Chapter Two

Corporations and The Public Interest Since 1970

INTRODUCTION

The nation's postal services are vital to many communities and constituencies and serve many interests. Unfortunately, the term "public interest" does not have a precise definition in U.S. politics, and just what the "public interest" is an how it can be represented has long been a subject of debate in American society. There could be many "public interests" in the mail communications system run by the government. Americans have generally valued and supported uniform services to all communities, because of the importance of the mail to civic, personal, and business communication. It has been considered important for the service to be affordable to virtually all customers, to be relatively speedy, and to be free from political restrictions.

Beyond these areas of general agreement, there has been controversy over the mail system, who should run it, what services it should provide, and how its rates should be set. Advertising and mass market consumer industries use the mail for publicity. They want low rates and speedy service, as do newspaper and magazine publishers, whether profit or non-profit. When discounts are given to one group, other groups resent the perception that they are bearing an undue burden in the rates. Businesses who contract with the post office want to preserve or expand their financial relationships. Competitors want to expand their market share in opposition to the public market. Recently, environmentalists want to reduce the consumption of wood and paper products and reduce solid waste. Workers and communities want the postal system to produce living-wage jobs. Most citizens value subsidized non-profit mailing rates, free mailing for the blind and free mailings from elected Congressional representatives.

Since the Postal Service was created in 1970, though, the interests of non-profit organizations, residential customers, workers, environmentalists and others have been subordinated to those of large corporations who have a great financial stake in using the mail or in contracting with the Postal Service. The public company set up in 1970 has been designed to operate in private interests. Corporate priorities have dominated the decisions of postal management, while consumer groups, unions, and politicians have been quiet or relatively ineffective in advocating other interests. This chapter traces the history of postal reorganization and the increasing and ultimate dominance of private business in the governance of a public corporation. It examines the official and unofficial method through which these businesses set postal policies.

When Congress reorganized the Post Office in 1970, the legislation stated that the USPS "shall be operated as a basic and fundamental service provided to the people by the Government . . ." The "exercise of the power of the Postal Service shall be directed by a Board of Governors . . . chosen to represent the public interest generally."

The "public" interest has, in this case, been construed to be commercial interest -- the interests of the USPS largest mailing customers and contractors. Only corporate interests have a "seat at the table" in governing the Postal Service; residential customers, non-profits, community organizations, small business and environmentalists have only an appeal through their elected representatives to Congress who provide some oversight through committees.

In order to understand how business interests came to dominate a public institution philosophically and functionally, it is vitally important to look at the origins of the postal corporation and the intentions of those that initiated it. Business interests have been placed at the center, and the postal service's other constituents (or "stakeholders" in the current lingo) -- residential customers, rural communities, small publishers, non-profit mailers and postal workers have been represented only indirectly through organized political pressure on Congress, through contesting rate proposals, or through collective bargaining in the case of the service's workers.

The current push by the Postal Service to contract out operations, shift mail sorting and delivery to the private sector, and set rates to subsidize the largest mailers is a predictable and logical consequence of the 1970 reorganization. Events since that time have developed within that basic framework. The official governance system, the Board of Governors, and the "unofficial," the special task force, have assured that the benefits of the system will be privatized and the costs socialized. A look at the forces behind the 1970 reorganization makes this clear.

CIRCUMSTANCES LEADING TO THE 1970 REFORM

From many points of view, the Post Office was in crisis during the 1960s. Mail volume almost tripled from 1940 to 1967, and Congress failed to fund adequate mechanization or research and development to handle the volume. Worker morale was low; turnover reached an annual 26 percent by 1967, and the Post Office had difficulty hiring enough workers. Wages were so low that in some states, postal workers qualified for "War on Poverty" programs like food stamps and Medicaid.

With the Vietnam War underway and with inflation increasing, President Lyndon B. Johnson's administration and Congress gave only 2-3% annual raises to the already low-paid workforce. Morale dove, and spending cuts led to curtailment of overtime. The growing mail volume couldn't be handled by the system, and backlogs of mail accumulated around the country.

The most famous logjam was the October, 1966 crisis in Chicago. Over 10 million pieces of mail were backed up in that office alone. Johnson's former legislative aide, Lawrence O'Brien, had been appointed Postmaster General the previous year; he was a former Chairman of the Democratic National Committee and had years of experience working with Congress and key private sector interests.

O'Brien, in attempting to solve the postal crisis, could have initiated a broad public debate and could have consulted the unions, but instead he relied on elite business and political allies developed over his years of high-level political work. He created a highly confidential task force called the Quadriad Group, four men he brought with him to the Post Office Department, to develop a reform plan that would provide postal management with greater autonomy. The task force came out with a recommendation that a government corporation be chartered. O'Brien announced the proposal at a meeting of the Magazine Publishers Association in April of 1967, and President Johnson soon appointed the President's Commission on Postal Organization to study the plan.

The Commission was chaired by retired AT&T Chairman Frederick R. Kappel. When the administration appointed Kappel to chair the reform study, they probably had already made a decision about the nature of the outcome. Kappel had worked for his entire life in the Bell System. As the CEO of AT&T there was only one model that he was familiar with in shaping a public corporation -- it was the AT&T model, and at that time the company was viewed as the world class telephone company delivering service at a low cost with a superb productivity growth record of more than 6% annually.

The commission's other members were "a roll call of American business elite," according to John Tierney, author of the 1981 study, Postal Reorganization. They included George P. Baker, Dean of the Harvard Business School; David E. Bell, vice president of the Ford Foundation; Fred. J. Borch, president of the General Electric Company; David Ginsburg, partner in Ginsburg and Feldman; J. Irwin Miller, chairman of Cummins Engine Company, W. Beverly Murphy, president of the Campbell Soup Company, and Ralph A. Peterson, president of the Bank of America. George Meany, president of the AFL-CIO was also included, probably for strategic reasons, as the postal unions expressed their opposition to the proposal immediately after Postmaster O'Brien raised the idea, and the unions were known for their legislative influence. According to one study of the commission, Meany did not participate in the commission's meetings except for one phone conversation. He later endorsed legislation that paralleled the commission's recommendations.

The commission assembled a professional consultant staff from two of the nation's leading management consultant firms, Arthur D. Little, Inc. and Price Waterhouse. The commission had $1 million and one year to report to the President. The report, issued in June 1968 was entitled "Toward Postal Excellence."

The report noted the lack of investment in mechanization as a cause of poor productivity. The commission recommended that a corporation be chartered which could borrow money and retain its own funds. The report advised rule by a board of governors, collective bargaining and binding mediation (retaining strike prohibition) for non-managerial employees, and that rates be set by a five person expert rate commission, subject to veto by Congress. The Postal Rate Commission was designed as the postal counterpart to the Federal Communications Commission.

The idea of a government owned corporation was not new nor limited to the Post Office. During the New Deal, the federal government established several companies that were designed to fulfill a specific social or economic function. The Tennessee Valley Authority, the Export/Import Bank and the Federal Deposit Insurance Corporation were all examples of government run corporations. In theory, they were supposed to grant managerial flexibility, serve a social/economic/public good, and break even financially. President Harry Truman explained in 1948:

The Kappel commission did not foresee the reform as a final step, nor did it see the public corporation as a final product. Commission members suggested that "the possibility remains of private ownership at some future time, if such a transfer were then considered to be feasible and in the public interest."

Kappel may have intended a regulated private monopoly similar to AT&T, providing some public control through national regulation but also producing profits for investors. In testifying before a congressional committee he later explained:

The corporate plan gained the support of both the Democratic and Republican parties, but it was opposed by the postal labor unions from the beginning. The unions had relied upon lobbying Congress for raises from their beginnings, since they had no collective bargaining for wages. While the postal unions were unable to affect change directly through collective bargaining, they had substantial political muscle, since they could mobilize thousands of members spread throughout every congressional district. The officers of the postal unions had no private-sector collective bargaining experience, and, in addition to a general suspicion of the forces behind reorganization, they feared the loss of their traditional political leverage.

O'Brien left the Post Office department in April 1968, and other postal officials continued his push for "reform," recognizing it would be difficult to get the legislation passed. Lobbyists were lent to the Congressional Liaison Office of the Post Office Department by Sears, General Electric, Procter and Gamble, J.C. Penney, the Chamber of Commerce and the Magazine Publishers Association. Even this lobbying might was not enough, however, to get the proposal through, and postal officials, constrained from the kind of "massive selling job" needed, suggested that the U.S. Chamber of Commerce and other corporate lobbyists could establish a separate organization. With the help of Lawrence O'Brien, who was no longer in federal office, the Citizens Committee for Postal Reform (CCPR) was established.

The CCPR became the tenth largest lobby by 1970, and it was backed by large corporate customers of the post office: McGraw-Hill, Sears, Roebuck, the Bank of America, Montgomery Ward, General Foods, Pitney-Bowes, Time, Inc. and Standard Oil, Scott Paper, Pan American Airways, General Electric, Goodyear Tire, Ford, Conde Nast publishers, Cowles Communications, and others. The CCPR launched a speakers bureau, radio and televisions ads, and a national op-ed and print advertising campaign.

Skeptical Washington Post columnist Nicholas von Hoffman commented,

After listing the major backers of the CCPR, von Hoffman went on to say,

Postal unions lobbied against the corporate reform and supported an alternate piece of legislation. National Association of Letter Carriers President James A. Rademacher testified before a congressional committee in 1969:

Rademacher also expressed concern at the involvement of AT&T in the reform and speculated that the company could acquire a functional monopoly on written and phone communications.

A similar position was put forward by Ashby Smith, President of the National Alliance of Postal and Federal Employees, a union made up primarily of black postal employees of all postal crafts, during later hearings:

In early 1970, NALC President Rademacher compromised with the Nixon administration and agreed to the creation of an independent "postal authority" in exchange for a 5.4% raise. When a House committee approved a bill reflecting the Nixon-Rademacher compromise, letter carriers in New York City met and demanded a strike vote. Picket lines went up in Manhattan on March 18.

The strike spread through post offices all over the country, while the national unions and the President negotiated and the Citizens Committee for Postal Reform went on the offensive, stating in advertisements that the strike "need never have happened." Nixon sent troops to move the mail in New York, but the strikers stood firm until a tentative settlement was announced that included a 14% raise. In the bargaining over the settlement, the administration granted an immediate 6% raise with an additional 8% tied to the passage of postal reorganization legislation through Congress. With unions now actively lobbying for their raises, now tied to reform, the Postal Reorganization Act was finally passed on August 12, 1970. The Act compromised several proposed bills but contained the principle features of the President's Commission report; namely, the formation of a corporation with rule by a board of governors, collective bargaining and binding mediation, and the establishment of a rate commission.

Congress took a much less active role in postal affairs after the reorganization was complete. With a corporate management authorized to negotiate labor agreements, borrow money, construct facilities and manage work, Congressional representatives tended to be involved only when legislation or budget matters were at hand.

THE BOARD OF GOVERNORS

The members appointed to the first Board of Governors began a tradition of business domination. Many represented corporations that were deeply involved in advocating the proposed reform, and a tradition of business domination of all subsequent boards began. The first board members were Frederick Kappel, Chairman and former AT&T executive, E.T. Klassan, former president of American Can Co.; Theodore Braun, chairman of Braun and Co.; Andrew Holt, former president of the University of Tennessee; George Johnson, president, Johnson Products Co.; Crocker Nevin, former president, Marine Midland Bank; Charles Codding, Jr., co-owner, Codding Cattle Research; Patrick Haggerty, chairman, Texas Instruments; and M.A. Wright, chairman of Humble Oil and Refinery Co. (now Exxon).

Vern Baxter, author of Labor and Politics in the U.S. Postal Service, says, "between 1971 and 1992, 44 people served on the Board of Governors; 29 (two-thirds) were businesspeople, four were recruited from the professions, four were political appointees, and seven others were career postal employees. There has never been a homemaker or blue collar worker represented on the Board." (See Table 5)

Past Postmaster General Marvin Runyon, formerly an executive with Ford Motor Co., testified in Congressional oversight hearings that the postal Board of Governors "works very well. It works like a board of directors in any company. . . like any private organization would work."

Unions eventually dubbed postal reorganization a "success," largely due to its provisions for collective bargaining and their successes in improving wages and working conditions during the 1970s. William Quinn, President of the National Postal Mail Handlers Union, in his 1995 testimony before the House Subcommittee on the Postal Service, said, "There was nothing wrong with the Postal Reorganization Act, and Congress should leave the act alone." The National Association of Letter Carriers and the American Postal Workers Union, the two largest postal unions, published officially-endorsed histories in 1986 and 1992 respectively, and the books contained no criticism of any fundamental aspect of the act nor criticism of the Board concept. The unions have never contested the appointment of individual Board members or challenged the governance system as a whole. They have been fairly successful in bargaining for wages, and postal pay rose quickly through the first decade, from an average of $7,594 annually in 1970 to $21,146 in 1981 (See Table 4).

The Board's makeup, as well as the legitimacy of running a public service almost exclusively with corporate directors, has seldom been challenged from any corner, with two notable exceptions. Ralph Nader's Center for the Study of Responsive law campaigned for residential consumer representatives to the Board in the early 1980s, and retired National Association of Letter Carriers official Tony Huerta has campaigned for a worker governor, both without serious support from the unions or consumer groups. Clearly, most postal workers, consumer advocates, and non-profit mailers have not been part of a political discussion challenging the "right" of big business to represent the "public interest," so they have not attempted to intervene in board appointments.

The Board meets once a month and has a minimal staff, so the day-to-day decision making power remains in the hands of the board-appointed Postmaster General and upper management staff.

RELATIONSHIP TO BROADER POLITICAL CHANGE

The kinds of corporate political alliances forged during the postal reform became a model for a more general effort to overturn regulation, limit the power of unions, and restructure taxation during the 1970s. In discussing the origins and rise of the conservative think tanks and of more direct business lobbies like the Business Roundtable, Thomas Byrne Edsall explained in his 1984 book, The New Politics of Inequality:

Edsall explains that the Business Roundtable, which became, in effect, "the political arm of big business," was formed by two business organizations whose main purpose was to restrict the influence and bargaining power of unions. Bryce Harlow of Proctor & Gamble, a key figure in postal reform, urged the merger of the anti-labor groups with the March Group, an informal corporate lobbying organization. Several of the key principals named by Edsall were also central figures in the creation of the postal corporation.

"SPECIFIC INTERESTS?"

The Board of Governors members, according to the Postal Reorganization Act, "shall not be representatives of specific interests using the Postal Service," but this provision ignores the fact that corporate dominance places general business interests at the center of postal policy. There has only been one serious equipment procurement scandal; in 1986 Board Vice-Chairman Peter Voss plead guilty to taking at least $30,000 in kickbacks to push the interests of an automated mail sorting manufacturer in contracts that could have been worth $8 billion. Voss attributed his legal difficulties to having applied his "training as a businessman" to his board activities. "I'm used to being involved in intricate business deals . . . I did not think of the total ethics of the situation." He was fined $11,000 and sentenced to four years in prison.

The Sears Roebuck corporation has had a long term involvement in postal politics and committees, and the Postal Service established trial full service, Sears-staffed postal counters in Sears Roebuck stores in 1989. A series of protests and boycotts by the American Postal Workers Union followed, and the project was ended. Norma Pace, a USPS Board member who was elected Chairman in 1991 was also a director of Sears and owned stock in the company. Consumer advocate Ralph Nader called on her to resign, charging a conflict of interest. Pace denied a conflict of interest, offering the explanation that postage was a small factor in Sears' costs. She said that corporate directors were the kind of people interested and qualified to run the Postal Service and that many compete for contracts and use the mail. "I don't know who you would have [as a governor]," she said. "Everybody works for a company."

THE SPECIAL TASK FORCE

If general business interests thoroughly dominate the USPS, "specific interests using the Postal Service" are also well-represented in postal governance. Their entrance to policy making is through special task forces created by postmasters. Postal management is free to consult with its "customers" and invites bulk mailers, publishers, suppliers and advertising firms to meet to recommend policies and rates. These industry insider groups play a larger role in the formation of policy regarding the USPS than any elected official does. No similar meetings are held with residential customers, representatives of rural communities or small-circulation newspapers and journals. While members of Congress hold hearings on legislation related to the Postal Service and on broader issues, the hearings also tend to be dominated by business interests. Residential customers and consumer groups are not organized to facilitate their participation.

Postal officials have met with a Mailer's Technical Advisory Committee (MTAC) since before the reorganization. According to the Center for Responsive Law's Kathleen Conkey,

The task forces' missions are of a more specific nature. Their recommendations are frequently implemented in postal policy or in Postal Service legislative "wish lists," and postal officials provide no forum through which other stakeholders may contest the recommendations.

The Joint Industry/Postal Service Alternative Delivery Task Force was formed in 1978 to "analyze postal ways of doing business that have not been examined for decades, with the goal of preserving the volume that drives the postal system and easing needless restrictions on customers." The majority of the task force's 89 recommendations, all designed to lower costs for large mailers and facilitate the expansion of private sorting companies, were implemented. These including looser restrictions on presorting and the lifting of postal restrictions on the use of overtime hours for sorting third class mail. A justification for the low third class rates had been that, with more relaxed time constraints, the mail could be used to fill off-peak hours when some workers may otherwise be idle, but use of overtime to sort this mail now would increase its cost without increasing the revenue.

In recent years, special task forces have been convened more frequently and have taken an aggressive role in postal policy and in crafting key components of the proposed Postal Reform Act.

In 1988, Postmaster Anthony Frank established a special task force whose job was to study ways to expand the private sector of mail processing and avoid the use of USPS labor. The committee was called the "Joint Industry/Postal Service Worksharing Project Team" and consisted of postal management, representatives of some of the largest mailers in the country, and executives of pre-sort bureaus. The Worksharing Team's November, 1988 report addressed changes in USPS rates and procedures that would "enable the Postal Service and Industry to work more efficiently together . . ."

The "cost-saving" concepts detailed in this almost 300 page report were reflected in the rate structure adopted by the USPS in February of 1991. The organizational changes and goals proposed by this team were also reflected in the USPS' Corporate Automation Plan and in changes that were implemented in the mail sorting and delivery operations. Private industry was represented in two categories: a group of the largest mailers, like Time, Inc. and Reader's Digest and a group of executives of mail sorting businesses.

In the Worksharing Team report, the members recommended postal rate and policy changes, of which some of the most significant were implemented. Each of those below benefits the private companies who sort mail and benefits the large mailers who are already granted large discounts:

1. Rate incentives for companies to sort mail in walk-sequence order, or the order in which the letter carriers deliver the mail. This change eliminated much of the postal clerk and letter carrier sorting and is an operation that is performed with advanced bar coding equipment.

2. Allow mixing of five-digit barcoded and Zip + 4 pre-barcoded mail and allow mixing of permit and meter mail. Previous to the implementation of the task force recommendations, bulk mailers were required to have these mailings accepted separately. They could not combine them for the deepest possible discounts.

3. Rebate money to the pre-sort firms for "value-added." When businesses or agencies have the pre-sort companies to pick up mail paid at the single-piece first-class rate, the pre-sorters can mix this with their lower-rate mail and be refunded the difference between the pre-sort rate and the full rate. This can amount to almost 9 cents per piece, and the rebating allows the private companies to operate as full-service mailing facilities.

4. Multiple mail acceptance times. The companies requested that the USPS relax its demands that the first-class mail be delivered to postal sorting facilities by an early evening hour and with a current postage meter date. This change required postal facilities to adjust their work scheduling to the largest presorts and probably played a significant role in the service's later relaxation of delivery standards.

Industry members of the Worksharing Team included:

Vince Giuliano - Vice President, ADVO

Hank Ablauf - Vice President, Mellon Bank

Ed Bjorncrantz - Sears Roebuck

Robert Rosser - Bell & Howell

George E. Stiver - R.R. Donnelly & Sons publishers

Thomas Lagan - Vice President, Publishers Clearing House

Deane Raley - Director of Postal Affairs, Time, Inc.

John Ruggerio - Director, Aetna Life and Casualty Co.

Ralf Seiffe - MailSort

Heywood Girion - Mailing Services, Inc.

Henry Daboub - President, National Presort

Charles Thompson - Ace Mailing

In 1992, the Competitive Services Task Force was created; its mission was "to make short- and long-term recommendations that will make the Postal Service more attractive as the carrier "of choice." The Task Force was chaired by Robert Kamerschen, CEO of ADVO, the nation's leading mailer of advertising circulars,

"Regardless of mail class, the industry should be very pleased with postal management's aggressive and conscientious initiative to make the Postal Service a more market-driven institution," said Kamerschen. The committee compared the Postal Service to its competitors in "alternate delivery" for newspapers and magazines and in package and express services. It recommended that the USPS offer highest possible rate discounts, emphasize automation compatibility, offer tracking & tracing for Priority & Express mail, offer "system certification" for pre-sorts (allow certain commercial mail sorting companies to have automatic approval for their mailings, without inspection), and contract out some letter carrier routes. The CSTF took a particular interest in the USPS labor policies and recommended the invocation of layoff clauses, disciplining clerks for customer complaints, elimination of union rules, local area wage scales, and placing mirrors and instructions to "smile" at each postal window.

Competitive Services Task Force private industry members included:

Vince Giuliano - Vice President, ADVO

Bernard Schraml - Reader's Digest, Inc.

Jeff Brewer - Bell & Howell

David Allan - Sears Roebuck

Richard Barton - Senior VP, Direct Marketing Association

Gene Del Polito - Exec. Dir., Advertising Mail Marketing Assoc.

William Mahoney - Pitney-Bowes/ Nat'l. Assoc. of Manufacturers

Frank Delfer III - Senior VP, Int'l Billing Services/Cable Data

John M. Nolan - CEO, Tritech Services/Merrill Lynch

Dennis MacHarg - President, Advance Presort

Deane Raley - Director of Postal Affairs, Time, Inc.

Richard L. Graff - Dow Jones & Co.

Gene A. Del Polito - Advertising Mail Marketing Association

Richard Barton - Direct Marketing Association

Robert C. Williamson - National Association of Presort Mailers

FuturePost '95 was a conference that studied worldwide postal "reform." Executives of postal services in several European countries who had succeeded in corporatizing, privatizing, or establishing joint partnership with private couriers like DHL discussed strategy and international markets. The U.S. participants made recommendations that were largely reflected in the first version of Rep. John McHugh's postal reform act, HR 3717. Their recommended changes included customized service for some large mailers, universal access to mailboxes, capping prices to an index, outsourcing services, no straying from "hard copy" delivery mission, and separation of the issues of uniform rates and universal service.

Future Post working group members included many of the same company representatives present on other task forces, among them:

Vince Giuliano - Vice President, ADVO

Robert Kamerschen - CEO ADVO

John M. Nolan - Tritech Services

John Cleary - President and CEO, Donnelley Marketing, Inc.

Michael Critelli - Vice Chairman, Pitney Bowes

Cary Baer - Vice President, Reader's Digest

Mury Salls - Vice President, International Billing Services

Laurel Kamen - Vice President, American Express

Theodore Deikel - CEO, Fingerhut Companies

Postal rates underwent a major revision effective July of 1996, and again the USPS used a special task force to set priorities. The new postal rates provided for deeper discounts for barcoded, presorted mail and required mailers to do more of postal workers' traditional jobs to qualify for discounts. A first class letter could be sent for as little as 23 cents postage, if properly barcoded and sorted, while the residential customer paid 32 cents. The new discounts were combined with higher bulk rates for mailers who didn't have the technology to barcode mail -- thereby virtually compelling some mailers to use private mail sorters to prepare their mail.

The Postal Service initially claimed that reclassification would be "revenue neutral" -- that discounts and increases would offset each other. But this statement quickly changed once the new rates were approved. According to a June 29 New York Times article, the rate reductions could cost the USPS $400 million in revenue, which, according to the article, was supposed to be made up for in labor cost savings.

Local postal management teams planned to cut union jobs to cope with the revenue decreases. According to the Seattle USPS "Performance Cluster Meeting" minutes, "USPS will be losing revenue due to classification reform, which must be offset by reduction of operating hours. . . Due to reclass impacts, the District budget will be significantly reduced, possibly by as many as a couple hundred positions. The District will be tasked for workhours savings of approximately 197,000 hours." While reclassification would reduce revenue by deepening discounts, it did not significantly decrease the amount of mail postal workers eventually sorted nor did it ultimately decrease the number of workers employed.

The June 29 New York Times article estimated that a company could save an additional $39,000 over the old rates on one 750,000 piece mailing under the new rates. The Times reported that ADVO, the nation's largest advertising mail company expects to save $20 million under the new rates, $15 of which would be passed on to their customers.

The Classification Reform Implementation Advisory Groups included:

Mury Salls - Vice President, International Billing Services

Dennis MacHarg - President, Advance Presort

Gene A. Del Polito - Advertising Mail Marketing Association

Jeff Brewer - Bell & Howell

Charles Thompson - Ace Mailing

Robert C. Williamson - National Association of Presort Mailers

Gretchen Schroeter - Metromail

Marjann Caldwell - Time-Life, Inc.

Charles Howard - Harte-Hanks Direct Marketing

Dana Rhodes - Zip Sort, Inc.

Cheryl Miller - ElectroCom Mail Systems

Finally, in late 1997, Postmaster Runyon sought support for legislative reform by summoning a "blue ribbon committee" of top mailing and advertising industry executives. Their report supported many of postal management's goals and supported the changes recommended in the Postal Reform Act. Runyon said he was "encouraged to hear the blue ribbon committee echo the beliefs of many in the mailing industry that we must see past the outstanding success of today and make change happen for the future . . . We're going to deliver your message on legislative reform to Capitol Hill," he said. The committee recommended that the Postal Service more

aggressively control costs and partner with the mailing industry to obtain postal legislative reform.

Blue Ribbon committee members included:

Theodore Deikel - Chairman and CEO, Fingerhut Companies, Inc.

Randy Lintecum - President of International Billing Services

Frank W. Delfer - VP for billing systems and operations, AT&T

Robert "Kam" Kamerschen - CEO of ADVO, Inc.

Leon Gorman - President, L.L.Bean

Harry V. Quadracci - President, Quad/Graphics

John L. Clark - President and CEO, CTC Distribution Direct

Christopher M. Little - President, Meredith Corporation Publishing

Through the special task force, the board of governors, and management reliance on private interests to determine public policy, corporations have come to dominate the decision-making of a public institution. Workers, community organizations, non-profit organizations, environmental groups, and individual consumers are not at the table.

CONCLUSIONS

The enormous influence of big business on postal governance is exercised in official and semi-official forms, from the Board of Governors to the various task forces. This influence has yielded a direct benefit through a rate structure which favors large volume mailers and through contracting of work to private firms. The growth of the private-for profit mail sorting industry spawned by the rate discounts will be discussed in the next chapter, as will the practices of contractors.

It may be reasonable and efficient for the public Postal Service to grant volume discounts for large mailings. If the discounts granted were equal to the cost savings (and if low-wage labor were not considered an important "social cost") the discounts might be fair. Since, though, the discounts outweigh the cost savings, one can only assume that the full first class rate payer is contributing more than their own cost of service. Even proponents of privatization acknowledge that first class mail users pay a disproportionate burden and are "highly diffuse and not well organized," making it difficult for them to exert their interests. Discounts could be apportioned differently; Sweden's deregulated postal service, for instance, gives coupons for household discounts on letter mail.

While it is also certainly reasonable to consult with officials of large economic organizations, it is not reasonable to consult only with business. There is constantly the danger that businesses with huge resources and great lobbying power will push decisions in their favor. The governing structure of the USPS has no role for, or individuals representative of, residential customers, community or environmental concerns, or small publications or non profit organizations. Congress' oversight is too far removed to have an impact on day-to-day decisions.

Even the unions that negotiate employee pay and conditions are excluded from input on strategic decisions. The Postal Service began to meet with outside business leaders to "redesign" Priority Mail in 1993; it did not notify the union that the work would possibly be outsourced until mid-1996, three months after placing advertisements in newspapers for contractors. Similarly, the Service awarded a pilot for-profit contract to repair mail equipment in 1992, but the union was notified of possible outsourcing in late 1996.

If the public postal service were to truly balance social priorities, the results might differ. Discounts given to, and volume of advertising mail produced, might decline. Certainly, if environmental advocates were at the table, the rates would probably not promote the high volume of advertising mail currently going to homes. For instance, in The Netherlands, residential customers can put a sticker on their mail boxes to refuse advertising mail. If worker and community economic interests were represented, the wages and benefits paid by contractors might be regulated to ensure adequate incomes for workers. Residential customers might ask for expanded local post office hours or more locations; they might also want the post office to provide internet access and facsimile service.

The governance policies of the Postal Service have consistently served business interests above all others, as intended by the initiators of postal reorganization. The next chapter will discuss the ways discounts have nurtured and expanded an alternative to the postal service's unionized mail sorting operations -- the private pre-sort businesses and the uses of technological innovation to expand the portion of operations contracted to private corporations.

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