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Running with the Bulls

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Link to Al Dunlap Inteview Transcript
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Al Dunlap Interview, Part IV

SMITH: I want to give you a chance to answer your critics. You do it very well. -- uh -- you know the rap on Al Dunlap: you canít run a corporation over the long run.

DUNLAP: Well, thatís, of course, nonsense for the simple fact -- you have to determine what is it that I do. And it goes back to what I just said. I take on the corporations that are in the worst possible shape. I go in when no one else wants the job. And I rescue and save the corporation. Thatís my job. Thatís what Iím there for. There are other executives who run a corporation year in and year out, and they do a very nice job. But itís not necessarily what I do.

SMITH: I have this picture of West Point second lieutenants being trained as infantry officers to take the high ground. And then, when theyíve taken the high ground, go on and take the next high ground and to take more and more. But somehow, I have a hard time fitting that notion together -- with taking the high ground and then negotiating its sale or its surrender to another corporation. It doesnít seem like they fit.

DUNLAP: Oh, itís exactly the same. I take the high ground in the most difficult of battles where everyone else has already gotten killed trying to do it. I take that high ground. Then I turn it over to someone else to operate and control the high ground, and then I look for the next most difficult battle and take that high ground, turn that over to someone to control. So it -- it -- itís very much in keeping with hereís the mission, hereís what I have to do and accepting that difficult mission and seeing it to conclusion.

SMITH: Any politician coming down the pike would tell you, ďThe last president so screwed up the White House that absolutely nobody could run the American government, and look what I did when I arrived.Ē Iíve only heard that eight times in my Washington career. So Iím a little bit used to it. So you arenít the first leader Iíve ever heard say to me, ďYou know, there was nothing here before I came, and I made it all. Look how beautifully it works.Ē Now isnít there something a little bit overdone in that, Al?

DUNLAP: You can come to that conclusion. The only conclusion I can come to is based on my experiences, based on having done a lot of turnarounds in my life, that the corporations I go into are in serious, serious trouble and, in my belief and the beliefs of the board, are terminal. I come in, put together a first-rate team, and save them. The results are the results. This corporation today is worth over thirty-nine dollars a share in eleven months. It was worth twelve and falling like a brick. Now that tells you -- that tells you the world has totally re-valued this corporation -- the investment community, the banking community, the customers, the suppliers have totally re-valued this corporation. They re-valued it because now you have a great...

SMITH: And there are people who are enormous winners out of that...

DUNLAP: Absolutely.

SMITH: ...enormous winners. And youíre one of them. Michael Price is one of them.

DUNLAP: And so are the moms and pops who invested their 401k plans and their pension plans.

SMITH: I wonder i-- what -- what your reaction would be to the statement -- uh -- that we heard from Stephen Roach, who, as you probably know, is the chief economist of Morgan Stanley, certainly no stranger to Wall Street. He says effectively whatís been going on in America in recent years is an enormous shift of wealth from the workers to the shareholders, that the shareholders are gaining from this kind of restructuring, and, net-net, the workers are losing.

DUNLAP: Well, that, of course -- that statement is a total, complete nonsense, and let me tell you why. Firstly, we must get back to this truism. Corporate America is owned by the workers, by their pension funds, by their 401k plans. And the transfer of wealth -- if we did not have people who would create great wealth, we wouldnít have any free enterprise. There would be no jobs. Youíve been to communist countries. Youíve been to socialist countries. And it is a total basket case. Thatís what we would have in America. We have capitalism, and the rest of the world has failed miserably with socialism and communism. Yet now we want to discover socialism.

SMITH: I have been to Russia. I have been to China. Iíve been all over Eastern Europe. I have seen true basket cases. Thatís why I have trouble understanding that either Sunbeam or Scott was a true basket case. Because Iíve seen the others.

DUNLAP: How many...

SMITH: I mean, are you suggesting that these companies were basket cases the same way companies in the Communist Soviet Union or Communist China...

DUNLAP: Absolutely because they were going to cease to exist in my view. They would not exist. Now, you can ask anyone. You can get their view on it. I was the person on ground -- ground zero. I was the person asked to save the patient. I save the patient.

SMITH: Do you think Sunbeam was in as bad shape as a Soviet appliance company?

DUNLAP: I think that Sunbeam would have ceased to exist: game, set, match. And, when you cease to exist, what are the degrees of dead? Dead is dead. Would you rather be shot? Would you rather be hung? Would you rather be electrocuted? The end result is the same, dead. You know, itís most interesting. About five years ago, people were writing books saying the -- ďAmerica lost to Japan. America lost to Germany. The American worker is doomed. They have no future.Ē But, yet, people who came into the free enterprise, people like me, made the difficult decisions, stood up to every form of criticism, spoke up for what was right. You know, when a recent magazine did a cover story, they asked fifty CEOs to speak about what they were doing. Only one touched the subject, and that was me.

SMITH: Why? Where are the rest of them?

DUNLAP: They should be there.

SMITH: Where are they?

DUNLAP: Well, Iíll tell you where they are. People do not like to be up front. Iíve been very up front on every topic because I believe that the -- I believe in the free enterprise system. I believe in creating an environment where the American worker can succeed. I believe in rescuing companies. I believe in certain executive comp being a percentage of wealth. I believe in boards of directors being responsible to the shareholders. But these are all highly controversial subjects, and, when you stand up front, you will be criticized. That is the price of leadership.

SMITH: Does the corporation have any social role? I mean, tell me your view on the whole idea of stakeholders because you take a dim view of that.

DUNLAP: I take a very dim view of that. In the first place, business is not a social experiment. Business is a very serious undertaking. I believe the shareholders own the corporation. Now people talk about stakeholders, and some people will mention fifteen, twenty constituencies. Now, if I name enough constituencies, Iím going to get something right for someone. If I break my watch right now, itís right twice a day. Now, if you run a good corporation for the shareholders who take the risk, you will, by definition, generate value, have the best people, the best factories. And that is the true measure of what you should be doing.

SMITH: -- um -- is there any social role? I mean what do you have to say about charitable contributions? One of the things you did at Scott was to cancel their pledge of three million dollars, or whatever it was, to the Philadelphia Art Museum. And you put it in your book.

DUNLAP: Yeah, I did put it in my book. Scott was giving away the shareholdersí money while it was going bust. It loses two hundred and seventy-seven million dollars. It is on credit watch, and itís giving away the shareholdersí money. So what did I say? I said any obligation that we legally have we will honor. All other obligations we cannot afford to give away the shareholdersí money. We need to build new factories. We need to come up with new products. See, the problem with corporate charity -- if youíre an investor, youíre taking your life savings, youíre taking money that you may have put aside for your childrenís education or your retirement, and youíre giving that to a corporation and youíre saying, ďGive me an acceptable return.Ē If you want to give that money to a charity, you can do it. But youíre not giving it to the corporation so the CEO can sit on the dais, so the CEO can be aggrandized.You give that wealth back to the people and then they can give it to whoever they want to give it to, to charities that theyíre interested in.

SMITH: Whatís your favorite charity right now?

DUNLAP: My favorite charity -- obviously we left in our estate a very large gift to West Point. Iíve given money in -- in the past to hospitals, to animal shelters, things of that nature.

SMITH: But itís West Point where your heart is?

DUNLAP: Sure, I think so. It gave me an opportunity to get an education that I otherwise could not have afforded.

SMITH: And -- uh -- is there a special -- uh -- designation of your charity to West Point? Is there something in particular that you feel is important for West Point to have?

DUNLAP: Well, I -- I -- Iíd like the money used to further the -- the spirit of West Point, leadership, what it stands for because I think, at the end of the day, the product of that institution is leadership, the ability to motivate people, the ability to take on the tough issues, the ability to stand up and stand for something. And I think thatís the essence of a leader. It is very easy to duck controversy. You know, I -- I realize many of the things I do, many of the things I say -- I could duck all the criticism if I just wouldnít do or say them. But I believe them, and, if you believe in it, you must be true to yourself. You must be true to your ideology. And, if more people would do that and stop managing their life by the latest poll or the latest whim, we would restore leadership and the great heroes of our time.

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