Geico Corp., the Washington automobile insurance giant, has been in the news for much of the past decade -- first as a company on the verge of bankruptcy and then as a company achieving a miraculous rebirth.
Last week, Geico was in the news again. The parent company of Government Employees Insurance Co. and affiliates announced a donation of $593,833 to the District public schools so that the existing student driver-education program could continue for at least a year.
Perhaps it is only a natural outgrowth of the cynicism of our times that the recurring question about Geico's action had this bottom line: "What's in it for Geico?"
Such a reaction helps to demonstrate how attitudes about business have changed.
When auto dealers donated cars used for driver-education in earlier years, there were no questions about the ethical implications. Decisions about such things were seen as a reflection of common sense and community spirit instead of as a calculated business decision based on profit.
Several years ago, Detroit's school budget was slashed and a decision was made to eliminate all high school interscholastic sports competition.
Businesses, including auto manufacturers, gave money to keep the school sports program -- and Detroit -- intact. In short, helping to make Detroit more healthy also was good business.
Business people here have maintained in the past that such corporate intervention was impossible, because of the absence of Fortune 500 firms in a government-dominated town.
Now we have the example of Geico, giving -- in 10 monthly payments -- almost $600,000, an amount of money that far exceeds annual contributions of all kinds by individual local businesses.
"It's very precedent-setting, a staggering amount of money," commented John Tydings, president of the Greater Washington Board of Trade, of the Geico decision. He could recall no similar, single cash contribution to meet a broad-based community objective.
Tydings also noted that Geico had an unwritten debt to the city because the D.C. insurance department helped organize an industry plan to keep the firm in business when insolvency threatened in the past decade.
D.C. school officials also welcomed the Geico gesture. It was a business decision that combined enlightened self-interest and community service. As could be expected, several stockholders, customers and employes are unhappy with the decision.
Geico Chairman John Byrne, who took over the reins in the company's dark days in the mid-1970s, had anticipated some of the criticism and cynicism that has followed.
"First and foremost, it was a good business decision," said Bryne over the weekend, emphasizing that the proposal came from Geico's senior insurance executives and not from the board of directors.
"They are very good, tough businessmen," said Byrne of Geico President William Snyder and his associates.
Here was their pitch, which Byrne and the board of directors liked: Geico insures at least a quarter of all automobiles in the metropolitan area and "D.C. has been a very good market for use for 40 years. We've collected a lot of money from D.C., and the Virginia-D.C.-Maryland market has been and is likely to be in the future a very good place to do business," Byrne stated.
As a result, Geico has pinpointed this market -- as well as parts of Florida, Georgia and California -- as major growth areas for its insurance business, and the company plans to expand its marketing programs substantially. Making a good name for the company cannot hurt.
In addition, Byrne said the District "has very severe problems and this is a socially responsible gesture that can help." The Geico chairman was particularly excited by the fact that his firm's $600,000 would guarantee an additional $1 million in federal funds for highway safety programs that otherwise would disappear.
Another important factor in the Geico decision involved making the city streets safer. "We obviously have a very big interest in the number of accidents and it is reasonable to think that we could get the entire $600,000 back in four years, just from a modest reduction in the number of accidents that would take place if all the teachers were fired and the program ended," Byrne stated.
These are some of the explanations Byrne is providing to angry stockholders, who have been asking: "What on earth are you doing with our money?"
Philosophically, Byrne noted that every decision he makes attracts angry responses from some of Geico's 10,000 stockholders. Specifically, he said that Geico's net income (after taxes, reflecting the donation as a business expense) should be trimmed by $100,000 in both 1980 and 1981 as a result of the gift. "But two years from now, net income will be higher for having done it," he forecast.
To customers in D.C. who request lower rates instead of corporate philanthropy, Byrne said he believes that rates in the city would soar if a rash of accidents occurred and that "we are citizens of the District. If (policyholders) do not live in D.C., they drive there and have a vested interest in keeping accidents down, and if they don't drive in D.C., they're still affected because their neighbors do drive, and rates are designed by neighborhoods. I expect some pretty severe backlash, some of it with racial overtones."
Some anonymous letters from employes "make me very sad," Byrne said. These workers argued that the $600,000 should go to higher wages.
Byrne's response: "This is good business! We will grow and the increased business will bring higher wages." There have been only a handful of employe complaints, however. "Overall, our employes are very proud," he said.
There is one additional point that should be made. Geico has donated the $600,000 for one year only and that buys time for this community's total leadership in the District Building, the school board, Capitol Hill, labor unions, businesses and civic groups, to come up with consistent financing of necessary city services.
Perhaps other area businesses will get some encouragement from the Geico example, to get involved and help the city construct a rational program of federal aid.