American Corporations



The US is a Christian country.  The essence of Christianity is love and the fight against sin, which includes greed. The US is a capitalist country.  Therefore US capitalism is characterized by love and resistance to all sins, including greed. Despite its obvious logic, this syllogism would seem to be disproved by items such as this:       Carly Fiorina, CEO and chairman of Hewlett-Packard, has been fired by the company's board of directors over "differences about how to execute HP's strategy." Fiorina's best-known achievement was the company's
controversial takeover of Compaq, which led to clashes with board members and lackluster response on Wall Street. Industry analyst Rob Enderle said the current dispute most likely stems from what the board perceived as Fiorina's inattention to day-to-day operations. "The next CEO will undoubtedly be much more operationally focused; there is a strong possibility that the office of the CEO will be more shared, but in the end, the company will also be a lot stronger depending on how well the selection is done." Computerworld
editor-in-chief Don Tennant had this take: "Carly deserves a lot of credit for making the Compaq acquisition happen simply because it demonstrated her fortitude. But what she apparently forgot is that in an increasingly services-oriented economy, pushing more boxes than the next guy is going to get you less and less glory." (Washington Post  2/9/05)
<http://www.washingtonpost.com/wp-dyn/articles/A10295-2005Feb9.html>

RH: The capitalist being hounded by New York Attorney General Spitzer for his greed is named Grasso (fat), very appropriate for a fat cat.

Regarding the firing of Carly Fiorina, Miles Seeley writes: Both my son and daughter live in Ft. Collins, CO, the home of HP. My daughter is in fact in the tech sector, but not with HP. When Carly Fiorina first stated her goals, my kids were appalled and predicted she would ruin HP. Then she engineered the Compaq merger and my kids both thought it was the worst idea possible. HP had been a highly regarded and successful company known for treating its employees well. Carly downsized at the rate of 20,000 a month for a while. The stock fell, and it still is floundering.

And Carly? The Board fired her and she walks away with $21,000,000 severance pay. That was written into her hiring contract. And this is only the latest of such deals. To me, it indicates once again that there are some huge problems in the US corporate world that need fixing, and specifically in executive compensation and accountability. It also seems to show that mergers between very large corporations are often a very bad thing both for the companies and the work force.

RH: And we are trying to sell this system to the world!

Miles Seeley sent a comment on the firing of Cindy Fiorina from HP and the big golden parachute with which she was rewarded. I said: And this is the system we are trying to sell to the world. Randy Black comments: Au contraire. We are not, in fact, trying to sell „this system‰ whatever „this‰ means, to the world. We are trying to sell a system where the people control the system and therefore have a say in how it is run. As opposed to a system where one leader dictates everything. Her contract stated that if she were dismissed „without cause‰ she would receive a severance equal to 2.5 times her base salary. She was asked to resign; she did so. RH: The idea that the people control the system is crazy, and bringing in "one leader who dictates everything" is a red herring.  As for the attempt to explain her golden parachute as just a legal obligation, tell that to the people who lost their jobs.

Regarding the firing of Carly Fiorina by HP, Miles Seeley wrote:*And Carly? The Board fired her, and she walks away with $21,000,000 severance pay. That was written into her hiring contract. And this is only the latest of such deals. To me, it indicates once again that there are some huge problems in the US corporate world that need fixing, and specifically in executive compensation and accountability. It also seems to show that mergers between very large corporations are often a very bad thing both for the companies and the work force. Randy Black commented: Au contraire. We are not, in fact, trying to sell “this system” whatever “this” means, to the world. We are trying to sell a system where the people control the system and therefore have a say in how it is run.  Gene Franklin counters: I'd like Mr. Black to explain how is is that 'the people control the system' when CEOs are able to insulate themselves from the cost for failures such as this one was and pass off all the risk to the employees and stock holders. Just who are 'the people' here? Perhaps Randy means that we are trying to sell others a system we have not bought for ourselves. Where is the spirit of TR when we need it?

Randy Black says: Gene Franklin may not be aware that the shareholders of HP, headquartered in Palo Alto, fired Fiorina. No one else. As Mr. Franklin asks, who are the people here? They are the shareholders. And the largest of the shareholders, a board member of the largest block owner of shares instigated the dismissal. That person operated on behalf of thousands if not tens of thousands of other shareholders of the firm’s stock. Thus, the people controlled the system at HP.
 
I hope the following excerpts from today’s Wall Street Journal article (subscription only) on the issue helps Mr. Franklin understand the issues regarding who controlled what at HP:

“People familiar with the matter said directors felt too much of the company's vast operations had been centralized in Ms. Fiorina's office, creating decision-making bottlenecks. Meanwhile, H-P had failed to meet key performance targets Ms. Fiorina had set for the company during the Compaq takeover fight….

…That appears to be what the board did Tuesday. Patricia Dunn, an H-P director since 1998 who was named nonexecutive chairman yesterday, said directors asked Ms. Fiorina to step down. While praising Ms. Fiorina for doing an "outstanding" job in positioning H-P for success, Ms. Dunn said, "a new set of capabilities is called for." Ms. Dunn is the vice chairman of Barclays Global Investors, H-P's third-largest institutional shareholder, and was the principal author of the board report, according to a person familiar with the matter….

…Ms. Fiorina's ouster reflects increasingly clear strategic problems at H-P. The company faces fierce competition from Dell <http://online.wsj.com/mds/companyresearch-quote.cgi?route=BOEH&amp;template=company-research&amp;ambiguous-purchase-template=company-research-symbol-ambiguity&amp;profile-name=Portfolio1&amp;profile-version=3.0&amp;profile-type=Portfolio&amp;profile-forma> Inc. in personal computers and International Business Machines <http://online.wsj.com/mds/companyresearch-quote.cgi?route=BOEH&amp;template=company-research&amp;ambiguous-purchase-template=company-research-symbol-ambiguity&amp;profile-name=Portfolio1&amp;profile-version=3.0&amp;profile-type=Portfolio&amp;profile-forma>  Corp. in computer services and corporate computing. In a recent interview with Fortune Magazine, Mr. Wayman conceded that the centerpiece of Ms. Fiorina's strategy -- the 2002 acquisition of Compaq -- might require a write-down. "There's no question that if profitability doesn't improve, there will be an impairment charge," he said.

Ms. Fiorina's leadership was also marked by a drop in morale at a company with a legendary history of a collegial culture. She had a compelling public persona that gained her many fans in the business world. Yet inside H-P, she was a highly polarizing figure who stirred deep animosity from many veteran employees. Her abrupt -- some said autocratic -- management style won few fans. In recent months, several high-level executives had quit for positions elsewhere, something that increasingly concerned the board, according to people familiar with the matter.

Yesterday, some H-P employees reacted to the news of Ms. Fiorina's ouster by holding champagne toasts, according to several employees, who described the scenes as "jubilant."…

RH: I am sure that Gene Franklin is well aware of the details, since the drama played itself out under our noses here in Palo Alto, and it received detailed coverage in the local press.  The fight had been going on for a long time, and it was characterized by a nastiness whish was a disgrace to civilized society. Many workers were fired when HP absorbed Compaq, the jubilant workers Randy mentions were hopeful that now they would not get the axe.  The San Francisco Chronicle ran detailed charts showing HP's problems.  The US is supposed toi be a Christian country, and Christianity is love. The hatred these fights create is hateful, and I for one will not condone or excuse it.

Jon Kofas writes: When corruption, decadence, and unethical behaviour occur, it is an old argument whether it is a few "bad people" within an institution, like HP & other multinational corporations, the Catholic Church with its not so recent scandals, and governments of all types, or the system that is at fault. Obviously, without people there is no institution, but the institution's life and importance invariably finds a way to transcend people. I will repeat my previous argument regarding secretary Rice, an argument that applies to Carly Fiorina, namely, that if it were not these ladies in positions of authority, it would be someone else just about same. Placed in a given institutional structure like a U.S. multinational corporation, the Bush administration, the Islamic Republic of Iran, the Chinese Communist regime, etc., Jesus Christ and Mahatma Gandhi would either have to walk away and become critics, or be a part of the system which needs to mold people in a certain manner so that it perpetuates itself. It is futile to try to convince people who are so ideologically driven that they will reject empirical evidence.  Just as Galileo endured the wrath of Catholic dogma, today we have political ideology of all stripes that has replaced religious dogma, a development that prevents otherwise very intelligent people from seeing anything outside their ideological prism.  RH: Such people are unWAIS..

Randy Black said: Gene Franklin may not be aware that the shareholders of HP, headquartered in Palo Alto, fired Fiorina. No one else. As Mr. Franklin asks, who are the people here? They are the shareholders. And the largest of the shareholders, a board member of the largest block owner of shares instigated the dismissal. That person operated on behalf of thousands if not tens of thousands of other shareholders of the firm’s stock. Thus, the people controlled the system at HP. Gene Franklin counters: Mr Black correctly points out that we shareholders have nominal control of the company and I have the small consolation of having voted my few shares against the merger with Compaq. When an entity like Barclays Global Investors hold enough shares to place a member on the Board, they have effective control of the company. All true, of course. My frustration comes from the perception that the contract Ms. Fiorina held that allowed her to  depart with $21,000,000 after being fired by us shareholders for poor performance seems unfair to me and to the many employees who were fired with much smaller rewards. Mr. Black,  to whom do we complain? Our political system was structured with an elaborate scheme of checks and balances. In the corporate world it seems to me that what checks there are to individual greed are far too weak. It is my belief that the ratio of executive compensation to median employee pay is too high and interlocking Boards who support each others' rewards are too common. I am not as pessimistic as Mr. Kofas and hold up Bill Hewlett and Dave Packard as counter examples to the hypothesis that the system corrupts all players.

RH: "Our political system"? Big money counts as much there as in the corporate system. My contempt is for the greedy executives who grab millions while firing large numbers of workers.  They have no conscience.



Ronald Hilton 2004

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last updated: February 28, 2005