We attended the White House Conference on Corporate Citizenship in 1996 at Georgetown University. There, we asked President William Clinton about Fannie Mae.
THE PRESIDENT: Yes, sir?
MR. CUNNINGHAM: Hi, my name is Bill Cunningham, from Creative Investment Research. One thing I wanted to talk about today, a little bit, were the financial markets. I mean, we see a lot of corporate citizens blaming the financial markets for lopping off 40,000 people of their work force. They say that Wall Street make me do it: I really didn't want to do it. How do you re-engineer the financial markets to be a little more humanistic? Or is that possible? I mean, you have some experience and expertise on the panel, it seems, people who really have had to deal with the financial markets. Is it possible to create new financial instruments, for example, that take into account certain social goals?
We, for example, at Creative Investment Research, on the local level, suggested to a local corporate citizen, Fannie Mae, that they issue bonds to rehabilitate the D.C. public schools as a way of meeting their local obligations instead of paying local taxes. I mean, that's the type of financial instrument innovation and expertise that we'd like to see developed in the capital markets.
If you have any comments, I'd like to hear them. Thank you.
THE PRESIDENT: Would anyone like to take a crack at that, what he said about the --(laughter.) Gerry?
MR. GREENWALD: I'd like to come back to an earlier point and link this question to it because I do think there's a disconnect at the moment. I think a statement has been made that there is clear evidence, there is clear evidence that caring for employees, broadly speaking, avoiding harsh layoffs that create a shock through those who remain and become disloyal, that there is clear evidence that if you do the right thing, that you become a more profitable company.
Now let's pause for a minute. I do not believe today that Wall Street analysts or institutional investors believe that, because if they did, they would not reward instant massive layoffs which is done today. That's the disconnect. And it seems to me our challenge is to demonstrate that it's a fact, that if we can do so, Wall Street will respond.
Q. Instant massive layoffs means that management has failed.
THE PRESIDENT: Let me just follow up on both of those comments. Look -- and let's talk about this -- people make mistakes. The President even makes a mistake now and then. (Laughter) People make mistakes. And sometimes -- and the world changes sometimes. Sometimes a decision that was good this year looks pretty bad next year because things that you couldn't foresee change.
Now, if that happens and you're running a really big company, and, let's say, two out of six divisions of it no longer make sense for you to be running and you want to have a no-layoff policy. And maybe you shouldn't have gotten into all these things that you got into when it looked like a profitable thing, at least from a financial transaction point of view to do. How do you get the time from the markets and from your board to make the transition? Maybe if you had three years you could figure out something for all these people and then you wouldn't have to lay them off. I mean, I think that's the thing that plagues me, you know. I think over the long run the markets make pretty good judgments. I don't think you can stay very strong in the market over the long run if you're not producing a quality product or service that somebody wants to buy.
But I think, what has happened is, as these markets have become more global and our ability to move money around just like this -- and the people who are moving it make money based on quarterly returns and also based on how many transactions are churned, it really forces people who are in a tight -- in the near-term at least, to make decisions that seem draconian. I mean, at least that's what it seems to me. And is there a fix for that? I mean, is there something that can be done about that, even if it's no more than -- to go back to the question the gentleman asked -- even if it's no more than changing the attitude of the people that are making those judgments? Because my perception is that some of these managers are under extreme market pressure in a dimension for short-term results that was not the case even a few years ago.
That's my perception. And I would like -- anybody else want to comment on that? This is a tough issue.
Q. I think that's true, Mr. President. And also there are other factors. at work, too, that in this day of increased corporate governance today -- boards, I think, are looking for more of that, not only the financial markets, but there are higher levels of expectations with boards of directs. I'm not sure it's all bad. Is it good or bad?
THE PRESIDENT: Well, I think the point they were making is, if you could be more reluctant to have layoffs because you knew that these folks could be made productive if you had time to do it, are you robbed of the time to do it if you're market-dependent on a quarterly basis? I think thats-- to go back to our friend, again, from Lincoln Electric, if you stick with your mission and you stick with your mission over decades, and then you broaden your production line or you broaden your services, sort of flowing naturally out of your mission, this might not have ever happened to you. But if, in the last 15 years, you have got into expansions that were basically adopting unrelated or tenuously related enterprises, then you are liable to get caught on one of these whipsaws. And I think that's some of what we have seen here in some of the most highly publicized ones.
Sidney, what were you going to say?
Q. Just a quick comment, Mr. President. I can remember when it would have been impossible to assemble a group of chief executive officers such as you have on the stage today to talk about the material we have been talking about today. It was regarded as kooky 15 years ago There is hope in the financial markets. I am not here to shill for Wall Street, but yesterday I visited with Robert Doran, who is the chief executive officer of Wellington Management company in Boston. They have $120 billion under management, and he told me that they invested in our company because they think we are a model and they see value in what we're talking about here today. I think there are many people in the financial community who are coming up behind this crowd, thinking very well of the same point of view.
THE PRESIDENT: If I might just make one other point, then I want. to call on the lady over here in the corner; then we have to adjourn. Earlier today -- maybe it was this morning at breakfast, someone said, the enemy is us. And some of our representatives of the unions here were laughing about it because, of course, the employees pension funds are among the biggest investors in the stock markets. And if they invest in mutual funds, let's say, their money managers are trying to get the highest return they can for the pension, and perversely, they could be undermining the employment stability of the very people whose retirement they're trying to protect. At least that is arguable. But if you want the people who are representing you -- this is something, it seems to me, that would be really a worthwhile discussion and maybe we could put one together for corporate executives and the union folks and the people in the middle, the people that are supposed to make these investment decisions that you asked about, sir. You see, you gave us a topic for a whole other day. (Laughter.)
But, I mean, I think, these markets, on balance, have served us all very well over time. And so we have to be reluctant to mess them up. But on the~ other hand, when the incentives get a little out of whack, we have to -- we ought to look at it. And I think -- anyway, I'll pursue it and I'll follow up with you all.
