How America's CEOs Feel About 'Darth Vader' Image
GREED OR JUST GOOD BUSINESS?
THEY'RE the Darth Vaders of downsizing, corporate hit men in black hats, merchants of greed who slash jobs by the thousands while pocketing millions in take-home pay.
That's the fast-growing image, anyway. Nowadays, lots of people have something bad to say about America's chief executive officers. With economic anxiety spreading across the country, critics are pointing fingers at the top - accusing CEOs of caring more about Wall Street than Main Street, more about raising their stock prices than improving the welfare of workers.
But the view looks different, or at least more complex, from the other side of the boardroom table. Many CEOs say they're not to blame for what's happening in today's fast-changing job market. It's business pressure from deregulation and competition that's making some kinds of employment less stable, they say. And most big companies aren't laying thousands off. Overall, the job market is booming.
The dynamic change produced by free markets can be harsh on individuals, the CEOs admit. It's that change, though, that has helped make the US economy a powerful engine that remains the envy of much of the developed world.
"There is just an immense amount of activity going on in corporations all over the country that is very constructive in setting the stage for continuing wealth creation," says Robert W. Galvin, the CEO of Motorola Inc. in Schaumburg, Ill. "It is a word that I use in its most noble form: wealth that affects and helps everybody."
Recent rhetorical attacks by commentator Pat Buchanan and other populists reflect the "superficiality" of much political discussion, according to Mr. Galvin. The glass of jobs is mostly full, he claims. But "part of it is empty, and politicians like to make a fuss over the part that's empty," he says.
Other CEOs complain that they are not ogres, as they feel the press often portrays them. Chrysler Corp. CEO Robert J. Eaton told the Economic Club of Detroit this week that layoffs are often the result not of cruelty, but of a change in the way power flows through the US economy.
Institutional investors, such as pension funds, have more and more say in how businesses operate today, Mr. Eaton said. Every CEO knows that if shareholders feel their firm is not efficient they'll feel enormous pressure to change - or face a takeover that could result in the demise of the company. "Downsizing and layoffs are part of the price of becoming more competitive," he said.
Still, it's undeniable that many people are worried about the future of their work. Mass firings at AT&T, IBM, and other former blue-chip firms have made millions of unaffected people wonder if they are next on the firing line. Whole industries, such as telecommunications and banking, seem to be in a riotous state of employment turmoil.
According to a recent New York Times analysis of government data, 43 million jobs have been eliminated in America since 1979. Yet during the same period 70 million new jobs were created. What's really going on here?
First of all, it's unclear whether the US layoff rate has increased significantly in recent years. Back in the early 1970s about 35 percent of unemployment was caused by firings, says Robert Valletta, an economist with the Federal Reserve Bank of San Francisco. Today the figure is 40 percent.
But the real story may be the patterns within this overall figure. "I suspect the burden of layoffs is falling on a narrow range of workers," Mr. Valletta says.
Specifically, two kinds of employees have seen large increases in job instability, economists say: men at the lower end of the education scale, and upper middle-class white-collar workers. While significant from an economic point of view, these two categories don't make up anything close to a majority of US workers.
The real problem may be that highly publicized layoffs are occurring after a long period of erosion in average worker wages - and that fired workers today face an increasing probability of never finding a job as good as their old one.
"What has changed is not so much the probability of being laid off as the fact that when you're laid off this will likely usher in a permanently fallen income," says Gary Burtless, an economist at the Brookings Institution in Washington.
At the same time, pay for those at the top of the business ladder appears to be skyrocketing - a fact that hasn't helped their image an iota. A survey of several dozen CEOs by consulting firm Pearl Meyer & Partners recently found that their average compensation rose 23 percent last year, to $4.3 million.
AT&T, for instance, may be laying off thousands, but CEO Robert Allen took home $5.85 million in 1995 (and he was also granted a stock option valued at $11 million).
Members of the CEO club don't necessarily defend Mr. Allen's compensation as the going market rate. They point out that Ma Bell might not have had to shed those jobs if Allen had done a better job in managing the transition to today's deregulated telecom environment, or if AT&T's ambitious try to enter the computer business hadn't flopped.
"That's a lot of money for bad decisions," says Jim Wall, president of Amrep Southwest, a housing construction firm.
Mr. Wall reduced his own work force by 15 percent three years ago. "Our profitability was low. We were under a lot of pressure from shareholders," he says.
"It's always painful," he says of the layoffs. "When you address the cost cutting, it is the newest and oldest [employees] who go."