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Poor CEO Leadership Leads to LayoffsUSA Today by Jason Jennings November 24, 2002
The Business Roundtable last week announced the results of a survey of its membership -- 150 chief executives of leading U.S. companies -- that had one truly astonishing finding: 60% of these CEOs expect their total employment to decline in 2003. In other words, the top leaders of three out of five major firms believe the weak economy will continue, that they must cut costs and that they have no choice but to fire people.
These CEOs have embraced the conventional wisdom of Wall Street analysts: If you don't have layoffs during tough times, your firm isn't lean and mean, and you don't have a prayer of becoming highly productive. But what if that conventional wisdom is wrong?
Don't balance books on workers' backs
I recently completed a major research project on the relationship between layoffs and productivity, and I was surprised to discover that the world's most productive firms almost never lay off workers. In fact, they make an explicit promise that their books won't be balanced through layoffs -- not even during deep recessions. Instead, they cut costs and boost demand in other ways.
After evaluating the finances of more than 4,000 public and private firms worldwide, my research team and I settled on 80 that topped their peers by every reasonable measure of productivity. Simply put, these firms sold more, spent less and made more profit per employee than their competition, year after year.
The most striking trait these 80 productivity superstars shared was their passionate opposition to layoffs, even when the economy was in the dumps. Consider Nucor, America's largest steel maker, which manufactures rolled steel and steel joists. Nucor has reduced the time it takes to produce a ton of steel from 11 hours to 30 minutes -- while increasing its earnings for 30 years in a row.
More than 40 U.S. steel companies, stuck with high fixed-cost structures that make it hard to be nimble, have gone bankrupt in recent years. Yet Nucor continues to thrive. It pays its steelworkers $70,000 to $100,000 per year, far above the industry average. And it has never gone through a layoff.
''When business is bad, as it's bound to occasionally be in a highly cyclical industry like ours, the first thing to go is every executive perk and bonus, followed by every plant manager and supervisor giving up theirs,'' says Nucor's CEO, Dan DiMicco. ''Only then are the workers affected. We'll reduce the workweek to five days and then four and, on rare occasions, even three, but we don't lay people off.''
'Cure' causes more woes
Leaders such as DiMicco don't act this way for altruistic reasons. They understand that, except in rare cases, layoffs create more problems than they solve.
* When layoffs begin, workers become afraid, distracted and preoccupied with their own financial security. It's hard for them to focus on doing good work. Teamwork suffers as they spend more time covering their rear ends and looking over their shoulders.
* Companies that routinely use layoffs to solve short-term problems risk losing their most valuable workers to more stable environments. A great deal of institutional memory also is lost.
* Firms that downsize when business is bad face huge recruiting, hiring and training costs to refill jobs when demand recovers. Add the costs of layoffs, including severance packages, and savings evaporate.
My advice to those elite CEOs of the Business Roundtable contemplating layoffs: Focus on your shareholders' long-term interests, not the current quarter's profits. Stop trying to impress the Wall Street analysts by cutting staff at the first sign of a downturn. Inspire your workers to help you cut costs and boost demand. And above all, stop talking about layoffs as if they're beyond your control. Ultimately, layoffs are not caused by a weak economy, or industry trends, but by uninspiring leadership.
Jason Jennings, a management consultant, is the author of Less Is More: How Great Companies Use Productivity as a Competitive Tool in Business.
CEOs Want to Restore Trust?Associated Press by Hope Yen November 22, 2002
NEW YORK - As Cyrus Freidheim tells it, there "couldn't have been a worse time" than this year to become CEO of a big American company.
Before he became chairman and chief executive officer of Chiquita Brands in March, he said, "I was respected. I'm not respected anymore."
"I was trusted," he added. "I'm not trusted anymore.
"No one wants my job and everyone is angry."
Freidheim's misery had lots of well-heeled company Wednesday, when he addressed other corporate chief executives at a conference in the city's most expensive hotel.
He and his peers sounded sometimes hurt, sometimes contrite and generally humbled as they puzzled over ways to rebuild investor confidence after a year of accounting scandals.
Nearly 150 CEOs gathered in New York for Chief Executive magazine's annual two-day conference at the St. Regis Hotel, known for its personalized butler service, thousand-dollar guest rooms and Louis XV-style furniture.
The agenda covered various topics including technology and work force productivity, but the issue of damaged corporate credibility hung over the meeting like the rooftop-level ballroom's crystal chandeliers.
Indeed, as a sign of the embattled times, the magazine said its CEO of the year, Citigroup chairman Sanford Weill, had backed off giving a keynote address Thursday, on the advice of his attorney. A Citigroup spokeswoman said Wednesday that Weill canceled because of a scheduling conflict.
Weill is facing questions about whether he asked a star analyst Jack Grubman with the company to upgrade his rating on AT&T Corp. shares - and allegedly win business for Citigroup and oust a boardroom rival - in exchange for help in getting Grubman's kids into an exclusive Manhattan school. Weill denies doing any such thing.
"Many CEOs don't understand the magnitude of this crisis of confidence, since we leave action to the regulators and do nothing," said Gerard Kleisterlee, chairman at Royal Philips Electronics, as CEOs sipped mineral water and crunched French mints.
"As a group, we've been all talk and no action," he said. "We as CEOs need to focus on running companies for long-term value and sustainability. We need more accountability and less celebrity."
The proposals for action varied, from reducing executive pay and avoiding celebrity outsider CEOs in favor of more homegrown talent, to resisting shareholder pressure to gain short-term results at the expense of long-term growth and investment.
But many agreed that the past year, which featured criminal indictments and bankruptcies at Enron and WorldCom on allegations of improper accounting, represented CEOs' greatest challenge ever amid terrorism fears and the economic downturn.
Kleisterlee urged a move away from the celebrity culture fostered in the 1990s, which tends to cast CEOs as miracle workers who focus on short-term gains. That view tends to drive up executive pay unnecessarily while hurting the company's long-term growth, he said.
Instead, he said executives must devote time to training new company leaders at a time when CEO turnover is high and when studies suggest that company bureaucrats who move up the ranks may perform better and be less likely overpaid.
"A company is a reflection of the CEO role and not the other way around," said Kleisterlee, whose annual compensation at Royal Philips is more than $900,000. "We either start doing it or risk being legislated into it."
Still, some CEOs were uncertain how much they could actually do.
"You're only as good as the team around you. If I failed, it's because I misjudged the quality of the people with whom I was working," said John Gutfreund, senior managing partner at CE Unterberg, Towbin & Co., who described himself as one of the older CEOs at the conference.
"There's no way a CEO can be omniscient," he said.
Stephen Cooper, chairman of restructuring company Kroll Zolfo Cooper who is serving as interim CEO of Enron as it seeks to emerge from bankruptcy, said company boards also need to become more independent and be packed with fewer cronies and golfing buddies of the CEO.
"There's a little bit of larceny in all of ourselves. If we don't have independence, some people will take advantage," he said.
Cooper also cited several flaws he's seen in failed CEOs, including unrealistic ambitions and a blindness to long-term trends.
Then, when the corporation gets into deep trouble, they fail to see it.
"At the end, they go into denial," he said.
Above-It-All CEOs Forget WorkersUSA Today by Alan Webber November 13, 2002
(11/11/02) - Just when you thought the whole CEO scandal scene couldn't get any darker or more disgusting, well, of course, it does.
Last week, court-appointed examiner Dick Thornburgh slammed bankrupt WorldCom's ''culture of greed'' and questioned whether former CEO Bernie Ebbers' use of millions of dollars in personal loans, including for a $1.8 million house, was properly disclosed.
That report comes on the heels of more indictments of corporate executives, including John Rigas at Adelphia and Dennis Kozlowski at Tyco, each accused of misusing funds on lavish items and ventures.
The whole slimy affair continues to claim new victims -- including one whose job it was to regulate, investigate and clean up the mess: Securities and Exchange Commission Chairman Harvey Pitt, who resigned Tuesday.
But for all of the truly selfish examples of CEO behavior, the worst offense is how out of touch many corporate leaders have become with the people they purport to lead. It is especially galling that it comes as the economy scrapes along, earnings lag and firms lay off workers and reduce operations.
The real challenge for CEOs today is to close the gap that increasingly separates them from their employees. From 1985 to 2001, workers' pay rose by 63%. CEO pay rose by 866%. In 1985, CEOs were paid about 70 times what the average worker was paid. By 2001, CEOs were making 410 times what the average worker made. It's hard to name a newspaper or business magazine that hasn't produced a roll call of CEO shame, top dogs who paid themselves top dollar while their companies have gone to the dogs.
CEOs need to get back to basics, but they've apparently forgotten what little they may have learned during the innovation boomlet of the 1990s. Right now, for instance, companies are starting the sprint toward the end of the year (without much good news to look forward to). At this point in the business year, CEOs are likely to focus on two things: ''headcount reduction'' and ''EBITDA.''
Headcount reduction is a bloodless term for laying off more people -- one of the fastest ways to try to make a firm's financial performance look better in the short run. People are still the most expensive part of running any business. If a CEO can get rid of a whole bunch of them, he might be able to make his year-end numbers look better.
If you work for a living, here's a question you should ask yourself: Do you think of yourself as a ''headcount''? Even the term is an insult. ''Headcount reduction'' is the kind of phrase CEOs use to avoid looking the truth in the eye: To cover up for their own performance, they're willing to sacrifice others. It happens all too often -- but not at the great companies.
Organizations such as Southwest Airlines will do whatever it takes to keep from laying off their people, because they genuinely believe that their workers set them apart. Loyalty is a two-way street: Employees who feel valued work harder, are more productive and give better service to customers, who come back for more. The strong loyalty that Southwest Airlines shows to its people is only one of the reasons the airline has not only weathered the current economic downturn, but also has managed to turn hard economic times into a strong competitive advantage. While the other airlines are battling bankruptcy, Southwest is profitable.
EBITDA -- which stands for earnings before interest, taxes, depreciation and amortization -- is the latest financial alphabet soup designed to measure the company's earnings performance.
Now, there is nothing wrong with CEOs trying to propel their companies toward better year-end earnings. What's wrong is the way they tend to think about it and talk about it.
Another question for working people: If you got a message from the CEO urging you to work harder these last two months to hit the company's EBITDA target, how motivated would you feel? Most people don't eagerly get out of bed in the morning and race to the office to hit their EBITDA targets.
In truly great companies, they do race to the office -- even in tough times -- because they have passion for their work, commitment to their colleagues and a sense of responsibility for their customers.
Dell Computer is another company that has gained market share during these tough economic times. But to its credit, Dell is satisfied not only by economic gains. In a genuine effort to build a truly great company, Dell recently has embarked on a remarkable journey to define ''the soul of Dell,'' which is about as far from EBITDA as you can get. The soul of Dell isn't a number or a profit figure; rather, it's a way of doing business, a way of relating to employees, customers and even competitors. It's the soft stuff of business: the way people feel about their work, the way customers feel about their experience. Dell's campaign is a reminder that, in tough times, the soft stuff matters even more.
The shenanigans of this past year have widened the gap between CEOs and their workers. Tactics that emphasize fear and threats in the fourth quarter will only make a bad situation worse.
A better strategy for CEOs to close the gap involves some simple common sense:
* Want to show that your people really matter? Before you lay off people, cut your own salary and the salaries of your top reports.
* Want to inspire the troops? Spend some time with people who do real work: Go to the loading dock, spend a day on sales calls, check out the life of a retail clerk.
* Want to show some leadership? Take a good hard look at Harry Kraemer, the CEO of Baxter International. Last year, when Kraemer learned that dialysis filters manufactured by a company Baxter had recently acquired were involved in the deaths of patients, he took strong, decisive action.
Kraemer did what CEOs do all too infrequently: He took responsibility for the problem. He apologized for it. He directed his team to make sure it never happened again. He took a $189 million hit to the company's books -- and then he recommended to his own board of directors that it reduce his bonus by 40% as a measure of his own responsibility for the problem. The points he made to his people, his customers and the medical community couldn't have been clearer: authenticity, accountability and integrity.
The message to CEOs who want to be real leaders in this new, grittier economic time couldn't be clearer, as well: Get down off of the pedestal -- and out of the company-paid-for penthouse apartment -- and get back on the ground, where real business takes place.
Alan M. Webber is founding editor of Fast Company magazine. He also is a member of USA TODAY's board of contributors.
Guess Who Pays for the OptionsNew York Times by Gretchen Morgenson November 10, 2002
By proposing last week to make companies deduct the cost of stock options as they would any employee cost, the International Accounting Standards Board may finally be moving the corporate world closer to uniform treatment of this wildly popular and decidedly American form of executive pay. But the debate is not about to stop.
The board's move, which would make corporate accounting for stock options reflect reality, is already drawing fire from technology company executives and their lobbyists who favor keeping option costs out of corporate profit-and-loss statements. Proponents of the status quo argue that if options must be reported as expenses, companies will no longer dispense them.
Some say option grants are the best way to align the interests of executives with those of outside shareholders. Others, like Senator Joseph I. Lieberman, Democrat of Connecticut, contend that if companies stopped dispensing options, rank-and-file workers who receive them would be most hurt.
Now, though, a new and comprehensive academic study soundly disproves both rationales, giving shareholders more reason to reject new pay packages skewed in favor of top managers or not adequately linked to short- and long-term performance.
Joseph R. Blasi and Douglas L. Kruse, professors of human resource management at Rutgers, examined stock option grants and shareholder returns at the 1,500 largest American companies from 1992 to 2001. They found that companies dispensing significantly larger-than-average option grants to their top five executives produced decidedly lower total returns to shareholders over the period than those dispensing far fewer options.
As for the notion that options are primarily a rank-and-file perquisite and that abandoning them would hurt lower-level employees the study instead confirmed what many investors have suspected: in recent years, most options have gone to top executives. And that has been true at hundreds of companies, from Campbell Soup and United States Steel to the El Paso Corporation and the Rowan Companies.
Patrick S. McGurn, vice president at Institutional Shareholder Services, a shareholder advisory service in Rockville, Md., said that the study would fuel a movement among pension fund managers and other institutional investors to start rejecting executive pay packages that pour on the options.
"I think companies are going to be shocked this season," he said.
Mr. Blasi said his study "strongly suggests that executive excess in stock options did not help total shareholder return over the entire decade.
"The problem," he added, "is not a few bad apples but the entire system of executive compensation which was created by a compromised system of corporate governance."
Carol Bowie, director of governance research services at the Investor Responsibility Research Center in Washington, says investors have rapidly become wary about stock options. "At the very least, options tended to promote a short-term focus," she said, "and at worst, they promoted fraudulent activity to manipulate earnings."
In their study, the professors looked at how widely companies had distributed options among their employees. Over the 10 years beginning in 1992, the median percentage of options going to the top five executives was 29 percent.
But companies that dispensed significantly more than the median like R. R. Donnelley & Sons, which in 1997 handed out 94 percent of all options to its top five executives disappointed in two respects. They produced lower overall returns to shareholders than did companies that dispensed less than the median and generally underperformed the overall market as well.
The study is part of the professors' forthcoming book, "In the Company of Owners: The Truth About Stock Options and Why Every Employee Should Have Them," to be published by Basic Books on Jan. 7. They researched and wrote the book with Aaron Bernstein, a senior writer at Business Week.
The professors ranked 1,500 companies according to how much of their options they awarded to their five most senior executives. The 375 that gave the most to their top executives more than 40.8 percent of all options performed worst, returning 22.5 percent over all to shareholders through 2001. The 375 companies that gave the fewest options to their senior executives less than 19 percent fared the best, giving investors a 31.3 percent return, on average.
After combing through the data, the professors said they were surprised by the number of companies that chose to hand over their entire annual stock option grant to just five top executives in any given year. According to regulatory filings from 1992 to 2001, an average of 11 companies a year gave all their options to five executives.
Companies that did so in one year during the period studied included Weatherford International, an oil services concern; the Energen Corporation, an energy holding company; and Harvest Natural Resources, an oil driller.
"The assumption that the system is better for everybody by giving most of the pie to the top of the hierarchy is an assumption that is widely accepted by lawyers, accountants, Wall Street investment bankers and even by many academics," Mr. Blasi said. "But when you compare companies against each other, the more you increase the option grant to the top five executives above the mean, the worse your shareholder return gets."
Perhaps in reaction to investor ire about excessive executive compensation during the stock market's fall, no company gave 100 percent of its options to top executives in 2001, and only three gave more than 90 percent. And the median share granted to the top five executives fell to 18.2 percent in 2001, from a high of 28 percent in 1994.
It is perhaps not surprising that as the stock market climbed throughout the 1990's, more and more companies were giving their top executives larger-than-average option grants. Investors did not seem to mind the transfer of wealth that these option grants represented, maybe because the investors themselves were making money on the stocks.
In 1992, for example, only 375 companies exceeded the average percentage given by companies to their top executives. But that number rose steadily during the decade, to 733 in 1999. The number has since tumbled: last year, 226 companies gave their top executives more than the average grant.
Mr. Kruse, who is also a research fellow at the National Bureau of Economic Research in Cambridge, Mass., said his study underscored the need for institutional investors to be vigilant about huge grants.
"While institutional investors are enjoying beating up on executives these days," Mr. Kruse said, "one sad implication of these results is how they actually point the finger at those same institutional investors for leaving corporate governance to the wrong people.
"Anyone who claims there hasn't been a systematic corruption of business as usual using the legal system as a front, compensation consultants as handmaidens and corporate human resources staffs as lackeys doesn't understand what's gone on."
The Mood: Anger and AnxietyNew York Times by Steven Greenhouse October 30, 2002
(10/29/02) - The ebullient mood of American workers during the 1990's boom has evaporated over the last two years, a victim of recession, rising unemployment, a hobbled stock market and scandals at WorldCom, Enron and other corporations.
In its place, workers are feeling an anxiety that takes many forms, according to numerous surveys and interviews with employees and labor-market experts. Workers who were confident that they would climb the corporate ladder now often worry that their companies will implode like Enron and that they, too, will suddenly find themselves unemployed. Many baby boomers who were looking forward to a prosperous early retirement have been forced to rethink that dream.
Some employees are questioning whether it is worth going the extra mile when asked by senior executives because, as the WorldCom scandal demonstrated, some executives are looking out for themselves, not their corporations.
For the first time in two decades, most workers surveyed said they would vote to join a union if they could, looking to unions as a way to gain coveted protections on the job.
And a New York Times/CBS News Poll found that American workers were more anxious about the economy than at any time since 1993. A survey of 668 Americans conducted from Oct. 3 to 5 found that 56 percent of Americans considered the economy fairly bad or very bad. Thirty-nine percent said they thought the economy would get worse, 46 percent expected the economy to remain the same and 13 percent predicted it would get better. This pessimism was fed by numerous factors, including the corporate scandals, lingering effects of the Sept. 11 attacks, Wall Street's woes and worries about a war with Iraq.
With 70 percent of respondents saying the economy is worse than two years ago, this pessimism has influenced feelings about job security. Slightly more than half of those polled said they were very or somewhat concerned that in the next year they or someone in their household might be out of work or looking for a job.
All this anxiety comes during an unusual downturn. While most economists say the recession ended early this year, job growth continues to be minimal. And some economists expect the anxiety to endure even when growth picks up because many workers, already feeling fragile from the previous decade of downsizing, are deeply shaken by the wave of corporate scandals and by the end of the long Wall Street boom.
"Americans are feeling much less secure about their own job futures," said Carl Van Horn, director of the John J. Heldrich Center for Workforce Development at Rutgers University. "Even during the height of the 1990's boom, workers were expressing some anxiety about their jobs because of the rapid churning of the labor market, through things like downsizing. But now that a real recession occurred, people are more nervous than before. People are also much more concerned about their own retirement security, not only because of the corporate scandals but because they have seen their 401(k)'s get smaller."
Linda Guyer, a project manager for I.B.M. in Endicott, N.Y., said that fellow workers had grown more uneasy because of layoffs. "In the early 90's, when I.B.M. let people go, there were one or two massive layoffs and then you knew it was over," she said. "Now it's every quarter. You hear of someone let go in San Jose or Raleigh. They're spreading it out. You never know when you're going to be hit."
In a poll of 1,000 Americans conducted last spring by the Heldrich Center and the Center for Survey Research and Analysis at the University of Connecticut, 58 percent of those polled said they thought it was a bad time to find a good job.
That has been the story for Geoff Cross of Lincoln, Neb., who has been unemployed for a year, having operated a travel agency that closed, largely because airlines kept reducing commissions.
"There are not a whole lot of nonentry-level positions available," Mr. Cross, 44, said. "The only jobs in the paper are telemarketing and McDonald's. Basically, I'm living in my mom's basement right now and my savings are just about gone."
While worker insecurity is high in troubled industries like telecommunications and airlines, not everyone is worried about layoffs.
Pamela Smith, 52, a retired hairdresser from Dothan, Ala., said: "My husband is in advertising and marketing, and they're talking about moving him up. They're in the grocery business, and they have picked up so much business that they're expanding. One thing people have to do is eat."
In a strong departure from the 1990's, when C.E.O.'s were often hailed as heroes, workers are voicing a sense of anger, even betrayal, toward top executives. Among experts in human resources, a sharp debate is under way about whether workers' commitment to their employers has waned in response to corporate downsizing and a sense that many top executives have betrayed workers and investors.
According to the Rutgers-University of Connecticut poll, 58 percent of workers think that most top executives are interested only in looking out for themselves, even if it harms their company, while 33 percent think top executives are interested in doing a good job for their company.
Ilene Gochman, director of organization surveys for Watson Wyatt, a consulting firm specializing in human resources, said that surveys by her firm had also found decreased confidence and trust in corporations and management.
And in a poll of 900 people in August by Peter D. Hart Research, 60 percent of the respondents said employers fell short "in showing concern for employees, not just for the financial bottom line" and 57 percent said employers fell short in "being loyal to long-term employees."
BILL WALTERS shares this harsh view of the corporate hierarchy. After working for WorldCom for 18 years, Mr. Walters lost his job as an information technology specialist on June 28, one of 5,100 WorldCom workers who were laid off that day as an accounting scandal rocked the company.
His 401(k) plan, which was loaded with WorldCom shares, has lost more than $300,000. And citing its bankruptcy court filing, WorldCom paid him only $4,600 of the $22,000 in severance that was promised.
"I was very naοve, and I just thought that if you did what you were supposed to do, then your employer was going to take care of you," said Mr. Walters, a 48-year-old Dallas resident.
"I think there's a general attitude among high-level executives that they're above the law," he said. "It's hard to explain to my 12-year-old what the difference is between what a bank robber does and what one of these senior executives did."
His family is staying afloat because of his wife's job as a reservations clerk with Southwest Airlines. Mr. Walters applied for a job teaching computer applications at a Gateway store, but he was not surprised when he did not get the job 600 people applied.
"It's very difficult to find a job unless I want to go to work for Home Depot, and I'm not too far away from that," he said.
Wanda Chalk recently landed a job in Houston with a payroll services company after being laid off by Enron, where she had worked for 15 years. "I find it very hard to believe that there is any job security anywhere," Ms. Chalk said. "It's kind of hard to believe that anymore."
She lost more than $70,000 in Enron stock and as a result could not afford to send her son to the four-year colleges that had accepted him. Instead, he began this fall at a community college.
These negative attitudes may hurt corporations whether or not they have been touched by scandal. "That kind of skepticism is very corrosive," Professor Van Horn said, "because the trend in the last half decade or more has been company leaders' ratcheting up expectations for their work force to be more productive, work harder and longer.
"At the same time that they're asking people to make sacrifices, some of these executives were feeding at the trough to enrich themselves," he said. "This has a negative effect in terms of people's commitment, loyalty, willingness to go the extra mile."
Ms. Gochman says she thinks that workers' uneasiness is limiting their ability to act on their anger, at least for now. She cited her firm's surveys showing that employees' commitment to their employers remained unchanged even as their trust in management had declined.
"When you don't see a change in commitment, it doesn't mean that the emotional side of things is unchanged," she said. "What's more likely is they're saying: `My 401(k) has fallen. I know I won't be able to get another job.' It's, `I need to stay here, not that I want to stay.' "
Many workers, she said, feel their employers have violated their trust, by cutting the company match in their 401(k) plans or instituting a less-generous pension plan.
"Trust with an employer isn't much different from a romantic relationship," Ms. Gochman said. "Once trust is broken, people will look elsewhere to see whether they can find a better relationship."
She said that because so many workers were embittered, once the economy picks up, "we have a potential to see massive job exodus with people switching companies."
Ms. Gochman had advice for companies that might be threatened with such an exodus. She said managers should identify the top performers and work to build the emotional commitment those employees have to the company "so they're not the first ones to bolt when things get better."
Garrett Lanzy, a software engineer for I.B.M., said that the upheaval and layoffs at his company and across corporate America had undermined employee loyalty. Mr. Lanzy, 40, who works in Rochester, Minn., said, "People tell themselves, `If this is happening, then there's a good chance it will happen to me in the future, so there's no reason for me to put in a whole lot extra.' "
But he said he was working harder than before, noting that he had to assume some of the responsibilities of four people who had been laid off.
And Stephen Vivien, a carrier management specialist with WorldCom in San Francisco, said that the day-to-day commitment of many employees had not been affected by the anger they felt toward several ousted executives.
"I can transcend my view that these guys at the top weren't looking out for me," he said. "A lot of people believe in the mission of the company to such a degree that that's what motivates us. It's almost like a kid, and the mom and dad are screwed up. The dad has a drinking problem, and the mom is leaving them, and the kids just keep charging forward."
$200 Billion Corporate Abuse TaxThe Daily Enron October 18, 2002
The next time President Bush talks about how cutting taxes will put more money in the pockets of ordinary Americans to spend and spark economic growth, watch his lips. See if he happens to mention the $200 billion tax just imposed on working Americans over the past year.
That's how much a new report, The Cost of Corporate Recklessness, claims Americans are now paying in what the report describes as "corporate abuse taxes."
The report, produced by the No More Enrons Coalition, was released at a Washington, DC, press briefing this morning hosted by Senate Majority Leader Tom Daschle (D-SD).
According to the report, the real cost of all the recently exposed corporate misbehavior has fallen largely onto the shoulders of ordinary working Americans.
This unofficial tax has hit them in many forms, from lost investments, to lost jobs, to gutted retirement funds. The report represents the first effort to pull the various costs together and quantify them.
The group admits its report is not yet a complete accounting, having yet to include such costs as revenues lost to corporate offshore tax dodges. But, the figures released today are jarring enough.
Line items in the report's "corporate irresponsibility tax" include:
The Cost of Corporate Recklessness (Outside link)
CEOs' Warped Mind-SetUSA Today by Bruce Horovitz October 13, 2002
(10/11/02) - The hit parade of corporate scandal isn't about money. It's about boredom. It's not about wealth. It's about loneliness. It's not about power. It's about insecurity.
And it's not about greed. It's about unrealistic fantasy.
So say top corporate psychologists, management experts and CEOs asked by USA TODAY to answer the simple question: Why? What motivates wealthy CEOs to steal from their companies? When you're already a multimillionaire, why do you need more?
Take Dennis Kozlowski, former CEO of Tyco, who, along with two others, has been charged with looting $600 million from the company. Or Andrew Fastow, former Enron CFO, who has been charged with masterminding schemes that officials say let him pocket millions of dollars.
Take former Global Crossing chairman Gary Winnick, under fire for selling $734 million in Global Crossing stock before the company's collapse. Or John Rigas, founder of Adelphia Communications, who along with two sons was accused of stealing hundreds of millions from the company.
This image CEO as crook changes everything. It changes the way millions of investors view Corporate America. It changes the way the nation's best and brightest leaders of the future view the executive seat. It changes the way honest, hardworking CEOs view themselves and their peers. And it changes the way some scandal-weary boards of directors will operate.
"It threatens the very fabric of our system," says William George, former CEO of Medtronic, an outspoken critic of corporate greed.
But it doesn't change one thing: the internal motivations that prodded a plethora of top executives to enrich themselves at the expense of shareholders and workers.
Were he still alive, Dr. Seuss might have his own name for it: Yertle the Turtle syndrome. Sound hokey? Well, the more Yertle got, the more the imperious turtle wildly fantasized about what else he could get until his kingdom literally toppled into the muck.
Some of the nation's top corporate psychologists say that's precisely what's taking place in Corporate America. This isn't about simple greed. It's about a warped executive mind-set stoked by the faux tech boom of the 1990s that's so out of whack it threatens the credibility of big business.
It wasn't long ago that CEOs were equated with rock stars and heralded as corporate messiahs. Now, after various scandals, investors are lumping corporate chiefs into the same ethical junk heap as con artists and two-bit crooks.
Why did Kozlowski need a $15,000 umbrella stand or a $6,000 shower curtain? Why would multimillionaire John Rigas allegedly take $13 million from his company to build a golf course?
"I call it the summer of greed," says Gary Hirshberg, CEO of Stonyfield Farms, the nation's No. 3 yogurt maker.
Five companies Enron, WorldCom, Tyco, Qwest and Global Crossing have destroyed a combined $460 billion in shareholder value while moving inexorably toward bankruptcy, says George.
But it wasn't just greed that got us here. It's desperate, despondent and unfit leaders. "Their desires become insatiable once they reach the top," says Steven Berglas, a renowned executive coach and instructor at the University of Southern California. "They become toxic CEOs because their job challenges are no longer rewarding."
Here are the most common and often surprising explanations the experts gave for over-the-top greed-at-the-top. Not excuses. Just explanations:
Contributing: Bruce Rosenstein
Putting Pressure on CEOsFT.com by J. Earle, S. Targett October 8, 2002
(10/2/02) - Two of the most powerful US pension funds are preparing to target big companies over directors' pay in a move that could make the annual shareholder voting season the most confrontational on record.
TIAA-Cref, the teachers' retirement fund, is drawing up a list of 50 companies which run over-generous executive pay schemes. Calpers, the Californian fund than $150bn assets, also plans a new campaign on pay following the outcry at the huge sums paid out by companies, some of which have since collapsed.
TIAA-Cref will present boards with proposed pay schemes and, if these are rejected, it is going to file shareholder resolutions against the companies. It will also seek to clamp down on abuses of the executive pay system - including the practice of chief executives hedging any risk in their stock options.
The campaign represents a significant hardening of the fund's position ahead of the annual voting season. The wave of corporate scandals is likely to generate a highly charged atmosphere at the next round of shareholder meetings.
Peter Clapman, chief investment counsel for TIAA-Cref, said: "We are going to speak to the CEOs of these companies and get real tough with these people."
Mr Clapman said TIAA-Cref was compiling a list of companies with the worst executive pay schemes with the help of two former CEOs - Ken West of Harris Bankcorp, of Chicago, and Dolph Bridgewater of Brown Shoe Co, of St Louis.
Mr Clapman added that the fund would finger chief executives who hedged the risk in their stock options and, in effect, "pay lip service" to the idea that their interests are aligned with those of shareholders.
Mr Clapman said TIAA-Cref would present executives with pay schemes the fund had individually tailored for each company. These would, however, involve three common themes: stocks and stock options would have to be performance-related, have extended holding periods, and contain an element of downside risk.
TIAA-Cref is to visit companies' executives this month to demand change. If the companies fail to listen to specific concerns by TIAA-Cref, the fund will file shareholder resolutions.
TIAA-Cref is also targeting companies' auditing practice and will be pressing for companies to rotate their auditors. This would go further than the requirements laid down in the new Sarbanes-Oxley Act which stipulates companies only have to rotate partners in an auditing firm rather than the firm itself.
It is to target about 10 companies on accounting independence issues.
Calpers is also drawing up a list of companies where it will press for changes.
"There will be the usual suspects and topics and executive compensation and director independence will be part of those practices," said Calpers' spokesman Brad Pacheco.