Corporate Excesses

Large Corporations, in the main, in the last several decades at least, have been lead by those who have been offered incentives based on short term goals. If executives reach such numbers in one, two or three years they are rewarded with an obscene amount of money. These moneys offer total financial independence for the executive and his family, so why should they be concerned with the long range health of the company. As Will once said, " ah, therein lies the rub."

In the early days of the industrialization of America the "robber barons" owned the companies outright. By so doing they had no compunction to view business in the short term. They were fabulously wealthy very earlier on in their ventures and sought only to establish an institution that would live in perpetuity thus insuring their legacy and legend. They would invest in new plants and equipment knowing the payoff would be in the out years. Today's leaders could care less about the future beyond a couple of years. This attitude lead directly to the $70/hour wage cost in the automotive industry for instance because a prolonged work stoppage, while possibly beneficial to the company in the long run, is detrimental to the income of present day leaders and attacks their income directly as they only have short term concerns and incentives.

The legacy of such leadership is apparent perhaps in the Ford Motor Company. When started and managed by Henry Ford himself and his sons afterward, they would invest in whatever capital requirements they deemed necessary for the long term health of the company no matter the payoff might be 10-15-20 years away. Into the 1950s Ford Motor Company was consistently number two automaker and in the top five largest manufacturing companies in the US. Not bad since the company was privately owned by the Ford family until in the late 1950s they went public to buy Philco thus diversifying into electronics which was very new at the time. Today Ford has refused the Government's help and say they don't need it for survival. Could its management history and legacy have had something to do with it?

Another excellent example of such a management attitude is the S.C. Johnson and Son, Inc. They own many of the most recognizable brands in American and world commerce, such as Ziploc, Saran Wrap, Raid, Windex, Drano and many more. They are very conscious of the ecological impact of their products and processes and invest to generate a significant amount of their power requirements by wind devices and strive at every level to leave only a faint environmental footprint. How can they do this and still be very prosperous? Surprise, they are privately owned by the founding family and seek to maximize their return on investment over the long haul instead of "tomorrow."

If the Government insists on "giving" money to various companies, both industrial and financial they should require the CEOs and other top management be paid a generous living salary, but insist their "big money" comes from hitting parameter representing goals set in the out years. For instance, a substantial bonus in 5 years if numbers are achieved. Substantial but not independence. Again a larger bonus in 10 years if certain numbers are obtained and finally the "obscene" payoff would be after hitting numbers in 20 years when they actually earn the money. Management forced to operate within these confines would more likely insure the long term health of the companies. I do not favor the Government engaging in the management of any business in this Country, but if we, the taxpayers, are going to pay to guarantee their success then it seems little to ask that the companies at large, succeed over time rather that make a succession of management types hideously wealthy every few years while the company's long term health declines.

Wouldn't it be pleasant if this caught on in industry in general and Boards of Directors actually set policies that would, if not guarantee, at least have the stated aim of long term health of the company and then hire management teams with the abilities and understanding to accomplish the necessary goals.