Corporations Are Not Humans : Not Even Close---Episode 48

                     NO PLACE FOR PEOPLE ---continued

                                 PAIN AT THE TOP 

   Behind their bold public defense of an economic system in an advanced stage of self-destruction, there are growing reports of unease and concern even among the most elite Stratos dwellers. In 1980--82,  79 percent of managers reported that their job security was "good" or "very good." By 1992--94, that figure had fallen to 55 percent.  It is not simply that their own positions are increasingly at risk. It is a sense that something simply isn't right, that they are leaving their children a deeply troubled world. Many corporate managers face growing conflicts between their personal values and what their corporate positions demand of them.  
   When justifying outrageous executive salaries, the press commonly notes the importance of such rewards in motivating the heads of corporations to exert their best efforts. When William A. Anders, the chairman of General Dynamics Corporation, was granted a $1.6 million bonus for having kept his company's stock price above $45 for ten days, a company spokesperson told The Washington Post that the bonus plan was needed to give top executives the incentive to change the company's business strategy and focus on maximizing returns to the shareholders. It is an extraordinary claim that most privileged and well-paid professionals in the world require million-dollar bonuses to motivate them to do their jobs.
   Derek Bok, the former president of Harvard University, offers a telling explanation. He suggests that top corporate executives must be paid such outrageous sums to ensure that they place the short-term interests of shareholders above all other interests that they might otherwise be tempted to consider --- such as those of employees, the community, and even the corporation's own long-term viability. In other words, top executives have to be paid outrageous salaries to motivate them NOT TO YIELD to their instincts toward social responsibility. Viewed from this perspective, these salaries indicate how distasteful the job of top corporate managers has become in the era of downsizing. 
   With no end to the bloodletting in sight, a growing number of managers are losing their enthusiasm for their jobs, as Fortune reported in its July 25, 1994, cover story, "Burned-Out Bosses" : 

     Managers who were trained to build are now being paid to tear down. They don't hire ; they fire. They don't like the new mandate, but most have come to understand that it's not going to change. That realization makes the daily routine look different : Work no longer energizes ; it drains. 
      Under the circumstances it seems almost immoral to take mush joy in work. So they become morose and cautious, worrying that they will be washed in the next wave of discharges. Meanwhile, they work harder and longer to make up for the toil of those who have left. Fatigue and resentment begin to build. 

   Unlike the financial speculators who move billions of dollars around the world from computer terminals detached from human reality, the managers of companies that produce real things deal every day with flesh and blood humans. They are the ones who must respond to the demands of money managers for greater "efficiency" by imposing on their former friends and colleagues an experience almost as devastating as the loss of a loved one. As one CEO related to Fortune, "You get through firing people the first time around, accepting it as part of business. The second time I began wondering , "How many miscarriages is this causing? How many divorces, how many suicides ? I worked harder so that I wouldn't have to think about it." 
   An executive recruiter reported visiting a manager who had just gone through several rounds of firing immediate subordinates. Previously a strong, take-charge executive,  he was now smoking, had lost weight, was unable to look the recruiter in the eye, and seemed extremely nervous. For another executive who had previously eliminated thousands of jobs, the need to put several thousand more former colleagues out on the street resulted in a loss of appetite and difficulty sleeping. He began breaking out in spontaneous fits of crying and one day couldn't get out of bed. 
   Those who achieve the pinnacles of financial and professional success in America seldom lack for physical comforts. They are learning, however, that no amount of money can buy peace of mind, a strong and loving family, caring friends, and a feeling that one is doing meaningful and important work. 
   The world is changing even for managers who were once at the pinnacle of power and prestige within their industries. Richard W. Snyder, one of the best known and most powerful figures in the publishing business, had a key role during his thrity-three-yearcareer in building Simon and Schuster into a major U.S. communications firm with an annual gross income of $2 billion. On June 14, 1994, he was abruptly and summarily sacked as chairman and CEO during a five-minute meeting with the CEO of Viacom, Inc., which had recently taken over Simon & Schuster's parent company Paramount Communications. The reason given was simply "a difference in styles." 
   Under the leadership of its chairman Kay R. Whitmore, Eastman Kodak reported 1992 profits of $1.14 billion --- a margin of roughly 5 percent on sales. On August 6, 1993, he was fired by the company's outside directors on the grounds that he was moving too slowly on cost reduction. He had announced 1992 layoffs of only 3,000 of Kodak's 132,000 employees. Institutional shareholders were clamoring for cuts of at least 20,000. Financial analysts heralded his firing as clear evidence that the outside directors were committed to placing the the INTERESTS OF INVESTORS ahead of those of management and employees. Kodak stock closed up $3.25 at the end of the day. 

   No one is immune. There is no longer security at any level of the pyramid. The Economist recently noted : 

     Being the boss of a big American firm has been one of the safest and most richly rewarded jobs in the world. Until recently, that is. Last week the bosses of IBM, Westinghouse and American Express lost their jobs. A few months earlier Robert Stempel was unceremoniously removed as chairman of general Motors . . . Now those at the top of big companies are wondering who will be next.

   The Economist attributes the phenomenon to a shift of shareholder power from the individual investor to performance--oriented investment funds that are flexing their muscles to kick out top managers of corporations that they consider to be "underperforming." There is the need for takeover battles as fund managers realize they can simply fire managers whose performance is lagging.