Corporate arrogance reinforces need for regulation

Fast on the heels of some of President George W. Bush's new tax proposals, which include some of the largest corporate tax cuts in history, and in the midst of calls from the right for deregulation in a host of industries, we're seeing first hand how big business can behave--and it ain't pretty.

This isn't an attack on businesses forced to shed workers because a world-wide recession has reduced demand for goods and services; companies must respond to problems, and those of us who work for a company understand that a bad marketplace can leave us out in the cold. Further, many companies are good corporate citizens. But several large corporations have engaged in acts now apparently so routine that we seem incapable of recognizing them as repulsive violations of basic business--or human--ethics.

First case: Microsoft. The immense software corporation, shown repeatedly to have violated antitrust and monopoly laws in acquiring and entrenching its power in the PC marketplace, has given up trying to appeal those findings. Instead, Microsoft is appealing the punishment handed out by the federal judge, Thomas Penfield Jackson, arguing that Jackson was biased; a panel of judges concurred--despite Jackson's history of pro-business decisions and that his enmity towards Microsoft emerged, reasonably, after he saw the evidence. Having upheld Jackson's findings of fact and reaffirmed Microsoft's guilt, the panel of judges ruled that the penalties should be decided by a different judge. Since then, the company has repeatedly attempted to stall that process in order to continue its revenue stream from Windows XP, which has been developed, marketed and sold in the same way that got Microsoft in trouble in the first place.

Meanwhile, Microsoft proposed its own settlement: a donation of one billion dollars worth of software and hardware to poor school systems. It sounds good, except for two small facts: Many of these schools are outfitted by Microsoft rivals, such as Apple Computer, such that the give-away of products would be an immensely anti-competitive act to extend Microsoft's unfairly obtained power; and the value of the donated products would doubtless be immensely exaggerated. After all, Microsoft declares the value of its Office software 10 percent or more over the street price, which is nearly double the academic price. Finally, considering the seriousness of the proven charges against Microsoft, and the 60 billion dollars they have in cash alone, even the full one billion dollar settlement hardly seems like serious punishment.

Second case: Enron Corporation. This huge and complicated energy company seemed spectacularly successful. Now, however, it appears to simply have been spectacularly dishonest. Enron systematically used loosely affiliated subsidiary corporations to hide losses, thereby inflating profits. When the truth finally got out, the company's standing plummeted, and since their business depended on a steady stream of credit financing, they quickly saw their business model implode and their stock price collapse. From a high of about $80 a share just a few months ago, Enron stock closed Monday at 67 cents a share. Long a champion of free-markets and a foe of regulation, Enron donated heavily to Republicans (including George W. Bush), and many Republicans served on its board--including the wife of Phil Gramm, the U.S. Senator who pushed through a bill specifically to exclude Enron from certain government regulations. Most donations to Democrats occurred while the company collapsed, apparently in an attempt to prevent partisan--read intensive--investigations. As if that wasn't bad enough, company employees were prevented from selling their Enron-stock retirement savings as the stock value tanked over the last few months; but corporate executives sold $1.1 billion of dollars worth of stock while it was still worth something.

Third case: Burlington Industries. This once-powerful textile giant filed for bankruptcy in November 2000. Last week, its reorganization plan was unveiled: Burlington intends to slash the severance pay of the thousands of workers they're firing. Simultaneously, they will offer bonuses to upper management, averaging 30 percent of annual salary. The CEO would be eligible for a bonus of up to 120 percent of his base pay, which is some $600,000 per year. The rationale is to "reduce overhead" and "retain leadership." The workers losing even their severance pay probably had little to do with the poor management that got Burlington into trouble--and that leadership is now eligible for enormous bonuses. Only the company's managers could possibly accept this; the rest of us should be outraged.

These acts by Microsoft, Enron and Burlington are harmful and arrogant reflections of corporate disdain for customers, employees, stockholders and even the rule of law.

If all this doesn't prove the common-sense value of dispassionate, external regulation of vast and powerful corporations, it's hard to imagine what could.