SOCIAL CONSCIENCE IN CORPORATE RANKS : Executive Says Corporations Should Strive to Make the World They Work in a Better Place for All to Live

Walter Bland Gerken got a taste of public service in the early 1950s, when he became supervisor for budget and administrative analysis for Wisconsin.

It was a job that introduced him to the state’s mental hospitals and prisons, conservation efforts and homes for the criminally insane, a job that showed him the good that government can do and one he has never forgotten.

But after four years in a service that he still considers “noble,” the self-proclaimed “sharp young guy” was invited to join Northwestern Mutual Life Insurance Co. in Milwaukee .

“And so I did, for the opportunity that I could make some more money,” Gerken said. “And it was a very interesting job, nothing wrong with that. But, when I did that, I always had a guilt complex that I had sold out to make a buck. So I’ve always, therefore, tried to find ways that I could satisfy this need. I was always an activist. I was a do-gooder.”

Gerken, now 65, contends that his bleeding-heart streak was born at Wesleyan University, where he earned a bachelor’s degree in economics, and at the Maxwell School of Citizenship and Public Affairs of Syracuse University, where he earned a master’s of public affairs.

It was nurtured in Wisconsin state government and a later stint on the Milwaukee school board . It was one factor that brought him to Pacific Mutual Life Insurance Co. as financial vice president in 1967.

“I came out here 20 years ago, I think, because Pacific Mutual has had a long history of leaders who were activists, like Asa Call, who was a ‘Mr. Republican’ in Southern California for a long sweep of time,” Gerken said. “His successor was active. And therefore, when I was recruited by a headhunter to be the financial vice president here, the fact that I had been an activist was appealing to the young leadership of this company.”

Gerken has spent the last two decades upholding his company’s tradition of social consciousness. During his rise to and tenure as chairman and chief executive of Pacific Mutual, he has served on an impressive roster of boards and committees, including stints as chairman of the UC Irvine Foundation, the United Way of Los Angeles and Occidental College’s Board of Trustees.

He has served on the Orange County Performing Arts Center’s Board of Trustees and the UCLA/Rand Center for the Study of Soviet International Behavior’s Board of Overseers. He is an active Democrat . Gerken is married, lives in Corona del Mar and is the father of six grown children.

In September, 1986, Gerken relinquished the title of chief executive of Pacific Mutual. He retired as chairman of the board a year later, after reaching the company’s mandatory retirement age. He remains on the board of directors as chairman of the company’s executive committee.

In 1987, Gerken was elected by the University of California Board of Regents to be a Regent’s Professor at UC Irvine. In that capacity, he will deliver a speech on Jan. 12 to students, faculty and the community on corporate ethics.

But public spirit is not the only facet of the Gerken personality. One colleague, in an in-house farewell tribute , said: “All I can do is laugh. I just think about the guy and I laugh. He’s got such a great sense of humor.”

That humor is evident throughout the printed tribute, which is graced with photographs of Gerken in Astaire-like tails, tap - dancing his way into retirement (above). The tails--and a photo session--were a surprise gift from co-workers, who knew of his soft spot for hoofing.

In a recent interview at Pacific Mutual’s Newport Beach headquarters, Gerken warmed up for his speech (not his dance routine) by telling Times Staff Writer Maria L. La Ganga that social consciousness and business savvy can--and should--coexist.

Q: How do you define ethics in business?

A: I think it’s very obvious that ethics involves adherence to the laws of your society. But it’s really more than that. I think it’s setting a tone, and I think a leader of a company has to set the tone. I think that you can’t always be looking for ways to slide around something, even though it may be legal and you’re not going to be put in jail for it. I think that you just have to be up front with people. There is integrity in saying what you believe and mean and honoring a commitment.

Q: Has this point of view ever directly affected Pacific Mutual’s operations?

A: 1980 was a tough year for all financial institutions, beginning with the Federal Reserve Board’s change of policy in October of ’79. (The Federal Reserve announced a program of higher interest rates and credit restrictions intended to stabilize exchange rates and curb speculation, as well as to restrain domestic inflation.) When interest rates went skyrocketing in the first quarter or first half of 1980, a lot of people were trying to walk away from their commitments, saying that lower interest rates then prevailed. But in our company, we honored our commitments (for example, to clients who had begun negotiating loans from Pacific Mutual before the change). We didn’t try to weasel out of ‘em. And I think that’s important.

Q: Is that at all unusual?

A: Well I don’t know whether it’s extraordinarily unusual. I mean there are degrees of it. I think that the most important thing in life if you’re a male, is that you have to look at yourself in the mirror when you’re shaving in the morning, and if you’re a woman, I guess it’s putting on your makeup or whatever, doing your hair, but you have to have that feeling of goodness in yourself, that you’re straight up, and not trying to cut corners, not being frank with people, in all respects.

Q: Why is it crucial for business to behave in an ethical fashion?

A: Well, my theory is rather simple to state: I think business can only flourish in a healthy society. And that is to say a healthy economy, a clean and honest government, an education system that produces people who are capable and competent and have a sufficient degree of skills that they can deal with the ever more complex requirements in our society. I think that’s in part why the Japanese are knocking us off. Everything I mentioned I think involves the government to some degree. It also involves more than just managing your own company. You can’t be an isolationist.

Q: That sounds fine, but does it make good business sense to behave ethically and to have a corporate social conscience?

A: I think there is a definite pragmatic side to it. I think that in the long run that kind of character and reputation stays with you, becomes a part of the culture of the company, and it’s perceived to be such. And a lot of people remember back when you could have put the screws to ‘em and you didn’t, that yours is a pretty first-class operation. So, I think a lot of people would recognize that my activism has a pragmatic side as well.

Q: Is it out of the ordinary for a company head to be an activist?

A: I’m not unique at all. I know I’m a little bit more on the wide side in the range of how much time corporate executives--CEO types--spend on external things, government in their communities, doing things for United Way or the cultural arts or whatever, being on a school board. I give it a spectrum just to prove it, but any CEO today has to spend 20% to 50% of his time or her time outside the company. And I was on the fuller side of that range. But to me it makes so much common sense, that we have to be doing things like that.

Q: Pacific Mutual recently sponsored a booklet--written with reactions from varied county businesses--on acquired immune deficiency syndrome education in the workplace. Why did your company and others spend the time and money on such a project?

A: I think that we did it for a number of reasons. I think it’s fair to observe that more so than most corporations, we have an interest in the subject, because we’re in the life and health insurance business and the whole incidence of AIDS has enormous consequences on our morbidity and mortality rates. But even beyond that, we have an interest in it as a good corporate citizen, because I think it’s a disease that probably is now being recognized for what it is--one of the major health cataclysms of the century. And we felt that it is essential that we deal with it and deal with education. At this point, when we don’t have a vaccine that’s even promising, education is the most important line of defense we have. And we probably ought to do something about it. We convened a conference, as you know, in Orange County, and it got into drug abuse and AIDS and out of that came this manual, of which I think we’ve printed about 25,000 copies.

Q: As CEO of Pacific Mutual, you spent a lot of time in 1978 as finance chairman for the state’s “No on Proposition 13” campaign, an effort that unsuccessfully fought the Jarvis-Gann property tax reform initiative. In that capacity, you sent a letter to a large group of corporations, asking for support and contributions to stave off what you believed to be a drastic change that would have decimated state government, particularly education. The letter said basically that business--for once--had a chance to “wear the white hat” on an important issue and stated: “The No on Proposition 13 campaign offers the business community an opportunity to support a strong public interest position. By aligning itself with labor and public interest organizations, in this issue businesses can demonstrate a sense of civic responsibility.” What was the response to that?

A: I gotta tell you, a lot of the guys around here (Orange County) thought I was nuts. And they didn’t agree with us. Well, I’ll tell you. I was young at the time, ‘78, and I just did it, and that’s one of the perquisites of being a head guy of a company, being able to write something like that. And Pacific Mutual put money into the campaign, I think we put $25,000, which was then and even today when we’re a lot bigger, a lot of money for us.

Q: These are examples of the positive things businesses can do if its social consciousness is aroused. But you can’t forget the Union Carbide explosion in Bhopal, India, the insider trading scandal on Wall Street. Business generally is not looked on as being that ethical a group. Do you think that’s a bum rap?

A: Yeah, because I think business is the good guy in lots of things. Business has voted 2 to 1 to support my campaign reform initiative. I shouldn’t say business has, I should say the California Business Roundtable voted 2 to 1. And the state Chamber of Commerce just reaffirmed it, by tabling a resolution which would have withdrawn support for the campaign reform initiative.

Q: What is this so-called Gerken Initiative?

A: I was one of 21 people asked to be on a commission on campaign finance reform. It had Democrats and Republicans, labor and business and academia. Every one of the commissioners voted for a set of recommendations, which embraced campaign contribution limits, and then the big thing, spending limits, which necessitate having a degree of public financing. We also recommended a limit on transfers of funds from one candidate to another and suggested giving candidates 3-to-1 matching funds if the money they raise comes from outside their district, 5 to 1 if it comes from within, to build more responsiveness to hometown votes.

Because the commission was a tax-exempt group, it couldn’t become political. This was more or less an academic type of study. No one else jumped up to the plate, and so I took that whole set of recommendations, and, with one or two modifications, submitted it as an initiative. And then went out and spent a lot of time of my own raising money in the business community. I think we raised a couple hundred thousand and we raised about another $100,000 elsewhere.

Q: It’s coming up on the June ballot. What are its chances?

A: I think it depends on a lot of things. We’ve done a little bit of polling, we the campaign initiative, and what it shows is that people by like 2 to 1 are for contribution limits; they are for spending limits, but less than half of the people are for public financing. But if you put the question to them this way, that if you have to have public financing to get expenditure limits how do you feel, that comes out a little bit better. That tells me there’s a feeling that campaign spending has gotten out of hand. And the numbers show that: an increase from $1.4 million in 1958, for our state legislative races, to $44.6 million in ’84 to $57.1 million in ’86.

Q: In 1987, the issue of ethics in general was at the forefront of our consciousness as a nation--mostly because of major blunders like the Iran-Contra scandal and the peccadilloes of Gary Hart and Joseph Biden. What else brought this to our attention in 1987?

A: I think I’m going to get in to a lot of trouble with what I’m going to say, but I didn’t just awaken to this on Oct. 19, and I have been very concerned. It always bothered me that young people on Wall Street before they hit 30 were making $600,000 a year. Now there’s something wrong in our society. Nobody’s that good that young. And what has happened is our productivity as a nation is declining, becoming the lowest in the free world, with the possible exception of Britain. Our federal deficit’s remaining at a trillion dollars. But all this paper shuffling is going on, and people who didn’t create one iota of new plant, new equipment, new technology are capitalizing on the paper shuffling in ways that make them wealthy. And the whole bubble burst. In one sense, I say it’s about time.

Q: You’re going to be plugging the concept of corporate ethics in a Jan. 12 lecture to business students at UCI. These are some of the same young people who aspire to those investment banking jobs you decried. How do you think those students take that lecture?

A: As Regent’s Professor there, I’ve had a few scheduled interviews and meetings with students one on one. And it’s interesting, because two of those meetings have been right on this subject. And I think the students were glad to hear what I was trying to tell them. They were worried about a world in the aftermath of Boesky and the Wall Street insider trading scandals and all. They were glad to hear me say that I think that’s not the way it really is or really has to be.