Tough times test firms' lofty standards

For many US firms, doing good had begun to come easy. Prosperity greased the corporate skids for so long that many companies piled onto the social-responsibility bandwagon.

They cut pollution, increased the living standard of third-world workers, donated to their communities - and still turned a decent profit. The movement burgeoned with new recruits, especially during the last half of the 1990s.

But the recession is challenging all that. Can corporate do-goodism, born during a boom, survive the squeeze? Surprisingly, the answer looks positive.

"You get - in any downturn - the postponement of new business ideas," says Bob Massie, executive director of the Coalition for Environmentally Responsible Economies (CERES). But "this is a massive global trend."

"We haven't seen retrenchment," adds Aron Cramer, vice president of Business for Social Responsibility, a business-membership group headquartered in San Francisco.

To be sure, recession has challenged companies, even those with the strongest social commitments. Some have postponed environmental improvements. Many have resorted to layoffs.

For example, of the 25 largest companies included in the Domini 400 Social Index - the best-known listing of socially responsible corporations - at least 19 have made or announced layoffs in the past year.

These include such household names as telecommunications giant AT&T (5,000 job cuts last year and 5,000 more this year), stock broker Merrill Lynch & Co. (possibly 10 percent or more of its workforce), and insurer American International Group (3 percent of its workers).

Of course, almost everybody endured a tough year in 2001. As a whole, corporate America announced close to 2 million job cuts - nearly three times more than the total the year before and the largest number since job placement-firm Challenger, Gray & Christmas began tracking the figures in 1993.

The key, observers say, is how companies make those cuts. Do they use layoffs as a first or a last resort? And does management share the burden?

Instead of massive layoffs to eliminate some 5,000 positions last year, chipmaker Intel Corp. gave valued workers two to four months, with full salary and benefits, to look for other jobs inside or outside the company.

Other firms froze pay or even reduced it to keep everyone on the rolls. When consulting firm Watson Wyatt Worldwide surveyed 110 companies recently, a quarter had delayed or reduced salary increases and a third trimmed merit-pay increases to try to avoid firing people.

On the other hand, Hewlett-Packard Co. - long a fixture on the Domini index - has run into hot water because of its layoff plans. Chief executive Carly Fiorina plans to acquire rival Compaq Computer Corp., and then cut some 15,000 workers to prevent duplication.

Two sons of the company's founders are leading the fight against the move, saying it violates the HP Way, the company's long-standing set of principles. An ugly proxy fight looms.

"Has she changed the HP Way? I don't know," says Peter Kinder, president of KLD Research & Analytics, the Boston consulting firm that created the Domini index. "I sure wouldn't rush to judgment. As someone who has laid off employees, I know there are times when you absolutely have to do it."

Employees often accept even massive layoffs, as long as everyone bears a share of the burden, he adds. Employees at Enron - another fixture on the Domini index - were enraged when, two days before filing for bankruptcy, the firm handed out $55 million in bonuses to encourage 500 key employees to stay on.

The day after the bankruptcy announcement, Enron discharged more than half its 7,500 headquarters staff. Promised severance pay: $4,500 apiece.

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