The New York Times
February 12, 2006
New Front: Protecting America's Investors
By BEN STEIN
IN the tiny room where I am writing this missive, there are four
little display cases and a framed diploma, among many other mementos.
The diploma is for my father-in-law, Dale Denman Jr. of Arkansas, and
it is from the United States Military Academy, dated June 6, 1944 - a
day when quite a lot was happening of military significance in France.
Next to that is a display case with two little stars. One is a Silver
Star that my father-in-law won in Europe several months after he
graduated. It is for running along a road under heavy German
machine-gun fire to call in artillery to save the company for which he
was a forward artillery observer. Next to it is a Bronze Star that my
father-in-law, then a colonel, won in Vietnam in 1966 for holding his
unit together when it was ambushed by a Vietcong force and would have
been cut to pieces without him.
I have been thinking a lot lately about these heirlooms that Colonel
Denman left to my wife and me. That's because of some mail I have been
getting about my recent articles in this space about the way high
executives have been treating their employees and stockholders. What I
said two weeks ago about UAL, the parent company of United Airlines,
prompted hundreds of e-mail messages. (I have still not even remotely
caught up with all of them because I read them myself - no secretary
Several people sent clippings describing how UAL provided Glenn F.
Tilton, who was living in San Francisco when it hired him as chairman
and chief executive, with a suite in a luxury hotel when he spent time
at its headquarters in Chicago. UAL was paying for the suite - which
cost $18,000 a month, according to The San Francisco Chronicle - while
it was reorganizing its finances under bankruptcy court protection and
telling tens of thousands of workers that their jobs had been
eliminated, their pay cut, their pensions terminated or all of the
above because the company was broke.
Some of the letter writers recalled how UAL spent an average of $10
million a month on lawyers, accountants and investment bankers for 37
months while UAL was in bankruptcy, and yet was unable to pay its
employees their pensions.
Now UAL has emerged from bankruptcy with a mighty flourish, and an
allowance of hundreds of millions of dollars for its top executives.
Some letters pointed out that one of UAL's board members is none other
than our old friend Robert S. Miller, chief executive of Delphi, the
auto parts maker.
Delphi also recently entered bankruptcy - but proposed to the
bankruptcy court a payment of well over $100 million to its top
executives to keep them happy while it was in bankruptcy. Mr. Miller,
who goes by Steve, a version of his middle name (not the one who sings
"Fly Like an Eagle," but an artist of sorts nonetheless), has told
Delphi's workers that they will have to take pay cuts of roughly
two-thirds in order to save the business.
But my favorite communication, the one that made me stay up nights,
was from a United States Army sergeant who has done two combat tours
in Iraq and two more in Afghanistan, and is now home in Georgia
training others to serve in those wars. I have been pals with this man
for a couple of years now, and we talk on the phone. He has been
following my articles online, and he simply asked, "Was this what I
was fighting for in Iraq?"
The question haunts me, not only because of UAL and Delphi, but also
because there is something deeply broken about the corporate system in
America. Long ago, my pop was pals with Harlow H. Curtice, the
president of General Motors in its glory days in the 1950's. Mr.
Curtice presided over a spectacularly powerful and profitable G.M.
For that, in his peak year as I recall from my youth, he was paid
about $400,000 plus a special superbonus of $400,000, which made him
one of the highest-paid executives in America. At that time, a line
worker with overtime might have made $10,000 a year. In those days,
that differential was considered very large - very roughly 40 times
the assembly line worker's pay, without bonus; very roughly 80 times
with bonus. A differential of more like 10 to 20 times was more the
Now C.E.O.'s routinely take home hundreds of times what the average
worker is paid, whether or not the company is doing well. The graph
for the pay of C.E.O.'s is a vertical line in the last five years. The
graph for workers' pay is a flat line - in every sense.
Now, my fellow free-market fans may well say: "Hey, stop your whining.
This is the free market at work." Only it isn't the free market at
work. It's a kleptocracy at work. (I am indebted to another of my
correspondents for the word.) What's happening here is that the
governance system for many - by no means all - corporations has simply
For centuries, the idea has held that the stockholders own the
company. They are the trustors. The trustors select directors who in
turn hire a chief executive and other top officers and then keep an
eye on them for the stockholders. They - the chief executive, other
top officers and the directors - are all agents for the stockholders,
many of whom are often the employees, as is the case at UAL.
But what has happened is that - as in a corrupt, failed third-world
state - the trustees in too many cases are captives of the C.E.O. and
his colleagues; they owe both their places on the board and their
emoluments to the chief executive, and they exercise no meaningful
restraint at all on managers. The directors are instead a sort of
praetorian guard, protecting management from its real bosses, the
stockholders, as management sucks the blood out of the company.
I am by no means saying this is the standard or the usual way business
is done in this country. Most managements are still honest and
hard-working, I believe. But far too many are simply in the catbird
seat to take what is not decently theirs from people who cannot afford
to be taken.
Government, meanwhile, does nothing, or next to nothing. Courts,
especially bankruptcy courts, do nothing. And the employees and
stockholders and the whole society are looted. Maybe it's not looting
in the legal sense, but something basic is removed from the society.
In the capitalist society, the most basic foundation is trust. But in
today's world, trust is abused, mocked, drained of meaning.
Again, I am not talking everywhere, by any means. I work with many,
many businessmen and businesswomen, and a huge majority are honest and
amazingly hard-working. I am sure that this is true nationally. But
enough are not so honest and hard-working that it takes a toll on the
rest of us.
Don't get me wrong. I am not a newborn. I know that looting is not
new. Man is highly flawed when money is on the table and not guarded
well. I saw it and wrote about it in great detail when Michael R.
Milken and Drexel Burnham Lambert were ascendant, and in many other
cases. It was terrible and dreadful, at least in my view, back then in
the 1980's. It has always been terrible.
But there is something new and unlovely that my pal in the Army
brought up. Now, we are engaged in a war. More than 100,000 Americans
are fighting far from home. Many don't come back. Many come home
crippled. They are fighting for a vision of a just and decent society
back home in glorious, shining, blessed America. And back home,
meanwhile, the looters are running wild, taking the meaning out of
that vision of America, taking some - by no means all - of the beauty
out of America as a land of justice and fairness.
ONE of my correspondents wrote that she, a flight attendant at United
Airlines, had played by the rules, believed what her bosses told her,
trusted that the laws would protect her, believed that fairness would
triumph in the end because it's America. "I guess that makes me a fool
in today's world," she said, because now she is broke, with no job,
barely any pension and no faith. While the soldiers are fighting to
protect us from the terrorists with bombs, too few are at home
protecting us from the terrorists with briefcases. There aren't a lot
of such terrorists, but they do a lot of damage.
Surely this is not what Colonel Denman won his medals for. Surely this
is not the America that our best are fighting and dying for in Iraq
and Afghanistan. There is something desperately wrong here, and if
President Bush is searching for an issue, I might suggest this: common
decency for the workers and the savers and investors of this country,
and an end to the hideous breaches of trust that build great mansions
in the Hamptons and wreck a free soci- ety.
Ben Stein is a lawyer, writer, actor and economist. E-mail:
* Copyright 2006The New York Times Company
Hello, Mister Stein...
A pilot-friend of mine forwarded me your article ("New Front: Protecting America's Investors")and it lent me some much needed hope. You see, I also work for an airline and a bankrupt one at that. Rumors of liquidation abound and strike-actions are threatened while upper management is salivating at a plan to outsource a 75% of our international flight attendants to foreign nationals. This in an age when American citizens are being thoroughly screened before stepping foot onto a plane. I won't EVEN begin to tell you what a potential security-compromise this represents. Bottom line: Front-line staff are expendable in the feeding frenzy to cut costs and feather the nests of CEO's and upper management. Bigger, Better, Faster, MORE are the cornerstones of 21st Century capitalism, it would seem. Ah, well...this happened with Rome and it's Empire, back in the day. Most of the wealth was held by a miniscule percentage of the populace...the upper classes. And we all know what happened to Rome. All empires have to fall(and make no mistake, the United States is an extremely bloated one) we are no exception. And I don't imagine that it's going to be pretty...
Thank you for listening...
Yet another jaded front-line airline employee,