The U.S. has rarely
been as buoyant as it is today. The golden economy has delivered years of
plentiful jobs and soaring incomes--after decades of going sideways. From
janitors to dot-com billionaires, almost everyone is feeling the flush times.
Paychecks are rising, and wealth is piling up on a scale unimaginable just a
few years ago, when the U.S. struggled through the recession of the early
1990s. Even many of America's worst ghettos are seeing an influx of investment
and jobs.
Most Americans recognize that Corporate America gets much credit for the good
fortunes. A solid two-thirds of the U.S. public gives companies kudos for
today's prosperity, according to a BUSINESS WEEK/Harris Poll released on Aug.
31. About the same number say large corporations make good products and compete
well in the global economy.
Yet amid the good times, Americans feel uneasy. BUSINESS WEEK's poll shows that
nearly three-quarters of Americans think business has gained too much power
over too many aspects of their lives. In a response that surprised the pundits,
the public seemed to rally around the sentiment expressed at the Democratic
convention, when Al Gore declared that Americans must ''stand up and say no''
to ''Big Tobacco, Big Oil, the big polluters, the pharmaceutical companies, the
HMOs.'' Gore sensed the frustration of many voters and their desire to blunt
some of the power of business, crafting a new campaign strategy that so far is
working (page 150). Indeed, 74% of those polled by BUSINESS WEEK agreed with
the Veep's remarks.
Gore's neo-Populist rhetoric has tapped a vein of discontent. Consumers are
seething about insensitive corporate behavior. And that is only adding to a
souring of attitudes toward large companies. While Americans give companies
their due for producing more wealth and higher incomes, only 47% think that
what's good for business is good for most Americans, according to BUSINESS
WEEK's poll. And 66% think large profits are more important to big companies
than developing safe, reliable, quality products for consumers. Adding to the
disenchantment is the perception that companies often buy their way into
government: Witness the success of Senator John McCain (R-Ariz.) in pushing for
campaign-finance reform during his Presidential run. ''There's a widespread
sense of unfairness and distrust today, where people think companies are not
quite playing by the rules,'' says Ruy Teixeira, a polling expert at the
Century Foundation, a Washington think tank.
So how is it that Corporate America is both hero and villain? Oddly enough,
part of the anticorporate mood may be a consequence of the rip-roaring economy
itself. Now that Americans' material needs are so well satisfied, they have the
luxury of focusing on their quality of life. Just as U.S. companies claim to be
the architects of the boom, so too are they held responsible for its excesses
and failings. ''The slippage in service--it's almost epidemic, across every
aspect of our lives,'' fumes Anne Zenzer, an executive recruiter in Oak Brook,
Ill., who flies 100,000 miles a year, mostly on United Airlines Inc.--notorious
these days for delays.
The revved-up New Economy has also left many families feeling overworked and
stressed out. The sticking point in last month's strike at Verizon
Communications
(VZ) was workers' complaints about burnout and mandatory overtime, which
management finally agreed to limit. At the same time, many Americans feel
they're not getting their fair share of the riches. The reason: Average wages
and benefits have outpaced inflation by only 7.6% since the last recession
ended in 1992, while productivity has jumped by 17.9%. The gap between the rich
and the poor also grates on many middle-class people. Chief executives inflame
matters by granting themselves multimillion-dollar pay packages, which 73% of
the public sees as excessive, the poll shows.
NO REINS. Indeed, corporate leaders are perceived as insensitive and
more concerned with profits than with those they're supposed to be serving.
''Some companies get big, they get arrogant, and they lose touch with the
community,'' concedes Jerry Jasinowski, head of the National Association of
Manufacturers. Part of the problem is that no one's reining in business
anymore. Most of the institutions that historically served as a counterweight
to corporate power--Big Government and strong unions--have lost clout since
Ronald Reagan came to town crusading for deregulation and local control. The
conservative ascendancy that followed discredited much of the New Deal social
structure, leaving corporations to fill the vacuum, says Boston College
sociologist Charles K. Derber, author of a 1998 book, Corporation Nation: How
Corporations Are Taking Over Our Lives And What We Can Do About It.
It's this power imbalance that's helping to breed the current resentment
against corporations. Some experts draw analogies to a previous period of
unchecked corporate power--in the late 1800s--when the opening of the wide-open
frontier economy and robber-baron capitalism gave rise to the Populist
movement. Such raw anticorporate sentiment was on display in this summer's Big
Tobacco trial in Miami. When it ended, the foreman of the jury that delivered a
$144.8 billion punitive-damage judgment against the industry took the
opportunity to speak out, saying the jurors' deliberate intention was to ''put
the companies on notice--not just the tobacco companies, all
companies--concerning fraud or misrepresentation of the American public.''
For Corporate America, there is danger in the new climate: In a word, renewed
government regulation. For two decades, market deregulation has fostered
competition and lowered many prices. But the pendulum may have swung too far
for many citizens, who now take the gains for granted and want to dampen the
extremes that can come with unfettered capitalism. Already, Washington is
making noises about curbing megamergers, regulating health-maintenance
organizations and drug prices, imposing new rules on airlines, and capping
energy rates in cities such as San Diego, where costs skyrocketed after the
city deregulated its utilities.
Unless companies placate critics, they may prod politicians into more
government intervention. While Gore's new pitch undoubtedly involves some
calculated appeal to the liberal base of the Democratic Party, he also may have
to deliver on some of the promises if he's elected. Certainly, the pressure to
rein in companies isn't likely to let up anytime soon. Just look at longtime
consumer advocate Ralph Nader, who in his Presidential campaign has zeroed in
on companies as the bad guys responsible for many of the nation's ills (page
152). ''There's an increased readiness to believe negative things about
corporations today, which makes it a dangerous time for companies,'' warns
Daniel Yankelovich, chairman of pollster DYG Inc. ''Executives haven't had to
worry about social issues for a generation, but there's a yellow light flashing
now, and they better pay attention.''
OUT OF CONTROL. Another risk for Corporate America is weakened support
for free trade. At home and abroad, citizens facing globalization worry that
powerful corporations override national sovereignty and can undermine political
and monetary systems. On Aug. 25, Federal Reserve Chairman Alan Greenspan
warned the annual gathering of central bankers in Jackson Hole, Wyo., that the
''unease about the way markets distribute wealth'' could cause the ''latent
forces of protectionism and state intervention'' to reassert themselves, both
in the U.S. and other countries. The French have made a hero of the farmer who
lashed out at McDonald's Corp. (MCD), not so much
because they hate the fast-food company but because many think multinationals
crush local culture. McDonald's executives say they see few effective ways to
combat this attitude, except to emphasize local franchises' neighborhood roots.
''It comes with the turf,'' laments McDonald's Vice-Chairman James R.
Cantalupo. ''I don't know if you ever get over it as long as you are the No. 1
brand.''
Similarly, the Asian crisis drove home the loss of control many citizens feel
when companies and investors upend the money supply or yank investment dollars
at a moment's notice. Europe has had even more demonstrations than the U.S.
against corporate-driven globalization. World Bank and International Monetary
Fund officials are bracing for another round when their annual meetings open in
Prague on Sept. 19. ''The whipping boy is the corporation because it's the
leading agent of change in the new global markets being created,'' says Boston
College's Derber.
Also at play, at least in the U.S., is a shift in cultural norms. Put simply,
it's becoming fashionable to be anticorporate. The sudden prevalence of the
dot-com companies, with their sneakers and parrots in the office, have led many
professionals to turn against the hierarchical, buttoned-down environment of
Corporate America. In today's tight labor markets, even Wall Street and
white-shoe law firms have ditched pinstripes for slacks and sweaters, hoping to
stanch the flow of talent to the online world. Madison Avenue, too, sees chic
in the anti-big-corporation fad. A recent ad for financial consultants Salomon
Smith Barney--whose parent, Citigroup (C), is a monster
conglomerate if ever there was one--plays off the dot-com sensibility that
derides business-suited executives, saying: ''Suits aren't necessarily bad.
When they're working for you.''
Anticorporate feelings are seeping into popular entertainment, too. Rock
musicians and other artists have always identified with the counterculture, but
today they are rebelling against the clout of media and retail companies. Many
artists perceive their decisions not to buy ''offensive'' material as corporate
censorship. And Hollywood has seen a spurt of movies that portray companies as
sinister baddies (page 158). All the negative imagery tarnishes Corporate
America's legitimacy.
To some degree, corporations are victims of their own success. In the past
decade, they have created global brand names by cultivating emotional
connections with consumers that go beyond products. In the process, they raise
consumers' expectations about their favorite companies--making them sitting
ducks. ''Multinationals like Nike (NKE), Microsoft (MSFT), and Starbucks (SBUX) have sought to
become the chief communicators of all that is good in our culture: art, sports,
community, connection, equality,'' asserts Naomi Klein, author of No Logo:
Taking Aim at the Brand Bullies, a book that documents youth rebellion
against the pervasiveness of brand names. ''But the more successful this
project is, the more vulnerable these companies become'' to attacks on their
image.
When brands do wrong, she argues, loyal consumers feel betrayed, much as fans
turn against a fallen movie star or sports hero. All those college students who
show up at demonstrations against globalization see corporations such as Nike
Inc. as self-serving organizations that violate human rights and pollute the
earth. Even teens think it's cool to hate corporations. Suburban 13-year-olds
accuse Starbucks Corp. of driving local coffeehouses out of business and sport
T-shirts that say: ''Friends don't let friends drink at Starbucks.'' Says Irene
Krugman, an 11th grader who in 1998 helped to start the Student Committee
Against Labor Exploitation at her New York high school: ''I still shop at those
brand-name stores, but I feel really guilty about it.''
Whether they admit it or not, corporate chieftains are certain to be watching
this trend closely. Citizen attacks on corporations have been surprisingly
effective, and many executives have seen how stonewalling and defensiveness
have boomeranged. In some cases, the criticism intensifies, with the potential
to damage brand images and sales, undermine companies' standing with regulators
and politicians, and, ultimately, whack a company's stock price. Yet some of
the moves critics find the most egregious are the ones managers say they're
forced to use to compete, from downsizing to in-your-face ad blitzes to
political lobbying.
In a few cases, companies have realized that the new climate requires a
response before a consumer backlash spins out of control. Last April, for
example, after months of protests by human-rights and student groups, Starbucks
agreed to buy coffee from importers who pay Third World farmers a premium over
world market prices. In mid-May, 3M said it would voluntarily stop making
Scotchgard, a 40-year-old product with $300 million in sales, after 3M tests
showed that the compound didn't decompose in the environment. And in late
August, McDonald's tried to head off concerns about the treatment of animals
through regulations for farmers who provide it with 1.5 billion eggs a year.
''Corporations have to prove themselves,'' says John P. Rowe, CEO of Unicom
Corp., a Chicago utility that has spent $1 billion to improve service after
huge blackouts last summer. ''Don't promise the moon, but don't promise so
little that any damn fool could deliver.''
If today's anticorporate backlash is more low-key than the counterculture
revolution of the 1960s, it may be even more dangerous for Corporate America.
Back then, antibusiness attitudes were restricted mostly to youth and college
students. And they were just one element of a broader generation gap that led
baby boomers to reject the entire Establishment, from its sexual mores to the
Vietnam War and the military-industrial complex. Today, those Americans angry
at corporations cut across generations, geography, and even income groups. And
the Net amplifies the power of the tech-savvy discontented who use it the way
the colonists used Paul Revere, getting out the word about the most recent
outrage or expose. ''With the Internet, information flows instantly, so even if
we don't have more people concerned about companies, those who are can do more
about it,'' says Harvard University labor economist Richard B. Freeman.
Also unlike the 1960s, students today aren't necessarily antibusiness: The
e-mail that anti-sweatshop activists send to muster rallies flashes with ads.
But that doesn't preempt protesters from targeting companies they deem
offensive--no matter how benign their products seem to be. ''We suffer from not
enough people knowing what we do [with philanthropic causes], because we can't
beat our own drum too loudly, for fear of weakening the trust that we do
have,'' laments David Olsen, Starbucks' senior vice-president for corporate
responsibility.
And once activists have lost faith in a company, it can be hard to rebuild
confidence. Tobacco companies have been so vilified that they may never regain
the tolerance they enjoyed just a few years ago. Now, HMOs have become the
whipping boy for a public fed up with bureaucratic decisions and lousy health
care; 43% of Americans give HMOs poor marks at serving customers, according to
the BUSINESS WEEK poll, a rating as bad as tobacco received. For several years,
critics have hammered the industry with gut-wrenching stories like those of Ian
Malone, the baby Gore introduced to the Democratic convention, who was denied
coverage for a full-time nurse he needed after he was injured at birth by a
medical error.
LISTEN TO ME. Such tales have put HMOs on the defensive in Congress,
where the industry has been battling furiously against a bill granting patients
the right to sue health-care providers. HMOs concede that more regulation is
needed to give patients a way to challenge corporate health-care decisions. But
they want to avoid fat jury awards with a system of independent reviews. ''The
logical extension of the demonization of HMOs is to push the problem into the
courts, but employees will lose if costs go up and their employers can't afford
to cover them anymore,'' warns Karen M. Ignani, president of the American
Association of Health Plans, the industry's trade group in Washington.
Mistrust of big companies--and a feeling that they listen to citizen complaints
only when forced to do so--is a common refrain among critics. Take genetically
modified foods. Initially, the industry brushed off the so-called Frankenfoods
complaints, arguing that no scientific studies had validated critics' concerns
about health or environmental hazards. But over the past year, hundreds of
protesters have descended on Food & Drug Administration hearings. This summer,
potato giant J.R. Simplot Co., a major McDonald's supplier, told its farmers to
stop growing Monsanto Co.'s
(MCT) genetically modified ''NewLeaf'' potato, bred to resist insects.
Overall, the U.S. acreage of biotech corn and soybeans has leveled off after
several years of explosive growth, according to the Agriculture Dept. biotech
setbacks were one reason industry leader Monsanto saw its stock fall, leading
to its acquisition by Pharmacia Corp. (PHA) in March.
Executives even occasionally admit their mistakes. In an extraordinary essay, The
Welcome Tension of Technology: The Need for Dialogue about Agricultural
Biotechnology, published in February by Washington University in St.
Louis, former Monsanto CEO Robert B. Shapiro wrote: ''We've learned that there
is often a very fine line between scientific confidence on the one hand, and
corporate arrogance on the other.'' Shapiro, now the nonexecutive chairman of
Pharmacia, added: ''It was natural for us to see this as a scientific issue. We
didn't listen very well to people who insisted that there were relevant
ethical, religious, cultural, social, and economic issues as well.''
LOCAL HEROES. Similarly, many residents upset about urban sprawl feel
ignored by the big companies they battle. When Kmart Corp. (KM) set out last year
to build a 100,000-square-foot superstore in South St. Louis, local citizens
feared that a big box store would destroy small businesses and ruin the
pedestrian scale of the neighborhood. A group of 20 neighborhood associations
swung into action against the chain. The group, called the Southtown Coalition,
defeated Kmart before the local zoning board earlier this year by going door to
door with a petition and packing board hearings with 150 to 300 people.
Southtown, which has been talking with smaller stores about developing the
location, brought the troops out again on Aug. 23 after Kmart reapplied to a
city appeals board. ''This is a multibillion-dollar corporation trying to shove
a big box down our throats,'' charges Kerri Bonasch, a marketing manager and
resident who volunteers at the coalition.
After hundreds of battles nationwide, local antisprawl groups such as the
Southtown Coalition now have a sophisticated body of knowledge about how to
mount zoning battles and pass referendums to restrict store size. Activists
haven't stopped big stores in their tracks, but they have blocked them in more
than 120 locations, estimates Al Norman, the head of Sprawl-Busters, a
nonprofit group. Some 40 or 50 such clashes are going on at any one time today,
more than triple the number of a few years ago, he says. Perhaps three-quarters
of the battles involve Wal-Mart Stores Inc. (WMT), followed by Home
Depot Inc.
(HD). ''The citizen's movement is costing the industry millions of dollars
in lost sales, and at least $200,000 to $300,000 to campaign against us in each
battle,'' says Norman.
Wal-Mart CEO H. Lee Scott Jr. says that ''without a doubt'' his company faces
more challenges to new stores these days, even though it wins many battles. A
company spokesman estimates that activists block at least two to three new
stores a year. Concedes retired CEO David D. Glass, now chairman of the
Wal-Mart board's executive committee: ''Retailers need to be more responsible
to look and see if problems are being created'' by big-box stores.
ANGRY MOMS. Some of the most extreme anticorporate language comes from
parents opposed to advertising in schools. Many object to exclusive marketing
deals signed by Coca-Cola Co.
(KO), PepsiCo Inc.
(PEP), and other companies that pay schools for the right to sell their
products in the classroom. Channel One Network became a target of their ire as
soon as it was launched a decade ago. A unit of Primedia Inc. (PRM), the service
offers schools money, supplies, and programming in exchange for the right to
beam ads to students on its classroom TVs. Some 12,000 schools have accepted
the deal--but far from diminishing over time, the battles have become more
intense.
When Diane Gramley, a mother of five, discovered last year that the Franklin
(Pa.) high school her children attend carries Channel One, she formed a group
with other parents. They agitate at every school board meeting to end the
arrangement, distribute flyers by the hundreds, write op-ed pieces in the local
paper denouncing the company, and now plan to petition parents to get rid of
it. Like other Channel One foes, the parents object to their children's
exposure to commercials at school. They also argue that the company's
educational programming is mostly a waste of time that diverts children from
their studies. ''This is a big company preying on my children,'' says Gramley.
Similar battles are going on in hundreds of communities, says San Francisco's
Center for Commercial-Free Public Education. The group, which provides
resources to grassroots groups like Gramley's, says it gets some 100 requests a
month for help. Channel One Network Affairs Executive Vice-President Jeffrey H.
Ballabon dismisses all the attacks as the work of a small number of groups. He
points out that 98% of schools renew their contracts to carry the station.
Assaults from citizens groups are bad enough, but for most executives, the most
potentially hazardous attitudes lie with their own employees. The best economy
in 30 years has brought a bounty of jobs and exuberant consumer spending. The
competitive wars against Europe and Japan of the 1980s and 1990s have been won.
But many employees in Corporate America think they're being worked to the
breaking point by CEOs who aren't sharing the wealth. Last year, 43% of workers
at large corporations said they ''find it very difficult to balance my work and
personal responsibilities,'' up sharply from 36% in 1997, according to
Chicago's International Survey Research (ISR), which surveys employees at
hundreds of large companies annually. Meanwhile, 44% said that they are ''very
much underpaid for the work I do,'' up from 38% two years earlier.
Such feelings reflect the stark discrepancy between the high productivity rate
the U.S. economy has achieved in recent years and the slower pace of wage
gains. This is one reason an astonishing 40 million employees say they would
vote in a union today if given the chance, double the number of a decade ago,
according to pollsters Peter D. Hart Research Associates. Organizing drives
have ticked up in recent years, forcing companies to fight harder to fend off
unions. But even though management still usually wins such battles, today's
labor-short economy means that disgruntled employees have more options and can
jump ship if companies don't respond to demands for higher pay.
Certainly, soaring profits and high CEO pay have embittered many employees who
feel squeezed. Just ask Reed T. Hinchliffe, a 20-year veteran at Raytheon Co.
The 58-year-old computer engineer stood up at the company's annual meeting in
April and demanded that CEO Daniel P. Burnham return his $900,000 bonus because
the company lost $181 million in the first quarter and its stock was trading at
20, down from a high of 76 last year. Burnham refused. ''I asked him how he
justifies this, but he just said: 'I intend to keep it,' like I was a peon and
should shut up and leave him alone,'' complains Hinchliffe. He says he has
personally talked to about 300 of the 600 people at his unit, a Defense Dept.
computer complex in Northern Virginia, and ''they're virtually all ticked
off.'' A Raytheon spokesman says Burnham told Hinchliffe that he respected his
point of view.
Several factors have contributed to the ascendancy of the corporation in the
past decade or so. The fall of communism and the triumph of Western capitalism
set the stage, as did the rollback of government in the U.S. But mostly, it's
the incredible success of the economy that allows companies to wield enormous
power in American society today. With that power, however, comes added
responsibility. Corporate executives would be wise to deal with the burden--and
take care to avoid the hubris that so often accompanies heady success. If they
don't, a growing number of Americans stand ready to call them to account.
To read a letter to the editor about this story,
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