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Ideational items gentle admonitions on outside activities
IDEAtional Items from the desk of L. L. WArEaS
G e n t l e a d m o n i t i o n s on o u t s i d e a c t i v i t i e s
Mr. Waters is a professor of transportation and business history in the Graduate School of Bustness, Indiana University.
60
Most employees of a modern corporation can disassociate their work life from their private life. Either they produce or they do not; the rewards may be commensurate with the varying degrees of production, or the employees may be fired. This primerlike simplicity vanishes with the first promotion to a supervisory position, even at the foreman level, for elements are introduced that are more difficult to evaluate and measure. Progressive promotions toward top management make the measurement of productivity even more troublesome. The input of the manager as he advances should reveal increasing creativity, a contribution usually growing out of both the capabilities of the man and his commitment to the particular enterprise--to the exclusion of outside activities. From the position of top management, these outside activities can create distressing situations, which require great delicacy and tact to handle. A tolerant chief executive will permit~moderate and even gross abuse of position on the part of managers. The situation of corporations differs very little from that of university adminis-
trators dealing with intractable professors or highly talented ones whose energies and abilities cause them to become involved in affairs outside their principal assignment. Long experience in the academic field and observations of the corporate field are the basis for the comments that follow, which might benefit personnel of the middle-management level and above. Not many specific rules, if any, should be set down regarding outside activities and investments; gentle hints and admonitions should take care of 95 percent of the occasions for distress. As for the rest, ff a man cannot handle his business affairs with a certain amount of subtlety, he probably should not be in the position he holds or be advanced to a higher one. DIVERSIONS Managers need hobbies and a change of pace from their duties; this is true on both a day-to-day and a periodic basis. A manager certainly ought to be able to pursue a hobby like stamp collecting, gardening, playing golf or bridge, attending concerts, or even spelunking or ballooning ff he so chooses. These activities may be pursued avidly and successfully. But while a corn-
BUSINESS HORIZONS
I D E A T I O N A L ITEMS
pany should admire golf prowess, it should not encourage the man to spend every waking hour away from the ottlce in pursuit of a golf ball or cause him to join the tournament circuit. In short, there is nothing wrong with playing enthusiastically and frequently, but enthusiasm must be tempered; on the job, the man must think about the challenges of his job and not about three-putting a green. The plea for moderation has another aspect One of the accompaniments of promotion is usually responsibility. With responsibility, a man goes off a time dock, and the line of demarcation fades between work and play, or work and any other part of his life. Creative and causative thinking becomes the contribution sought by his firm. Thus, he may have his best ideas at 4:00 in the morning when sleep is impossible. One level below that of a vice-president, a man should be unable to differentiate, much of the time, between when he
is working and when he is not. He should, in short, be primarily committed to a fulltime job without having to demonstrate continuous effort between 8:00 A.zvr. and 5:00 P.M., but with the assumption that he automatically works for the enterprise between 5:00 P.M. and 8:00 A.M. This does not mean that he cannot be a good citizen or a good family man. Rather, it is a matter of balance. A company certainly ought to tolerate imbalance for a good reason, to string along with a man if he is having marital diflleulties, illness, death in the family, or is receiving some extraordinary recognition as a citizen that may not be directly relevant to the firm. Somehow the manager should realize, though, that he is deviating from the norm and give evidence of intention to resume a normal pattern. While few rules should be set down in this sphere, open discussion should be possible so that variations from the norm are understood by colleagues and top ottleers. If, for example, a controller is asked to head the local United Fund drive or assume a title in a national professional organization that would entail speeches and absences from the once, some understanding should be reached to facilitate both the man's development and his contribution to the community or to society. At the same time, the work in his own area of duty must be done effectively. INVESTMENTS From a coldly calculating point of view, an executive should buy stock in rival companies rather than his own. His biggest investment is his job and, to the extent that he wants diversification, he might wish to safeguard himself in case the other company gets the better of his own firm. If both companies prosper, well and good. If his own flrm loses a competitive race, he
APRIL, 1968
61
L. L. Wxrmas
62
might lose his job, but the returns from the surviving company might be higher; if his own firm wins, he would not get much out of his stock, but his wages might go up. An executive generally ought to be free to invest in the stock of his own company and should be applauded if he does so. This simply extends his commitment. However, the man should not speculate in the stock of his own company and, indeed, if he is inclined to do so, he should find out whether the SEC rules apply to him and whether he is violating common law. Dealing in stock is one thing; dealing in one's own stock is another. Investment in rival or supplementary companies should be avoided or done with maximum circumspection because all sorts of conflicts of interest may develop that could prove most embarrassing. One need only remember the Chrysler episodes on supplementary activities or consider the numerous reports of government investigations of interlocking financial interests. An important element in all of this is the extent of control that the investment represents. There is certainly nothing wrong if an officer of a trucking company buys stock in General Motors, and an officer of a railroad should not hesitate to buy in GM just because of the electromotive division. Difficult questions arise only when the extent of investment is so great that an element of control exists. Even this in itself should Hot necessarily eliminate an investment because an existing opportunity for control may never be exercised either directly or indirectly. There could be interlocking investments between two companies
in which the combination engages in extremely profitable operations with a third company to the benefit of the first two. Common sense and good faith seemingly are the best guides for direction in this area. Managers sometimes will elect to put their money not in stock, but in real estate or other commitments. Again, this is quite proper, provided the investor does not undertake to become a moonlighting manager. There is much to be said for an officer who refuses to buy investment property within his own county unless he has a management firm to operate it. More than one executive who buys an apartment building finds that a distressing number of his telephone calls are from tenants complaining about a stopped-up sink. Anyone smart enough to be a manager ought to possess qualities that cause him to keep a sensible balance between his work on behalf of his company and his outside activities and obligations. He should have diverse interests and probably will be a better executive if he does. If he is the least bit thrifty, he is bound to accumulate funds which must be invested. An executive should invest these funds wisely, but, as he does so, he should also keep in mind the position he holds. He should be discreet and avoid investments that might embarrass both the firm and himself. If he doubts the wisdom of a particular investment, it would seem wise to discuss the matter with top management. The problems in this area are delicate; therefore, discussion and understanding are probably better guidelines to follow than rules and regulations.
BUSINESS H O R I Z O N S
G e n t l e a d m o n i t i o n s on o u t s i d e a c t i v i t i e s
Mr. Waters is a professor of transportation and business history in the Graduate School of Bustness, Indiana University.
60
Most employees of a modern corporation can disassociate their work life from their private life. Either they produce or they do not; the rewards may be commensurate with the varying degrees of production, or the employees may be fired. This primerlike simplicity vanishes with the first promotion to a supervisory position, even at the foreman level, for elements are introduced that are more difficult to evaluate and measure. Progressive promotions toward top management make the measurement of productivity even more troublesome. The input of the manager as he advances should reveal increasing creativity, a contribution usually growing out of both the capabilities of the man and his commitment to the particular enterprise--to the exclusion of outside activities. From the position of top management, these outside activities can create distressing situations, which require great delicacy and tact to handle. A tolerant chief executive will permit~moderate and even gross abuse of position on the part of managers. The situation of corporations differs very little from that of university adminis-
trators dealing with intractable professors or highly talented ones whose energies and abilities cause them to become involved in affairs outside their principal assignment. Long experience in the academic field and observations of the corporate field are the basis for the comments that follow, which might benefit personnel of the middle-management level and above. Not many specific rules, if any, should be set down regarding outside activities and investments; gentle hints and admonitions should take care of 95 percent of the occasions for distress. As for the rest, ff a man cannot handle his business affairs with a certain amount of subtlety, he probably should not be in the position he holds or be advanced to a higher one. DIVERSIONS Managers need hobbies and a change of pace from their duties; this is true on both a day-to-day and a periodic basis. A manager certainly ought to be able to pursue a hobby like stamp collecting, gardening, playing golf or bridge, attending concerts, or even spelunking or ballooning ff he so chooses. These activities may be pursued avidly and successfully. But while a corn-
BUSINESS HORIZONS
I D E A T I O N A L ITEMS
pany should admire golf prowess, it should not encourage the man to spend every waking hour away from the ottlce in pursuit of a golf ball or cause him to join the tournament circuit. In short, there is nothing wrong with playing enthusiastically and frequently, but enthusiasm must be tempered; on the job, the man must think about the challenges of his job and not about three-putting a green. The plea for moderation has another aspect One of the accompaniments of promotion is usually responsibility. With responsibility, a man goes off a time dock, and the line of demarcation fades between work and play, or work and any other part of his life. Creative and causative thinking becomes the contribution sought by his firm. Thus, he may have his best ideas at 4:00 in the morning when sleep is impossible. One level below that of a vice-president, a man should be unable to differentiate, much of the time, between when he
is working and when he is not. He should, in short, be primarily committed to a fulltime job without having to demonstrate continuous effort between 8:00 A.zvr. and 5:00 P.M., but with the assumption that he automatically works for the enterprise between 5:00 P.M. and 8:00 A.M. This does not mean that he cannot be a good citizen or a good family man. Rather, it is a matter of balance. A company certainly ought to tolerate imbalance for a good reason, to string along with a man if he is having marital diflleulties, illness, death in the family, or is receiving some extraordinary recognition as a citizen that may not be directly relevant to the firm. Somehow the manager should realize, though, that he is deviating from the norm and give evidence of intention to resume a normal pattern. While few rules should be set down in this sphere, open discussion should be possible so that variations from the norm are understood by colleagues and top ottleers. If, for example, a controller is asked to head the local United Fund drive or assume a title in a national professional organization that would entail speeches and absences from the once, some understanding should be reached to facilitate both the man's development and his contribution to the community or to society. At the same time, the work in his own area of duty must be done effectively. INVESTMENTS From a coldly calculating point of view, an executive should buy stock in rival companies rather than his own. His biggest investment is his job and, to the extent that he wants diversification, he might wish to safeguard himself in case the other company gets the better of his own firm. If both companies prosper, well and good. If his own flrm loses a competitive race, he
APRIL, 1968
61
L. L. Wxrmas
62
might lose his job, but the returns from the surviving company might be higher; if his own firm wins, he would not get much out of his stock, but his wages might go up. An executive generally ought to be free to invest in the stock of his own company and should be applauded if he does so. This simply extends his commitment. However, the man should not speculate in the stock of his own company and, indeed, if he is inclined to do so, he should find out whether the SEC rules apply to him and whether he is violating common law. Dealing in stock is one thing; dealing in one's own stock is another. Investment in rival or supplementary companies should be avoided or done with maximum circumspection because all sorts of conflicts of interest may develop that could prove most embarrassing. One need only remember the Chrysler episodes on supplementary activities or consider the numerous reports of government investigations of interlocking financial interests. An important element in all of this is the extent of control that the investment represents. There is certainly nothing wrong if an officer of a trucking company buys stock in General Motors, and an officer of a railroad should not hesitate to buy in GM just because of the electromotive division. Difficult questions arise only when the extent of investment is so great that an element of control exists. Even this in itself should Hot necessarily eliminate an investment because an existing opportunity for control may never be exercised either directly or indirectly. There could be interlocking investments between two companies
in which the combination engages in extremely profitable operations with a third company to the benefit of the first two. Common sense and good faith seemingly are the best guides for direction in this area. Managers sometimes will elect to put their money not in stock, but in real estate or other commitments. Again, this is quite proper, provided the investor does not undertake to become a moonlighting manager. There is much to be said for an officer who refuses to buy investment property within his own county unless he has a management firm to operate it. More than one executive who buys an apartment building finds that a distressing number of his telephone calls are from tenants complaining about a stopped-up sink. Anyone smart enough to be a manager ought to possess qualities that cause him to keep a sensible balance between his work on behalf of his company and his outside activities and obligations. He should have diverse interests and probably will be a better executive if he does. If he is the least bit thrifty, he is bound to accumulate funds which must be invested. An executive should invest these funds wisely, but, as he does so, he should also keep in mind the position he holds. He should be discreet and avoid investments that might embarrass both the firm and himself. If he doubts the wisdom of a particular investment, it would seem wise to discuss the matter with top management. The problems in this area are delicate; therefore, discussion and understanding are probably better guidelines to follow than rules and regulations.
BUSINESS H O R I Z O N S