Talking About Values
Updated: Nov 10, 2020
My life has spanned a unique historical period in America, and I have an unusual range of experiences. My youth in the 1950’s and 1960’s was at the height of the Civil Rights Movement against America’s systemic racism, and also the Black Power Movement which was about black pride and self-determination. I was part of those movements during my Cornell University years. In 1969 I put my life on the line in an armed occupation of the student union building at Cornell. I did that because I believed I was part of the generation of African Americans destined to stand-up and fight, and thereby “raise the price” of racial oppression in America. Then, as a young adult in the 1970’s I was one of the first wave of African Americans seeking to climb the ladder in corporate America, and I experienced the obstacles first-hand. As a mature adult and seasoned professional, I was one of the first African Americans to reach the top of the corporate ladder in the 1990’s.
My life journey also gave me a front row seat to important historical events such as the “911” terrorist attack at World Trade Center in 2001, where the first plane in flew just a few hundred feet above where I was sitting in my northwest corner office on the top floor of Seven World Trade Center. I was also involved in the early stages of the 2008 mortgage crisis through serving on the board of directors at Freddie Mac, America’s second largest mortgage guaranty company. And I witnessed the 2008 collapse and subsequent government bailout of Citigroup. My life story also encompasses a 55-year association with Cornell University, which comprises over one-third of Cornell’s history, and I’ve played a role in shaping what Cornell is today. These various threads are all part of the fabric of my life story, and I’ve learned many important life lessons, three of which I want to share with you today. These are life lessons you may want to share with the young people in your lives.
One of my important life lessons came early in my career. I thought I didn’t have very good odds for success in the corporate world. I didn’t have the right credentials, and I was labeled “black radical from Cornell.” I was working fulltime and attending Boston University Graduate School of Management at night to obtain my MBA degree. It was the first time I had ever approached school with intense focus. I took two courses each fall and spring semester, and one course in each of the two summer sessions. I front-loaded my curriculum with finance and accounting as much as possible, while deferring other distribution requirements. I attended classes and studied with purpose and passion. For the first time, I discovered the difference between working hard and working to full capacity. I had essentially no free time. I was working full time at a demanding job, attending classes most weeknights, and writing papers or studying most weekends. I did this day after day, for three years, between September 1975 and October 1978.
I discovered that, like most people, I had seldom exceeded a 95 percent level of effort previously, probably because most of us are socialized to think that 95 percent is an “A”, and an “A” is the best you can do. Right? But I learned that I didn’t have to stop at average, or above average, or even at 95 percent. I could work nearly every waking minute, and it felt good. I had the energy for it. I never stopped at 95 percent anymore, and the resulting gap between me and my peers drove much of my subsequent career success.
The five points separating 95 and 100% don’t seem like much – and it isn’t on any given day, or any given exam or work assignment. But it’s a lot when those five points are compounded every day, week after week and month after month. Over the span of five years, it becomes an enormous gap of effort and achievement. When you push yourself to the 100 percent mark over the course of a 40-year career, as I learned to do, you can lift yourself to an elite level. But what’s most fulfilling about giving 100% is the resulting feeling of self-actualization, meaning that you’ve achieved your highest potential, which is all that any person can do – regardless of whether you eventually “win” or “lose” the worldly “prize” you seek. My first important life lesson is to advise young people to learn to give themselves this spiritual gift; to guarantee themselves a spiritual “win” when they achieve their highest potential – whatever that may be.
A second important life lesson I want to share with you came thirty years later at the peak of my career, when I was brutally fired by Citigroup and faced Securities and Exchange Commission (SEC) prosecution without company protection. It was October 19, 2004 and I was waiting to make a presentation to a Citigroup board committee at approximately 2:30 pm in the afternoon when I was summoned to go immediately to CEO Chuck Prince’s office. Prince told me that I was being terminated, and the public announcement would be released at 5:00pm. He said I was being informed at that time so I would have an opportunity to speak to my staff before the announcement. I returned to my office and called my wife Addie so she would not be surprised by the public announcement. I met with my staff, which took longer than anticipated because of their emotional outpouring. At 6:39 pm I sent a final farewell email to my global business unit employees and left the office. My driver was waiting in the usual location near the corner of Park Avenue and East 54th Street in Manhattan, and traffic was heavy, so the drive home to New Canaan took longer than usual. I didn’t want to talk. My mind was spinning. “This isn’t a dream, this is real. You were just fired and your career is over. What a fool you are. You thought you were important. Big job. Big title. But you were nothing – they threw you out like an old dishrag. What are you going to say to Addie? How are you going to explain this to your family?” My mind raced in circles, around and around and around.
Over the next few days I was buried in negative news coverage driven by Citigroup’s public relations machinery. I tried to think of how to soothe the pain my family was suffering. How could the brutal events which were unfolding occur in the elite corporate business world? For as long as my family could remember, I had been the master of my own fate – always excelling, always calm, always prepared. I knew they were probably embarrassed and humiliated by the constant stream of negative news stories, and the questions from their friends. I knew they were probably apprehensive regarding what might happen to me, and how all our lives might be affected. I suspected that they wondered, but would not ask, whether perhaps I had indeed done something inappropriate. I knew Addie was afraid.
I reassured Addie and the kids and our close relatives as best I could that I hadn’t done anything inappropriate, let alone illegal, and everything would eventually work out okay, but that it would take time to get through this. “I need,” I told them, “quiet time to meditate and pray and think.”
Then I turned to my faith for comfort. Despite how alone I felt those first few hours and days, in fact I knew I was never alone, none of us ever is. God was with me. I had developed a daily prayer discipline in 1982 and one of my daily prayers, which stood me in good stead during this period, includes the phrases “I affirm my belief, my Father, that all things work together for good to those who love Thee… And I will not walk in fear because I know that Thou hast not given me the spirit of fear, but rather the spirit of power and of love and of sound mind.” I spent the next two weeks praying and meditating, asking God to help me understand what good could possibly come from this humiliation and pain and suffering. I prayed for healing for my family’s pain, and for my own pain. And I prayed for the strength to pick myself up and move forward. Daily prayer and meditation enabled me to gather my strength, pick myself up, and prepare to fight. My spirit wasn’t broken.
Eight years later at the end of this ordeal, having won against the SEC in federal district court in 2007, and defeating the last piggyback class action litigation in federal district court in 2012, it was clear to me that my faith had been redeemed and I had indeed been blessed in three ways – “All things work together for good to those who love God.” I had been blessed financially through both a legal settlement with Citigroup for wrongful termination, and because I sold my Citigroup stock at $48 per share shortly after I was fired and before Citigroup’s stock price collapsed to $3 per share in October 2008. I had been blessed physically because it was only when I stepped away from my intense daily work routine that I realized the toll it was taking on my health. And I had been blessed spiritually because the ordeal of suffering and pain had caused me to grow closer to my wife and children.
My second important life lesson is to advise young people that if you’re stripped of all the external accoutrements of success, if your public persona is beaten and humiliated, if it seems that the world has turned against you – you must be prepared to look inside yourself for spiritual strength. Most people’s lives do encounter a time of trial. It may be physical health; or mental health; or your children; or your significant other; or your career; or some other important aspect of your life. I encourage you to advise young people to prepare themselves with spiritual strength and depth for their time of trial.
A third important life lesson was born in the transformation of American capitalism over the course of my career. When I started my career in the early 1970’s corporate American culture was broadly benevolent. Lifetime career employment was common, accompanied by generous family medical benefits, and defined benefit retirement pensions designed to replace 50-60% of preretirement income. Companies shouldered the burden of funding those defined benefit pensions, and absorbed the investment risks associated with investing those funds over the course of decades. When Reginald Jones retired as CEO of General Electric in 1981, widely regarded as the top CEO in the country, news media reports estimated his net worth at $10 million (approximately $40-$50 million in today’s dollars). Jones was rich, but not so wealthy as to be “out of touch” with his community. One of the defining characteristics of that era was the modesty and moderation of the people at the top. People at the top did well, and a lot of people in the middle and lower tiers also did very well, in relative terms.
Then things began to change. I observed the changes occurring in tandem with the emergence of the “leveraged buy-out” (LBO) corporate raiders in the 1980’s, often funded by junk bond king Michael Milken. The excesses of this era are perhaps best illustrated by media reports that Michael Milken’s compensation was $550 million in 1987, and the 1988 story of buyout firm Kohlberg Kravis Roberts winning the $25 billion takeover of RJR Nabisco which was chronicled in the book Barbarians at the Gate. The basic modus operandi of the buyout firms was to use enormous junk bond debt to finance company acquisitions, then strip out corporate costs to increase operating cash flow for debt service and dividends. The corporate costs which were stripped were most often employee headcount, medical and pension benefits, employee compensation, and research & development expenditures. For the most part the LBO raiders did not create new value in the form of new products or services. Numerous mainstream corporate CEOs soon decided that they could also play the game of stripping costs, increasing cash flows, and capturing enormous compensation rewards for themselves. General Electric CEO Jack Welch was an avid practitioner of this employee headcount reduction mentality, earning the nickname “Neutron Jack” in a twist on the US military bomb which reportedly killed people while leaving buildings and structures intact.
Fast forward thirty years and we arrive at today, and what I call “Winner Take All Capitalism” has become the dominant corporate business model. It is not uncommon today for a Fortune 500 CEO to retire with net worth of $500 million to $1 billion or more. The number two’s in the corporate hierarchy get $250-500 million, the number threes get $125-250 million, etc. Staying with the General Electric example where CEO Reginald Jones retired in 1981 with the equivalent of $40-50 million, Fortune magazine reported that CEO Jack Welsh retired in 2001 with $417 million, and CEO Jeff Immelt resigned in 2017 with $211 million after a failed tenure in which GE’s market value declined thirty per cent.
Meanwhile, many employees below the top tier are getting by on modestly funded medical benefits with significant co-pays and deductibles; defined contribution retirement benefits which transfer the funding and investment risks to employees ; slow growth in wages; insecurity associated with outsourcing of engineering, call center, and legal research jobs to India; relocation of manufacturing jobs to Mexico, China and Southeast Asia; and insecurity associated with the growth of the “gig economy” and “independent contractor” status for workers. Should we be surprised that news media report that many young people are expressing doubts about our capitalist economy?
Today’s top corporate executives are usually competent stewards of the companies they inherited, but they rarely create true economic value on a scale which justifies their outsized compensation. The lion’s share of the rewards at the top are driven by stock compensation, which benefits from stock prices pushed higher by corporate cash flows diverted to dividends and stock buybacks. A defining characteristic of this Winner Take All Capitalism is that the few winners at the top are immensely better- off, and many people in the middle and lower tiers are relatively worse-off. This has not been good for our country.
My third important life lesson is to advise young people to be a little less selfish, and a little more concerned about the welfare of their fellow citizens. This is especially true for those young people who live in wealthy communities such as New Canaan; are trained to excel in the meritocracy; are prepared for the rigors of elite universities; and who are likely to eventually occupy the top ranks of our most important companies and other institutions. Those of us who have reached the top should advise young people that sometimes little except good fortune, or good connections, separates us from those who did not achieve as much. We worked hard to earn our success, but so have many others who have not been so rewarded. I encourage each of you to advise young people to practice grace, humility, and generosity towards others. It will be good for their souls, and good for our country.