Corporate View

Much has been written about "corporate America," but I have worked in several countries throughout the world and am a student of globalization myself. It think it's safe to say that whenever someone refers to "corporate America," it's really a broader category that is occupied by all corporations in all of the western nations.

So what is it that they're writing? Well people write about corporate politics, corporate policy, productivity, management, leadership, corporate responsibility, social responsibility in the corporation, etc. I sometimes wonder if any concept of being has been written about more than "the corporation."

There doesn't seem to be nearly as much written, for example, about churches, about governments, about clubs or schools or neighborhoods. It would seem that we have some fascination with corporations.

Could it be that our capitalistic view leads us to believe that corporations are where the true power lies?

I guess I'm no different. I'm a student of "the corporation" as well. But there is something that perplexes me more and more as I get older. It is this notion that corporations seem to have about layoffs. Honestly, it seems to be part of the fabric of "the corporate world." Whenever times are difficult or a company is struggling, they immediately move to lay off staff.

Jack Welch, former CEO of General Electric, laid off about 112,000 people between 1980 and 1985. He then announced his intention to lay off "the bottom" 10% of his staff every year! In a 1987 New York Times article, the editor said that a new corporate order had emerged.

This new corporate order "eschews loyalty to workers, products, corporate structures, businesses, factories, communities, and even the nation. All such allegiances are viewed as expendable." The article concluded that, "only market leadership, strong profits and stock prices can be allowed to matter."

Really? You know, there was a time when the word "corporate" suggested a group engaged in some collective undertaking - beyond just making money for shareholders. In other words, the notion of a corporation was a group of people providing a valuable service or good that made the world a better place to live.

And their shareholders were to be rewarded for financing that and making the endeavor possible. So corporations could be measured based on their overall contributions to society.

But somewhere in the 1980's, we changed our minds. We decided that stock price and shareholder profits should trump all other considerations - including pride in the product itself. And relieved of any concern for employees, customers or society as a whole, corporations then degenerated into mere aggregations of financial assets.

And what did corporate executives decide that the best thing to do with those aggregations of financial assets would be? Plunder them, disaggregate them or merge them into another (corporation) at will.

I think books like Tom Peters' In Search of Excellence or Swim with the Sharks without Being Eaten helped pave the way for this new thinking. The latter, for example, specifically stressed that the (new) corporate setting is basically every man (or woman) for himself. Even high level managers came to realize that they were as expendable as anyone else.

Even CEO's were being churned (and still are) in and out of their jobs. But the higher-ups had one great advantage over the average employee living under the threat of layoffs. They have been increasingly rewarded with stock options and outrageous bonuses. So they stood an increasing chance of striking it rich (literally) in the ongoing turmoil.

Now the combination of great danger and potentially dazzling rewards makes for a potent cocktail. It has become a wave of business leaders that reject the notion of thoughtful methods of professional management or management that actually leaves a true legacy.

Instead, CEO's have formed a new self-image as charismatic gurus who have almost divine powers to discern the truth in any situation and who can be relied upon to make only the best decisions in the moment. While it may appear to us commoners that they are flying by the seat of their pants, they are convinced that they - and only they - know what is right and best. And they execute with that mantra every day.

Between 1981 and 2003 - a span of 22 years - more than 30 million Americans lost their full time jobs in their trained profession. They fell from the stable corporate life into tenuous social positions and even dire poverty or homelessness. Of course since then, in the last 6 years, we've continued that trend and tens of millions more have lost their jobs. As I write this blog, some 30 million Americans are receiving unemployment benefits. So the behavior of "corporate America" has had a devastating effect on society. In fact, few of us can even comprehend the level of this devastation. It is that complex.

It appears that the world has vastly underestimated the ability that corporations have to build societies and to impact societies positively. And perhaps because of that, we failed to act when corporations changed their mantra and began to destroy our societies.

I don't think that the corporate executives who make these decisions are all that wise. We're seeing many great companies disappear from the landscape completely. Their boards are allowing it and their top executives are becoming filthy rich from it. But society is being destroyed.

Every time I hear of a company laying off people (which is at least a weekly event in my country), I think to myself, "How on earth can any company slash and burn its way to greatness?"

Angelo Mozilo

It's a name you might not recognize. Whether you recognize him or not, chances are pretty good that he's touched your life in some way. He's Angelo Mozilo, CEO of the world's largest mortgage company, Countrywide (http://about.countrywide.com/StockInformation/StockInformation.aspx).

Here in north Texas, his Countrywide companies collectively are one of the biggest employers we have. Thousands work for Countrywide in Fort Worth, Plano, Richardson and other north Texas cities. The firm's headquarters are in California, and it is an important employer in Simi Valley and Pasadena. Nobody makes more home loans than Countrywide. Nobody services more loans than Countrywide. In all the world.

Mr. Mozilo and his original business partner (David Loeb) were pioneers in the mortgage industry. A scrappy New Yorker who believed strongly in what he was doing, Mozilo set the standard for excellence in the industry. He pushed hard, dreamed bigger and did what many only dream of doing. Countrywide was known for, among other things, a self-sufficient, independent company that got things done. Clearly, Mr. Mozilo poured a lot of blood, sweat and tears into his baby.

I remember many years ago, when Angelo was named Chairman of the Mortgage Bankers Association of America. The event was held at the Anatole Hotel in Dallas. Mozilo was there, with all his family. I remember riding down in an elevator with him. His son, who might have been around 12 or 13 at the time, looked just like him. It was like a little version of Angelo (who isn't a big many anyway). I admired the pride they both exhibited in what they were doing. It seemed that by virtue of pulling him out of school and bringing him to this event, Mozilo was teaching his son about pride in hard work and a job well done.

So why is Angelo Mozilo now in the news, testifying before Congress? Why has he become, almost overnight, the scourge of the industry? Why is his name suddenly synonymous with all that is wrong in housing finance? Well, it's simple really. Greed.

You see, the scandal that unfolded is the fact that Mozilo dumped a lot of his stock in Countrywide --- just before the subprime mortgage bless exploded. He dumped a lot of his stock --- and took a lot of profits --- just before Countrywide's stock nose-dived and its shareholders lost a fortune. Mozilo walked away unscathed, with hundreds of millions of dollars.

Immediately thereafter, Mozilo took some obscene compensation. Between 2002 and 2006, Angelo paid himself $250 million in salary and took $414 million profit from stock sales. During this time, Countrywide was also playing dangerously in the subprime lending market, engaging in predatory (immoral) lending practices. And the company was starting to write off billions in losses from these poor lending practices. And still Mozilo paid himself even more.

Angelo hired three compensation consultants --- and fired the first two who thought his compensation was bloated at the time. He asked the board to pay the income taxes on his wife's personal travel aboard the corporate jet. He asked the board to pay him a retirement income --- but didn't want to retire. In fact, there is a litany of requests and demands ... and even threats, from Mozilo, trying to extract more wealth from his company. It would seem that Angelo Mozilo had become the enemy of his shareholders --- intent of shifting their wealth to himself.

So here's what I think happened. Angelo Mozilo was the scrappy, admirable entrepreneur who did what he believed. He risked a lot and worked his butt off. There was much accomplished and much to be proud of. But at some point he came to the conclusion that money mattered more. Mind you, he already ranked among the wealthiest people in the world. He wanted more though. Hundreds of millions more. And in his quest for massive, obscene wealth, Angelo Mozilo completely destroyed the legacy he had spent his whole life building.

Let this be a lesson for us all.