and onto a train are really wrecking schedules,” Motter said. “If I can’t get a container on my train, I can’t fill up the train, but I still have to move the train on a scheduled basis.”

Like airlines, the railroad industry depends on tight schedules to keep operations staffed and profitable. But global supply chain and logistics problems have thrown that into havoc, making recruiting more difficult.

“It’s really difficult to bring someone back into the industry,” Motter said. “There’s a considerable amount of training that needs to occur to make sure workers are ready to handle themselves. To bring on a new employee is really difficult too. What happens to the new employee in a unionized industry? Well, they get the worst choices for work schedules, typically late or even in the middle of the night.”

The railroad industry’s chief competitor is trucking. To make railroads more competitive, the industry implemented a new way of shipping called Precision Scheduling Railroading (PSR) several years ago. Instead of allowing trains to sit still until fully loaded, PSR now focuses on loading individual cars. This enables the railroads to operate more meanly. But it also led to layoffs.

According to Motter, the shippers and unions say that “PSR cut headcounts too deep.”

Labor shortage for railroads that have slashed workforce by 33%

WOLF RICHTER ON AUGUST 3, 2021

More wailing about workers

“No way did I realize how difficult it was going to be to try and get people to come to work these days…” CEO of CSX.

There are few hiccups in the US economy right now. James Foote, the chief executive of CSX, one of the largest railroads in the US, put it this way:

“In January when I got on this [earnings] call, I said we were hiring because we anticipated growth. I fully expected that by now we would have about 500 new T&E [train and engine] employees on the property,” he said. “No way did I or anybody else in the last six months realize how difficult it was going to be to try and get people to come to work these days.”

“It’s an enormous challenge for us to go out and find people that want to be conductors on the railroad, just like it’s hard to find people that want to be baristas or anything else, it’s very, very difficult,” he said.  So even though we brought on 200 new employees, we fell short of where we thought we would be by now….”

Railroads are grappling with a weird phenomenon that is a combination of “labor shortages” and 12.6 million people still claiming some form of unemployment compensation, amid stimulus-fueled demand.

This comes after railroads had spent six years shedding employees in order to tickle Wall Street analysts and pump up stock prices. The North American Class 1 freight railroads combined—BNSF, Union Pacific, Norfolk Southern, CSX, Canadian National, Kansas City Southern, and Canadian Pacific—have tried to streamline their operations, using fewer but longer trains and making other changes, including the strategy of “precision scheduled railroading,” implemented first by Canadian National, then by CSX.

The resulting deterioration in service triggered numerous complaints from shippers. But one of the big benefits was that the workforce could be slashed, which fattened the profit margins at the railroads. Wall Street analysts loved it, and it was good for railroad stocks. By now, precision scheduled railroading has become the new religion at all Class 1 railroads except at BNSF, which has not officially adopted it, at least not completely.

In the process, over the past six years, the Class 1 railroads have axed 33% of their workers through layoffs and attrition. According to the Surface of Transportation Board (STB), an independent federal agency that oversees freight railroads, the Class 1 railroads slashed their headcount from 174,000 workers in April 2015 to 116,000 workers in June 2021.

Before the railroads blame the 33% cut in the workforce on the pandemic, let’s point out that by February 2020, just before the pandemic, their headcount had already been cut by 46,000 workers, or by 26%, to 128,000. Only 12,000 workers were cut during the pandemic.

During the pandemic, some of the workers were put on furlough, to be recalled more easily. But it turns out that not all of them are eager to return to work on the conditions offered by the railroads, including relocation to new assignments.

These cuts in the workforce, and now the scrambling to hire people amid “labor shortages,” is contributing to issues in meeting heavy transportation demand: Union Pacific temporarily suspended traffic from Los Angeles into Chicago, and BNSF has started to meter traffic into Chicago, to allow them to catch up unloading the trains that are stuck in their Chicago rail yards. The resulting pot-banging by frustrated shippers has gotten the attention of the STB.

“The railroads cannot strip down to bare-bones operations,” STB chairman Martin Oberman told the Wall Street Journal. “It’d be like a professional football team only having one quarterback.”

The American Chemistry Council—which represents companies in the chemical industry, such as BASF, Chemours (the DuPont spinoff), Chevron Phillips Chemical, DuPont, ExxonMobil Chemical, etc.—lamented in a letter to the STB, cited by the WSJ, that railcars were waiting at railyards for over a week and travel times for some routes more than doubled. Some factories were running out of materials because shipments had gotten hung up and were approaching the point where they’d have to close, and other factories have cut production.

The railroads “clearly weren’t as prepared as they should have been for the increase in traffic,” Jeff Sloan, senior director of regulatory and technical affairs at the Council, told the WSJ. The deteriorating service shows that the railroads cut too deep before the pandemic and were unable to catch up, he said.

This is an excerpt from an article in Railroad Workers United News. It was written and published by Wolf Richter at WOLF STREET. Richter reports on “and dissects economic, business, and financial data, Wall Street shenanigans, complex entanglements, debacles, and opportunities.” His site is worth a visit.

Hear that lonely whistle Throughout Olympia’s history, railroads have crisscrossed the city’s landscape. As James Hannum notes in “Olympia’s Railroad History,” (an essay in the People’s History of Olympia) at various points in our city’s history, we hosted three “common carrier” lines, two logging railroads and a trolley line. While the last remaining segment of one historic line is still owned by the Burlington Northern Sante Fe (the modern successor of the old Northern Pacific), any trains you see operating on it are owned by Tacoma Rail, which is operated as a public utility by the City of Tacoma.  The second railroad still in operation in Olympia is the Union Pacific. This rail line comes into an urban portion of our community up the Deschutes River valley, passing through the old Brewery Complex, under Capitol Boulevard via a tunnel and then into downtown Olympia, terminating at the Port of Olympia. Excerpted from Emmett O’Connell’s article History of the RR Lines that Cross Through Olympia, in Thurston Talk, 2014

After Slashing 33% of Workers in 6 Years, Railroads Complain about Labor Shortages, amid Uproar over Slow Shipments

 • Jul 22, 2021 • 

“No way did I realize how difficult it was going to be to try and get people to come to work these days”: CEO of CSX.

By Wolf Richter for WOLF STREET.

So there are few hiccups in the US economy right now. James Foote, the chief executive of CSX, one of the largest railroads in the US, put it this way during the earnings call yesterday (transcript by Seeking Alpha):

“I’ve never seen any kind of a thing like this in the transportation environment in my entire career where everything seems to be going sideways at the same time,” he said.

“In January when I got on this [earnings] call, I said we were hiring because we anticipated growth. I fully expected that by now we would have about 500 new T&E [train and engine] employees on the property,” he said. “No way did I or anybody else in the last six months realize how difficult it was going to be to try and get people to come to work these days.”

“It’s an enormous challenge for us to go out and find people that want to be conductors on the railroad, just like it’s hard to find people that want to be baristas or anything else, it’s very, very difficult,” he said.

“Nor did we anticipate that a lot of the people were going to decide they didn’t want to work anymore. So attrition was much higher in the first half of the year than what we had expected,” he said.

“So even though we brought on 200 new employees, we fell short of where we thought we would be by now….”

Railroads are grappling with a weird phenomenon that is a combination of “labor shortages” and 12.6 million people still claiming some form of unemployment compensation, amid stimulus-fueled demand.

And this comes after railroads had spent six years shedding employees in order to tickle Wall Street analysts and pump up stock prices. The North American Class 1 freight railroads combined – BNSF, Union Pacific, Norfolk Southern, CSX, Canadian National, Kansas City Southern, and Canadian Pacific – have tried to streamline their operations, using fewer but longer trains and making other changes, including under the strategy of “precision scheduled railroading,” implemented first by Canadian National, then by CSX.

The resulting deterioration in service triggered numerous complaints from shippers. But one of the big benefits was that the workforce could be slashed, which fattened the profit margins at the railroads. Wall Street analysts loved it, and it was good for railroad stocks. By now, precision scheduled railroading has become the new religion at all Class 1 railroads except at BNSF, which has not officially adopted it, at least not completely.

In the process, over the past six years, the Class 1 railroads have axed 33% of their workers through layoffs and attrition. According to the Surface of Transportation Board (STB), an independent federal agency that oversees freight railroads, the Class 1 railroads slashed their headcount from 174,000 workers in April 2015 to 116,000 workers in June 2021.

The results of the efforts to hire people back this year are barely visible in the chart – that risible uptick in employment over the past few months. Turns out, it’s a lot easier to cut workers than it is to suddenly hire workers:

Before the railroads blame the 33% cut in the workforce on the pandemic, let’s point out that by February 2020, just before the pandemic, their headcount had already been cut by 46,000 workers, or by 26%, to 128,000. Only 12,000 workers were cut during the pandemic.

Since September 2016 – the beginning of the STB monthly data by individual railroad – the biggest workforce slashers were CSX and Norfolk Southern, which both cut over 30%, and Union Pacific which cut nearly 30%. The other railroads cut far less over that period. But massive cuts occurred in 2015 and 2016, before this by-railroad data began.

During the pandemic, some of the workers were put on furlough, to be recalled more easily. But turns out, not all of them are eager to return to work on the conditions offered by the railroads, including relocation to new assignments.

These cuts in the workforce, and now the scrambling to hire people amid “labor shortages,” is contributing to issues in meeting heavy transportation demand: Union Pacific temporarily suspended traffic from Los Angeles into Chicago, and BNSF has started to meter traffic into Chicago, to allow them to catch up unloading the trains that are stuck in their Chicago railyards. The resulting pot-banging by frustrated shippers has gotten the attention of the STB.

“The railroads cannot strip down to bare-bones operations,” STB chairman Martin Oberman told the Wall Street Journal. “It’d be like a professional football team only having one quarterback.”

The American Chemistry Council – which represents companies in the chemical industry, such as BASF, Chemours (the DuPont spinoff), Chevron Phillips Chemical, DuPont, ExxonMobil Chemical, etc. – lamented in a letter to the STB, cited by the WSJ, that railcars were waiting at railyards for over a week and travel times for some routes more than doubled. Some factories were running out of materials because shipments had gotten hung up and were approaching the point where they’d have to close, and other factories have cut production.

The railroads “clearly weren’t as prepared as they should have been for the increase in traffic,” Jeff Sloan, senior director of regulatory and technical affairs at the Council, told the WSJ. The deteriorating service shows that the railroads cut too deep before the pandemic and were unable to catch up, he said.

In line with the executive order from the White House that exhorts agencies to work on making markets more competitive, the STB is now examining what can be done to improve competition among the railroads. Nixing any thought of mergers among Class 1 railroads would be a no-brainer.

SHORTAGE OF RAILROAD WORKERS THREATENS RECOVERY

Date: Friday, July 23, 2021

Source: Wall Street Journal


America’s freight railroads are struggling to bring back workers, contributing to a slowdown in the movement of chemicals, fertilizer and other products that threatens to disrupt factory operations and hinder a rebound from the pandemic, according to shippers and trade groups.

The problems have attracted scrutiny from federal regulators, who have been concerned that cost cuts and new operational plans implemented across most freight railroads that have been celebrated on Wall Street have resulted in lackluster service for some customers.

“The railroads cannot strip down to bare-bones operations,” said Martin Oberman, chairman of the Surface Transportation Board. “It’d be like a professional football team only having one quarterback.”

The board, which oversees freight railroads, is examining ways that it could improve competition in the rail industry, a mission highlighted in the Biden administration’s recent executive order to promote more competitive markets across numerous industries.

The challenges largely stem from two issues buffeting the U.S. economy: labor shortages and widespread supply-chain bottlenecks as manufacturing ramps up and the economy snaps back.

Railroad executives say they have done their best to manage through a pandemic that has forced swaths of their workforce to quarantine and caused fluctuating demand from irregular production at some plants.

CSX Corp. CSX +0.38% Chief Executive Officer Jim Foote said that the railroad had expected to hire 500 new conductors by now to help with the increased demand and higher-than-expected attrition, but has added only 200 so far. “It is an enormous challenge for us to go out and find people that want to be conductors on the railroad, just like it’s hard to find people that want to be baristas or anything else,” he said.

Railroads retrenched quickly when the economy seized up last year, furloughing thousands of workers and taking hundreds of locomotives offline. It came in the midst of a multiyear push by railroads like CSX, Norfolk Southern Corp. and Union Pacific Corp. UNP +0.54% to streamline their operations by running fewer trains with more cars, changes that already had resulted in fewer workers.

Some railroads implemented the Covid-related cuts in ways that would allow workers and locomotives to quickly be recalled should the pandemic ease quickly. Instead of furloughs, some railroads set up reserve boards that allowed the workers to use unpaid time off or work one week a month. That let them keep their benefits and return to duty in just 48 hours, instead of 15 days under normal furloughs. Idled locomotives were parked and maintained so that they could resume hauling trains.

But other workers who were furloughed have been slow to come back, with many of them balking at relocating to new assignments. Training took months and Covid-19 protocols stretched some training classes out further.

Shippers noticed. The American Chemistry Council, whose members include companies like Dow Inc. and Honeywell International Inc., said in a letter to the STB that railcars were waiting at yards for more than a week and travel times for some routes more than doubled. Some factories were close to closing because of lack of materials and others slowed production, the companies said.

Jeff Sloan, the trade group’s senior director of regulatory and technical affairs, said that the deteriorating service shows that the railroads cut too deep ahead of the pandemic and were unable to catch up. “They clearly weren’t as prepared as they should have been for the increase in traffic,” he said.

CSX, based in Jacksonville, Fla., was the first U.S. railroad operator to implement the operating philosophy called precision scheduled railroading starting in 2017, when Hunter Harrison, who pioneered the ideas on Canada’s major freight lines, joined the company as CEO. The strategy calls for running fewer trains longer distances and keeping them on a tighter schedule, allowing the railroad to scrap locomotives, employ fewer workers and shut facilities.

The implementation is jarring to operations and customers complained about mayhem on the tracks as the changes took place. But other railroads followed suit, in part due to Wall Street pressure to lower costs and boost margins and stock prices.

CSX and others say they have ramped up hiring lately to handle the increased shipping demand. Norfolk Southern had 114 conductors in training as of mid-June and plans to add between 72 and 96 new trainees each month for the remainder of the year.

CSX’s Mr. Foote said the challenges are prompting the railroad to re-evaluate its approach to hiring for certain jobs, such as those that require people to work during weekends and holidays, or spend days away from home. They are providing $3,000 bonuses to workers who provide referrals for new hires, which Mr. Foote said has helped boost the pool of applicants.

“It is a challenge for us to figure out ways to bring more normalcy to the hours worked by a railroad employee in order to make the job more attractive,” Mr. Foote said. “It’s not about the job.”

Across the freight rail network, employment levels still remain below pre-pandemic levels. According to data shared with the STB, railroads reported 47,444 transportation employees in June, down from about 51,800 in March 2020.

Not all railroads are scrambling to find workers. Union Pacific executives on Friday said the railroad has been able to hire workers to run their trains. CEO Lance Fritz said that furloughed employees, including some out of work for up to a year-and-a-half, are returning at a 70% rate.

“To date, while sometimes it’s difficult, we are finding the talent we need,” Mr. Fritz said.

The worker shortages are being exacerbated by congestion from products entering and exiting the rail system. Backlogs at ports mean strains on the freight railroads that are pulling cargo inland, while a tight market for trucking also creates pinch points when trains transfer containers to the highways.

“The supply chain is only as good as the weakest link in the chain and there are a lot of weak links in the chain,” Citi transportation analyst Christian Wetherbee said.

Union Pacific and BNSF Railway Co., a unit of Berkshire Hathaway Inc., BRK.B +0.33% have taken steps to mitigate some of the congestion of freight moving into Chicago. Union Pacific this week suspended traffic for seven days from certain West Coast ports into a Chicago intermodal facility to clear some of the backlog of trains waiting to be unloaded. BNSF said that it would be metering traffic from some West Coast ports into Chicago.

Mr. Oberman, the STB chairman, said that there are some industries that are reporting good service, but others continue to be plagued by the same issues, including crew shortages, late deliveries and other service cutbacks. “I don’t think we are overall having a system that works the way it should work,” he said.

Rail Industry Faces Worker Shortage

Welcome to Thomas Insights — every day, we publish the latest news and analysis to keep our readers up to date on what’s happening in industry. 

Fayola Powell

Sep 05, 2018

Worker shortages have taken their toll on quite a number of industries in recent years, and the rail sector is no exception. The industry will need to hire more than 80,000 workers within the next six years in order to meet the increasing demand for transportation — for both people and commodities. Multiple factors must be considered when tackling the issue. Right now, the industry is trying its best to lure prospective candidates with financial incentives, such as signing bonuses worth thousands of dollars and more comprehensive benefits packages.

America’s focus on traditional schooling and career training is partly to blame, but the rail industry also has a reputation for involving exceedingly difficult, grueling work. Salaries simply don’t go as far as they used to in many regions; the industry’s rules and regulations are viewed as rigid and overly complex; workers are sometimes subjected to intense scrutiny, even in the form of supervisory drones; the hectic work schedules don’t leave much room for downtime; accidents are common; employees are given basic or inadequate benefits packages; and signing bonuses often involve a lot of fine print.

Overall conditions make for a challenging work environment, putting off prospective employees and painting an unappealing picture for the younger generation entering the workforce. The boomers are keeping things afloat right now, but many are retiring or reaching retirement age.

The rail industry must work to revamp its image. Heavy-handed, bureaucratic company policies have taken the shine off rail industry jobs, and while signing bonuses are certainly a solid starting point, the internal culture needs a complete overhaul. Improving the morale of current employees is a good place to start, helping to improve current conditions while also helping to attract the new generation of rail workers.

 

Resources:

• Overwhelmed by freight loads, railroads offer hefty hiring incentives to fill jobs
• Union Pacific, BNSF paying bigger hiring bonuses amid labor shortage
• NJ Transit, facing shortage, is slow to train locomotive engineers
• Trainorders.com
• Association of American Railroads
• What The Rail Industry Can Do To Prevent Sleeping Workers
• Union Pacific faces shortage of equipment and workers
• For big railroads, a carload of whistleblower complaints
• On American railroads, switch mistakes and speed cause an accident every other day
• Union Pacific spies with drones on their railroad workers to see if they follow safety guidelines
• Moving and storage: Careers in transportation and warehousing
• Occupational Employment Statistics

Image Credit: SimplyDay/Shutterstock.com

Congress, Unions Can Cure Rail Worker Shortage

Written by Frank N. Wilner, Capitol Hill Contributing Editor

Railroads, including Amtrak, are hiring, but applicants are scarce. The Washington Post reports Amtrak is short 1,500 workers, and may be forced to eliminate some service, trim some daily long-distance trains to three times weekly, and delay inauguration of new routes. Already, Amtrak is operating at 80% of its pre-pandemic schedule.

Although Amtrak has a help-wanted sign hanging nationwide, one doesn’t fall off a turnip wagon to work on an Amtrak passenger train, a maintenance-of-way gang or in a repair shop. Earning a federal locomotive engineer license requires training for up to 24 months; and at least six months of training before certification as a conductor. Both positions require a mastery of safety protocols, operating rules and route familiarization.

Compounding the labor shortage are Amtrak employees selfishly thumbing their noses at medical science and refusing—for a host of reasons including misinformation spread via social media—to be vaccinated against COVID-19. Aside from putting their own and their families’ lives in danger, they threaten the health and lives of fellow employees and Amtrak passengers. Amtrak CEO William J. Flynn says some 6% of Amtrak’s current 17,000 employees so far have failed to be vaccinated and will be terminated Jan. 4.

As for potential new hires, many resist accepting jobs requiring nights away from home, flexible work schedules and weekend assignments—even when compensation tops $100,000 annually and includes incomparable healthcare benefits. Other potential new hires sadly are unable to pass drug-screening tests. “If we were fully staffed, we would be able to offer more schedule, where right now we’re unable to do that,” Qiana Spain, Amtrak’s Executive Vice President of Human Resources, told the Washington Post.

Neither scrubbing a vaccination requirement nor reducing training time are solutions. The unvaccinated pose too great a health threat to those with whom they come in contact. Cutting short stringent training requirements, even were it lawful under provisions of federal engineer and conductor licensing requirements, similarly puts in danger others’ lives.

But there is a near immediate solution.

With favorable congressional legislation and rail labor union cooperation, Amtrak—and freight railroads—could coax out of retirement recent retirees still in good health who might leap at an opportunity to return to work temporarily while efforts continue to find and train new hires.

Retirees could be returned to service rather rapidly with refresher training as is provided recalled furloughed rail workers. These seasoned veterans and their families long ago learned to balance the downsides of railroad work with the positives, with many being second, third and fourth generation railroaders. Moreover, they would be an asset in helping train the new hires. 

Indeed, there are retirees who likely are bored or miss the workplace comradery. Others may have miscalculated financial needs in retirement, or would use the additional earnings for a luxury not previously considered. Still others have taken non-railroad employment at a fraction of their previous railroad compensation because current law prevents a return to railroad employment.

Coaxing retirees back to work might not be so difficult were Congress to pass legislation temporarily allowing continuation of monthly Railroad Retirement benefits plus a separate paycheck reflecting current railroad wage scales. 

Congress has to act—and it could act quickly, as the fix is relatively simple and straightforward—because the law currently provides that “a railroad annuity is not payable for any month in which you work for a railroad, regardless of age or amount of earnings.”

Without legislation temporarily lifting the prohibition on payment of Railroad Retirement benefits, a retiree returning to rail employment would forfeit Railroad Retirement benefits in any month he or she held railroad employment. Thus, legislation is the quid pro quo for coaxing rail retirees back to work.

A second snag relatively easy to undo is seniority. A rehiring bonus could be paid by Amtrak in exchange for the returning retiree going to the bottom of the seniority roster. Alternatively, temporary seniority roster adjustments could be made. In fact, the temporary rehires would not necessarily be bumping current Amtrak employees, but, in many cases, filling empty slots.

Unions would have incentive to facilitate a mutually acceptable answer to the seniority question as each union has been struggling financially from years of declining rail industry employment levels and would crave the near immediate workforce augmentation. Even under rail labor’s “union shop” agreements, there is a lag—sometimes of many months—in union dues payment by new hires; but returning retirees would immediately resume dues payment, while new hires eventually filling those slots would keep the dues money flowing

This combination remedy of legislation and union cooperation could be extended to freight railroads similarly experiencing labor shortages.

Frank N. Wilner

Railway Age Capitol Hill Contributing Editor Frank N. Wilner is author of “Amtrak: Past, Present, Future,” and “Understanding the Railway Labor Act.” Publication of his latest book, “Railroads & Economic Regulation,” is pending.

TTD to STB: ‘Expand Reporting Requirements to Address Self-Inflicted Service Cuts’

Written by William C. Vantuono, Editor-in-Chief  

July 06, 2022

 

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AFL-CIO Transportation Trades Department President Greg Regan. TTD photo via Twitter.

The 37-union-affiliate Transportation Trades Department, AFL-CIO (TTD) on July 1 sent a letter to the Surface Transportation Board in response to the agency’s “information collection request” regarding Class I railroad reporting requirements. The letter, signed by TTD President Greg Regan, asks the STB to further increase the already stepped-up reporting requirements to include additional employment data.

Following is the letter’s full main text:

As discussed below, while TTD strongly supports the new reporting requirements set forth in the STB decision, TTD requests that additional information be required from Class I railroads to better understand the current rail service conditions and the impact employment decisions are having. Specifically, we request: a narrative description of employment data, employment data reported by craft in addition to job families, and data regarding specific causes for separation.

The STB is proposing reporting requirements for Class I railroads that would include specific performance metrics as well as employment data. These requirements were included in the STB’s recent decision regarding Service Emergency Orders due to an alarming and unmitigated decline in service and working conditions caused by the railroads’ decisions since 2015 to lay off approximately 30% of their workforce in order to maximize short-term profits, instead of prioritizing workforce investments that would ensure the long-term viability of the railroad system. However, the deteriorating rail service conditions necessitate additional data collection in order to identify the root causes of the current service problems.

Despite the STB’s repeated efforts over the past few years to constructively work with the Class I railroads to overcome the challenges to this country’s rail network caused by the Class I railroads’ own decisions, we still face an ongoing crisis. As Vice-Chair Robert Primus indicated in the STB’s April 2022 “Urgent Issues in Freight Rail Service” hearing, it is important that “we don’t keep going on roller coaster rides every few years so we are riding high one time and then we cut and then next you know we are in a valley struggling to get out of it.”

Just last week, BNSF announced it was limiting inbound service to California until the end of July because of congestion issues. The Class I CEOs have admitted that their current level of service is not meeting their own standards despite years of opportunity and copious offers of help from the STB to fix things. The Class I railroads have not been able to fix the mess they have created and it is clear that more action is required from the STB. Proper data is the first step to inform these necessary actions.

In order to better understand deteriorating rail service and working conditions, TTD requests that the STB expand reporting requirements for the Class I railroads to include a narrative description of employment data, employment data reported by craft in addition to job families, and data regarding specific causes for separation. This information will provide a more holistic view of employment at each Class I railroad, allowing the STB, workers, and the public to better understand why service disruptions have occurred and will continue to occur until these problems are resolved.

TTD strongly supports the following monthly reporting requirements included in the STB’s decision: 

(i) total employee count
(ii) how many employees were added.
iii) how many employees were separated (with a breakout of those employees who separated by voluntary resignation)
(iv) how many employees have been furloughed but are potentially available for recall
(v) the number of “extra-board employees.”
(vi) for categories 300, 400, 500, and 600, how many employees are working in active service (as opposed to completing training courses).”

 Additional Data Collection 

Further, the STB should require the Class I’s to also include in this monthly report: 

1. The number of employees working in active service in each craft within categories 300, 400, 500, and 600.
2. Specific separation data (resignations, retirements, dismissals, etc.) to include breakouts by craft, work location, and specific reasons for separation.
3. Tenure at time of separation, broken out by craft and year hired.
4. A narrative description of the data and trends in the monthly reports.

This additional information will provide the STB with additional data that is necessary to understand the root causes of—and take the needed action to address—this continuing crisis. The expansion of reporting will also provide an additional level of public accountability that is necessary to ensure that workers and the public accurately understand what actions the Class I’s are taking to address the unprecedented workforce reductions they implemented. For example, in the five years prior to the pandemic the Class I’s enacted drastic reductions to their Train and Engine (T&E) workforces. Specifically, BNSF cut 27%, Norfolk Southern cut 24%, Union Pacific cut 32%, and CSX cut 43% of these workers during this time period.

Worker Retention 

Another important issue the STB highlighted in its April hearing is worker retention. While the Class I railroads have been ironically complaining about their inability to hire workers after their widespread layoffs, they also have been implementing policies that worsen working conditions for existing workers and make these jobs less attractive for potential workers.

Many of the employees that the Class I’s eliminated had decades of institutional knowledge, skills, and experience that are not easily replaced. It is difficult to replace experienced workers when job conditions have worsened—the industry does itself no favors by imposing working conditions that make it much harder to retain new workers. Nothing is gained if the new workers that the Class I railroads hire leave within a short amount of time because of the unnecessary and draconian hardships of the job. In the past, many railroad workers stayed in the industry for decades, but we believe that there is notable worker attrition in the industry at the moment because of policies implemented by the Class I’s such as BNSF’s new Hi-Viz policy. Therefore, we urge the STB to require the railroads to report specific data on worker retention and attrition, especially for new hires. This data would allow the STB to understand the current extent of worker retention and attrition, the role that the Class I’s workplace policies are playing in that attrition, and the effect that worker attrition is having on the railroad network and freight rail service.

As we have stated before, there is no shortage of ready and willing workers in this country. That is a myth compounded by the reality that employers are driving working people away from jobs by constantly attacking wages and good benefits, requiring increasingly difficult and grueling work schedules, and—as is the case of the Class I’s—outright elimination of positions. Enhanced data reporting is necessary to allow the STB to correctly diagnose and address the problems that the Class I railroads’ decision to eliminate so many positions has caused. As STB has indicated, the current service challenges have existed for many years. The harm that these challenges have caused to the rail network and rail shippers that warranted this emergency action has the potential to continue beyond the six-month period that the STB has proposed these reporting requirements. As such, TTD urges STB to evaluate the usefulness of data gathered under this collection to be in a position to possibly extend reporting periods should the circumstances warrant such an extension.

We appreciate the opportunity to comment on this information collection and look forward to working with STB in the future on this matter.

Tags: Breaking News, STB, Surface Transportation Board, Transportation Trades Department, AFLCIO

Mexican president bizarrely mocks Biden by playing pop song ‘Ooh So Scared’ at press conference

Graeme Massie and María Luisa Arredondo
Wed, July 20, 2022 


(AFP via Getty Images)

The president of Mexico bizarrely mocked Joe Biden this week by getting staff to play a song entitled “Ooo, so scared” during a press conference after the US demanded trade dispute talks over the country’s energy policies.

The move, which could lead to US tariffs against Mexico, was laughed off by Andrés Manuel López Obrador, who played the song “Uy, qué miedo” by Tabasco singer Chico Che.

"They are going [to give us a call] so that we can explain the energy policy of our country. Let’s see if you can find my countryman Chico Che, the one with "Uy, qué miedo" [song]... we have to keep going, there is still time," said the country’s populist president during the conference.

The incident took place after the Biden administration requested dispute settlement talks with Mexico under the T-MEC for policies that it considers harmful to US companies in the energy sector and that favor the CFE (Federal Electricity Commission) and PEMEX (Petróleos Mexicanos).

In making the announcement, the United States trade representative, Katherine Tai, pointed out that the Mexican government has implemented changes in its energy policies that are contrary to the T-MEC because "they affect the economic interests of the United States in multiple sectors and discourage the investment of clean energy providers and companies that seek to buy clean energy and confiable".

Ms Tai specified that Mexico’s actions include amendments to the electricity law that give priority to the distribution of energy generated by the CFE, over renewable energy sources such as wind and solar provided by the private sector. The official added that the Mexican government has also delayed, denied and even revoked the capacities of US companies to operate in the energy sector in Mexico.

Ms Tai stressed in a statement that if attempts to resolve the dispute are unsuccessful, the Biden administration could implement punitive tariffs for Mexico.

López Obrador stated that the request for dispute resolution stems from “disagreement promoted by some businessmen,” whom he described as being more conservative and to the right than former President Donald Trump.

"Now there is a disagreement promoted by some businessmen, more than anything from our country, more than from the United States and Canadians about our energy policy. Yesterday it was formally announced that a review is going to be requested, a clarification about our policy in energy matters because it supposedly affects the treaty we have with Canada and the United States,” he added.

"They are already talking about that now yes, as if celebrating that we are sanctioned for our energy policy, well, they are more conservative, they are more to the right, although it seems incredible, I am referring to this group, Iberdrola is also there and others, that Trump himself, although it seems incredible," he said.

AMLO recalled that when the Treaty between Mexico, the United States and Canada was negotiated, the government of his predecessor, Enrique Peña Nieto, agreed to one of the chapters to a policy that he claims is "in violation of our sovereignty in energy matters.”

"And since we were observers, I was the president elect, I said that we did not accept it and that it would not be approved in the Senate if that chapter was sustained. The talks stopped for about a week, 10 days, pressure of all kinds from the Mexican government because they had already accepted,” continued López Obrador.

"[The person in charge of] Economy, in the previous administration, and other public servants, with this whole group and we said no. President Peña spoke to me like twice, very worried that the negotiations were going to come to a halt, and that we were heading towards great devaluation and a serious crisis. Well no, we cannot do this; how are we going to compromise our sovereignty?”

Obrador went on to say that talks ultimately broke down because no one “wanted to inform President Trump of what was happening.”

“They decided to inform him, (...) and President Trump said ‘see what they want in Mexico’ and we wrote the chapter and there were two paragraphs that have to do with the nation’s dominance over our energy policy," he explained.

China just put foreign banks on notice: Creating an internal Communist Party committee could be the cost of doing business


Geovien So—SOPA Images/LightRocket via Getty Images

Yvonne Lau
Thu, July 21, 2022

One of the world’s biggest banks, and Europe’s second-largest lender, is showing that it’s playing by China’s rules.

London-headquartered HSBC has become the first international bank to establish a Chinese Communist Party (CCP) committee, according to a new Financial Times report. China’s companies law requires firms to set up CCP committees, but this rule has been loosely enforced among global financial institutions—until now.

HSBC’s move could pave the path for other global lenders to follow suit, and underscores the delicate line that China-based foreign banks are now toeing between Beijing and the West.

The first, but probably not the last

HSBC’s China investment bank, known as HSBC Qianhai Securities, recently formed the CCP committee, as per the FT report that cited two people familiar with the decision.

In China, company employees can initiate CCP committees, which are typically made up of three or more staff. The committees have two functions: to act as a workers’ union, and to facilitate installing a party representative to a company’s top ranks.

HSBC is unlikely to offer its CCP committee any management role in the company, unlike China’s state-owned enterprises (SOEs), which are mandated to appoint a party secretary to serve as board chairman. SOEs must also establish CCP committees to facilitate party activities and advance government policies.

Following the report, HSBC released a statement noting that CCP committees are “common” in mainland China-based companies. “Management has no role in establishing such groups” and these committees exert zero influence on the direction of the business, nor hold any formal role in the business’s day-to-day operations, it added. The bank did not confirm whether its China investment bank had set up the committee. HSBC did not respond to a Fortune request for comment.

HSBC’s actions could pave the way for other foreign lenders in China to do the same. In the last two years, global lenders have begun taking full ownership of their mainland operations, leading them to explore whether they must abide by the law to initiate a CCP committee, according to the FT. “There was an internal email that said we might need to do something, but for the time being…it’s not yet compulsory,” the Asia head of one global bank told the publication.

In 2020, China scrapped foreign ownership limits for financial institutions. Previously, foreign financial firms were only allowed to hold a 51% stake in their Chinese joint ventures (JV). HSBC increased its stake in its China brokerage JV to 90% from 51% in April. Six other global lenders control their investment banking operations in the mainland, including U.S. banks Goldman Sachs, JPMorgan Chase, and Morgan Stanley, alongside European lenders UBS, Credit Suisse, and Deutsche Bank.

HSBC is on the “right side” in setting up the CCP committee, a person with knowledge of its decision told the FT. “You don’t second-guess the authorities in China. Any American bank who isn’t doing the same is playing a dangerous game.”

East vs. West

Though headquartered in London, HSBC’s focus is largely on Asia. The region, especially China and Hong Kong, accounts for the majority of the bank’s profits.

Last year, the British lender shifted the heart of its operations to Asia, when it moved four senior executives leading its commercial banking, personal banking, and asset management divisions, from London to Hong Kong. These departments account for nearly all of the bank’s revenues.

Asia-Pacific is “central to [our] future growth, investment, and innovation. I want more of our global executive team to be located in key growth regions,” including China, Southeast Asia, and India, HSBC CEO Noel Quinn said at the time.

Yet as HSBC doubles down on its Asia strategy—it’s investing an additional $6 billion in the region until 2026—it has become increasingly ensnared in the geopolitical crossfire between China and the West.

In the last couple of years, HSBC has weathered a barrage of criticism from U.S. and U.K. lawmakers over its public support for Beijing’s enactment of the national security law in Hong Kong—a response to the city’s mass pro-democracy protests that began in 2019. HSBC said at the time that it “respect[s] and support[s] laws and regulations that will enable Hong Kong to recover and rebuild the economy.” Western policymakers accuse HSBC of freezing the accounts of Hong Kong activists and have asked the bank to justify its actions—and whether it did so at the behest of Hong Kong or Beijing.

This May, China’s largest insurer, state-run Ping An—HSBC’s biggest shareholder—called for the bank to be split into “east” and “west” units. Ping An’s suggestion highlighted HSBC’s vulnerability at being caught between Beijing and Washington. One source close to HSBC told the FT that such a move could allow HSBC more breathing room by creating a “China-friendly bank in Asia, and a U.S.-friendly bank everywhere else.”

This story was originally featured on Fortune.com

Germany Bails Out Uniper in Fallout From Russian Gas Squeeze


Vanessa Dezem, Arne Delfs and Kati Pohjanpalo
Fri, July 22, 2022 

(Bloomberg) -- Germany hammered out a rescue package for Uniper SE to prevent the collapse of a linchpin in the country’s energy network in the wake of Russia’s moves to slash gas supplies.

The government will get about 30% in Uniper, a holding big enough to give it veto rights on important strategic decisions, Uniper said in a statement on Friday. Fortum Oyj, Uniper’s main shareholder, will retain a majority.

The package includes an expanded credit line of 9 billion euros ($9.1 billion) from state-owned lender KfW and mandatory convertible securities of 7.7 billion. The total package is worth more than four times the company’s current market value.

Uniper became the first major corporate casualty of Europe’s unfolding gas crisis when it asked Chancellor Olaf Scholz’s administration for a bailout earlier this month. Germany’s biggest buyer of Russian gas was pushed to the brink as President Vladimir Putin squeezed supplies in retaliation over European sanctions against Russia’s invasion of Ukraine.

“Before I go into this specific case and its consequences, I would like to speak about the principles we are following in the face of this challenge for our country, for Europe and for the whole world: You will never walk alone,” Scholz told reporters on Friday. “We will overcome the difficult times together.”

The Dusseldorf-based company’s shares climbed as much as 11% after the deal was announced. The stock has still tumbled more than 70% this year, valuing the company at about 4 billion euros. Main owner Fortum gained as much as 13% after trading in Helsinki resumed, the most since 2008.

The German government will introduce a mechanism for all gas importers to pass through the replacement costs for missing Russian gas as of Oct. 1, meaning Uniper will be allowed to pass on higher energy costs to consumers.

Fortum agreed to see its stake diluted to 56% from about 80% as part of the bailout plan. The Finland-based company will now have the option to convert its existing 4 billion-euro loan made to Uniper against a portion of maximum 70% of the mandatory convertible instruments subscribed by the German state, ensuring its ability to retain its position as the majority shareholder, it said in a statement.

Uniper -- setup in 2016 from the former fossil-fuel assets of E.ON SE -- emerged as the weakest link in the energy system that powers Europe’s largest economy. Its extensive contracts with state-owned Gazprom PJSC made the German energy company vulnerable to supply cuts and forced it to cover shortfalls at high prices on the spot market.

As it burned through cash, Uniper had already drawn a 2 billion-euro credit line from KfW and started talks about additional funds after getting 8 billion euros in financing earlier this year from Fortum.

Germany couldn’t afford to let Uniper fail as the fallout would ripple through the economy, hitting industrial companies and local utilities served by Uniper. While flows on a key gas link with Russia have resumed after 10-day maintenance, deliveries remain significantly reduced and storage levels are low.

On Thursday, Germany raised its targets for gas storage, reflecting growing concern about having enough energy to heat homes and keep factories running through the winter. The move increases the likelihood that the government will intervene in managing reserves.

Germany’s gas storage hasn’t increased since Tuesday and currently stands at about 65%. To reach the 95% level targeted for Nov. 1, the country would need nearly three months at the average fill rates in the week before the Nord Stream pipeline was halted.

Economy Minister Robert Habeck has warned that Russia’s gas squeeze posed the risk of Lehman Brothers-like contagion with Uniper’s failure potentially spilling over to the wider economy. The International Monetary fund estimated that the country is at risk of losing almost 5% of economic output if Russia shuts off gas supplies.

EU lawmaker calls for ban on payment for order flow

 

A key EU lawmaker is set to back calls for a formal ban on brokers selling customers’ share trades to market intermediaries, adding to momentum in favour of clamping down on the practice.

Danuta Hübner, a senior lawmaker in the European Parliament, said in a draft statement seen by the Financial Times that the concerns around the practice known as payment for order flow are “symptomatic of a broader issue” of national EU regulators interpreting rules differently.

In her note she said “the rapporteur maintains the initial proposal” of the European Commission, which is to ban the practice.

The draft highlights the growing resistance in Europe to payment for order flow even before it has become popular in the region. US brokerages earn billions of dollars a year on the process, collecting a record $3.8bn during last year’s retail trading boom. Payment for order flow is also lucrative for high-speed trading firms that profit on the difference in their own purchase price for a share and the price at which they pass it on to clients.

Brokers say the practice helps them keep fees low — many in the US offer free trading — and market makers are also obliged to provide clients the best price available on the broader market. But critics worry about potential conflicts of interest because brokers may be incentivised to sell their customers’ orders to the highest bidding wholesaler.

Hübner called on more transparency in the EU around the way in which best execution for retail orders is defined, on top of a ban, adding that this would lead to “a harmonised approach to best execution, more transparency and a level playing field across Europe, to the benefits of end-investors”.

Payment for order flow is not legally banned in Europe but rules on inducement to clients and requirements to find the best price means it is often tough to implement in practice.

Hübner’s position represents a blow to Germany, where some regional exchanges often only have a single market maker and a single broker.

However, many other countries in Europe have been pushing hard for a formal ban. Regulators in the Netherlands and Spain have both conducted in-depth studies that found investors got a worse price if their orders were sold to intermediaries before trading on an exchange.

Hübner’s report also recommended scrapping the limit on the amount of business that can be executed in dark pools — off-exchange venues that fund managers use to buy and sell large blocks of shares without disturbing the price on the market.

Hübner’s finding said the caps, brought into force with the 2018 Mifid II rules, were “set arbitrarily and had limited utility”. It would also bring it into line with the UK, which had committed to ending the policy.

Germany has told fellow EU capitals that it opposes a general ban on payment for forwarding client orders for execution in part because it fears it would damage retail investor participation in the markets. However diplomats say a majority of member states are in favour of a ban.

“Payment for order flow really does nothing to make the financial markets work better, it just maximises profits for brokers,” said one EU diplomat. “An EU-wide ban of payment for order flow services is key to increasing transparency and decreasing costs for regular people trying to invest some of their hard-earned savings.”

“Germany is not convinced of the commission’s proposal of a general ban on payment for order flow,” said a spokesperson for the country’s finance ministry, describing the measure as being premature and lacking empirical justification. 

The spokesperson added that it would not “sufficiently take into account the existing regulatory framework on best execution” and that it would “lead to a serious setback of the currently observed increased participation of retail investors in financial markets and hamper cross border competition between brokers and trading platforms.”

Wildfire near Yosemite National Park explodes in size

Sat, July 23, 2022

WAWONA, Calif. (AP) — A fast-moving wildfire near Yosemite National Park exploded in size Saturday and prompted evacuations even as firefighters made progress against an earlier blaze that burned to the edge of a grove of giant sequoias.

The Oak Fire, which began Friday afternoon southwest of the park near Midpines in Mariposa County, grew to 10.2 square miles (26.5 square kilometers) by Saturday morning, according to the California Department of Forestry and Fire Protection, or Cal Fire.

“Explosive fire behavior is challenging firefighters,” Cal Fire said in a statement Saturday morning that described the fire activity as “extreme with frequent runs, spot fires and group torching.”

As of Saturday morning, the fire had destroyed 10 residential and commercial structures and damaged five more, the Mercury News reported. The fast-growing blaze prompted Caltrans to order numerous road closures, including a shutdown of Highway 140 between Carstens Road and Allred Road — blocking one of the main routes into Yosemite National Park.


Hot weather and bone dry vegetation caused by the worst drought in decades was fueling the blaze and challenging fire crews, said Daniel Patterson, a spokesman for the Sierra National Forest.

“The fire is moving quickly. This fire was throwing embers out in front of itself for up to 2 miles yesterday,” Patterson said. “These are exceptional fire conditions."

About 1,700 residents in the area were put under mandatory evacuation orders Friday night.

A shoeless older man attempting the flee crashed his sedan into a ditch in a closed area and was helped by firefighters. He was safely driven from the area and did not appear to suffer any injuries. Several other residents stayed in their homes Friday night as the fire continued to burn nearby.

There’s no immediate word on what sparked the fire.

Meanwhile, firefighters have made significant progress against a wildfire that began in Yosemite National Park and burned into the Sierra National Forest.

The Washburn Fire was 79% contained Friday after burning about 7.5 square miles (19.4 square kilometers) of forest.

The fire broke out July 7 and forced the closure of the southern entrance to Yosemite and evacuation of the community of Wawona as it burned on the edge of Mariposa Grove, home to hundreds of giant sequoias, the world's largest trees by volume.

Wawona Road is tentatively set to reopen on Saturday, according to the park website.

California Highway Patrol Officer Matthew Chance walks away from a car that crashed into a ditch while driving away from the Oak Fire in Mariposa County, Calif., on Friday, July 22, 2022. Chance gave the elderly driver a ride out of the fire evacuation zone. (AP Photo/Noah Berger)

CRIMINAL CAPITALI$M;LOANSHARKS
Discover Financial Plunges After Suspending Buybacks on Student-Loan Probe

Jenny Surane
Thu, July 21, 2022 


(Bloomberg) -- Discover Financial Services dropped the most in more than two years after the company suspended share repurchases, saying it started an internal investigation into compliance practices at the student-loan servicing business.

The board appointed an independent special committee to conduct the probe, Discover said in a statement late Wednesday. Chief Executive Officer Roger Hochschild said executives at the firm took the probe into account when they developed guidance for expenses for this year, and the company continues to expect costs to climb by a percentage in the mid-single digits.

“We can’t really give you anything to expect in timing,” Hochschild said on a call with analysts Thursday, noting the decision to pause buybacks was made by Discover. “As soon as we can, we hope to restart the buyback.”

Discover dropped 7.3% to $101.82 at 9:42 a.m. in New York, after falling 9.1% earlier Thursday, the biggest intraday decline since June 2020. The shares are down 12% this year compared with a 16% drop for the S&P 500 Financials Index.

The company has faced regulatory scrutiny of its student-loan business for years. In 2015, it agreed to a consent order with the Consumer Financial Protection Bureau linked to certain private student-loan servicing practices, and five years later it entered into an order resolving a CFPB investigation tied to the 2015 order. With the latest order, Discover was required to implement a compliance plan as well as shell out $35 million in penalties and redress for consumers.

“The only thing I can say is you’ve got both the consent orders and the investigation are in the areas of student-loan servicing,” Hochschild told analysts. “But beyond that, there really isn’t anything else I can add at this time.”

The probe overshadowed an otherwise rosy quarter, Sanjay Sakhrani, an analyst at Keefe Bruyette & Woods, said in a note to clients. Revenue for the quarter was $3.22 billion, topping the $3.19 billion average of analyst estimates compiled by Bloomberg, aided by a 14% increase in net interest income.

“The solid results likely take a bit of a back seat,” Sakhrani said. “Clearly, we need to get more details on the size and scope of any inappropriate practices and the associated financial ramifications.”

Most Read from Bloomberg Businessweek

As Snap melts down, its founders make sure to protect the people who matter: themselves

Therese Poletti - Yesterday

MARKETWATCH FIRST TAKE

Snap Inc. has never been an investor-friendly company — as long as those investors weren’t its founders, at least — and the parent company of the Snapchat app made that even clearer Thursday.

Related video: Snap's Sales Slump Prompts Social Media Stock Sellof

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Amid a major slowdown in its digital advertising business, Snap’s board created a unique (as in we’ve never seen anything like this before) dividend meant to ensure that its founders maintain control of the company, even if they decide to sell their stock. The dividend would be in the form of a 2-for-1 stock split, offering every investor a fresh Class A share for every share they currently own, but it will only occur if shares hit $40 within the next 10 years.

Full earnings coverage: Snap stock plunges 25% as advertising slows down, executives decline to offer forecast

That would seem like an easy target to hit, considering Snap was trading for $40 a share as recently as January. But Snap’s stock has been under enormous pressure since late last year, when Snap blamed changes Apple Inc. had made to the iPhone’s ad tracking, and advertisers hurt by supply-chain woes, for a big disruption in its advertising revenue.

Since that October warning, when Snap’s shares were trading in the vicinity of $75, shares have fallen around 78%. The stock was tumbling sharply again in after-hours trading on Thursday, to around $12, after yet another troubling earnings report in which Snap’s founders couldn’t find it in themselves to even offer a financial forecast.

Since its inception, Snap has been built to please its founders, Chief Executive Evan Spiegel and Chief Technology Officer Bobby Murphy. When it went public in 2017, it offered only nonvoting shares, known as Class A shares, an at-the-time unheard-of move that hasn’t been copied in a major IPO since, and gave Spiegel a “CEO bonus” that amounted to 3% of a company of which he already owned a healthy percentage. The result is that Spiegel and Murphy own a whopping 99.5% voting control of the company.

From 2017: Snap IPO boils down to one question: do you really trust Evan Spiegel?

While other companies that have planned stock splits of late, such as Amazon.com Inc. and Tesla Inc. have pronounced that their moves were meant to help their employees better handle their stock compensation, Snap showed its hand by blatantly stating in a letter Thursday that the move was specifically for their founders’ benefit. It is a way to let the founders continue to donate or sell stock without diluting their voting control and ownership stake — receiving one Class A shares for every supervoting share they currently own gives them a chance at liquidity.

While the two executives have been involved in a lot of philanthropy in recent years, the move seems self-serving. Are the co-founders just making sure they have an easier path to make donations, or are they fiddling while Snap burns?

Clearly, a $40 stock price is a not something Snap is going to see in the near future, so that is probably why no analyst posed a question about the dividend plan on the company’s conference call Thursday. The more immediate problem for investors is the company’s deteriorating ad business, and whether it is symptomatic of the economy or something more problematic at Snap itself.

Snap’s top leaders also should have been focused on Snap’s serious issues, such as the widening quarterly loss and lower-than-expected revenue, or the fact that the company is still unprofitable and doesn’t seem headed toward profitability. Instead, they made sure to protect themselves.

If investors had forgotten how founder-focused Snap is, they got a big reminder on Thursday. And whether those founders are worth it or not, investors have no say in the matter.