Business as Target of Social Discontent

Last year, Pennwalt Corp. sent three lawyers to a federal courtroom in Tacoma, Wash., to offer a plea-bargain in a case where 75,000 gallons of cancer-causing chemicals had leaked into a waterway connected to Puget Sound. U.S. District Judge Jack Tanner rejected their offer. He decided that a Pennwalt executive should appear in court. “I think the public is entitled to know who’s responsible,” the judge said.

One month later, three executives from the company’s headquarters in Philadelphia entered the courtroom, prepared to pay $1.1 million in fines and penalties in return for the prosecution’s dropping selected charges. Again, Tanner refused to hear their plea. As a result, Edwin E. Tuttle, chairman of Pennwalt, finally made the trip to face Tanner and accept responsibility for the spill.

As the judge’s attitude suggests, business leaders are becoming the target of social discontent in which business is seen as villain and big business as big villain.

In a broader example, “Roger and Me,” the current documentary film, blames General Motors for the many economic misfortunes that befell Flint, Mich., in the 1980s. On the surface, a nonfiction film’s taking such an opinion may not seem unusual. However, this documentary has attracted such a large audience that it is listed in Variety’s revenue chart, which is extraordinary. Since documentary films usually see the light of day only on the Public Broadcasting System, the success of “Roger and Me” in theatrical distribution suggests that something has changed.

The film follows the city’s bid to regain ground lost after General Motors closed its assembly plant. Director Michael Moore depicts these attempts as comical and futile, especially when placed next to larger economic realities. The brunt of his humor is always GM and its chairman, Roger B. Smith. Although Moore has been criticized for rearranging the sequence of events and for even including events that occurred before the Flint layoffs, the film shows “business as villain” to be an emerging social theme.

After a special screening of the film for a randomly selected audience, viewers concluded that Smith is the film’s villain and that big business does not care for the human consequences of its own decisions. One viewer commented, “You can see that the man has no heart.”

Whether he does or not, Smith certainly has problems on his hands. The heads of the public employee pension funds in California and New York state took the unprecedented step of writing to GM’s outside directors to urge them to consider a broad range of candidates to succeed Smith when he retires this year. That would supersede the GM chairman’s traditional prerogative to choose a successor and turn a cold shoulder to other GM executives who think they should be considered. The pension fund directors also asked to be consulted when the company forms policy and objectives and asked for information about the normally confidential selection process for chief executive and about performance standards.

The two pension fund directors and others who agree with their position essentially bypassed GM executives and went straight to outside board members to emphasize the need for better management throughout.

GM executives are not the only ones feeling the heat. Two companies--CRA Realty Corp. and Jammies International Inc.--monitor executive stock trades to make sure that they adhere to the federal law that restricts executives of publicly held companies from buying and reselling their own company’s stock within six months. When these watchdogs identify an illegal trade, they sue the official and collect a reward. (The first party to notify a company of a breach can receive up to a third of the trading profits the officer must surrender.)

One group filed so many suits that U.S. District Judge Robert Carter suggested that the plaintiff was “an organization apparently formed as a private attorney general to police compliance with the federal securities laws by corporate officials.” So far, the watchdogs have targeted officers at Chase Manhattan, Beverly Hills Bancorp, Maytag Co., Fuqua Industries Inc., Litton Industries, Bristol-Myers Co. and Macmillan Inc. among others.

The Natural Resources Defense Council used right-to-know laws to acquire names of companies expelling certain chemicals into the air and depleting the ozone layer. The council published the names in “A Who’s Who of American Ozone Depleters,” a pamphlet the group plans to disseminate widely. The council, like the Tacoma judge, seeks to publicize actions that certain businesses prefer to keep private.

Such books as “Liar’s Poker,” “True Greed,” “Barbarians at the Gate” and “Bonfire of the Vanities” (soon to be an Oliver Stone movie) have given greater credence to the anti-Wall Street mentality that followed the insider-trading scandals. Originally, criticism centered on ill-gotten profits; but lately, criticism has revolved around being rich and comfortable while so many people are not. If economic conditions worsen for certain sectors of society, the wealthy executive could become an ever-more-attractive target. The image of executives getting richer and workers getting poorer has already surfaced in rhetoric regarding troubles at Eastern Airlines, Campeau Corp. and Drexel Burnham.

The emerging concept of “equality” seems to apply to opportunity, responsibility and resources. That theme has brought political attention to a bill introduced by Sen. Daniel Patrick Moynihan (D-N.Y.) to cut Social Security taxes. Congressional debate over a decrease in the capital-gains tax and Moynihan’s Social Security tax decrease have begun to sound like a debate between populists and the privileged.

The general shift of power from the “privileged” few to the “hard-working many” will not simply be a movement affecting political issues. As the shift occurs, business leaders who act fairly and responsibly can probably avoid being labeled villains ; those who do not act fairly may want to check the mail--theirs as well as that of their independent directors.