[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.