billion — ten times the value of mergersnbetween 1975 and 1977. Businessesnrepresenting up to 7 percent of thentotal market value of all US companiesnhave disappeared through acquisitionsnin each of the past four years.nNow even a partner in a leveragednbuyout firm — Theodore Forstmannn— thinks things have gotten out ofnhand. As he puts it: “Watching thesendeals get done is like watching a herd ofndrunk drivers take to the highway onnNew Year’s Eve. You cannot tell whonwill hit whom, but you know it’s dangerous.”nForstmann thinks today’s financialnage “has become a period of unbridlednexcess, with accepted risk soaring outnof proportion to possible reward. Everynweek, with ever-increasing levels ofnirresponsibility, many billions of dollarsnin American assets are being saddlednwith debt that has virtually no chancenof being repaid.n”Most of this is happening for thenshort-term benefit of Wall Street’s investmentnbankers, lawyers, leveragednbuyout firms and junk-bond dealers atnthe long term expense of Main Street’snemployees, communities, companiesnand investors,” he added.nWho’s to blame? Bill Neikirk, financialneditor of the Chicago Tribune,nblames everyone. As he puts it: “Austeritynstinks. No one practices it anymore,nleast of all the nation’s mostnhallowed financial institutions and corporations,nleast of all the average shareholder,nleast of all the AveragenAmerican. . . .n”We now have the ironic situationnof people buying stock in the mostnsolid American firms in the ferventnhope that someone will sap the firm’snfinancial strength.”nEven more ironic, perhaps, is thatnlarge institutions supplying funds to thenbuyout people are often pension funds.n”Pension fund managers have becomentraders instead of investors,” says JohnnYoung, president of Hewlett-PackardnCo. Conceivably, pension fund moneynused in a takeover could contribute tonthe restructuring of the very companyn— and employees — that fund it.nThe $2 billion down payment onnthe $20-plus billion buyout offer fornRJR Nabisco will be provided by thenretirement funds of, among others,nCoca-Cola and Georgia Pacific (theirnneighbors in Atlanta!), and UnitednTechnologies.nITT Chairman Rand Araskog,nwhose pension fund was involved innthe RJR buyout, is now having strongnreservations. He has called on thenSecurities and Exchange Commissionnand the Federal Trade Commission tonexamine the large mergers. “It’s aboutntime somebody said stop.”nWhat happens up till then? Onenresult of “restructuring America” isnloss of jobs. Due directly to restructuring,nmore than a half million peoplenwere thrown out of work betweenn1984 and 1986 alone. Many of thencasualties had spent 10, 20, or even 30nyears with a company. Just five bignleveraged buyouts done in the pastnthree years — Borg-Warner, AlliednStores, Beatrice, Storer, and R.H.nMacy — cost 114,000 people theirnemployment.nAs CBS’s Andy Rooney put it,n”these new takeover business leadersnare going to eliminate unnecessary jobsnand increase the profit. … It mattersnnot to the businessmen that they oftennare firing loyal employees who madenthe business worth acquiring in the firstnplace.” (Macy’s, incidentally, loadednwith $5.3 billion in debt stemmingnmainly from its management-lednleveraged buyout in 1986, recentlynreported a $19 million loss for its firstnquarter.)nRobert Creenleaf, a former managementneducator for AT&T, thinksnemployees should be the first constituencynof concern to management.n”When a business manager who isnfully committed to this ethic is asked,n’What are you in business for,’ thenanswer may be: ‘I am in the business ofngrowing people — people who arenstronger, healthier, more autonomous,nmore self-reliant, more competent.'”nUnfortunately, such lofty thoughts arennot enjoying top-of-the-mind awarenessnamong buyout firms — or, itnseems, significant other sectors ofnAmerican business today.nAlso as a result of takeover pressure,nsays management expert PeternDrucker, corporate managements arenbeing pushed into subordinating everythingn(even such long-range considerationsnas a company’s market standing,nits technology, indeed its basic wealthproducingncapacity) to immediatenearnings and next week’s stock price.n”This contributes to the . . . slightingnnnof tomorrow in research, product development,nand in quality and servicen— all to squeeze out a few more dollarsnin next quarter’s bottom line.”nThe current wave of hostile takeoversnand restructuring of hundreds ofnAmerican corporations is a politicalnstruggle, not merely an economic phenomenon.nAt root, it’s a fight over whonis to own and control the Americanncorporation: bona fide investors —nincluding the American worker — orntraders, greenmailers, and fast-bucknartists. Obviously, financial acrobatsnare having their day, though high-wirenacts never last forever. And their fallsnare generally calamitous.nWhy fuss about takeovers andnbuyouts? After all, you can get as manynpeople swearing by them as at them.nFirst, because the American worker isndeeply involved — his livelihood, hisnfamily, his peace of mind. And secondnbecause, as Drucker says, while there isna great deal of discussion about whethernthey are good or bad for the shareholdersn(generally good, short term),n”there can be absolutely no doubt . . .nthat they are exceedingly bad for theneconomy. They force managementninto operating short term.”nThe threat of buyouts forces managementninto doing stupid things tonkeep from being raided—like spendingnits money on poor acquisitions,nsimply so that this money isn’t on thencompany’s books, waiting to be “absorbed”nby a raider.nWorse still, says Drucker, is thatnafter the successful takeover, the moralenin a company is destroyed, oftennforever. The people who can leave do,nand the others do the minimum. As henputs it: “what’s the point in my tryingnto do a good job if the rug will benpulled out from under me tomorrow.”nAdd to this, says Drucker, the fact thatnthe raiders, in order to reimbursenthemselves, usually start out by sellingnoff the company’s most promising businesses.n”Hence the impact of a takeovernon morale is total catastrophe.”nHarold Geneen agrees. “You can’tnfool people in companies,” he toldnForbes. “They know what you’re like,nand if you are the kind of person thatnwould sell those people off becausenyou could make $2 extra, they willnknow that about you and you will notnbe a good leader for the rest of thenpeople.”nMAY 1989/57n