Meeting Minutes from inSPIRe Social on October 11, 2008

We had our seventh social event of 2008 at Sharon and Will s home on Alki.  We had a nice turnout with approximately 32 guests to hear our guest speaker Bob Watt.  Thanks so much to Will and Sharon for opening up their home!

Our next meeting Our next social will be November 8^th.  Mark your calendar!  Details upcoming stay tuned!

Announcements

Election Volunteers Needed We have three weeks until the election.  NOW is the time to volunteer!  Jim Simpson spoke of his phone banking efforts for Governor Chris Gregoire s campaign.  There are many, many undecided voters in this race, and others.  Volunteering at a phone bank or in other fashions really does help and is critically important.  Please call the Obama/Gregoire Campaign Headquarters at 206-903-0172 or just show up at 1310 Mercer Street and you will be assigned a very important task.

inSPIRe Book Club! We are now reading Collapse by Jarod Diamond for our next meeting, Dec 5^th.  To join the book club and get on the list, just send an email to inspirebooks-subscribe@list.moralpolitics.org.

Keynote Speaker:

Bob Watt.  Bob Watt is the recently retired vice president of State & Local Government Relations and Global Corporate Citizenship at The Boeing Company.  Prior to his work at Boeing, Bob was President and CEO of the Greater Seattle Chamber of Commerce.  Prior to this position Bob was the managing director/co-founder of PhyCom Corporation, a company providing patient care software to the health care world.  From 1989-1994 Bob was the deputy mayor of the City of Seattle under Mayor Norm Rice, and before this the President of Family Services of Seattle/King County and the executive director of Youth Eastside Services in Bellevue, Wash.

Bob s other community involvement efforts include

• Chair of the Alliance for Education Board;
• Chair of the Group Health Foundation Board;
• Chair of the SEAFAIR board,
• Vice chair of the Seattle-King County Workforce Development Council,
• Board member of The Seattle Foundation, ArtsFund and the Greater Seattle Chamber of Commerce.
• Member of Governor Gregoire's Washington Learns Steering Committee and as non-governmental co-chair of the Washington State Early Learning Council.
• He also was a founding board member and chairman of the Children's Alliance in Washington State.
• In February 1998, Bob was presented with the Edward E. Carlson Outstanding Alumni Award from Leadership Tomorrow in recognition of his active leadership contributing to the well being of the Puget Sound Region.
• In 2004, Bob received the Lifetime of Idealism award from CityYear for his contributions to regional communities.

Even with this incredibly busy schedule, Bob agreed to come spend the evening with inSPIRe to discuss Corporate Social Responsibility, including appropriate social responsibility obligations and behavior of American corporations; corporate legal responsibilities and obligations towards their owners/shareholders as well as to their employees; the larger role of corporations in our communities; corporate responsibilities to the public; the appropriate role of corporations giving back to the communities in which they are located as well as to those in which their products and services are sold; government subsidizes to corporations to win the willingness of corporations to come or remain in a community; the appropriate level of government oversight (regulation vs. deregulation) of Corporate America; and how we avoid taxpayer bailouts. 

Corporate social responsibility (CSR) has become a very controversial term throughout the world.  CSR has been muddled with other hot topics , including going green , going lean , etc.  Bob worked to get Boeing to use the term Global Corporate Citizenship instead of CSR in that Bob felt this a broader and better descriptor for what Boeing was trying to do.  Corporations have the opportunity to be great corporate citizens, but to be great they must truly be effective in their efforts in this regard.

Boeing has a very long tradition of taking a broad view of the communities in which Boeing resides.  Boeing spends a lot of money, and also human resources, within the community.  For example, most all major Seattle art projects have management assistance from Boeing Engineering, at Boeing cost.  Boeing has donated project managers for many other community projects too, as well as providing extensive computing/data support, reproduction services, etc.  Bob believes that Boeing is a very thoughtful community citizen. 

Bob then spoke of the current credit crisis / housing market meltdown.  In 2002, then CEO of Fannie Mae Franklin Raines, a former Seattleite, believed he needed to push for greater corporate social responsibility through Fannie to provide people of color a greater opportunity to own their own homes, especially people of lower income.  Prior to this effort, default rates on mortgages by minorities were the same as with Caucasians.  After these efforts, default rates went from 8% up to 15%.  Bob s point was this:  beware of unintended consequences, even beginning with the best intentions.  Many people throughout the country were given loans that never should have gotten them.  The home mortgage defaults began the spiral that has led to our current banking failures and credit crisis worldwide.  Many other factors were, and still are at play, but this was part of the stimulus for our economic woes.

Bob serves on the Board of the Seattle Foundation.  (www.seattlefoundation.org)  Bob handed out a Seattle Foundation report on the Puget Sound Community which can be found on their website.  The Seattle Foundation takes a very broad view of community responsibility and their report covers the many areas of focus the community needs to make to ensure Puget Sound continues towards being a healthy community. 

Bob then talked about the different strategies different corporations use in community involvement.  Wal-Mart uses a cause-related approach to attempt to maximize the marketing impact they will receive for their good community efforts .  These efforts also provide Wal-Mart with tax breaks.  But, these efforts are not efficient and in light of the negative consequences of Wal-Mart s business behaviors, including low employee wages, lack of employee benefits, etc., Wal-Mart s CSR efforts do not pass the test.

CSR is a good idea, but Bob emphasized that we are likely to receive better results working as individuals and in small groups (such as inSPIRe!) towards community betterment.  We, as individuals and in membership with our community neighbors, can likely achieve much greater successes than our local corporations. 

Boeing is in a different position than companies that sell consumer products, such as a Nordstrom, etc.  Boeing is not at risk of their customers sending cut up Boeing credit cards back to the company due to Boeing taking a risky position within the community.  (Nordstrom even experienced this when the Seahawks football team lost!)  For this, Boeing is willing to take on more controversial community issues.  As an example, Bob was able to get Boeing to be a sponsor of the Children s Administration and provide their Director with Boeing employees to help in administration efforts.  The Children s Administration was somewhat controversial, but Boeing did not hesitate. 

Q What about excessively high CEO salaries?  Is this under the umbrella of CSR?

A In Europe, the answer is yes .  In the US, not yet.  In Europe, the ratio of CEO salaries to that of the average employee of the company is much lower than in the US.  Corporations are run by a Board of Directors (BoD).  Publically traded companies, like Boeing, must report executive compensation.  A good Board sees the broader community as stakeholders, not just the owners of the stock and the company s customers.  In theory stockholders can work to un-elect the Board to voice anger over high executive salaries, but this rarely happens.  In Limited Liability Corporations, and in privately held companies, the public doesn t have access to what the executives actually are paid, so achieving more reasonable, lower compensation levels is close to impossible.  But our greatest tool is to vote with our feet and our pocketbooks don t buy their product or services if you don t like how the company is operating. 

Bob recommended a book on this subject, Firms of Endearment by Rajendra S. Sisodia, David B. Wolfe and Jagdish N. Sheth. The book points out how firms that do good in the community then do better in their financials!

Q It seems like most companies with high-priced CEOs are the very largest firms.  Is this true?

A Not necessarily.  Most of the largest firms are publically traded, thus executive compensation is known.  Again, with private companies we don t have visibility to actual compensation. 

Bob then spoke of corporate subsidies in the form of tax breaks , etc.  The example he spoke of was the much reported $3.2 billion tax break Washington State gave to Boeing to build the 787 in our state.  Bob came to Boeing with the goal of keeping the 787 production in state, but this effort was very difficult.  The core competition was from right-to-work states, such as most states in the south.  In these states it is very hard to unionize and to receive union-negotiated benefits, thus building costs for a company will usually be much cheaper.  Bob explained that the WA St Business and Occupation tax is very high, as is our unemployment insurance tax and workers compensation.  Before the 787, our taxes ranked #2 in the US.  After the 787 negotiated deal between Boeing and our state government, our taxes were reduced to the mid-range for the country, I.E., one can look at this deal as really not being sweetheart for Boeing.  Also, the true value to Boeing was more like $700 million, not $3.2 billion.  Boeing s BoD was a tough sell on the offer, because better offers came from down south.

Bob then talked about his extensive work in the area of early learning.  Bob mentioned studies that show how important it is for a community to support early learning programs.  Investment in these types of programs can really provide great results in keeping companies, and in keeping skilled workers living and working in one s community.

Q Boeing makes millions from being part of the Military Industrial Complex.  How does Boeing balance this vs being a Global Corporate Citizen? 

A This is truly a deep-seated conflict within Boeing.  Our former Commercial Airplanes leader Alan Mullaly strongly believed that bringing people together through travel would lead to a more understanding and peaceful world.  It was the right thing to do, Alan believed, and he looked at Boeing s airplanes as tools of peace.  But Boeing also builds military items.  As a lifelong social worker Bob had struggles with this.  He met many good people at Boeing that worked on the military side, and in discussions they explained how proud they were to be working on things that help keep America safe and our soldiers safe.  But if one is truly against military projects, a tactic they can take is to buy stock in Boeing and go to the shareholder meetings and protest.  Bob indicated he actually worked to separate the commercial side of Boeing from the military side, but was unsuccessful in these attempts. 

Q Washington State has a financial deficit.  How do we keep family services as a key part of our government spending?

A This election is really important in this area.  The winners will need to make important choices and have important priorities.  We, as voters, need to influence them.  We need to work to build coalitions and go to Olympia and lobby for what we believe should be done. 

Q Can you discuss the big party that AIG, whom our government just bailed out, put on for their executives to the tune of $400K?

A AIG is typical of a company that depends on their sales force to attract revenue.  Typical in companies like this are celebrations where a company meeting is combined with a party, typically in a nice setting.  Boeing does this.  It usually includes a half day of work, then a half day of social.  Depending on how many attendees there were at the AIG function, it might not have been excessive.  Bob, in his past social work, began the tradition of giving his employees a Christmas bonus.  He started at $25, but over time this increase to $500.  These sorts of benefits are common.  Whether the AIG event was appropriate depends on many of these factors.

Bob then spoke of personal responsibility.  Many people took home loans, from WAMU as well as from other banks, which they did not have the ability to pay back.  These people chose a path that was not responsible.  This is a problem of ethics.

Q What about efforts by WAMU and other banks to bundle loans into securitizations in efforts to increase corporate profits?  Don t we need more regulation?

A The reality is that the vast majority of mortgages are still good.  The process of bundling mortgage cash flows and selling them off began with Clinton signing, in 1999, a bill to allow this.  So, blame goes to both Democrats and to Republicans.  As happened too in 1929, we let things become way too deregulated, especially in regards to what is typically people s biggest financial investment of their lives, the purchasing of their homes.  This needs to change.  More regulation is needed.  But also we need a lot more personal responsibility.  People can t continue to engage in the remortgaging of their homes to pay off personal debt.  This is a very bad idea and never would have been practiced by those that had lived through the Great Depression of the 1930s.

Q What about co-determination ?  We re all in this together, so shouldn t labor and community members have a greater say in corporate decisions?

A With the new legislation and rule changes from our current financial crisis, America is going to become more like Europe in this regard.

Q How do we reconcile CSR and lobbyists?

A A lobbyist can be ethical or unethical.  The best lobbyists tend to work for organizations that they truly believe in, and thus only speak the truth when they lobby.  In Boeing s case, Boeing contributed to local politicians, but the average was only $700 per campaign, which is hardly enough to sway a politician s vote.  There are very corrupt lobbyists and legislators.  It is up to the individual.  Bob was never asked by Boeing to do something that he was uncomfortable with.

Q Shouldn t we change the rule of Corporate Personage, I.E., that rule that gives corporations the protections granted to individuals and that protects the members of the corporations from the risk of their behaviors?

A Bad things can and do happen in corporations.  Mistakes are made.  Problems come up.  Think of the consequences if a lawsuit was brought against a company, and personal responsibility of the employees was at stake.  For example, say Boeing was being sued by a customer for being late with the 787, and the Boeing Sales team was at personal risk of losing their homes and other assets because they were part of selling the airplane.  Would these people still be willing to do this job?  Most likely not.  Way too much risk for a job that doesn t typically pay too much.  This is just one example of how things are currently set up and it would be disastrous to business and jobs, and our economy in totality, if this major structural change was made.

Q Some people put CSR and Governmental Affairs in the same bucket.  Shouldn t companies have these departments separated?

A Bob actually worked to combine these at Boeing.  He viewed the skill sets of the employees on both teams as similar, thus people had greater career opportunities with the combination. 

As always, many, many questions were asked but not recorded.  Sorry!

Many thanks to our hosts and our speakers!

See you at the next inSPIRe meeting!

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