ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, October 10, 1996 TAG: 9610100047
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
DATELINE: CHICAGO
SOURCE: Knight-Ridder/Tribune
Some of the biggest hitters in corporate America stepped up to the plate this week to take their cuts at two of the most prevalent concepts in the world of business: downsizing and corporate responsibility.
Speaking to the Council of Institutional Investors - whose 103 members manage some $1 trillion in pension plans - the corporate superstars conceded that one concept wasn't working, while the other was still largely a matter of lip service.
``There's a lot of wishful thinking in boardrooms that the issue of corporate responsibility will go away,'' said Dana Mead, who was named Tenneco Inc.'s chief executive in 1994. ``But this is not a fad. It will not disappear.''
In fact, he added, the issue will only grow as American business continues down its path of downsizing and restructuring.
``We need a viable alternative to the slash-and-burn mentality that prevails in too many boardrooms,'' Mead said. ``You can't downsize your way to prosperity. You need to build a company to achieve value.''
In addition to Mead, those stepping up to take their cuts included Robert N. Burt of FMC Corp.; Vernon R. Loucks Jr. of Baxter International Inc.; Samuel K. Skinner of Commonwealth Edison Co.; Gerald Greenwald of UAL Corp.; Arthur C. Martinez of Sears Roebuck and Co.; and George Fisher of Eastman Kodak Co.
When it was over, the consensus among many of the institutional investors was that while there were no home runs, the CEOs were nevertheless creative in scoring points with the audience.
``A lot of what I heard made a lot of sense,'' said Marcia S. Hayes, managing director and business development officer for BZW Barclays Global Investors, an institutional investment group.
Mead especially seemed to resonate with the council members. And he didn't spare his fellow CEOs from criticism.
``As a CEO, you must also be as vulnerable as the troops,'' he said. ``Your salary should not be increasing at a rate faster than your employees.''
Burt, who has been FMC's chairman since 1991, took that thought a step further. ``A CEO should not accept any kind of bonus or pay increase while employees are being laid off,'' he told council members.
At the same time, CEOs, boards and investors should not look at restructuring and downsizing as a model strategy.
``The negative impact on the morale of those who remain after a downsizing is deep and it lasts for years,'' Burt said. ``CEOs shouldn't assume that restructuring is good for a company. In fact, most are not good.''
Another notion that boards, CEOs and investors should get rid of is the one that says American workers are nomads, moving from job to job, said UAL's Greenwald.
Greenwald was named CEO of UAL in 1994 shortly after it became America's largest employee-owned company. Greenwald said corporations are already paying the penalties for laying off older, experienced workers in the form of lost organizational memory and a decline in morale.
``I can't stand here and promise employees that there will be a moratorium on layoffs and downsizing, but I can promise trying some alternatives first,'' he said.
Among other things, he said, UAL will try to achieve cuts through attrition, then through buyouts. Only in the most severe emergency will it resort to layoffs.
Instead of layoffs and downsizing, Mead suggested a form of what he called ``soft restructuring.''
Soft restructuring, he added, means using more of an employee's talent while giving employees more responsibility for creating value by improving processes, products and services.
LENGTH: Medium: 72 linesby CNB