[Congressional Record Volume 142, Number 41 (Friday, March 22, 1996)]
[Extensions of Remarks]
[Pages E435-E437]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              SECOND ANNIVERSARY OF DURHAM WOODS EXPLOSION

                                 ______


                            HON. BOB FRANKS

                             of new jersey

                    in the house of representatives

                         Friday, March 22, 1996

  Mr. FRANKS of New Jersey. Mr. Speaker, tomorrow is the second 
anniversary of the Durham Woods natural gas pipeline explosion.
  On that fateful night, the residents of Edison, NJ were startled out 
of their sleep by the tremendous explosion that ripped through the 
Durham Woods apartment complex.
  A 36-inch natural gas pipeline had ruptured, sending men, women, and 
children fleeing from their homes in a race for their lives against a 
roaring wall of fire.
  Miraculously, only one person died. Twenty-nine others escaped with 
only minor injuries.
  Although the physical rebuilding of Durham Woods is complete, this 
horrendous explosion has left lingering fears about the hidden dangers 
of natural gas pipelines.
  Unfortunately, Congress has been slow to act to pass pipeline safety 
legislation. Although the House Transportation and Infrastructure 
Committee, of which I am a member, quickly passed a pipeline safety 
bill in the opening months of the 104th Congress, this bill still has 
not been voted on by the full House.
  This delay is precluding some important new safety measures from 
becoming law that could help prevent another Durham Woods-type 
disaster.
  For example, although it may never be precisely determined what 
caused the Durham Woods blast, authorities strongly suspect that a 
gouge, found in the pipeline after the explosion, had weakened the 
pipeline and precipitated the blast.
  Nationally, the single largest cause of pipeline accidents is 
excavating crews or other workers accidently damaging pipelines. But in 
far too many instances, the damage is never reported to the pipeline 
operator. After the incident, the weakened pipe begins to deteriorate 
and the risk of an explosion increases.
  A proposal I drafted that was included in the House pipeline safety 
bill addressed this problem. My proposal would establish a tough new 
Federal crime that would punish anyone who damages a pipeline and does 
not promptly report the damage to the authorities. Violators would not 
only be hit with a hefty fine of $25,000, but would face a jail term of 
5 years.

  Another provision in the pipeline safety bill of particular 
importance to any constituents concerns the one-call system. All States 
currently have some form of one-call system which requires construction 
crews to contact a central office before beginning any excavation work 
near a pipeline. But the success of these programs is often hindered by 
a lack of knowledge about the program or how it works. An important 
feature of the pipeline safety bill encourages pipeline companies and 
the States to launch public education programs aimed at all businesses 
which conduct excavating activities. This education program would 
increase compliance with one-call systems, which play an essential role 
in keeping pipelines safe.
  Mr. Speaker, while I am working to get Congress to pass a pipeline 
safety bill, I believe that improving pipeline safety is not solely the 
responsibility of the Government. The pipeline companies that own and 
operate natural gas pipelines should be improving their own safety 
programs. Improving the safety of their pipelines and increasing the 
public's confidence not only makes good business sense, it is the right 
thing to do.
  Therefore, today I am calling on Texas Eastern, who owns the pipeline 
that immolated Durham Woods 2 years ago, to voluntarily make a 
commitment to upgrade their safety procedures. Specifically, I request 
that Texas Eastern take immediate steps to install a remote control 
valve system on its pipelines in New Jersey. A remote control valve 
system would allow the flow of natural gas to be shut off by a human 
operator in case of a leak or a fissure in the pipeline. If a remote 
control valve was in place near the rupture that caused the Durham 
Woods explosion, this disaster may have been avoided.
  Mr. Speaker, Texas Eastern shouldn't wait for a law that would 
require it to make its pipelines safer. Moreover, this Congress 
shouldn't have to wait for the next pipeline disaster before it is 
prodded into passing a pipeline safely bill. My constituents have been 
waiting 2 years for a response from their Government, and for Texas 
Eastern to install remote control valves. They should be required to 
wait no longer.

[[Page E436]]



                         THE ROLE OF EMPLOYERS

                                 ______


                         HON. ROBERT S. WALKER

                            of pennsylvania

                    in the house of representatives

                         Friday, March 22, 1996

  Mr. WALKER. Mr. Speaker, we are engaged in a great economic debate in 
this country. As information technologies transform our economy, and 
economic competition becomes increasingly globalized, we must decide 
how to address the challenges before us.
  Companies, along with their owners and managers, have been called 
insensitive to worker concerns and uninterested in anything but the 
bottom line. An eloquent defense of the role of employers in our 
culture has been made this past week. In a speech before the Economic 
Club of Detroit, the chairman and chief executive officer of the 
Chrysler Corp., Robert J. Eaton, makes clear why the economic survival 
and success of the Nation's employers is positive for their workers and 
for the communities where they are located.
  Therefore, Mr. Speaker, I am pleased to include in the Record at this 
point excerpts of the text of the Eaton speech.

  Excerpts by Robert J. Eaton, Chairman and CEO, Chrysler Corporation

       It's open season on big business and CEOs. Party, that's 
     because it's an election year and beating up on Wall Street 
     and Corporate America is a cheap way to get votes or sell 
     papers. This is old-fashioned, empty-headed, tub-thumping 
     populism.
       The Democrats lost Congress because people got mad at 
     Washington. Now the plan is to get the voters mad at somebody 
     else. And on the right you have Pat Buchanan. He's mad at big 
     government, big business, the United Nations, the Chinese, 
     the Japanese and the Mexicans (Mexicans on both sides of the 
     border, by the way). Pat's mad at just about everybody.
       So all this current fear and loathing directed at American 
     corporations should not be surprising. It's being 
     orchestrated to move political and economic agendas.
       But that's not to say that Americans today don't have some 
     very legitimate fears. They do. And they are rational fears 
     about holding onto a good job if they have one, and getting 
     one if they don't.
       A New York Times reporter went into a big department store 
     in the Ginza recently and found 14 clerks in the jewelry 
     department ready to wait on him. He then gushed about how 
     enlightened Japan's full-employment policy is, and condemned 
     the U.S. business community (and I'm quoting), ``where 
     executives get bonuses for massacring their employees.''
       We can copy the Japanese. We can have 14 clerks to sell you 
     a watch. We only need to do three things:
       We have to close our borders to foreign competition.
       We have to convince American consumers to pay $50 for a 
     melon.
       And we have to stop giving the owners of American companies 
     a fair return on their investment.
       That's all. That's how the Japanese have done it.
       I don't think Americans are going to shut out foreign 
     goods. I don't think Americans will pay $50 for a melon. And 
     I don't think the owners of America's companies are going to 
     stop demanding a fair return.
       In Japan, the owners of a company happen to be large banks 
     and other members of that company's keiretsu. They're more 
     like partners than owners. It's different here, and one of 
     the key elements of the current national debate we're having 
     is who owns our corporations, who runs them, and for whose 
     benefit.
       Well, there have been some changes over the years.
       Large institutional investors like mutual funds and pension 
     funds now own more than half the stock in American companies 
     today--maybe as much as 60 percent. In 1980 it was 40 
     percent. In 1970 it was 19 percent. Go back much further than 
     that and these institutions were inconsequential.
       In 1980, they managed about $1.9 trillion. In 1990, the 
     figure was $6.3 trillion. Last year they managed more than 
     $10 trillion.
       They are big, and they have enormous clout, and in the past 
     decade they have decided to use that clout.
       Let me give you a list of companies that all of you will 
     recognize: American Express, IBM, Westinghouse, Apple 
     Computer, Eli Lilly, Eastman Kodak, Scott Paper, Borden. In 
     just one year--1993--the CEOs of those eight companies were 
     bounced, in no small measure due to pressure from 
     institutional investors.
       Most of the institutions don't follow the old Wall Street 
     rule that says if you don't like the company, sell the stock. 
     Some are so big and own such large chucks of individual 
     companies that selling the stock simply isn't practical. So 
     today, if they don't like a company, they may try to change 
     it.
       They have a right to. They are the owners. Or at least 
     they've been empowered to act for the real owners--their 
     shareholders.
       Now here's the rub.
       These institutions have one central goal, and that's to get 
     consistent, year-in and year-out returns from the companies 
     in their portfolios. They need these returns because their 
     individual shareholders do follow the old Wall Street rule--
     if they're not satisfied, they sell!
       At the same time, people like me and others who run 
     companies like to think of ourselves as builders. We think 
     five and ten years ahead. We like to invest in the future. We 
     also like to have a few shekels in the bank for hard times.
       And in spite of what the public hears and reads, we do care 
     about protecting jobs, and we are concerned about our 
     communities, and we do understand our social obligations.
       So there's some natural tension between the need to provide 
     returns and the need to build the company.
       Most of us in this room work for large corporations. We 
     want those companies to be successful ten years from now as 
     well as today, so we take a long view at work.
       But most of us have also turned over a substantial part of 
     our personal net worth to the managers of these funds. And 
     what do we look at in evaluating their performance?
       Returns!
       So if we don't like the kind of pressure these funds put on 
     our companies, we can't point fingers. ``Them'' is ``us.''
       The power of these institutions is simply a reality that we 
     have to deal with. And there is no doubt that they have 
     changed the way companies are run today.
       Professor John Pound of Harvard, in fact, says that big 
     corporations are no longer ``managed'' they are ``governed.'' 
     The new owners of Corporate America are not content to hire a 
     management team and then passively judge the results; they 
     want a say in the plans and policies of the company as well.
       Pound also believes--and I'm quoting now--that ``politics 
     will replace takeovers as the defining tool for corporate 
     governance challenges, and the marketplace of ideas will 
     replace the frenzied activity that dominated the financial 
     marketplace in the 1980s.''
       I happen to agree with him. And frankly, I think that's 
     healthy. Not comfortable necessarily, but probably healthy.
       He's talking about ``politics'' with a small ``P,'' of 
     course. He's talking about open, public discourse on 
     corporate issues that up to now have generally been settled 
     in the board room. That's not a clean way to make decisions. 
     Management would rather do it the old way. Public debate 
     often lends itself to all the low-rent machinations of 
     politics with the big ``P''--from news media leaks, to hidden 
     agendas, to the use of pressure groups.
       So, it isn't comfortable, but I think it's a big step up 
     from the back alley intrigues of the '80s when companies were 
     bought or sold and broken up or consolidated without any 
     debate at all.
       Chrysler, as you all know, was caught up in a public debate 
     like this for ten months. We came to a resolution in which 
     everyone was a winner and nobody was a loser. And by 
     everyone, I mean shareholder, employees, suppliers and 
     everyone else with a stake in the company.
       Communication was the key. Fortunately, we'd always 
     maintained open communication with the institutional 
     investors who own most of the company. We stepped it up. I 
     personally visited a large number of them. So did other 
     members of our management team. We did something quite 
     unusual. We took outside board members with us. On a number 
     of occasions, I would leave and let the board member and 
     the fund manager talk one on one.
       We had a simple story that combined solid performance over 
     the past few years with a compelling strategy for the future.
       None of our institutional owners asked us to change 
     direction. Not one of them told us to compromise the future 
     for the sake of today.
       If there's a lesson for other companies, large and small, 
     it's that maintaining open lines of communication with these 
     institutional investors is no longer a courtesy, as it was a 
     few years ago. It is now a critical part of a company's 
     strategic planning.
       Today, though, these new owners are under some scrutiny 
     themselves. The concentration of economic power that they 
     represent is new, and therefore it's a bit frightening. Their 
     short-term focus is a concern. Their activism is a challenge 
     for management.
       And yet, I'm hard pressed to find many examples of these 
     institutions acting irresponsibly toward successful, well 
     managed companies. The list of corporations I read a few 
     minutes ago was a list of companies that had problems. They 
     were companies where changes needed to be made.
       These large institutional investors must accept the 
     responsibilities of ownership. I think, for the most part, 
     they do. That includes stepping in when a company seems to 
     have lost direction. But it also includes allowing a company 
     to meet its responsibilities to other stakeholders besides 
     the shareholders.
       There's raging debate all over the world today about where 
     a company's first allegiance should be, to the shareholders 
     or the stakeholders. Is a company in business only to make 
     money for its owners, or is it there to provide jobs? Is it 
     right to focus on the bottom line, or are there social 
     responsibilities that should come first? And what about the 
     customers?
       The Economist magazine last month did a long piece on this 
     issue. They compared the recent performance of the 
     traditional ``stakeholder'' economies of Japan and most of 
     Western Europe with the ``shareholder'' economies of the 
     United States and the United Kingdom.
       They make a strong case that over the past 10 or 15 years 
     the ``shareholder'' companies of the U.S. and U.K. have been 
     doing a better job of taking care of ``stakeholders'' than 
     the

[[Page E437]]

     stakeholder companies of Japan and Germany have been doing.
       Companies that focus on making money become more 
     competitive, and that in turn means more economic growth, and 
     more jobs, and all the other results that ``stakeholders'' 
     care about.
       In both Japan and Germany, the false promise of lifetime 
     employment is ending. They should have known better. A boss 
     who can guarantee a job for life is like a doctor who 
     promises that you'll never get sick or a preacher who 
     promises you a place in heaven. It's too good to be true, so 
     it isn't.
       We don't have the keiretsu like the Japanese that help 
     insulate managers. We don't have a large bank ownership of 
     major corporations like both Japan and Germany that helps 
     guarantee ``patient'' capital. All that would be illegal 
     here. And we don't have co-determination and other social 
     legislation like they do in Europe that sometimes gives 
     employees as much say in major decisions as managers and 
     owners.
       Instead, we have owners who raise hell when they don't get 
     the returns they expect. And companies have to listen. And 
     companies change. And they provide those owners with their 
     returns. And in the process, they usually get stronger.
       Chrysler has added more than 15,000 hourly workers in the 
     past five years. Those are not replacements, those are new 
     jobs. We're in the process of building components in this 
     country that we used to have to buy from Japan, because we've 
     gotten more productive and it's cheaper to build here now.
       Our goal was not to increase employment. Our goal was to 
     get more competitive. New jobs and more security for the 
     existing ones are simply results of being more competitive.
       Chrysler is about to announce grants totaling $5 million 
     for the arts in Southeastern Michigan. But nowhere in our 
     strategic planning did we say ``take care of the arts.'' 
     We're able to do it only because we focused on a different 
     priority--financial success.
       Chrysler, Ford and General Motors have been generous to 
     this community for decades. We are major participants in the 
     new Greater Downtown Partnership that is just being 
     announced. But our real contribution has simply been staying 
     in business. That's our role, and when we're successful, the 
     whole community benefits.
       Some people, like Senator Kennedy and Secretary Reich, 
     wants to create the stakeholder economies of Germany and 
     Japan here. They want to force companies to become a Big 
     Brother. Washington has failed at it, so now let Corporate 
     America do it. But they've discovered the allure of 
     ``stakeholder'' politics at just the time it's losing its 
     luster overseas.
       The Japanese aren't building auto plants in Japan. They are 
     closing them. They are building plants here, in America. So 
     are the Germans--Mercedes in Alabama and BMW in South 
     Carolina.
       Has anybody else noticed that all the recent stories about 
     ugly American corporations firing people left and right are 
     butting up against other stories about the low unemployment 
     rate in the country? Unemployment in Germany is almost 11 
     percent, and in this country it's 5.5 percent? I can pretty 
     much guarantee you that saddling American companies with the 
     same burdens that German companies have will get our 
     unemployment numbers up too, if that's the idea.
       America is the model for economic growth for most of the 
     rest of the world. Some countries flirted with the Japanese 
     model for a while, but now they've realized that it wasn't 
     all it was cracked up to be.
       Our securities markets are particularly important. There is 
     nothing like them anywhere in the world. They are big. They 
     are broad. They are unparalleled in their ability to raise 
     capital.
       But they are also messy. They punish inefficiency, sometime 
     brutally. They can be capricious. They can be unfair. They 
     can be perverse. It's almost expected these days that the 
     markets rise on bad news and dive on good news. There is no 
     human feeling to the markets, and sometimes no discernible 
     evidence of human intelligence, either.
       But they work. That's all they have going for them--over 
     time, they work. And they work better than markets anywhere 
     else.
       The critics and the fear-mongers are missing an important 
     point about those markets, by the way: They've become 
     eqalitarian. Through 401(k)s, IRAs, pension funds, and easy-
     to-access mutual funds, more than a third of all adult 
     Americans are in the market.
       The market used to be just for plutocrats. Today the 
     ownership of American business is spread throughout the 
     population.
       The ``new ownership'' of Corporate America is rapidly 
     becoming most of America.
       That's healthy. It also helps to burst the bluster of the 
     redistribution of wealth crowd. At least it would if more 
     people understood that fact.
       Corporate America has always had a PR problem. We haven't 
     found a way to dress up certain economic realities so we can 
     take them out in public. Making money is still considered 
     tacky in some circles. Creating wealth for society doesn't 
     carry much cache. Focusing on the bottom line is simply 
     greed.
       We haven't made the case that our end goal is not ``making 
     money,'' it's perpetuating ourselves so we can serve all our 
     constituencies.
       We can't even seem to cut through all the propaganda about 
     American workers going backward. Real per capita income has 
     risen steadily. So has median family income. Secretary Reich 
     never uses those figures. He uses other measures which are 
     less relevant.
       And he never mentions the obvious fact that people do move 
     up from one economic quintile to another. They don't all just 
     stay put. They work hard, get better jobs, and make more 
     money. Low income people become middle class, and middle 
     class people become well-off. That's the American way, and it 
     still happens.
       There's no question, however, that some new dynamics are at 
     work. The concentration of power within the large 
     institutional investors is one. It's not necessarily good, 
     and it's not necessarily bad. It's not something to resolve; 
     it's just something else to manage.
       Downsizing and layoffs are part of the price of becoming 
     more competitive. The price for not doing it, however, is 
     much higher in both economic and human terms.
       The good part about globalization is that it allows 
     American workers to participate more fully in the world 
     economy. The bad part about globalization is that it forces 
     American workers to participate more fully in the world 
     economy.
       The torrent of gloom today is mindless, however. The 
     economy is strong. It's growing at a sustainable rate. 
     Inflation is low and stable. Employment numbers are 
     excellent. It looks like Mr. Greenspan is pulling off his 
     soft landing. The stock market is going bananas.
       American companies are leaner and meaner than they've been 
     in years. American productivity is once again the envy of the 
     world.
       And American executives are not the ogres portrayed by the 
     press in recent weeks. Big business has become an election-
     year straw man for those who like to pit American against 
     American by promoting the politics of fear and envy.
       There are some real problems to solve. We need to keep the 
     economy strong, to improve our schools, to cut the budget 
     deficit, to pay for health care, to keep Social Security 
     solvent, and that's just the top of the list.
       We need to stand together to do these things.
       And he never mentions the obvious fact that people do move 
     up from one economic quintile to another. They don't all just 
     say put. They work hard, get better jobs, and make more 
     money. Low income people become middle class, and middle 
     class people become well-off. That's the American way, and it 
     still happens.
       There's no question, however, that some new dynamics are at 
     work. The concentration of power within the large 
     institutional investors is one. It's not necessarily good, 
     and it's not necessarily bad. It's not something to resolve; 
     it just something else to manage.
       Downsizing and layoffs are part of the price of becoming 
     more competitive. The price for not doing it, however, is 
     much higher in both economic and human terms.
       The good part about globalization is that it allows 
     American workers to participate more fully in the world 
     economy. The bad part about globalization is that it forces 
     American workers to participate more fully in the world 
     economy.
       The torrent of gloom today is mindless, however. The 
     economy is strong. It's growing at a sustainable rate. 
     Inflation is low and stable. Employment numbers are 
     excellent. It look like Mr. Greenspan is pulling off his soft 
     landing. The stock market is going bananas.
       American companies are leaner and meaner than they've been 
     in years. American productivity is once again the envy of the 
     world.
       And American executives are not the ogres portrayed by the 
     press in recent weeks. Big business has become an election-
     year straw man for those who like to pit American against 
     American by promoting the politics of fear and envy.
       There are some real problems to solve. We need to keep the 
     economy strong, to improve our schools, to cut the budget 
     deficit, to pay for health care, to keep Social Security 
     solvent, and that's just the top of the list.
       We need to stand together to do these things. We need to 
     have some confidence that we, as a nation, are all moving in 
     the same direction.
       But it's a sure thing that we'll never accomplish any of 
     these if we let a bunch of demagogues herd us down the past 
     to class warfare.

                          ____________________