A new report on problems with privatized state economic development agencies singles out the Michigan Economic Development Corporation for excessive executive bonuses as well as questionable subsidy awards and resistance to accountability.
The report by Good Jobs First notes that Michigan is one of only seven states that allow private entities to control their business recruitment functions.
When the Michigan Economic Development Corporation was created in 1999 through a reorganization of the Michigan Jobs Commission, the head of the jobs commission, Doug Rothwell, was tapped by Gov. John Engler to head the new entity. Crain’s Detroit Business wrote at the time: “Widespread speculation surfaced last week in Lansing that the new structure is, in part, a way to retain Rothwell and pay him more than the $108,000 he makes now as an unclassified state employee.” Rothwell denied there was a connection, but he apparently had no objection when the MEDC board later raised his base salary to $189,600 – well above that of the governor – and then gave him a $49,000 bonus.
Doug Rothwell directed Gov. Snyder’s transition into office and was appointed chairman of MEDC.
Snyder’s pick for president and CEO of MEDC, Mike Finney, will receive an annual salary of $250,000.
The report recommends instituting the following safeguards for Public-Private Partnerships like MEDC:
Maximum transparency in decision-making and finances, including adherence to state open records rules;
For PPPs that oversee subsidy awards, maximum transparency concerning recipients of those awards and their performance;
Strict conflict of interest rules regarding staff members and boards of directors;
Strict rules barring favoritism and “pay to play” in connection with companies doing business with the PPP;
Appointment of a public ombudsperson to monitor PPP activities and respond to outside complaints; and
Respect for the rights of employees to organize a union (or to transfer a representation agreement that was in place when the entity was a government agency).
The report also recommends that state economic development groups include labor and non-profit representatives and that the governor not have power to name all of the entities directors.