The big boys: power and position in American business. - book reviews

Washington Monthly, July-August, 1986 by Thomas J. Peters

The Big Boys: Power and Position in American Business.

Newsweek devoted two columns of its June 2, business section to the Ralph Nader and William Taylor book, The Big Boys: Power and Position in American Business.* In an article entitled "Has Nader Gone Soft?' the reporter as much as snickered as he concluded: "[Nader] sets off in search of corporate pestilence but finds excellence instead.'

* The Big Boys: Power and Position in American Business. Ralph Nader and William Taylor, Pantheon, $22.95.

Not in the eyes of this beholder. After reading the book, I was left deeply shaken. I would not have supposed that possible, given my longstanding indictment of the performance of the Fortune 500 chieftains.

No portrait of the nine business leaders Nader profiles in his book is entirely pretty. U.S. Steel Chairman David Roderick abandoned his industry, using time and money largely gained by protectionist policies to acquire Marathon Oil and Texas Oil and Gas, valued at $9 billion. Part of the move out of steel may have been necessary, but his insensitivity is shocking. Roderick explains his repeated failure to meet with community leaders who wanted to develop an alternative use for the about-to-be-closed South Works in Chicago: "Look, I don't want one of these goddamned committees coming in here--a priest, a Boy Scout, and a housewife--telling me what to do. We're here to make money.'

General Motors Chairman Roger Smith was equally insensitive about the destruction of Poletown, the impoverished Detroit community that made way for a new GM plant. He also publicly humiliated on television (on "Donahue') seven governors who groveled to get him to locate GM's Saturn operation in their state, a setup former United Auto Workers President Douglas Fraser called "obscene.' Smith gave speech after speech about forthcoming car models that would have seven onboard computers featuring 38,000 instructions. But now he can't get the cars to work and GM is losing its market share each quarter to Ford, Chrysler, and the imports.

Northrop Chief Executive Thomas Jones is a super salesman, having led his defense contracting firm to outperform the industry by a wide margin since 1960. But are we well served by an exchange that Nader describes during the most recent annual shareholders' meeting? "Jones was asked by our correspondent to reflect on the deadly impact of the product his corporation manufactures. Admiral Hyman Rickover, in his farewell testimony to Congress, told legislators that he would sink all the nuclear-powered ships whose construction he had sponsored were they not a necessary evil. Has the Northrop chairman ever had similar reservations about the wisdom of his work? "I've not had similar thoughts,' Jones said with a smile. The auditorium rang with a chorus of approving shareholder laughter.' I sadly acknowledge the need for weapons, as did Rickover, but I find the topic far short of amusing and I am saddened that any chief executive would behave so flippantly regarding this grave topic.

Even giant-slayer Bill McGowan, head of MCI and humbler of AT&T, is somewhat tarnished. His cause was noble and his outspoken demeanor most refreshing. Nonetheless, Nader suggests that McGowan has simply created one more long-distance telephone company that soon will be part of a new oligopoly of a half-dozen companies in place of AT&T's monopoly.

Then there is William Norris of Control Data Corp. Nader admires his vision, which epitomizes the CEO's power to extend the corporation's aims. Inner-city and farmland ventures dot the CDC agenda, along with the billion-dollar PLATO (Programmed Logic for Automatic Teaching Operations). But Nader's profile depicts at least as much ego and arrogance as thoughtful application of power. Surely shareholder wealth-creation is not all there is to life, but Norris has run roughshod over his board of directors in pursuit of grandiose visions, crippling his balance sheet in the process and making the firm vulnerable to takeover. Specific practices such as the "Shark Club,' which celebrates occasionally unscrupulous sales victories, further blur the picture.

Is this the excellence Newsweek claims Nader has found? In fact, only one of Nader's chief executive officers comes through with tiny blemishes--Dow Chemical boss Paul Oreffice. Oreffice faces a transition that equals Smith's or Roderick's in autos and steel. However, he has stayed with chemicals and quickly transformed the firm from a sluggish, basic-commodity producer to a faster-moving specialty chemical producer that emphasizes pharmaceuticals and consumer products. Moreover, the wrenching transition was accomplished while maintaining, at great expense, a "no layoff' policy. Nader even praises some, but not all, of Dow's environmental policies.

Nader's avowed objective is to weigh the use and abuse of power among American leaders of giant businesses. He observes that chief executive officers are granted exceptionally wide latitude. Ironically, they are granted especially wide latitude when business performance is poor; though they are arguably to blame for such malaise, the historic American tendency has been to leave them alone to oversee the recovery when things get tough.