Now that the tears and ink have dried from Sept. 11, we can turn our attention to the other national tragedy in our midst: corporate malfeasance. If Enron and Arthur Andersen have taught us wariness about big business, the revealed avarice of Dennis Kozlowski and now Jack Welch should teach us outrage.
Kozlowski, former chairman of Tyco International Ltd., had quietly negotiated for himself a severance package worth more than $100 million just before resigning in June. A day later he was getting headshots taken at the local police precinct, indicted on charges of tax evasion.
Welch, often called the “captain of capitalism” for his ruthless savvy, and widely viewed as the paragon of the modern executive, came under the gun this week for accepting a retirement package that includes such high-priced goodies as skybox tickets, sporting events, the lifetime use of GE-owned jets, and charge accounts at New York’s most posh dining establishments. General Electric, his former employer, pays for the Welches’ apartment on Central Park West, membership fees at five country clubs and full staffs and services at homes in Florida, New York, Connecticut and Massachusetts. Despite being officially ‘retired,’ Welch continues to receive $86,000 per year as a consultant for 30 days’ work. For each additional day of consulting after that, GE pays Welch $17,307.
True, this treatment sounds appalling, but it has become less the exception than the rule. On the one hand, all this looks like an excess of unrestrained capitalism, a particularly nasty cross-section of good old-fashioned greed; on the other, it looks like the crony capitalism in which company assets are used to serve the personal needs of a tiny elite: the kind of capitalism which has kept post-colonial Africa in the thrall of oligarchy, helped bring Asia’s economy to its knees in 1997, and continues to hobble Japan’s. Greed is not just a lamentable private vice; it can kill an economy. Seeing company profits funneled not back into the organization but into executive goody baskets lowers shareholder confidence and worker morale, weakening equity prices and sinking GDP.
Some executives have argued that increasing executive compensation is simply an inexorable market trend. But clearly this trend runs counter to the huge cutbacks in the retirement system overall for workers. In 1978, about 38 percent of workers were covered by defined benefits plans, which gave them a certain level of retirement income, and about 18 percent were covered by plans that required them to invest on their own for the future, according to the Employee Benefit Research Institute. By 1997, only 21 percent of workers had guaranteed retirement incomes and 42 percent participated in plans that required them to invest on their own, such as 401(k)s. The trend has become even more pronounced in the past five years, according to the EBRI.
This discrepancy between employers and employees is disturbing. It is even more disturbing that Welch seems to think his record justifies GE’s obscene generosity. And it’s most disturbing that his retirement package was unanimously approved by the GE board in 1996, an itemized list of benefits was not disclosed.
As with campaign finance reform, a simple requirement of full disclosure will offer solutions to disparate problems. Welch’s deal would never have seen the light of day had it been exposed to public scrutiny.
Welch and Kozlowski have argued that their packages were perfectly legal, but ‘It’s not illegal’ is as much an ethical confession as a legal excuse. Corporate executives need to be removed from the sheath of unaccountability that the corporate structure affords. Extending the ultimatum of good behavior or prison time to white collar crime will help, but nothing replaces internalized ethical standards, especially in those areas where crime becomes ill-defined. Execs must come down from their murky culture of Nietzschean meta-morals and begin adhering to the same ethical standards as the rest of us, if not a higher one that befits their importance as capstones of a corporate and economic pyramid. Not business school ethics classes, but massive mobilization of public scorn will play the key role here. Vigilance in the face of corruption should be severe; there is no more slippery slope than the budding of legal thievery.
By tolerating the shameful and cynical pampering of corporate execs, we are inviting the disgust of detractors of American capitalism and, in the case of Welch, losing carefully cultivated heroes. A cancer of corporate irresponsibility is festering in America. As corruption rears its ugly head, it proves that despite a host of formidable foreign enemies, the worst enemy of our beloved, decent country may reside within.
Aaron Goode is a junior in Calhoun College.