    [Public Papers of the Presidents of the United States: William J. Clinton (1996, Book I)]
    [May 16, 1996]
    [Pages 749-754]
    [From the U.S. Government Publishing Office www.gpo.gov]

    Remarks During Panel II of the White House Conference on Corporate
    Citizenship
    May 16, 1996

        The President. Thank you very much, Dean.
        The last panel will cover the last two elements in corporate
    citizenship, training and investment in employees and partnerships with
    employees. And so I'd like to begin here discussing training and
    investment in employees. And the first company and the first presenter
    will be Mike Plumley, the chairman and CEO of the Plumley Companies.

    [Mr. Plumley explained that foreign competition inspired the beginning
    of a major educational effort among employees, including General
    Equivalency Diploma (GED) instruction.]

        The President. Thank you very much. Let me ask you one question.
    When you brought the teachers onto the premises of your factory to teach
    the GED programs, did the workers, did they take those classes either
    before or after their shift started? Is that when they did it?
        Mr. Plumley. The GED program was after the shift. And it's a
    voluntary.
        The President. And did you have to pay for that or did the State
    provide the service?
        Mr. Plumley. No, we paid the instructors ourselves, the teachers
    from the local high school.
        The President. When I was--back when I had another life, when I was
    Governor, we started a program where we actually sent GED instructors to
    any work site with more than 100 employees. And I was stunned by the
    number of people who wanted it, still needed it, and it seemed to work
    very well. But I applaud you for doing that.
        Our next presenter is the chairman and CEO of Cummins Engine
    Company, Mr. Jim Henderson.

    [Mr. Henderson said the company committed itself to establishing a good
    relationship with all employees based on trust and open communications
    and giving them responsibility for planning their work and for improving
    results for their customers.]

        The President. Thank you. Thank you very, very much.
        Our third company dealing with this issue of training and investment
    in employees is Cin-Made Company, and Bob Frey, the president, is here.
    I'd like to call on him now to speak.

    [Mr. Frey commented that corporate citizenship is good for companies,
    the country, the economy, and the family.]

        The President. Thank you. I believe you could sell that position.
    [Laughter] Good for you.
        Now, moving along in our story of partnerships with employees, we
    have a particularly unique example in Republic Engineered Steels. I want
    to call on Russ Maier, the chairman and CEO, and then he'll be followed
    by Dick Davis, vice president of United Steel Workers. And they'll tell
    you the story of Republic Engineered. It's a good story.

    [Mr. Maier and Mr. Davis described how the company became employee-owned
    through an employee stock ownership plan (ESOP).]

        The President. Thank you. I can't let you go--both of you--without
    asking you what is clearly the obvious question which is, do you believe
    that what you have done and how you have done it could be made to work
    just as well in a setting in which the company is not employee-owned?
    And if so, would there have to be some other kinds of incentives for the
    employees? Would there have to be some other kind of compensation scheme
    or something that would help to kind of re-create the conditions

    [[Page 750]]

    which exist from the get-go when it's an employee buyout on the front-
    end? I'd like to just hear both of you comment on that.

    [Mr. Davis said that other members of the panel had shown that other
    models were possible, and he believed more would evolve. Mr. Maier said
    that he would like every company to have an element of employee
    ownership.]

        The President. Thank you very much.
        The next person I want to call on is a 40-year veteran of a company
    that may be the only company represented in this room that I feel
    comfortable in saying we have probably, every single one of us, been a
    customer of, Mr. Arney Langbo, the chairman of the Kellogg Company.
    [Laughter]

    [Mr. Langbo said that when faced with a need to reduce capacity and
    improve efficiency, the company's strategy was accomplished through a
    negotiated agreement with the employee union.]

        The President. Thank you very much.
        I might say, just sort of by way of information background, that the
    ESOP concept was established in 1974, and since then, the number has
    grown from 200 to over 10,000. And there are an estimated 12 million
    ESOP participants that own $60 billion in stock in this country now.
        Participation in deferred profit-sharing plans has grown from 8.4
    percent of the work force in 1980 to 18.3 percent in 1991. That's the
    last year for which we have any figures. But you can see that this is
    not an insubstantial percentage of the American people that are out
    there working in these kinds of environments.
        And again, I think it's important to point out, because we nearly
    never hear anything about it, that there are literally millions of
    people out there working in partnerships trying to make their companies
    more profitable, their lives better, and their country stronger. I think
    it's worth pointing out.
        I thank you, sir, very much. If I might ask you one just brief
    question because it leads in--I want to ask the Vice President to speak
    after you about an issue which has been a difficult one for us, and that
    is how we handle the downsizing of the Federal work force, because I
    think it's quite interesting. You hear a lot of talk about downsizing in
    the private sector and how bad it is. I guess that the United States
    Government in the last 3\1/2\ years has been the biggest downsizer in
    the country. And I know that you had to have a modest one at Kellogg.
    I'd like you to just explain how you handled it, if you might very
    briefly.

    [Mr. Langbo said that in recent cutbacks, management sat down with the
    union and agreed to make use of early retirement, severance pay, and
    voluntary transfers to other locations. He concluded that recent changes
    in accounting laws would no longer allow immediate deductions for
    employee education.]

        The President. Thank you very much for that. I didn't know that.
        There's another related issue which is that the tax--the
    nontaxability to the employee of employer expenditures on education has
    historically been $5,250. It lapsed, and it's in the process, we hope,
    of being reenacted. But there are certain restrictions on it which I
    think are excessive, although they cover most--they don't cover all of
    the kinds of educational programs that employers would like to do for
    employees, especially if there might be a downsizing, because the
    restriction now says that the educational benefits paid by the employer
    up to $5,250 a year are not taxable to the employee if they're necessary
    to retrain for the existing job or to train for another job in the
    company, up the hierarchy. If it's sort of an off-line education
    program, if you will, it's not covered.
        In addition, in the reenacting, if the Congress--the Ways and Means
    Committee apparently has proposed to eliminate graduate education, which
    I think is a big mistake as it applies to higher tech companies. I hope
    we can still get a change in that. But in my view, we need that
    reenacted with the broadest possible meaning, because that also really
    matters to the employees, especially if they might be facing another
    downsizing. And we have proposed--we're going to send a note up to the
    Hill which also gives a little extra credit to the smaller businesses
    that may not be able to afford to undertake this, because I think it's a
    very good--a big thing.
        And I will look into this accounting tax issue. I didn't know
    anything about it. Thank you.
        Mr. Vice President.

    [The Vice President summarized the administration's efforts to reduce
    the number of Federal employees and improve the efficiency of Government
    operations.]

    [[Page 751]]

        The President. I know you may think that the Vice President sounds
    like a shameless booster--[laughter]--but we're pretty proud of what
    these Federal employees have done. And they did it at a time when they
    were being routinely condemned and held up as an object of ridicule.
        And I might just say that there are companies--there are some really
    successful companies in this room today that started out with an SBA
    loan. So before I sign off and go to our last participant, I'll just
    take the SBA. Three and a half years ago, they had a loan form that was
    an inch thick; now it's a page long. Three and a half years ago, they
    took 6 weeks to give you an answer; now it's 72 hours. Their budget has
    been cut by something like 25 percent, and they've doubled the loan
    volume.
        So it's simply not true that public service is not capable of
    operating at a very high level of productivity and quality based on
    pride and partnership of the workers. And so I'm very proud of them. And
    the Vice President deserves a lot of credit for the work he's done on
    this.
        Our last presenter also has a rather astonishing story to tell. He's
    the CEO of United Airlines, Gerry Greenwald.
        Gerry.

    [Mr. Greenwald said United was trying to pass two tests: to be
    profitable and to be a good place to work. He noted that employees who
    owned stock through ESOP's had to retire, die, or quit to cash in their
    stock, and that he hoped that would change. He also endorsed Government
    efforts to establish free trade in Asia and Europe.]

        The President. Let me say, as far as I know, you're the first person
    who ever told me that about the ESOP, that ever presented that as a
    problem, and I'll be glad to look into that.
        Secondly, as you doubtless know, our trade office has spent untold
    hours in airline negotiations trying to open new routes and be willing--
    taking on all comers, saying, ``If you want more routes in America,
    let's just have totally open competition.'' We can't find any takers for
    that, because the American airlines are so much more productive and
    competitive than anywhere in the world, and it's a real tribute to you
    and to the others in that business. But we will continue to work on
    that.
        Let me say, I'd like to--we've got a couple of minutes here, and I'd
    like to open the floor again to comments, but I do want to say that one
    of the most heartening things that's come out of this today for me is to
    hear so many of you say that the job security of your employees is a
    goal of yours and that you believe in it and that it matters to you and
    that you believe that you can withstand the cycles of the market and
    still by and large preserve it, recognizing that from time to time there
    will be significant problems that will cause some companies to have to
    downsize. The fact that it is a goal which companies are trying to
    preserve and pursue I think is very important and especially publicly
    traded companies who are under enormous pressure to keep their quarterly
    review of their stock prices up. This is very encouraging to me.
        Would anyone like to comment on this whole issue of partnership in
    training and investment?
        Mr. Harman?

    [Sidney Harman, CEO of Harman International, said he believed the
    conference's central theme was that there were many techniques to reach
    the desired end, and that the ultimate challenge was to increase
    workplace security. He joked that it took 6 weeks to make up lost
    productivity due to the President's visit to Harman's Northridge, CA,
    plant in March.]

        The President. All right. I'm going to call on you.
        Let me just make one very brief comment. It was worth it. It was a
    great day. The thing that I liked about what you had done is that it
    seemed to me that you were in a market where you could not possibly
    control dramatic fluctuations in the orders that were coming in. And yet
    it was clearly not in your interest, both from a human point of view and
    from an economic point of view, to have to keep bouncing these workers
    on and off like a basketball or having them on a yo-yo string.
        And so you were actually able to create a whole alternative way of
    working for them that was just purely ancillary to your primary mission,
    but it had the effect of allowing you to pursue the goal that the
    gentleman at Lincoln Electric has set for his company and held to. And I
    think it's very impressive. And I would think a lot of companies that
    have similar circumstances would want to take a look at how you did it,
    because they would save a lot of energy and productivity and loyalty for
    their company if they could do the same thing.

    [[Page 752]]

        Yes, sir. And then there were two more back here. Go ahead.
        Participant. [Inaudible]--once every 4 years we lose an enormous
    amount of productivity, so I can relate to your point. [Laughter]
        The President. Especially when I was up there. [Laughter]

    [A participant said that there was a good deal of data linking
    productivity to the kinds of practices outlined in the conference. He
    concluded by suggesting that a task force be set up to encourage
    businesses to devote a certain percentage of profits to training,
    employee ownership, or family benefits.]

        The President. Thank you.
        Two back here. You, and then you, and then the gentleman in the
    corner.

    [A participant said that his fast food company was not offering lifetime
    employment and suggested that the Government should address portability
    of health care, pension, and other benefits in order to preserve the
    economic benefit of the years workers had spent in such jobs.]

        The President. Thank you very much.
        There's a gentleman back there in the corner. While you're passing
    the microphone back, I just want to sort of support that and say that,
    if you look at the Kassebaum-Kennedy bill which passed the Senate 100 to
    0--which is the sort of thing we ought to be doing in this country, I
    mean, obviously we've got a manifest need like that. It doesn't solve
    all the problems, but at least it will make portability the rule rather
    than the exception, and it will make available insurance, even if it's
    expensive now, for people who have had someone in their family who is
    ill.
        And then the next big challenge will be to make sure that those of
    you who are in a tough margin and, particularly, smaller businesses are
    able to get into really, really large pools of purchasers so that people
    who have a preexisting condition don't have to get soaked on their
    premiums because the impact on everybody else is so negligible. And
    we'll just have to do this one step at a time, but we've got to pass the
    Kassebaum-Kennedy bill first so that we can get to that next step. And
    when we do, I think it will make a huge difference in stabilizing the
    whole work situation for people in these smaller companies and where
    that job is the first stop on the way to, hopefully, an even better
    future.
        Thank you very much for what you said.
        Yes, sir.

    [A participant said that some corporations blamed the financial markets
    for the need to downsize and asked if it would be possible to create new
    financial instruments to take into account certain social goals.]

        The President. Would anyone like to take a crack at that, what he
    said about the--[laughter]. Gerry?

    [Mr. Greenwald said he wanted to clarify an earlier point made by a
    participant that there was clear evidence that companies became more
    profitable through corporate citizenship. He said he did not think that
    Wall Street analysts or institutional investors believed that, because
    if they did, they would not reward instant massive layoffs.]

        Participant. Instant massive layoffs means that management has
    failed.
        The President. Let me just follow up on both of those comments.
    Look--and let's talk about this--people make mistakes. The President
    even makes a mistake now and then. [Laughter] People make mistakes. And
    sometimes--and the world changes sometimes. Sometimes a decision that
    was good this year looks pretty bad next year because things that you
    couldn't foresee change.
        Now, if that happens and you're running a really big company, and
    let's say two out of six divisions of it no longer make sense for you to
    be running and you want to have a no-layoff policy, and maybe you
    shouldn't have gotten into all these things that you got into when it
    looked like a profitable thing, at least from a financial transaction
    point of view, to do, how do you get the time from the markets and from
    your board to make the transition? Maybe if you had 3 years, you could
    figure out something for all these people, and then you wouldn't have to
    lay them off.
        I mean, I think that's the thing that plagues me, you know. I think
    over the long run the markets make pretty good judgments. I don't think
    you can stay very strong in the market over the long run if you're not
    producing a quality product or service that somebody wants to buy. But I
    think what has happened is, as these markets have become more global and
    our ability to move money around just like this--and the people who are
    moving it make

    [[Page 753]]

    money based on quarterly returns and also based on how many transactions
    are churned--it really forces people who are in a tight, in the near
    term at least, to make decisions that seem draconian. I mean, at least
    that's what it seems to me.
        And is there a fix for that? I mean, is there something that can be
    done about that, even if it's no more than--to go back to the question
    the gentleman asked--even if it's no more than changing the attitude of
    the people that are making those judgments? Because my perception is
    that some of these managers are under extreme market pressure in a
    dimension for short-term results that was not the case even a few years
    ago.
        That's my perception. And I would like--anybody else want to comment
    on that? This is a tough issue.
        Participant. I think that's true, Mr. President. And also there are
    other factors at work, too, that in this day of increased corporate
    governance today--boards, I think, are looking for more of that, not
    only the financial markets, but there are higher levels of expectations
    with boards of directors. I'm not sure it's all bad. Is it good or bad?
        The President. Well, I think the point they were making is, if you
    could be more reluctant to have layoffs because you knew that these
    folks could be made productive if you had time to do it, are you robbed
    of the time to do it if you're market dependent on a quarterly basis? I
    think that's--to go back to our friend, again, from Lincoln Electric, if
    you stick with your mission and you stick with your mission over decades
    and then you broaden your production line or you broaden your services,
    sort of flowing naturally out of your mission, this might not have ever
    happened to you. But if, in the last 15 years, you have got into
    expansions that were basically adopting unrelated or tenuously related
    enterprises, then you are liable to get caught on one of these whipsaws.
    And I think that's some of what we have seen here in some of the most
    highly publicized ones.
        Sidney, what were you going to say?

    [Mr. Harman, citing the example of an investment firm that specifically
    supported Harman International because of its policies, expressed his
    belief that other financial managers would in time have the same point
    of view.]

        The President. If I might just make one other point, then I want to
    call on the lady over here in the corner, then we have to adjourn.
    Earlier today, maybe it was this morning at breakfast, someone said,
    ``The enemy is us.'' And some of our representatives of the unions here
    were laughing about it because, of course, the employees' pension funds
    are among the biggest investors in the stock markets. And if they invest
    in mutual funds, let's say, their money managers are trying to get the
    highest return they can for the pension, and perversely, they could be
    undermining the employment stability of the very people whose retirement
    they're trying to protect. At least that is arguable.
        But if you want the people who are representing you--this is
    something, it seems to me, that would be really a worthwhile discussion
    and maybe we could put one together for corporate executives and the
    union folks and the people in the middle, the people that are supposed
    to make these investment decisions that you asked about, sir. You see,
    you gave us a topic for a whole other day. [Laughter]
        But I mean, I think, these markets, on balance, have served us all
    very well over time. And so we have to be reluctant to mess them up. But
    on the other hand, when the incentives get a little out of whack, we
    have to--we ought to look at it. And I think--anyway, I'll pursue it,
    and I'll follow up with you all.
        Yes, ma'am.

    [A participant said she was a consultant to small corporations which
    frequently considered corporate citizenship to be a luxury item,
    something that businesses could afford when they got bigger. She
    suggested that any followup conference should emphasize that corporate
    citizenship was essential for any size company.]

        The President. Thank you. And I agree with you. And I would, you
    know, just point out we have had some companies represented on this
    platform today that have under 100 employees. And we have even more in
    the audience. And all of them have various stories to tell. So I think
    that it is more important, but that's one place where the Government
    should come in. You know, if there is a particular policy that is more
    difficult for a small company than a large company to implement, then
    maybe that's the place where we ought to have a little extra incentive
    on, for example, extra educational benefits or something like that.

    [[Page 754]]

        Well, this has been an amazing day for--certainly for me. I hope you
    think it has been worth your time. I thank you all for coming. I thank
    you for your support of the idea that we do have responsibilities to one
    another in the workplace, and that if we fulfill them in the appropriate
    way, more money will be made, the free enterprise system will be
    stronger, more jobs will be created, and America will be a better place.
        There will be, I assure you, some followup with all of you on this
    conference, and we'll try to determine where we go from here. But let me
    say I called this conference for two reasons. One is I wanted to change
    the perception that there were no companies in America that cared about
    the employees and that were sticking up for them and trying to do right
    by them. And the second is, I wanted to change the reality, where we
    could, by using the good examples here to influence people in the rest
    of the economy. I believe today we have gone some significant way toward
    both of those objectives, and I think there are some other things we can
    do.
        Again, I want to thank the executives who have agreed to serve on
    the board for the Ron Brown award, and we will follow up on that as
    well.
        Thank you all for coming, and we will be back in touch. Thank you
    very much.

    Note: The President spoke at approximately 2:10 p.m. in Gaston Hall at
    Georgetown University. In his remarks, he referred to Robert Parker,
    dean, Georgetown University school of business. A portion of the
    President's remarks could not be verified because the tape was
    incomplete.