New Surveys Show
That Big Business Has a P.R. Problem
By CLAUDIA H. DEUTSCH| The New York Times | December 9, 2005
More than ever, Americans do not trust business or the people who run it.
Pollsters, researchers, even many corporate chiefs themselves say that business
is under attack by a majority of the public, which believes that executives are
bent on destroying the environment, cooking the books and lining their own pockets.
Even as corporate scandals like Tyco's recede, fresh complaints - over high energy
costs and soaring oil company profits, planned layoffs in the auto industry, bribery
and conflicts of interest in military contracting - fuel the antipathy.
And every report of high-dollar executive compensation - Philip Purcell's $113
million payout to leave Morgan Stanley, James M. Kilts's $165 million for selling
Gillette to Procter & Gamble - strengthens the feeling that business funnels
money from the workers to the elite. The trial of Enron's former top executives,
which begins in January, is likely to renew anger about the scandal that touched
off this wave of distrust.
"There is a sense that business is a zero-sum game, that if companies are
making a lot of money, it must be coming out of someone else's pocket," said
Michael Hammer, a management consultant who writes frequently about business.
Executives ruefully agree with his assessment. "This is a challenging time
for big corporations," said John D. Hofmeister, who runs the United States
operations of Shell Oil Company. The modern feeling, he said, is "big is
bad."
It is not clear whether such views will bring significant change, but it is clear
that the disaffection is spreading. In a Roper poll conducted from July 28 to
Aug. 10, 72 percent of respondents felt that wrongdoing was widespread in industry;
last year, 66 percent felt that was the case.
Only 2 percent checked off "very trustworthy" to describe the chief
executives of very large companies, down from 3 percent last year. And only 9
percent said they had full trust in financial services institutions, down from
14 percent last year.
Nor do Americans expect much help from Washington: 90 percent of respondents to
a Harris poll, conducted Nov. 8-13, said big companies had too much influence
on government, up from 83 percent last year.
Business is certainly not the only big institution viewed with suspicion. Recent
surveys by the Pew Research Center show that a growing number of Americans believe
that government is inefficient. And 68 percent of the respondents to the Harris
Poll said the news media were too powerful, while 43 percent said unions were
too strong. About 35 percent felt even religious leaders had too much power.
But animosity toward executives as a class, not just the institutions they work
for, seems to be rising to a new level. "Society has come to believe that
the term 'crooked C.E.O.' is redundant," said Robert S. Miller, the chief
executive of Delphi, the bankrupt auto parts company.
Perhaps unsurprisingly, some politicians are picking up the antibusiness scent.
Representative Barney Frank, a Massachusetts Democrat, recently introduced a bill
to require shareholders to approve executive compensation and force companies
to take back bonuses that were based on faulty accounting.
"Income distribution in America is seriously out of whack, and there is zero
correlation between C.E.O. pay and C.E.O. performance," Mr. Frank said. He
conceded that the bill's chances of passage were "bleak" but said he
hoped it would "become a factor in the 2006 elections."
Even Republicans have joined the attacks. At a recent Congressional hearing, senators
from both parties demanded that oil executives defend their record profits. And
now some Senate Democrats, unsatisfied with what they heard, are clamoring for
the oil executives to be called back again, this time to testify under oath.
Many executives, while acknowledging the public antipathy, adamantly dispute the
criticism. They note that some companies were more helpful than government in
the wake of the tsunami in Asia and the Gulf Coast hurricanes. They argue that
they are disclosing more financial information, and have cracked down on unethical
behavior.
James R. Houghton, chairman of Corning, said he felt little animosity in Corning,
N.Y., even though his company had cut thousands of jobs there. "Maybe I'm
in an ivory tower, but I think society realizes that 98 percent of businesses
are doing the right thing," he said. "The press doesn't write that,
because it's the world's most boring story, and because business does a really
lousy job of promoting itself."
Business is trying to rectify that. Commercials for Wal-Mart show its employees
lauding their benefits and career opportunities. The American Chemistry Council
has earmarked $20 million for an education campaign to stress the role of chemicals
in daily life. The Business Roundtable has stepped up its corporate ethics programs
and just introduced what it calls Sea Change, a program to get big companies to
pursue environmentally sound growth.
"We don't think it's productive to just say society is wrong," said
John J. Castellani, the roundtable's president. "A lot of pain and suffering
has come from business's wrongdoing, and we must again foster trust."
Business has faced similar problems in the past. Theodore Roosevelt was following
popular sentiment when he sought to break up cartels at the start of the 20th
century. College students in the 1960's ran Dow Chemical's recruiters off campus,
furious that Dow's napalm was used on villages in Vietnam. The term "military-industrial
complex" - rarely used in a flattering way - has been around for 44 years.
But these days, even institutional investors no longer give corporate executives
the benefit of the doubt. "We're operating in a caveat emptor world, one
in which you have to check everything that management tells you against what else
you know and hear," said William Riegel, a managing director of TIAA-CREF,
the huge teachers' pension fund that commissioned the Roper poll.
But why the rampant distrust?
Some executives concede that business brought the opprobrium on itself. "Today's
companies are run not by entrepreneurs, but by traders who are increasingly preoccupied
with short-term gain and profits," said Henry B. Schacht, the former chief
executive of both Cummins and Lucent Technologies. (Mr. Schacht serves on the
board of The New York Times Company.)
But others say that middle-class Americans are seeking villains to blame for their
losses in the stock market implosion of 2000, and for the high oil and gas prices
today.
"John Q. Public was burned, and asked, 'Where were the directors and external
auditors?' " said Dennis M. Nally, chairman of PricewaterhouseCoopers. "The
trust equation was broken."
Others point out that the gap between the income of the top 10 to 20 percent and
the rest of the work force keeps widening.
"There's always been a tendency to dislike the big guy, and it has been intensified
by concerns over global competition and the widening gap between the winners and
the losers," said Henry M. Paulson Jr., chairman of the Goldman Sachs Group.
Technology has given the angry voices a more public outlet. The blogosphere is
rife with postings castigating Coca-Cola, Wal-Mart and other big companies, citing
everything from unfair labor practices to dangerous smokestack emissions.
Hollywood has long recognized that portraying sleazy business executives as bad
guys is a crowd-pleaser. Michael Douglas won an Oscar in 1987 for his portrayal
of a consummate greedy trader, Gordon Gekko, in the film "Wall Street."
Today, though, unscrupulous businesspeople are practically stock characters in
movies. "You have to be so politically correct that the only guy you can
safely portray as a villain is a business guy in a suit," Dr. Hammer, the
consultant, said.
That is not entirely true, of course. Terrorists and crooked athletes show up
in movies, too. And top actors and athletes have been plagued with their own scandals
regarding substance abuse, behavioral tantrums and swollen paychecks.
But, experts say, when actors and athletes stop delivering huge box-office returns
or home runs, their paychecks plummet. In contrast, "there is a real perception
that we continue to pay for failure," Mr. Castellani of the Business Roundtable
said.
Still, many executives insist that society must share blame for the business practices
it so despises. They say that people who blame McDonald's for their obesity still
order the large fries, and that those who complain about low wages still insist
on low prices
.
"I don't see investors refusing to buy because they think the chief executive
is overpaid, and I don't see union members boycotting nonunion stores that sell
attractively priced foreign goods," Anthony M. Maramarco, a managing director
at Babson Capital Management, said.
That certainly is Wal-Mart's take on it. Mona Williams, vice president for communications,
said Wal-Mart's own surveys, done at the behest of board members worried about
the company's image, indicated that only 8 percent of consumers refused to shop
at Wal-Mart because they were opposed to its practices.
"The people who criticize us most do not have a Wal-Mart in their town, and
can afford to shop elsewhere anyway," Ms. Williams said.
Even so, businesses like Wal-Mart are actively trying to regain public trust.
Wal-Mart has set up an office of diversity, has added environmental safeguards
to many stores and has fired managers who abused workers.
Mr. Miller, the Delphi chief, cut his own salary to $1 this year and is not partaking
in bonuses allocated for the top executives when Delphi emerges from bankruptcy.
The reason, he said, is so that he "could look Delphi's hard-working people
in the eye when I tell them that they have to tighten their belts."
And many companies are disclosing even more financial information than tightened
laws require. Eastman Kodak erroneously listed an $11 million severance cost in
its second-quarter earnings. No money had changed hands, so Kodak added the amount
back into its third-quarter earnings, a move its accountants remain certain was
permissible under existing rules.
Kodak restated earnings for both quarters anyway. When asked why, Robert H. Brust,
Kodak's chief financial officer, cited a "heightened sensitivity" about
financial reporting and a desire to adhere to the "spirit" of regulatory
change.
Experts say such moves may help, but doubt that they will pull people back into
industry's corner.
"Executives seem to believe that they will be O.K. as long as people want
the products they make," said Rosabeth Moss Kanter, a professor at Harvard
Business School. "Well, Big Tobacco used to say, 'We're satisfying demand,'
too. Look how far it got them."
Copyright 2005 The New York Times