Biz-War?(A)

In late January, 1993, I stood shivering next to a colleague and watched a helicopter land on a pad near the pillared entry of the old Guggenheim Estate at Sands Point, Long Island, then the home of IBM’s Corporate Management Development Center. Four CERES[1] staff members had driven with me from Boston to a meeting with environmental, legal and shareholder relations people from ten companies. My beige Honda sat forlornly off to the side as the helicopter disgorged its cargo, and as limos slowly wound around the circular drive. As if watching a B movie starring us, my colleague and I gaped at the helicopter. We and others were there to represent the broad coalition of activists and public investors (the masses), discussing the issue of corporate accountability, specifically around the environmental impact of their business. In this B movie, the company representatives moved easily around the aging splendor of the mansion with its sweeping drives, echoing halls and paneled conference rooms, once private studies and libraries. The rest of us pretended comfort, living out the metaphor.
Guggenheim’s mansion was a white elephant relic of a by-gone era when IBM purchased it in 1953 to use as a country club for some privileged employees. At one point in Guggenheim’s time, as many as 104 men worked on the grounds and in the barns alone. Flowers grown in the cut-flower garden tended by some of those workers were scattered each morning in 100 vases around the house. The weird thing was, the obsolete computers in the rooms of IBM’s education center did not all work. We made a mental footnote to file that fact, but were not sure under what category.
The meetings with IBM and their counterparts from other companies were not at all unfriendly. They were part of several meetings discussing the need for companies to manage their impacts on the environment, and to create a report to stakeholders that illustrated the companies’ policies and results. IBM and others accepted the desirability (or perhaps inevitability) of such a relationship with stakeholders and we met several times to negotiate the terms. Although these meetings with IBM did not end as we had all hoped due to the departure of John Akers as CEO and the sudden change of personnel in the negotiating process, they were informative, useful and positive, and helped us learn how to better relate to other companies.. On the wall of my office in Boston hangs a letter from one of the IBM people, with the dutiful if dubious formal, quintessential IBM salutation addressed to Dear Sirs and Ms. Bavaria.
Hard won, hard fought agreements that came out of other similar negotiations with other companies like Sunoco, Baxter International, American Airlines or Ford were always voluntary, and always facilitated the company’s relationships with the communities in which they did business. There was no recourse for failing to live up to their end of the deal except, possibly, public scolding. No-one in that room had any illusions that we supplanted government regulation. In fact, many of the NGO participants were particularly anxious that the agreement might weaken rules and fines already in place and give companies a place to hide while accepting kudos for the relationship. For their part, companies often saw a deal with CERES as pre-empting possible future command and control regulation. As is often true, somewhere in the middle of those two views lay the truth, a different truth for each company.
It was thus hard to recognize myself in the papers released from the American Enterprise Institute’s recent conference on NGO’s entitled “We’re Not the Government But We’re Here to Help You: Nongovernmental Organizations: The Growing Power of an Unelected Few”. Yet when someone seems to have you in his or her sights, it’s usually smart to find out what’s going on. Parts of this conference dealt with socially responsible investing and shareholder activism, and one of the presenters produced a Power Point slide entitled “Social Netwar: Shareholder Activism Subnet” that was a bright blue and yellow diagram of the shareholder activism power structure. It looked like a bad illustration of the behavior of atoms under stress. Three organizations I personally started were in the diagram along with many NGO colleagues.
Reading further among the conference papers, I learned that I was part of an internet-organized army engaged in Biz-War that is designed to topple all corporations, and also part of an “emboldened” anti-free market NGO. The obvious (and old) dichotomy was set up linking shareholder activists with socialists and companies with free trade. The old debate from the mid 90’s was re-hashed around The Body Shop[2]. We were also portrayed as trying to “undermine the sovereignty of constitutional democracies, as well as the effectiveness of credible NGO’s”. And of course, the work that I do is “at odds with the Bush administration”. I didn’t need the AEI to tell me that!
The best I can figure, the motivation for this jabber is probably part of a “best defense is offense” strategy. Public confidence in corporations is scraping an historical bottom, for good reason. The PERP walks of the implicated in the Gucci loafers have been less frequent this year than in 2002, but still they continue. Wall Street reforms teeter along with little focus and decreasing drama. Even with so little government reaction to the scandals, shareholders have picked up traction and have increasingly attracted attention. When under pressure, one of the best ways to throw the opposition off base is to drive up their negatives, a fancy tactic meaning “call them names” and “find out if they smoked pot. Now, when companies are under the gun for their behavior and shareholder initiatives are gaining new support in search of corporate transparency and dialogue with stakeholders, it’s a fine time to call us all socialists and create a picture of us as an unpatriotic, anti-corporate, anti-trade invading army.
Professor Thomas Kochan of the MIT Sloan School of Management told the Academy of Management in August of 2002[3] that low confidence in corporations stems from “the over-emphasis American corporations have been forced to give in recent years to maximizing shareholder value without regard for the effects of its actions on other stakeholders”. He states that this situation, in his opinion, evolved from the takeover years of the ‘80’s that created short-term earnings myopia, which led eventually to the charismatic, over-paid CEO. “The self-reinforcing escalation of executive compensation that ensued eventually led to 600 to one ratio of CEO compensation to the average worker”. Kochran posits that “Power became highly concentrated at the top of organizations and the adage that ‘power corrupts and absolute power corrupts absolutely’ was again was proven true.” I happen to agree with him.
The fact is, just as shareholder activists cannot be pigeon-holed or stereotyped or portrayed as a “node” in an internet swarm, neither can corporate CEO’s and managers be assumed all to be corrupt. Although most earn extravagant salaries, many are honest, and, frankly, a lot smarter than those who would use tactics of confrontation and polarization to push back honest dialogue and stakeholder input. Many corporate managers understand the long-term danger of alienating community and employee stakeholders. IBM managers understood it when they graciously hosted the meeting at Sands Point in 1993.
I have, for one thing, never in my life considered doing completely away with corporations as entities, though I know some folks have thought seriously of this and would like to find a way. I run a company organized as a Massachusetts corporation and depend on many others for various pieces of my business and personal life. I deeply admire many of the corporate people we have worked with over the years, people who are not naïve but sophisticated and who are able to think in multiple dimensions, understanding that U.S. based transnational companies will be ill-served if they assume they can conduct commerce all over the world as it is done in Kansas City.
But at this time, there are many deep differences to resolve as we strive to continue dialogues bridging the gaps in understanding between business – especially big transnational business – and the global community. It will take transparency, willingness to compromise, and openness to the ideas of others. According to Professor Kochan, over $7 trillion has been lost from the value of pension and 401-k plans since 2000, even as new mansions continue to rise. That’s a lot of pain.
[1] CERES.org, Coalition for Environmentally Responsible Economies
[2] The Body Shop, Insight, September, 1996, Bavaria, Billenness, Becker with Freundlich et al
[3] Addressing the Crisis in Confidence in Corporations, 2002 Kochan, Academy of Management