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U.S. Chamber of Commerce

Steven Pearlstein
Washington Post Columnist
Wednesday, April 6, 2005; 11:00 AM

Washington Post business columnist Steven Pearlstein was online to discuss his latest column, which continues his examination of the U.S. Chamber of Commerce and Thomas J. Donohue, its president and chief executive. Pearlstein writes that Donohue has become a walking apologist for everything that's wrong with corporate America.

Last week, Pearlstein wrote that the chamber is waging a rear-guard action against government regulators determined not to let another Enron happen. Pearlstein also hosted a discussion with readers on that topic. You can read a transcript of that discussion here.

A transcript of today's discussion follows.

Steven Pearlstein writes about business and the economy for The Washington Post. His columns on the economy appear every Wednesday and Friday.

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.


Arlington, Va.: Greenberg hasn't been charged, let alone convicted, of anything, right? Why shouldn't the leader of an organization that's in business to support business defend him?

Steven Pearlstein: I don't know if he's criminally guilt of anything, although tampering with documents that may be needed for the SEC's investigation is a pretty serious thing. You may remember that what Andersen was charged with was obstruction of justice -- nothing to do with accounting.

But beyond that, I think you've missed the point. What's the subject here is what used to be called in polite circles "earnings management/" That means manipulating your books in legal ways to come up with quarterly earnings that meet or exceed analyst expectations. And not only was everyone doing it, but apparently reinsurance companies like AIG were actively peddling products that did just that, selling insurance that had so little risk attached to it that it was really nothing but a loan. At one point, the accounting geeks got a look at it and said you have to meet a 10-10 test, meaning that there had to be a 10 percent chance of a 10 percent or more loss. Whether AIG's products met that test I surely don't know, but I can assure you that Tom Donohue didn't know either. Which is why, at this point, with two agencies looking actively at the company, he should keep his trap shut. And I would suggest that one big reason he has come to the defense of Hank Greenberg and AIG is that they have been the key funder of many of the Chamber's initiative, including apparently a "building fund" for the chamber's headquarters, as well as the legal reform effort. G

Greenberg was an old fashioned, CEO tyrant. He did not practice good corporate governance, although his company was very successful and he made a lot of money for shareholders (as well as himself and other top executives). Since its governance that we're talking about here, I think it inappropriate that the head of the Chamber would criticize the prosecutors and not the company at this point.


Cubicle City, Washington, D.C.: As a somewhat lower-level Bush Administration employee, I found myself stunned by what you wrote in last week's chat. To save space, I won't reprint what you said -- but I can tell you that it is demonstrably untrue where I work. We get constant feedback and try to adjust policies when we get meaningful feedback. The purpose of working in the Administration is to further the President's policies, and I see nothing wrong with doing that. But beyond the substantive argument, the tone of your screed made me wonder whether you're harkening back to your earlier days editing a journal of liberal opinion, or whether you've joined Moveon.org. I see nothing different in your tone than in the worst of what those partisan groups write.

washingtonpost.com: Discussion Transcript (March 30, 2005)

Steven Pearlstein: For our readers, what the writer refers to is an assertion that the Bush administration runs the executive branch in a very corporate like way. You can check the transcript: the editor enclosed a link. But I think the writer's assertion is laughable. Just look at the incredibly tight control the administration insists on in terms of its internal discussions and what cabinet secretaries can say in public (or even at cabinet meetings, if Paul O'Neill is to be believed), or the way the President holds public forums only with people who support and agree with him, etc, etc. This is the corporate way, as anyone would know who has tried to suggest a possible director to a board or attend a annual meeting or question the policies of a corporate CEO. Sure, there is an office that accepts information and sends out polite replies. But since the President doesn't listen to the career people in the government, who actually know something, why should he listen to people who send in information over the transom. Of course the exception to that is people and organizations that have been supportive of the President. And we know the administration is VERY responsive to them.

By the way, please don't question my motives or suggest I am in the pocket of some party or organization. That, by the way if very corporate like: companies now say that anyone criticizing their governance is really a tool of the unions, who are using governance as a smokescreen. I've written lots of columns that get the lefties mad.


Alexandria, Va.: Thanks for the column on Mr. Donohue's defense of the indefensible.

Something has happened in this country in the last twenty years that makes CEO's and other business leaders believe that they have a right to make obscene amounts of money and are willing to do anything they can to achieve that end.

This is not good business practice and it's certainly not good for our country.

Steven Pearlstein: By the way, Mr. Donohue has also given a speech recently defending executive pay as being appropriate and set in a free market. So it should not surprise you that he is also the head of the compensation committee at Union Pacific. He also makes more than $1 million in salary, and travels in a corporate jet, presumably on the theory that he runs an organization as big as many corporations and should be paid competitively. He also earns the equivalent of several hundred thousand dollars for his four board memberships, although much of that is in stock and options. So he's very much in the corporate culture as it is now and is unlikely to find anything wrong with it.


Re: not questioning your motives: I'm sorry but to say that one should not question your motives but you can question other people's motives (such as the Administration) is a bit hypocritical.

Steven Pearlstein: I don't think I questioned the administrations motives so much as I did the way they go about their business, which from their point of view is the right way. It basically derives from an arrogance that people on the inside (us and our friends) know all that there is to know, really, so that you really don't have to take people outside your circle seriously, although you may have to go through the motions of pretending you do. Furthermore, the view is that people who criticize are just political rivals or enemies trying to politicize an issue to make you look bad, or move.on types, as you suggested I was (which if you knew me, you'd know is really absurd). Why do you think it is that Dick Cheney never, ever, has a substantive talk with a Democratic member of the Senate to see if maybe he can learn something or understand the legitimate arguments he or she may be making. That's not the sign of an inquisitive or open or even accommodating mind.


Laurel: Please don't infer the following as an apology for Mr. Donohue's attitudes:

The stock market has always included corrupt practices. Back when only rich people owned stock, the impact of them was narrow because only people who could afford the losses owned stock, anyway.

To some extent, the current push for greater corporate accountability stems from the stock market's role as the backbone of many ordinary citizen's retirements.

Considering the myriad ways earnings can be cooked, shouldn't virtually everyone stop trying to pick individual stocks, since we don't have reliable data on which to make a selection? Then, if we all just owned broad mutual funds, a few bad apples wouldn't matter so much.

This isn't to say there's no MORAL imperative to accurate accounting; just a practical defence mechanism.

Steven Pearlstein: I think those are all good points. But, in fact, much of the corporate reform movement has been aimed at getting those mutual fund managers to have the kind of information that they, in particularly, could put to good use. The good ones complain about the lack of transparency and accountability. But what is disappointing is that the mutual fund industry has, as a whole, not been a champion of corporate governance reform, preferring to stay out of the line of fire or quietly supporting management. Why is that? Well, here I'm going to have to question motives. These companies are very keen to sell their services to companies' 401(k) and other pension programs. And that may have something to do with their reluctance to piss off a current or prospective customer.


Mt. Rainier, Md.: Let's see. For a job where I am the most important person in the joint and everyone kowtows to me, where I make all the important decisions (or even unimportant ones if I want), where I travel firstclass to show off the company's importance and rub shoulders with all the major politicos in town, and where golf is compensated as "work" - they have to pay a LOT of money to find people who are interested and capable???? Not to mention that it's a no-fail course - if you lose you still get massive pay and bonuses and no one even raises an eyebrow. How can salaries in the stratosphere be justified for jobs that people are falling over themselves to latch onto?

Steven Pearlstein: They can't be justified only on the basis that everyone else is doing the same, which once it gets started is obviously a self-reinforcing mechanism that only causes pay to ratchet up and up (after all, what company wants to say that it pays its CEO at the 20 percent level of comparable companies?). And you put it nicely: if they don't do well, they get paid two or three million dollars. If they do well, sky's the limit. Either way, they live very very well.


Arlington, Tex.: Its incredible that when our nation faces a vitally important issue, and market trust, is vital to Social Security reform, we divide upon ideological tendencies. If an argument is different from the one we espouse the author is attacked as an ideologue. Greenberg and his dynasty have been implicated in scandal after scandal. It would seem that an open and on-going dialogue would be best for all, yet he has taken an obstinate and combative posture towards investigations. He wants to be the recognized as one of Wall Streets greatest titans, but his lawyer, David Bois, has started his "I'm an uninformed idiot CEO defense. Does he believe that he too can fool all the people, all the time? Is America that gullible?

Steven Pearlstein: Good to hear from George Bush country. You make some good points, although I'm not sure the Boies quote didn't get garbled somehow.


Free Markets ?: There is nothing free about a market when I , as a board member, get to decide how much you make and you, as a board member, get to decide how much I make.

Steven Pearlstein: Precisely.


Arlington, Tex.: I question the administration's motives, I've voted for the President in four elections: twice for Governor of Texas, and twice for President. He claims to have a mandate of the people, yet has retreated to favor business on almost all issues and has reverted to name calling concerning involved citizens that he disagrees with. If political capital is owed to anyone, it is George Bush to the American people and especially the middleclass that his policies are destroying.

Steven Pearlstein: Sounds like a leading indicator to me...


Steven Pearlstein: Thanks folks. Enjoy the cherry blossoms (those of you who are in Washington). See you next week.


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