[Congressional Record Volume 143, Number 21 (Tuesday, February 25, 1997)]
[Extensions of Remarks]
[Pages E297-E299]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         HONORING MARVIN RUNYON

                                 ______
                                 

                            HON. BOB CLEMENT

                              of tennessee

                    in the house of representatives

                       Tuesday, February 25, 1997

  Mr. CLEMENT. Mr. Speaker, I speak today in honor of Marvin Runyon--a 
good friend, a great constituent, and an honorable leader. Many 
Americans recognize Mr. Runyon as the Postmaster General of the United 
States. However, he has also enjoyed a distinguished career in the 
corporate world and as a public servant.
  I first met him when he was President and CEO of Nissan America. At 
the time, he had chosen Smyrna, TN, as the site to build Nissan's 
manufacturing plant from the ground up. After great successes at 
Nissan, he was selected by former President Ronald Reagan to become 
chairman of the Tennessee Valley Authority. Following his chairmanship, 
the Postal Service's Board of Governors asked Mr. Runyon to become our 
Nation's 70th Postmaster General.
  My esteemed constituent oversees a $56 billion Federal agency, 
employing 760,000 individuals and bearing 40,000 post offices 
nationwide. Under Mr. Runyon's watch, the U.S. Postal Service earned a 
$1.6 billion in 1996. In addition, overnight service performance has 
improved in recent years from 82 to 91 percent.
  Mr. Runyon has come under criticism in past months over some stock 
holdings. However, I hope that these allegations do not overshadow the 
diligence, competence, and honor of a man who has spent his career 
serving others. While others must judge the ethics of Mr. Runyon's 
investments, I am pleased to submit two articles that tell his side of 
the story. I ask that these articles be submitted for the Record.

                   [From Industry Week, Feb. 3, 1997]

                  Marvin Runyon Delivers a Turnaround

                         (By William H. Miller)

       When most top-level CEOs reach the retirement years, 
     they're only too glad to swap

[[Page E298]]

     their corner offices, limousines, and other perks for a less 
     stressful life of golf, grandchildren, and gardening. If they 
     do want to keep a hand in running things, may be they'll sit 
     on a few boards, head a quiet foundation, or spearhead a 
     fundraising drive for the local symphony.
       For Marvin T. Runyon, all that sounds boringly tame. At age 
     72, the former Ford Motor Co. vice president, Nissan USA 
     manufacturing CEO, and Tennessee Valley Authority (TVA) 
     chairman toils 10 to 12 hours a day--and takes work home--in 
     what has been called the toughest management job in the U.S.: 
     Postmaster General and CEO of the U.S. Postal Service (USPS).
       Runyon has been in the job--thriving in it, in fact--for 
     4\1/2\ years. During that time he has created headlines and 
     controversy--and a notable turnaround of a troubled 
     organization that in an onrushing era of electronic 
     communication seemed an anachronism.
       How tough is his job? Based on its size alone, the Postal 
     Service is a managerial pressure cooker. Its fiscal-1996 
     revenues were $56.4 billion--enough, probably, to preserve 
     its 1995 ranking as the U.S.'s ninth largest and the world's 
     33rd largest enterprise. And with a career workforce of more 
     than 760,000, it is the nation's largest employer next to the 
     Dept. of Defense.
       What makes Runyon's job even more challenging, however, are 
     the severe restraints on operating freedom that any boss of 
     the Postal Service faces--restrictions not shared by private-
     sector CEOs. Although no longer a Cabinet department--it 
     became a quasi-government organization in 1971--USPS is 
     subject to oversight from Congress, which has never been shy 
     about exercising its will. It also reports to a nine-member 
     Board of Governors appointed by the President.
       Moreover, a host of federal departments can control its 
     actions: Treasury, for example, must approve any new 
     businesses the Postal Service enters; the Dept. of 
     Transportation sets rates for overseas air mail; and the 
     Office of Personnel Management represents the agency on 
     appeals to the Merit Systems Protection Board.
       The Postal Service can't even determine its own postal 
     rates. It can only recommend increases to the Postal Rate 
     Commission, an oversight body that can approve, disapprove, 
     or change them. The decision process often drags on for 10 
     months or more, during which time markets may change or 
     competitors beat the USPS to the punch.
       In perhaps its greatest lack of self-determination, 
     however, the Postal Service--unlike private businesses or its 
     competitors--isn't able to pick and choose its markets and 
     services. It is required by statute to provide universal 
     service at a uniform price--delivering mail to any address in 
     the U.S., regardless of how remote or how crime-ridden an 
     area may be, six days a week and at a standard rate. ``That 
     keeps us from cream-skimming, like our competitors can,'' 
     Runyon acknowledges.
       As if these strictures weren't enough, any Postmaster 
     General must manage in an awkward labor-relations 
     environment. Because strikes among government workers are 
     forbidden by law, the Postal Service and its five unions--
     mainly, the 365,000-member American Postal Workers Union 
     (APWU)--must submit labor disputes to mandatory binding 
     arbitration. ``No company has to do that,'' points out 
     Runyon. ``One arbitrator can tell us what our labor costs are 
     going to be. And we have no responsibility for the outcome.''
       Runyon was well aware of these constraints when he stepped 
     into his post, first held by Benjamin Franklin. He also was 
     aware of a variety of other daunting challenges he had 
     inherited--challenges that to an executive war-horse like him 
     made the job seem even more appealing. Among them:
       Nimble competitors, not bound by the obligation to provide 
     universal service at a uniform price, were tearing at the 
     Postal Service's very existence. Private carriers offering 
     overnight package delivery were grabbing an increasing share 
     of the market. The fax machine, e-mail, and other electronic 
     forms of communication were rapidly replacing first-class 
     mail, long a USPS monopoly. Runyon figures that 35% of 
     business-to-business mail has disappeared in recent years--an 
     erosion that he expects to continue.
       The Postal Service's organizational structure was a classic 
     example of bureaucracy at its most bloated. The culture of 
     the 221-year-old agency was steeped in the 19th century. 
     Technology seemed barely in the 20th.
       Red ink was flowing. The last time the USPS had turned a 
     profit was 1989, the year after a postal-rate rise.
       Relations with the postal unions were, at best, strained.
       Runyon plowed into these challenges with the zest of a CEO 
     20 years his junior. But, unlike a younger executive, he 
     brought a rich background of varied management experience to 
     the post.
       First was his 37-year career at Ford. He started as an 
     assembly-line worker in Dallas while awaiting a call-up to 
     the Air Force during World War II, went back as an hourly 
     employee while completing his engineering degree at Texas A&M 
     University, and eventually worked his way up to vice 
     president of Body & Assembly Operations.
       After leaving Ford in 1980, he became President and CEO of 
     Nissan Motor Manufacturing Corp. U.S.A. where he built the 
     first Japanese auto plant in the U.S. at a greenfield site in 
     Smyrna, Tenn.
       Then, at a time when most executives his age head for the 
     golf course, in 1988 he left Nissan to become TVA's chairman, 
     ``I went there,'' he says, ``because President Reagan asked 
     me to. And I wanted to prove that we could run a government 
     agency as efficiently as a private company.''
       He did precisely that. In what he calls ``a learning 
     experience'' for the Postal Service, he turned TVA, then a 
     reeling organization, around. He slashed overhead by 30%, 
     achieved $1.8 billion in efficiency improvements, and 
     stabilized TVA's utility rates that had been rising more than 
     10% a year for the previous 22 years. (Thanks to his 
     spadework, it has been 10 years since TVA's last rate 
     increase.)
       His success at TVA caught the eye of the Postal Service's 
     governors, who offered him the Postmaster General's job in 
     May 1992. He started two months later and immediately asked 
     all postal officers to ``explain to me what they did, why 
     they did it, and how they did it.'' After digesting that 
     information, within three weeks he launched a process of 
     change that, going on five years later, continues.
       ``The biggest challenge,'' he says, ``was to stop losing 
     money.'' Beyond that, his goals were to improve service, stop 
     the high wage increases that were granted every three years, 
     and reduce overhead.
       ``Another challenge I had, both at TVA and here,'' he 
     reflects, ``was to convince employees that they had 
     customers. I had to convince them that we didn't just exist 
     because we were a government agency, but because we provided 
     a service--a service to customers. And we had to satisfy 
     those customers. It required a total culture change.
       ``We've done a pretty good job,'' Runyon reflects, looking 
     back on his tenure with an air of detachment--and obvious 
     satisfaction. Ticking off his team's accomplishments, he 
     points out that USPS went four years without a rate increase. 
     When it did raise rates in January 1995, the boost was only 
     10.3%--two points below the four-year inflation rate. 
     Significantly, the service posted a profit of $1.8 billion in 
     fiscal 1995 and $1.5 billion in 1996. Runyon is confident of 
     more black ink in fiscal '97, which would mark the first time 
     since the Postal Service became independent in 1971 that it 
     has strung together three consecutive profitable years. 
     Profit is budgeted at $55 million, but Runyon is setting $1 
     billion as ``an aggressive target.''
       The service doesn't make a profit merely for the sake of 
     profit. But the last two years of black ink have more than 
     halved USPS's one-time negative equity of $6 billion. ``When 
     we get our negative equity down toward zero, and if we can 
     continue to make a profit, we may be able to cut the price of 
     stamps,'' he says.
       In perhaps an even greater accomplishment, the Postal 
     Service under Runyon has managed to make these profits while 
     simultaneously improving its performance. Since early 1994, 
     USPS has boosted on-time delivery of overnight-designated 
     mail from 79% to 91%, helping to erase its long-time image of 
     offering ``snail mail.''
       How did Runyon accomplish all this? Much of the turnaround 
     he credits to his reorganization of the once-bloated agency. 
     He trimmed four layers of management, reducing overhead by 
     some 23,000 administrative employees. This leaner 
     organization, in turn, has made possible a significant 
     improvement in communication. And communication, he stresses, 
     ``is the most important thing you have in any business.''
       At the same time, Runyon reduced the number of regulations 
     in the USPS Domestic Mail Manual, which hadn't been 
     overhauled in more than a century, by 50%
       Not unexpectedly, many of Runyon's moves sparked 
     resistance. But now, he claims, his customer-oriented, 
     market-driven approach--unquestionably helped by the 
     incentive-compensation plan he has in-stalled--has energized 
     the organization.
       Important, too, in the Postal Service's turnaround have 
     been Runyon's marketing innovations. Perhaps most noticeable 
     to the general public are the post offices themselves. They 
     don't look like--well--post offices anymore. They're bright, 
     colorful, user-friendly ``postal stores,'' featuring 
     automatic-teller machines and clerks who actually smile. 
     Customers can even use cards--a simple convenience that took 
     Runyon two years to get approved by Congress.
       In addition, Runyon has launched an aggressive advertising 
     campaign. Focused particularly on Priority Mail, it is 
     credited with raising volume of that service by 23% from the 
     previous year. The campaign has been so successful that it 
     has attracted a lawsuit by Federal Express over claims made 
     in the ads.
       The Priority Mail campaign also is the subject of one of 
     Runyon's managerial embarrassments. It led to the forced 
     resignation last October of Loren E. Smith, the former chief 
     marketing officer who draws effusive praise from Runyon for 
     spearheading USPS's marketing initiatives. A one-time Procter 
     & Gamble executive, Smith left the Postal Service following 
     revelations he had overspent his advertising budget by nearly 
     $90 million. The episode is another example of the lack of 
     flexibility the Postal Service, whose advertising 
     expenditures are firmly fixed by the Board of Governors, has 
     in responding to the market. Any private company seeing 
     similar effectiveness of an ad campaign, postal officials 
     point out, could easily have shifted spending to continue the 
     momentum.
       Besides its marketing emphasis, the Postal Service is 
     introducing a steady stream of popular new products. Self-
     adhesive ``no-lick'' stamps, which now account for 60% of all 
     stamp sales, are one. Two newer ones in recent months: Global 
     Priority Mail (available to 27 nations) and Global Package 
     Link

[[Page E299]]

     (a customized direct-mail service for businesses). More new-
     product offerings are on the way, many of which are an effort 
     by the Postal Service to counter its electronic competition 
     by offering innovations of its own in the area of electronic 
     commerce. Among them:
       CIPS (Customer Initiated Payment System)--a service that 
     will enable consumers to drop a prepaid card into the mail to 
     trigger electronic payment of bills. It will save them from 
     having to write a check.
       Hybrid Mail--a potential market of $200 million a year in 
     which consumers--especially advertisers--can transmit mail 
     electronically and have it delivered in hard copy.
       Electronic Postmark capitalizes on the Postal Service's 
     unique capability of being a ``trusted third party'' by 
     certifying electronic messages.
       Kiosks will offer consumers one-stop shopping for federal 
     services. By inserting a ``smart card'' in a slot, for 
     example, they can get their Social Security checks.
       Still another innovation--installation of vending machines 
     in post offices--is in the works (and has subjected Runyon to 
     a Justice Dept. investigation because he was involved in 
     negotiations despite formerly owning Coca-Cola stock).
       At the same time it introduces these and other new 
     services, the Postal Service is installing sophisticated new 
     automation equipment--part of a record five-year, $14 billion 
     capital-investment program that is one reason for the 
     dramatic improvement in on-time delivery.
       Despite this automation and other efficiency gains, 80 
     percent of USPS's revenues still goes to labor, Runyon 
     pointed out in a recent speech. He indicated the agency is 
     ``taking a good, long look'' at using private-sector labor--
     an action that invites a battle with postal unions (see Page 
     47).
       As if Runyon won't be busy enough this year shepherding the 
     Postal Service's new products and other innovations, he also 
     will devote much of his attention to Capitol Hill. Already, 
     he says, ``I spend 20 percent of my time dealing with 
     Congressional matters.'' That percentage may increase as he 
     works for enactment of legislation, expected to be 
     reintroduced by Rep. John M. McHugh (R, N.Y.), that would 
     give the Postal Service greater flexibility to set prices and 
     to expand and create products more rapidly.
       Beyond that, Runyon says his goal is ``to just keep on 
     improving.'' He'd like to extend USPS's string of profitable 
     years--``a historic three-peat,'' he calls it--and boost its 
     service performance even higher.
       ``That is what makes the rumors so hard to understand,'' he 
     declared in a December speech to the National Postal Policy 
     Council, an organization representing large mailers. ``I am 
     talking about the rumors that I am ready to hang up my bag 
     and leave the Postal Service. I am looking forward to 1997 
     and beyond.''
       That doesn't sound like a man who wants to chuck it all for 
     golf, grandchildren, and gardening.
                                  ____


                 [From Barrons, Monday, Jan. 27, 1997]

                       The Appearance of Conflict

                         (By Thomas G. Donlan)


       stock ownership is not necessarily a collision of interest

       Marvin Runyon, chief executive officer of the Postal 
     Service (in pretense a private company) has done what he must 
     to hold on to his real job, which is Postmaster General of 
     the United States. He has apologized for ``an appearance of 
     conflict of interest'' involving his ownership of stock in a 
     company doing business with the Postal Service. The apology 
     may have been politically necessary but it will do nothing to 
     improve government or the Postal Service.
       At issue is Runyon's ownership of somewhere between $50,000 
     and $100,000 worth of Coca-Cola stock while he was also 
     involved last year in discussions about a franchise for Coke 
     machines in the nation's 40,000 post offices.
       According to Runyon's report, he has owned the stock since 
     1977. We did not ask him, but let's assume he has about 1,700 
     shares worth about $100,000. Undo the effects of 20 years' 
     worth of stocks splits and appreciation: By our calculation, 
     that means he paid $35 a share for 70 shares--much less if he 
     reinvested dividends. It was a trivial investment for a man 
     who was then one of Ford Motor Co.'s top executives. Only 20 
     years' worth of appreciation makes the investment a sum worth 
     noting.
       Anyone with a sense of proportion should also wonder how 
     much profit Coca-Cola might gain from even 40,000 new Coke 
     machines. After all, the company makes syrup, which passes 
     through the hands of distributors and bottling companies and 
     vending-machine companies before it ever reaches the lips of 
     thirsty postal patrons, parched by waiting for the so-called 
     service of the Postal Service.
       If Coca-Cola makes a penny a drink and each machine rings 
     up 500 sales a day (both estimates are absurdly high), that's 
     20 million pennies or $200,000 a day profit. Six days a week 
     minus national holidays is roughly 300 days and $60 million. 
     Divide that among 2.4 billion shares and multiply by no more 
     than 1,700 shares that Runyon owns if his holdings are worth 
     less than $100,000, and we're looking at an appearance of 
     less than $45 a year worth of conflict of interest.
       When Runyon was reproached for this conflict, he should 
     have replied with defiance, not with meek acceptance. 
     Instead, he recused himself from the negotiations with Coca-
     Cola and sold his Coke stock.
       Obviously, he paid more in capital gains tax on the sale 
     than he could have earned from 500 years of his stockholder's 
     share of the profits from a Coke franchise in post offices. 
     But this is the U.S. Postal Service, which swallows camels 
     and strains at gnats with the best bureaucratic skill.
       A few months ago, the Postal Service system forced the 
     resignation of one of Runyon's key aides, marketing director 
     Loren E. Smith. The unfortunate fellow violated a rule 
     against unauthorized budget transfers. He had overspent his 
     advertising budget by $90 million on aggressive ads for 
     express mail that targeted the competition, Federal Express 
     and United Parcel Service.
       Called ``$12, $6, $3: What's Your Priority?'' the ads 
     boosted the Postal Service's Priority Mail service, which 
     offers two-day service for $3, compared with the competitors' 
     two-day services at $12 and $6. The ads glossed over the 
     other guys' service guarantees and computer package-tracking, 
     but the emphasis on low price worked.
       The ads were the most effective in Postal Service history, 
     pushing express-mail revenues up by $500 million or more 
     during the campaign. ``Quite frankly, you ought to be 
     throwing a parade for everybody in the marketing 
     department,'' Smith said, just before he was sacked.
       The Smith affair underscored the real character of the 
     Postal Service as a government bureaucracy rather than a real 
     corporation. The rules Smith broke were legislated into his 
     way by political appointees on the Postal Service Board of 
     Governors, for whom line items were more important than 
     success. Smith had never overspent the marketing budget, just 
     the part for advertising, which was covered by spending 
     restraint in other areas.
       For an explanation of Smith's fate, recall that FedEx was 
     the largest corporate contributor to congressional campaigns 
     between 1993 and 1995, while UPS was third. When such 
     contributors complain about their governmental competition, 
     things happen. All Runyon could do was send Smith on his way 
     with a $94,000 severance arrangement, something that brought 
     the postmaster general under more fire.
       Still, the biggest stick with which Runyon's enemies are 
     beating him is this convenient thing, the appearance of 
     conflict of interest.
       Similar sticks are raised throughout the country, where 
     federal, state and local rules restrain officials from owning 
     insignificant quantities of stock because their holdings 
     might pose an appearance of conflict.
       At the moment, two Clinton Administration nominees, Anthony 
     Lake and Samuel Berger, are struggling with such an 
     appearance. While Lake was serving as National Security 
     adviser and Berger was his deputy, the two were advised by 
     some overzealous White House lawyer to sell their energy 
     stocks, as if they could pervert the nation's foreign policy 
     to make a few pennies per share in Lake's Duke Power and 
     Exxon stock, his wife's stock in Mobil and TECO Energy, and 
     Berger's stock in Amoco. The two men ignored the admonition, 
     accidentally they say, and the Justice Department has been 
     investigating them for more than a year.
       Now Lake has been nominated to be director of the CIA, a 
     particular irony since the most successful recent director, 
     the late William Casey, was an ardent Wall Street plunger. 
     Casey's purchase of stocks at the beginning of the bull 
     market in 1982 was fully disclosed and drew sarcastic remarks 
     in Barron's, among other places, but never seemed to affect 
     his performance as the nation's spymaster.
       Appearances aside, either there's a conflict or there 
     isn't, and reasonable people can tell the difference. It's 
     not a conflict for an official such as Runyon who owns one-
     millionth of a company while negotiating with that company 
     for a contract that might enhance its profits by 3%. It's a 
     conflict when the investment is so large that the potential 
     swing in earnings also represents a substantial percentage of 
     the official's annual income.
       The real appearance in the Postal Service is of a conflict 
     between tough-minded people trying to run a business and 
     muddle-headed political appointees trying to maintain a 
     traditional preserve of civil-service unions and political 
     patronage.

                          ____________________