THE WHITE HOUSE
Office of the Press Secretary
CONFERENCE ON CORPORATE CITIZENSHIP PANEL I Gaston Hall Georgetown University Washington, D.C.
11:30 A.M. EDT
FATHER O'DONOVAN: Good morning. Mr. President, Mr. Vice President, distinguished guests, ladies and gentlemen, I am delighted to welcome you to Georgetown University as you explore the issues of corporate responsibility and citizenship. I am particularly delighted to welcome the many major American business leaders who have shown their care not only for productivity and profits, but for people. And I welcome our 24 MBA students up here on the stage.
The key word embedded in any definition of good citizenship is responsibility. We hear a great deal about it today -- in the press, in the Congress, in society, among church leaders. Sometimes the reference is to personal responsibility, sometimes to social responsibility or civic responsibility, or even fiscal responsibility. But whatever the usage, it always implies an obligation, a trust, a duty toward something beyond one's immediate self, whether that self is individual or corporate.
What it means for corporate activity will of course be one of the key questions to be discussed today. But we know that all institutions, including universities and corporations, are going to have to do more to accept responsibility for building a new sense of community in our nation. You will be sharing examples and insights today that suggest ways to begin. Higher education is anxious to join with you.
Perhaps it's time for society to look not only for the creation of profits, spelled p-r-o-f-i-t-s, but to the creation of prophets, spelled p-r-o-p-h-e-t-s. (Laughter.) Leaders who can speak with a truly prophetic voice about the need for all of us, corporations, academic institutions, students, educators and citizens to turn our attention toward serving a greater good, a good promoted by economic prosperity, but not only by that means.
Overall, I think we can best promote corporate responsibility by adherence to personal responsibility, a sense of obligation to the common good, the well-being of employees, their families, their communities and their future, and to our nation and our world. The root of the idea of responsibility is response, answering. It means answering for who we are. We cannot answer for ourselves, as Fyodor Dostoyevsky so dramatically pointed out to us, unless we answer for others -- indeed, unless we answer to the God who made us all.
We scarcely need another reminder than that of the business leaders who died with Secretary of Commerce Ron Brown while trying to be of service in the Former Yugoslavia. How do we honor their memory better than by emulating their dedication to citizenship and responsibility? As we approach the 21st century, corporations, like unions, universities and private groups, must play a greater role in securing justice and equality for all citizens, not just for those on Wall Street, but for those on Main Street.
Indeed, in their 1986 pastoral letter on economic justice, the nation's Catholic bishops put it this way: Economic decisions have human consequences and moral content. They help or hurt people, strengthen or weaken family life, advance or diminish the quality of justice in our land.
At Georgetown, as one of the largest corporations in the Washington area, we are trying to do more to ensure a better future for everyone in our community. We are investing, for example, a million dollars to help capitalize the Community First Bank, a new financial institution for low and moderate income neighborhoods in the District of Columbia. With many other universities we are committed to public service, encouraged by the federal Learn and Serve America project and higher education's Campus Compact.
All these people are working hard to promote what Carol Quigley once called "future preference," a conviction that the future could be better for all American citizens, and it was the obligation of each of us to work for that end.
I invite you to join our young people in searching for new and better ideas about our personal responsibility, our corporate responsibility, our civic responsibility. Nothing less than our future as a nation, a community of communities, is at stake.
And now I have been asked to introduce, my notes say, "our next speaker." (Laughter.) But let me tell you that he told me to start speaking. A member of the Georgetown University Class of 1968. In 1991 he returned to Georgetown and invited us all to a new covenant of responsibility for our nation's sake. Since then, he has been back on campus a good many times, again urging us to live up to the obligations of good citizenship.
We await his words eagerly today. Ladies and gentlemen, the President of the United States, Bill Clinton. (Applause.)
THE PRESIDENT: Thank you very much, Father O'Donovan, for giving those assembled here in five minutes the essence of what I got in four years of my Georgetown education. (Laughter.) When I was a student I came to this magnificent old hall many times to hear other people say things I thought were very wise. I never imagined I would be here so many times myself in this position, but I am delighted to be back.
This is a peculiarly American event we're about to have today. And I'm glad that the business students from Georgetown are here, the law students, the undergraduate students. I understand this is the day after finals -- that shows the level of devotion to this topic -- (laughter) -- that I hope the rest of us can match.
I also want to thank the business leaders who are here and the labor leaders who are here. There's a remarkable collection of people here from large, medium and small companies, men and women, different racial and ethnic backgrounds, people who represent different kinds of unions and different work organizations -- all committed to discussing this very important topic today of citizenship in the workplace.
As the nature of work and the nature of the workplace changes dramatically and we move so rapidly into the 21st century, what do we owe each other in the workplace? What do employers owe employees? What do employees owe employers? What, if anything, should the government do to help to deal with the new challenges that we face?
We are here today for two reasons: First of all, because there are some very profound changes taking place, and if we respond to them properly, we get very good results. But even in the good results we see some paradox -- our economy in the last three-and-a-half years is a deficit that's less than half of what it was when I became president; low inflation, 8-and-a-half million new jobs, a 15 year high in home ownership, all-time highs in exports and small business formation.
But, still, according to studies done by both the Business Roundtable and the AFL-CIO, high levels of uncertainty in our workforce, people uncertain about their job security, whether they can get an increase in income even if they work harder, whether they can maintain access to health care and retirement for their families. And people wanting more genuine participation in their jobs, in their work force, in building their own future.
The government plainly has some big roles to play in reducing the deficit, having good trade policies, promoting our economic interest around the world, investing in technology and research in areas that it's obviously important for a public investment as well as the private investment. There are certain tax incentives the government has provided traditionally and that I hope we'll provide again -- the incentives for research and experimentation, the incentives for companies to help to finance the education of their own employees -- indeed, I would like to see expanded to give a little extra help to small businesses in that regard.
There are certain regulatory changes the government ought to make. The Vice President's worked very hard to work with our agencies in getting rid of 16,000 of the 80,000 pages of federal regulations and changing the way we work with the private sector to make the work place safe and the environment clean. There are some things we have to do to help people to become more employable even if they don't have specific job security, in terms of improving access to educational benefits and creating greater portability for health care and retirement.
And we know that government should do these things, but we also know that most of the action has to be in the private sector. Just as I always say when discussing education, the great magic of education will never be in Washington or any state capitol. It's what goes on in the classroom between the teacher and the child. The great magic of the American system of free enterprise is what goes on in the private sector. Indeed, one of the things that I like best about the job figures of the last three-and-a-half years is that the percentage of new jobs being provided by government is the smallest it's been in 20 years or more. And the federal government is almost a quarter of a million people smaller than it was when I became president, and overall, we are relying more and more on private sector job growth. And that, I think, is a good sign.
But what that means is that the mutual responsibility that employers and employees feel toward one another and toward the larger society is becoming even more important.
I would just like to mention a couple of things that I do not think we will discuss today, because I think they are illustrative of the way that we can deal with these issues. I have been very, very impressed with the work that the private sector has done with our administration and especially with the Vice President in trying to find new and economically efficient ways to protect the environment: the auto companies working with us to develop a new generation of cars that can get triple the car mileage that we take for granted as the ceiling today; all the companies that have worked with us to -- in the Project XL where we say you agree to meet certain high environmental standards, take the thick EPA rule book and throw it away. And we've got a long line of people that want to get into that particular project.
But it's working. This is exciting. The companies that have worked with the Occupational Safety and Health Administration say if we involve our workers and ourselves in a joint effort to make the workplace safer, we ought to get to decide how to do it if we can do it more efficiently and get better results. These are achieving good social ends as well as good ends within the workplace. I want to say a special word of thanks to the entertainment companies that worked with us and that are now hard at work in developing their own rating systems for television programs, for violence and other contents that may be inappropriate for children -- no government involvement at all except our agreement to work with them in the passage of the law that requires the V chip to go into the television.
These are very encouraging things. We got some indication yesterday that we may even wind up with an agreement with the private sector in this effort that we've been so intentionally involved in to try to curb the teenage smoking, when Philip Morris and the U.S. Tobacco Company indicated that they would agree to legislation to limit sales of tobacco to children and to reduce advertising of tobacco that affects the nation's children. And I want to thank them for that.
I have to say, in all candor, I believe we should do more because, under the proposal, kids in this country would still be confronted with Joe Camel and the Marlboro Man on billboards and stores and all the magazines. And we know 3,000 children start smoking every day and 1,000 of them are going to die early because of it. So I don't think it's enough. But I do believe that it's an indication that there may be some way that we can agree on legislation to do this. If all of the tobacco companies will voluntarily accept legislation containing the limits that will be as effective as what we've proposed, I will say again -- we believe it's better to have the companies come forward and ask for legislation. And the FDA has made perfectly clear that they will stop their efforts to impose regulation if we can have a joint agreement on a legislative solution.
These are the kinds of things that I want to do more of in dealing with the larger problems of society.
But to come back to the main point, the workplace itself has to produce a profit, has to produce a vibrant free enterprise system for America and what the relationships are in this new economy between employers and employees will have a great deal to do with that. The business leaders who came from all over this country today to be a part of this received a letter from me in which I suggested that there were at least five elements of corporate citizenship that we ought to consider as we move through this period of dynamic change.
First of all, since almost all families have all the adults, whether there are two or one in the family working, workplaces should be more family-friendly. We shouldn't ask our working people in America to choose between being productive workers and being good parents. Secondly, health and retirement security are profoundly important. And the nature of benefits, health and retirement benefits tied to the job has been changing rather dramatically in the last several years. How are we going to continue to ensure health and retirement security?
Thirdly, safe and secure work places. Fourthly, employees that know that they are invested in. How can we continue to develop the capacity of the employees of this country? One business executive, unrelated to this meeting, wrote me a letter saying that he had gone out of his way to invest more in the education and training of his employees once he realized they were less likely to be with him for a lifetime. He said, I felt that I owed even more than I ever had before to them to make them employable if for some reason they had to leave our company.
And, finally, the issue of partnership in the work force. One of our participants said today, in a very moving statement, that he had talked to a man who worked in a factory -- one of his company's factories -- who had been elected head of his local PTA and was prominent in the society in every other way. But he said it was only recently that his company had decided to let him participate from the neck up. For years and years and years, at work, he'd only participated from the neck down. Everybody else in his community wanted him from the neck up, just his company didn't. That was a profound statement, I thought. And more and more of our companies are looking for ways to let people participate from the neck up. When people feel that they're on the same team, it's a lot easier to take the bad news along with the good.
So these are the things that I hope will be discussed today. The companies that we will hear from up here are being showcased for one reason -- they have done all of these things in ways that I believe prove that you can do the right thing and make money, that you can be successful in the American free enterprise system by having better and stronger relationships and ties with your employees. Every company represented out here in this audience today had another story like that to tell.
I'm going to do my best just to stay out of the way and let them talk and then let all of you talk, hoping that some good ideas will come out of this because I believe the power of example to change the behavior of Americans is enormous. We have seen it in case after case after case. And I think that the coverage of these issues, on the whole, has been concentrated in negative examples when something bad happens to people, which then may be translated as a general rule. What I want to see us do is to elevate the good practices that are going on, show how they are consistent with making money and succeeding in the free enterprise system, and hope that we can reinforce that kind of conduct that so many of you have brought to bear in your own companies and with your own employees.
Let me say that I know that this is not an issue that can be solved in a day or a year, and that this is not a question of finding an answer. What we have to do is to join together in a great journey as Americans, to continue to deal with these issues as we go through this dynamic economy. And I have given a lot of thought to what we could do to sort of signal that we're going to do this over the long run.
And today I have an announcement to make that I think reflects the spirit of what we are doing and will help us to continue to do it year-in and year-out forever. I asked a number of business leaders, led by John Bryan (phonetic), the CEO of Sara Lee, and Larry Bossidy (phonetic), CEO of Allied Signal, to come together to develop an award -- totally financed and operated out of the private sector, not a government award -- to honor every year outstanding corporate citizenship. It would operate something like the Malcolm Baldrige Award does, that recognizes businesses for the quality of their products or services.
This award will celebrate business for the quality of their relationship to their workers and their communities. The award, as I said, will be created and managed entirely by the private sector, and its criteria will be based upon the five principles of corporate citizenship I mentioned earlier. These leaders will seek the advice of members of the business community, workers and their representatives and others, including educators. It will be presented every year by the President of the United States, and it will be called "The Ron Brown Corporate Citizenship Award." (Applause.)
We are honored to be joined here by Alma Brown. Thank you for coming today. Bless you, my friend -- stand up. (Applause.) If there ever was a person who thought you could do well and do good at the same time, it was Ron Brown. And I can't think of a better way for us to honor him by continuing this work.
Let me end by saying now, we're going to spend the rest of this day listening to you, trying to come to grips with these issues. We know that a lot of them are very difficult, that the facts will be different from industry to industry, sector to sector, company to company. But we also know that this country cannot become what it ought to be. We cannot make this transition into the 21st Century unless we create opportunity, unless we all go forward with a sense of personal responsibility, as Father O'Donovan said, and unless the end result is the community of America is stronger.
We have always believed that free markets and free enterprise made our whole country stronger, and we have always believed as Americans that we can find a way to correct the problems of the system so that it could thrive. That really is the whole story of the United States in the 20th Century, and I suppose the conversation we're having today will help to tell the story of the United States in the 21st Century. We need to give the right answers, and I think we will. Thank you very much. (Applause.)
Our first panel will deal with a lot of the questions of family-friendly workplaces, safe and healthy workplaces, and health and retirement security. We'll start with the question of families, and I'd like to begin by calling on Kenneth Lehman, the co-CEO of Fel-Pro, Incorporated, a third generation, family-owned automotive supply manufacturer in Skokie, Illinois. I'd like to ask him to tell the Fel-Pro story and why such a small company provides such extensive family benefits to its workers and whether this undermines or contributes to its success in the marketplace.
MR. LEHMAN: Thank you very much, President Clinton. Fel-Pro is honored an flattered to be included in this important national conference. A few brief words of background on Fel-Pro. We're 78 years old. We're privately held. The company was founded by my great grandfather and my grandfather -- I guess that makes me the fourth generation. We make and manufacture gaskets, sealing devices and other products for internal combustion engines and transmissions. We also make specialty chemicals for industrial maintenance and repair, like anti-seize lubricants and epoxies.
We employ a heavily inner-city factory work force, and 50 percent of our work force are minorities. Sensitivity to workers' needs and issues and commitment to providing a decent and fair place to work has been a way of life at Fel-Pro since our founding. The business press and media is full of obituaries announcing the death of corporate loyalty and corporate family.
But to paraphrase Mark Twain, as you did, Mr. President, at Xavier University, reports of those doubts are greatly exaggerated, at least from Fel-Pro's perspective, and judging from the conversation this morning, from the perspective of other companies as well. We've always believed that a work force which is treated fairly and decently will be loyal as well as diligent, quality- and cost-conscious and customer driven. And that's been our philosophy.
Now, I've been asked to give some examples of the work and family and family-friendly programs and benefits that Fel-Pro has implemented. I'm going to begin by telling you about a 220 acre employee recreation area that we founded in the late 1960s called Triple R, for rest, relaxation and recreation. And in 1973 we established a summer camp for the dependent children of our employees, and 300 kids go there every summer. In 1980 we put an on-site wellness center in our factory. And in 1983, we put in an on-site day care center. One day a week, on-site, we have legal counseling for our employees.
And we have an employee assistance program which offers confidential counseling and referral services to help our employees with personal problems. We also have an elder care program. We have tuition assistance for the in-service employees, as well as scholarship and tutoring programs for their kids. We have what's called the Better Neighborhood Fund, and this is near and dear to my heart. This program gives small contributions of up to $1,500 to the very most grass-roots organizations in the neighborhoods where our people live.
We also have a pretty long list of other smaller programs and benefits, which include seasonal gifts like turkeys at Christmas and a little box of candy at Valentine's Day. We give out Bulls tickets to our employees who come up with the best productivity improving suggestions.
Now, the cost of all of these work and family-type programs are $.70 an hour per employee or, stated differently, that is less than 10 percent of our total cost of benefits. And when you consider the government mandated benefits and the traditional benefits, which include hospitalization and major medical care, profit sharing, vacations and time off, it's really a very small percentage of our total benefit package.
Three years ago, the University of Chicago did a study of Fel-Pro and they were looking to find a link between family responsive policies and programs and job performance. It was a collaborative effort between the business school and the school of social service administration. And what was found was that employees who utilized and appreciated our benefits most extensively, participated most regularly in productivity cost and quality improving programs. They were the employees who had the best performance evaluations and the ones that had the fewest disciplinary notices. And they were the employees who embraced change most willingly. And companies with employees who thrive on change rather than fear, will be the successful companies in the 21st Century.
Work does not exist in a vacuum. To the extent that we can help our employees deal with family issues and pressures -- and our summer camp is just one example -- the alternative for many of our work force for the summer camp when school isn't in session is to have their kids out on the inner-city streets. And so if we can help those employees come to work less preoccupied, then they are better able to focus on serving customers, battling competitors and improving our products. It works for Fel-Pro. We regularly exceed industry profitability averages and we have won many of the quality and customer service awards our customers give out and, in fact, one of our customers is in the room today -- Cummins (phonetic) Engines -- so you can check with him, with Jim Henderson, if you care to check it out.
And so I tell you these things not to crow or brag about Fel-Pro, or to even suggest that we don't worry about a variety of other issues on a daily basis but, rather, you know, I wanted to provide specific examples of what can be done and proof that it can be done affordably.
Conventional thinking places extensive family-friendly benefits and corporate profits at opposite ends of the spectrum. However, we feel that our benefits enhance our profits, and as long as our bottom line continues to confirm this, we'll keep doing it. Thank you.
THE PRESIDENT: Thank you very much. (Applause.)
I would like to illustrate -- this is all something all of you know, but I think it's worth just putting the facts out there -- these family-oriented policies are much more important today than ever before because 60 percent of the mothers in this country with children under six are in the work force -- 60 percent; 76 percent of all the mothers with school-age children are in the work force; and 12 million families in America are exclusively maintained by working mothers. So these numbers give a little greater resonance, perhaps, and meaning to the presentation that's just been made.
I'd like to now call on Fran Rogers to talk a little bit about her company and what she's done with Work-Family Directions.
MS. ROGERS: Thank you, Mr. President. I, too, of course, am very honored to be here and I thank you. Let me start by saying something that may surprise you. At Work-Family Directions, of all places, we almost never use the term "family-friendly" nor think of it. We actually make no distinction between support of our people and doing what is best for our business. So we don't need the term "business-friendly" any more than we need the term "family-friendly." In fact, we have built our whole business on the premise that managing explicitly for employee commitment to the business is necessary for a healthy bottom line.
I started my company in 1983, in part because I felt that my previous employer wrote me off as not very serious. My first child had severe asthma, and I had to modify where and when I worked because there were many times when there was no substitute for my presence. Although I continued to get results, sometimes in the middle of the night when my daughter was sleeping, I knew that I would have to prove myself anew and I just didn't want to do it again.
The silver lining of this all too common story for me was that out of this experience, in the great American tradition of entrepreneurship, I saw that there was a great opportunity to help others manage and support people differently so that there is an unleashing, rather than a quelling of drive and ambition. But as I built my business, I knew that I could not and should not advise others if I did not do my level best to manage people well and toward high commitment.
Work-Family Directions has 400 employees, and about $65 million in revenue and, I'm happy to say, a healthy bottom line. We are smaller than many of the people here today, and we are smaller than each and every one of our clients. But it's interesting because we face similar pressures. Our people have complicated and full lives, and a full range of changing values and needs that they bring to the workplace, whether we like it or not. Our marketplace is becoming increasingly competitive, with price pressures brought about by the cost consciousness of large companies -- maybe in this room -- increased quality expectations, technology investments, and rapid change part of the daily landscape, whether we like it or not.
You may wonder whether a privately held, relatively small company is relevant to the issues of larger organizations. And I think that it is, in that I have watched many large companies change and become more supportive and better managed over time. They don't do it all at once. They transform one plant at a time, sometimes one manager at a time, sometimes one business division at a time, in every case, taking into account who the people are, what the community is like and what the business circumstances are.
We started our business believing that effort not made by our people would be our greatest strain but also our greatest asset to mine. I don't want Work-Family Directions to be a place ever where people say things like, "Let someone else worry about it," when it comes to serve a customer. When our clients walk around our offices they tell us that the energy and commitment to customers is tangible, is palpable, and our quality measures tell us this, too.
What we do to achieve this is not, if you'll excuse the expression, rocket science. It's dozens of small things, and it is embedded in our culture. When people need flexibility at our company, we don't make them beg for it, we don't dole it out as a favor, we simply ask them to show us a way that the work will get done and their any new arrangements.
On snowy days when we have to open our national service center, the Boston schools are closed. It's in our interest to provide the child care right at the company so people can get in and have their children safe. We do the same things to school vacations. We also support our people with things like college counseling and advice when their children are having trouble in school. And the reason we do it is because many of the public schools around us have virtually cut out their guidance departments.
We help pay some of the costs of child care for our lowest income employees so that they can have a stable experience with us. And when any employee who has to take out-of-pocket expenses to travel for work, works for us, we help pay for that.
We have a diverse work force, and at the core we trust our people. Even when they don't like a decision we make, they tell us that they feel like there is a caring and respect for who they are. Given my understanding of human nature and my practical immigrant child roots, it seems like it's just common sense that it's a prerequisite that our people know we care about them before they can care about our business.
Recently, we worked with one our clients, du Pont, to measure the effects of 10 years of prudent investments in making the workplace more flexible and supportive of family. The data collected showed a highly significant relationship -- as was just described at Fel-Pro -- between using du Pont's support and being willing to go the extra mile to do whatever it takes to make du Pont win in the marketplace. In fact, employees who felt supported were the most committed group.
I was delighted with these results. But, frankly, while they were counter-intuitive to some people, as an employer, they were consistent with my experience. At least weekly, an employee who has changed work hours, taken a leave to care for an elder, or been trusted with a major business decision where they've been given honest information, comes to me in person, via voice mail, through e-mail, to say how much the support has meant. And they don't tell me that we're nice or that we're socially responsible, though I think we are. What they tell me is that the support offered them a tool so they can work better. They say it helps them contribute more to the company and to their families and, most important as an employer, they say our unique environment makes them want to do anything that will make us successful.
In the end, isn't that what we want all our employees to feel? Thank you.
THE PRESIDENT: Thank you. (Applause.)
I'd like to make two brief points. First of all, I think the odd concept of all these things as tools that other people use to make the most of their own lives and their family lives is a very helpful way of looking at this, because most people just want you to make it possible for them to make the most of their own lives.
I also should point out that, since Fran didn't explicitly say this for fear that at this meeting she'd look like she was hawking business, this company, Work-Family Directions, is based in Boston, they employ about 250 people and they provide work and family referral services to larger companies, including child and elder care referrals, adoption referrals and a number of other services. So she's seen this from the perspective, as she said, of both smaller companies and larger companies.
We should say the size of each of these companies, because I think that's important. Fel-Pro has about 1,700 employees, I think -- is that right?
MR. LEHMAN: With 2,000 in the Chicago area and 800 in other places.
THE PRESIDENT: Yes, but in the Chicago area it's about 2,000.
MR. LEHMAN: Yes, we have about 2,000.
THE PRESIDENT: Now, our next panelist is famous to all of us who have children who love the environment and some of us who like to get out and around ourselves. Yvon Chouinard is the founder of Patagonia. And among other things, Patagonia devotes one percent of its sales to environmental projects and initiatives -- something which, when Chelsea and I go Christmas shopping every year she always reminds me when we decide what to do. (Laughter.) So I'd like to ask Mr. Chouinard to tell the story about his work family benefits program and how it's worked into Patagonia's history.
MR. CHOUINARD: Thank you, Mr. President. I'd feel a lot more comfortable on top of a mountain than here right now. (Laughter.)
THE PRESIDENT: Pretend that's where you are. (Laughter.)
MR. CHOUINARD: The mission statement of my company is, "Make the best quality product and cause no unnecessary harm." Quality is not something you can do piecemeal. Either you believe in quality or you don't; either it surfaces everywhere and you commit to it everywhere, or you don't. There's no gray area here.
I don't think it's possible to make a great quality product without having a great quality work environment. So it's linked -- quality product, quality customer service, quality workplace, quality of life for your employees, even quality of life for all living things on this planet. If you miss any one piece, there's a good chance you'll miss it all.
A family-friendly business tries to blur that distinction between work and family and work and play. For us, a quality workplace includes one of the best child care centers anywhere. The law requires that there be no more than four infants for every caregiver. At our center we have only three infants per caregiver. The law also states that there be no more than 12 two-year-olds per caregiver. At our center there are no more than five.
The center is on-site. Therefore, mothers can continue nursing their children while they are back at work. Mothers and fathers can take breaks and have lunch with their kids. Some parents choose to keep their young babies right at their desk. When we began our child care center in 1984, we were only one of 150 corporate on-site child care centers in the United States. In 1994, I believe it went up to 1,100.
For us a quality workplace is a flexible one. Our employees work hard and many of them work long hours. But we're flexible in allowing them to fulfill other interests or obligations. We have world-class athletes working for us, and if they are to stay the best in the world, they need time to climb or paddle or surf. We give them that time and it shows in our product.
For us quality of life means strong and healthy families. We give two months' paid parental leave for mothers and fathers. I don't want employees, male or female, who feel as if they were forced back to work too soon. I want employees who feel secure enough at home that they can be creative while at work. I want them to bond with their children. I want them focused. And if they're distracted by guilt, they can't focus. We don't provide these benefits because we're nice. We provide them because it's good for our company.
The benefit that any other business should understand is the impact these programs have on turnover. It's incredibly expensive to hire and train new employees. At our place it can cost $90,000 to find a senior manager. After the initial expense, they can spend many months, even years on a learning curve. This doesn't happen very often at our place. The turnover rate at our main offices is 4.5 percent. The average for our industry is 20 to 25 percent. Our employees stay with us for a long, long time. They don't stay because we pay huge salaries -- because we don't. (Laughter.) They stay because it is family.
This part of our mission statement is easy because it's just good business. The other part -- and this is important to the individuals and families who work for us -- is about causing no unnecessary harm. No unnecessary harm is also about quality of life, of all life, and it's more difficult to achieve. We're fortunate in that our jobs don't depend on making land mines or pesticides, but in making clothing. We do use up nonrenewable resources and we do pollute. So every day through our environmental assessment, we attempt to do less damage.
We also take, as the President said, one percent of our sales and use it to safeguard and restore the natural environment. Our customers appreciate our efforts, and all of us feel little less helpless in trying to leave a habitable earth for our children and other wild things. Thank you. (Applause.)
THE PRESIDENT: Thank you. Let me ask you, how many employees do you have?
MR. CHOUINARD: We have 750 worldwide.
THE PRESIDENT: And that includes the people that actually work in all the stores where Patagonia is sold?
MR. CHOUINARD: That's right.
THE PRESIDENT: One of the things that strikes me about -- I don't know how many of you have ever been in one of their stores, but every time I go into one I feel like I'm in an evangelical mission because all the young people there -- you can't get out of the store, it doesn't matter if you don't even buy anything -- you get the line, you know, that the company is really sort of environmentally responsible and you should be, too. And they always give you something -- do you do any work on that? I mean, do you actually work on getting these kids to learn how to speak that way or do they do it just because you set a good example? (Laughter.)
MR. CHOUINARD: Well, I think this type of thing can't be done from a desk somewhere in the part of the company that's called the Environmental Desk. It has to be driven all the way down to every single employee. It's part of everybody's job. So they were doing their job.
THE PRESIDENT: Very impressive. Let me also say one other thing that -- some of you, if you saw the State of the Union address, you know that I mentioned what is now the very famous story of Malden Mills, the Massachusetts-based company that had a tragic fire and afterward the gentleman who owned the company told the workers he was going to keep supporting them until they got up and going again. His name is Aaron Foyerstein (phonetic) and he's here today, too, right out there. Stand up, sir. (Applause.)
The reason I brought it up now is that Patagonia had a 15-year relationship with them and when he made that announcement, Patagonia announced that they would not have any layoffs as a result of the loss of the customer and that they would continue to support each other until Malden Mills got up and going again. And I think that is also a very credible thing.
I'd like to ask the Vice President now, before we go on to the next topic, to talk about some of the things that are being done in the federal government to provide our public workers with access to family-friendly benefits. I must say that this is an area in which the government has lagged behind, at least the most forward leaning private sector companies. And we've tried to do some things in this regard. I'd like for the Vice President to talk about it.
THE VICE PRESIDENT: Thank you very much, Mr. President. And ladies and gentlemen, I'd like to preface my remarks with a reminder that in our system of government, the head of state and the head of government are combined in the person of the President, not separated as they are in most countries around the world.
The President is speaking here today in this dialogue in his capacity as head of state, in leading our whole country. But he also has the daily responsibility of managing the operation of the entire government. We have 3.5 million federal, military and civilian employees -- more than half of them now civilian employees. When we began this task -- when the President was inaugurated three-and-a-half years ago, we found an enterprise that was in the red, so-to-speak, and had a lot of waste and float -- and I won't go in to all that.
But the President asked me to begin the national performance review, sometimes called re-inventing government. And we went through a process that included the same kind of downsizing that many of the corporate leaders here have gone through for many years now. The government is now 240,000 employees smaller than it was three-and-a-half years ago. But in the course of trying to figure out how to accomplish these objectives we looked very carefully at some of the new management approaches that many of the individuals here in this room have innovated and have used to good effect. And we found that most Americans, either through their experience in the workplace or their experience as customers, have learned how to distinguish very clearly between organizations that are managed in the old way and organizations that are managed in the new way.
The President used the phrase in his opening comments "from the neck down" and "from the neck up." It used to be, of course, that employees were usually seen as muscles to be given instructions and asked to do repetitive tasks over and over again. And some have said the single most important advance associated with the new way of managing organizations is recognizing that the greatest unused asset in any organization is the unused brainpower and creativity of the men and women in the organization. And any effort to capture that creativity and intellect and brainpower is going to pay dividends for the entire organization.
To take that as a model, I think you could probably say that the movement toward a family-friendly workplace incorporates the emotions as well as the brain, and sees the employees as whole people in families whose loyalties will be devoted to an organization that respects their own loyalties to members of their family and to their community. And in an era when downsizing has produced a good deal of concern, some of it expressed at breakfast this morning by corporate leaders who worry that the loyalty given to the corporation or employer may be diminished, respecting the family obligations and roles of employees is definitely a way to engender loyalty on the part of the employees.
The National Performance Review began addressing this in our work force in 1993. This led President Clinton in July of 1994 to issue a memorandum to the heads of all federal agencies to encourage and expand family-friendly workplace practices. We've made a great deal of progress; employees in every federal agency are actually making use of the many family-friendly options to help them meet the demands of both their jobs and their families. Flex time is very widely used; more than 52 percent of federal employees are now taking advantage of work week options other than the traditional five-day, 9:00 a.m. to 5:30 p.m. work day.
Federal government impacts workers and their families in two ways: through our own workplaces and other workers and families through federal programs and regulations that have an impact on the citizens of this nation.
I'd like to tell two brief stories that illustrate how we affect workers and their families and some of the innovations that are now underway. First, a story from our own workplace. The Department of Defense faces some unique family-friendly challenges because, at time, their work force is deployed for long periods of time, such as our soldiers in Bosnia who are there for a year on that important mission.
Let me tell you about one of our military fathers, Captain Greg Bryant, a Marine. You remember when Captain Scott O'Grady was shot down over Bosnia and survived by eating bugs and drinking rainwater. Well, Captain Greg Bryant's unit was the one that rescued Captain O'Grady and returned him safely. Captain Greg Bryant is a Marine, he is also the father of two little girls, ages three and one. He wanted to stay in touch with his family while he was deployed for six months. He recognized the importance of his whole unit staying in touch with their families, and so he took advantage of an initiative from his employer, DOD, and got video cameras and audio and visual tapes so the individuals in the unit could keep in touch with their families.
He personally read stories to his three-year-old on videotape and sent them back home on a regular basis. He led the entire squadron of 450 Marines in doing the same and similar things. I saw a film which showed Captain Bryant's three-year-old kissing the TV screen as she watched her Daddy read one of the stories to her.
This is not the only family-friendly initiative from the Department of Defense. It's doing a lot of other things to help the work and family balance, such as enhancing the roles of chaplains to provide parenting programs, family workshops, and establishing 291 family centers, recreation programs, youth programs and return and reunion programs.
Now, I want you to understand, the military has been doing this for years. We have built on some of the work that was underway and, indeed, we've used some of their models in other parts of the federal government. Military has been doing it because they understand the importance of secure families to the performance of people who are under a lot of pressure. They see these initiatives and programs not merely as some side benefits for employees, but as an integral part of military readiness, because they understand that the soldiers are not only people who can operate weapons, but have brains and have emotions, and are whole people in families.
I could give you other examples from each of the federal departments, but instead I want to conclude with a story about how we affect other, nonfederal workers and families through our programs. In the worst of all worlds, federal programs get in the way and inadvertently cause problems in the work-family balance. We're aggressively trying to identify these areas and change them. Here's one example.
Recently, a man named Victor Rush, who directs a family investment center in a public housing project, was at a gathering of the Charter Oaks Housing Project in Hartford, Connecticut. A man entered the room, and a small boy rushed up to him saying, "Daddy, Daddy." "Hush," said his mother, "how many times do I have to tell you not to call him `Daddy' when people are around?"
Well, the child's mother was afraid that if she acknowledged a relationship with the father of her child, she would lose her public housing. Rent rules for public housing, originally set up with good intentions, have inadvertently caused people not to work and not to maintain or create intact families for fear of losing their housing.
There are public housing projects all over America where there are 200 units or more, and not a single intact family, and almost no one working. President Clinton has insisted that this be changed at the federal level. With the leadership of Henry Cisneros, we are changing the rent rules so that no longer will there be situations where residents don't work or fathers stay out of the family because the rent will go up if the additional income is counted. We're also supporting programs like that of Victor Rush.
At that family investment center that he runs, incidentally, men are given work in the housing development effort at $20 per hour, after sophisticated skills training. But in exchange for this work, they must sign a contract that says they will spend time with their children, attend classes, attend a work group with other men to support their relationship with their children; they will not use drugs, they will live up to the responsibilities of their jobs and support their families financially.
His center has concrete, measurable goals -- namely, to reunite 100 families and increase those families' incomes by $14 million in five years. There are lots of stories we could relate to you like this, stories from more than half of our federal work force now using flex time, from the thousands who are telecommuting from home or new telecenters, from federal employees who use one of our 800 on-site child care centers; or from those like Captain Bryant, who are taking advantage of special initiatives to create a better balance between work and family.
You can probably see that I'm proud of what the federal government is doing in this area under President Clinton's leadership; and, incidentally, of the five goals that we are discussing here today, this one, the family-friendly workplace and the work and family balance, is a challenge that the President and I will be exploring in greater depth over a two-day period in Nashville June 23rd and June 24th in a workshop on balancing work and family.
I'd like to close by thanking the President for insisting that these initiatives take place in the country's largest employer. Thank you. (Applause.)
THE PRESIDENT: Thank you very much, Mr. Vice President. Let me just make one comment here. I'll just invite your best ideas. The military now has about -- I think about 60 percent of our personnel are married, and as we have downsized in the aftermath of the Cold War we've had to think a lot more about what we need to do to support families. And a lot of times, you read something and you think, boy, this sounds great. For example, if we reduce the number of planned aircraft carrier battle groups -- great, no Cold War problem, we're going to save a lot of money.
One bottom line consequence is that we have to extend the average tour of duty of Navy personnel from six months to nine months -- that's a 50 percent increase in the time those Navy people will be away from their children, and we have to figure out how to deal with that. The Bosnia deployment -- the Vice President said it's a year -- we try to make sure we could get everybody at least one break and sometimes two if they have family situations and need it; that's still a long time to be away from home. And this is in a time of peace, when it's hard to create this sense of national emergency for your children. They wonder, where is daddy and, in some cases, where is mom?
So this is a big challenge for us and, if any of you have any others constructive ideas about other things we can do, I'd personally be glad to have them because we're always looking for new ways to try to support an institution that really tries to live by family values but has been strained just by their duty to the rest of us as they exercise it.
I'd like to move on now to the second topic, which is maintaining a safe and healthy workplace, and start with Ralph Larsen, the Chairman and CEO of Johnson & Johnson, the largest company so far represented here. They have something over 28,000 employees, anyway -- maybe more, including two great plants in my home state. I should say that Johnson & Johnson has been repeatedly recognized for its innovative, family-friendly practices. But we want to ask, today, Mr. Larsen, to discuss the safety program and the effort that they've promoted in employee wellness and what a safe and healthy workplace has done in terms of the costs to the company and in terms of the benefits.
MR. LARSEN: Thank you, Mr. President and I thank you for inviting us here today and for establishing this very important dialogue.
Johnson & Johnson has had a longstanding commitment to the safety and health of not only its employees, but their families. We call it Live for Life. And that program really flows out of a very simple document that we call the Johnson and Johnson Credo, which says that our first responsibility is to our customers -- to give them high quality products at good value; secondly, that we are accountable and responsible to our employees and to their families and to provide them with a sense of security in their job and safe and orderly working conditions.
That document says that we are then responsible to the communities in which we operate to respect the environment and be a good corporate citizen. And then it ends remarkably with a statement that says if we do a good job on those three things, the shareholders of Johnson & Johnson ought to come out okay. And that's exactly what has happened over many, many years. The shareholders of Johnson & Johnson, over the last 10 years, have seen double digit, in fact over 20 percent, compounded annual returns. So the philosophy embraced in that credo has served us very well.
Now, having said that, we're not perfect. We make mistakes, as everybody does, but we really try very hard to make Johnson & Johnson a safe place to work for our employees and their families. And I'll talk specifically about safety for a moment. Just a few years ago, we took a look at our safety record, and we always thought we did a good job in safety. But we went out and we benchmarked ourselves against other great companies that have done a great job in safety, and we were surprised because we found that while we were pretty good, we were nowhere near the best. And so we said to ourselves, we want to be the best in every field, and we want to be the safest company in America.
So we set that out as an objective. And, frankly, the results have been more dramatic than I ever could have hoped. In 1981 when we started to get serious about it, our safety performance has improved by 80 percent. And that's a remarkable improvement. We have a lot of people around the world. And we did it by following four basic principles. The first is communication and training, letting everybody in the company know that we were very, very serious about this. This was not another program of the month, that we were very serious about this, that I was very serious. My predecessors were very serious about it. And we communicated that to everybody in a variety of ways.
Secondly, we engaged in a very intensive program of accident and safety prevention. We don't want to respond to accidents, we want to keep them from happening. And I'll give you just one anecdote.
As hard as we tried -- we use a lot of high-speed equipment, and no matter how hard we tried we found that we couldn't prevent people from circumventing the safety apparatus that we put in. Somebody would remove something and reach into take out a jam, and they'd nip their finger or amputate their finger. So we moved to something called zero access, and that's a very dramatic step. But what it says is you can't get into the equipment. You open any part of the door that gives you access to the equipment, the equipment shuts down, and you can't circumvent it. And it was through that one act that we really prevented serious accidents and deaths and injuries from occurring.
Thirdly, we started a very important program on incident investigation and reporting. When something serious happened, we really went in and looked at it. In fact, for a long period of time, if anybody in any of our operations in the world had a serious accident -- meaning an amputation or a broken bone or something -- they had to fly in to our headquarters and explain to me and to our executive committee how that happened, and how they were going to prevent it from happening again.
Well, you can imagine if you're someplace in the world and you're flying in to explain how an accident happened to one of your employees, you don't want to do it again. (Laughter.) So that had an impact. And finally, we put in a program of measurement and recognition so we could measure our progress and also recognize and honor those people in our company that really embrace safety as a value. So that's what we've done.
We've learned three important lessons. The first, that safety really does represent an investment in our people. It's an important investment. It's hard. It takes enormous effort at all levels of the organization to make it a reality. The second thing we learned is you can never let up. It's a never-ending journey, and the minute that we let up, we find that we start to decline in terms of our safety performance. So it's a never ending effort, and I guess the third lesson we learned is it really is a fundamental responsibility, not just of the corporation, but of every member of the corporation, and it's something that we take very, very serious. It's the right thing to do. Thank you very much. (Applause.)
THE PRESIDENT: Thank you. Now I'd like to introduce Roger Ackerman, the Chairman and CEO of Corning, and Larry Benkowski who is the President of the American Flint Glass Workers Union, which represents the workers at Corning, to talk about their common experience. In October of 1995, Corning was awarded the Malcolm Baldrige National Quality Award. It's been recognized in many, many other ways. The company has, I believe, over 42,000 employees and has a unique perspective on safety and health and a very strong partnership with its workers. And so I'd like to call on Mr. Ackerman and Mr. Benkowski to discuss their experience.
MR. ACKERMAN: I think I'll go first because Larry will steal all my thunder. (Laughter.) First of all, I think, like Patagonia and like J&J, Corning has a total quality program that we started really when Jamie Hook became the chairman and I was very much involved with this personally. And he adapted it as a way to change the company. Everybody who's in our industry -- the glass industry -- knows that it's an unsafe place, inherently. And you've got to be really concerned about safety and health right up front.
The other obvious thing that happens in total quality is you look at everything you do and examine how it affects your ability to compete. And the bottom line is to compete. And Corning as a company has found itself in many, many high technology, very competitive markets, where you're dealing with international competition. And if you're not good at everything you do, fundamentally, you're not going to win. So safety and health takes its place amongst a lot of other things.
We also have, not a credo, but seven values that we've worked very hard at. And I don't have my grey booklet with me, but everybody in the company is aware of our seven values that we articulated and worked together to make sure that we all understood them. I think when we started the effort of articulating our values, we weren't -- you would get maybe, depending on who you were talking to, you'd get different stories. But we adopted seven of them.
And three of them really create, to me, the framework for safety and health. And they are -- the three out of seven -- are total quality, performance and the individual. As a matter of fact, focusing on the individual, the words paraphrase say that the most important thing we have are the individuals. Our technology is important, but if our individuals are not empowered, are not participating, don't feel good about coming to work, and certainly if they come to work afraid, they're going to get hurt -- in the ultimate form of not being competitive.
And I personally have had some very difficult experiences with safety. This is a very dangerous environment that we're operating in. We're operating in furnaces that are operating at over 2,000 degrees Centigrade and one false move and you can be hurt. I, in my early career with Corning, was in the hospital. I was operating a factory down in Kentucky and one of our guys got killed. And it made a life-long impression on me as plant manager going in there and sitting with this man's family as he died.
So that put -- if you want to know where my personal emphasis on this subject comes, it comes from that experience. And I vowed that would never happen again.
Well, we have accidents. The good news is that by adopting this program and integrating it with the way we do business, we've seen our accident rate go down by 50 percent. And we're well below the average for manufacturing in this country and well below the averages for the glass industry. But it's not good enough. And two or three years ago we took a look at it and said, well, the numbers aren't getting better fast enough; what can we do differently.
Well, one of the things I did is I said, well, I'll tell you what, the top management in this company is going to go on safety audits. So we took the top 30 people in the company and they now conduct safety audits at every of our facilities. Every time there's a safety audit in one of our facilities -- and we've got them all over the world -- we have a member of top management. And it has really focused in on this issue.
We also, as J&J discussed, as Ralph discussed, we have a lot of measuring and display of our safety data. Every one of our factories, if you walked in, you'll see four or five things that they're actually connected to their -- every employee in our company can earn a 10 percent extra pay based on a series of performance factors. And one of the common denominators in all of our facilities is their safety and health record.
And every quarter we publish a -- what we call the top quartile, the middle quartile, and the bottom quartile, and we rank all of our factories in safety and health. And then we call the bottom quartile the "no parking zone." And the fact is that this creates enormous pressure. And it comes out every quarter and it's circulated all over the company. So there's just been this constant pressure on improving safety and health.
But I won't sit here and say we're some paragon of safety and health, because we're still hurting people. But we're hurting a lot less than we used to and it's wrapped in a -- the bottom line is if you're going to control your operation and if you're going to win in the marketplace, safety has got to be a -- is a prime indicator of whether you really have process control and if you really know what you're doing.
MR. BENKOWSKI: I'd like to confirm what Roger just said of our experience with Corning and on safety and health and other issues. We formed a partnership, a formalized partnership, back in 1989. We had had and continue to have an excellent labor-management with Corning, Incorporated, we had had over a half a century. When we formalized a partnership agreement, that was a direct lead-off from the total quality approach which we undertook 12 years ago together, and we began to focus on a number of problems in our factories -- safety and health being a major issue.
Safety and health is expensive if it is not properly addressed and people are not trained and made alert and focused on conditions in the factory, those that are adverse, and how to cope with them.
We focused on other issues in the factories, and within a couple of years we developed what we call a goal-sharing plan, which really puts emphasis and focuses workers' attention as well as the management attention on the specific issues, because every day there's a measurement in the plant -- when you walk into a Corning plant you see graphs and charts. I recall a former New York mayor, he used to say, well, how am I doing -- he'd go out in a crowd and say, how am I doing? Well, in a Corning plant they tell you how you did. And it's posted so everybody has that information available.
And by focusing everybody's attention on those goals, particularly in safety and health, we've reduced exposure to safety and health problems and incidents by over 50 percent; in some plants, we've practically eliminated safety and health problems that we had been regularly encountering in the past.
Now, Corning is an extraordinary company. Roger and his predecessors have been great corporate citizens of America, and great corporate partners of the American Flint Glass Workers Union, and the members that the company employs. We work together on many areas. Our goal-sharing plan -- in every one of our plants we have perhaps five or six mutually-selected goals we try to achieve that year. And as we reach our goals, there's a financial reward built into the program, and at the end of the year every employee in that facility is eligible to earn up to 10 percent in addition to his regular earnings. And that goes to everybody, it's a group plan.
Now, you know, workers, just like any other person, you get the extra edge and the extra attention if you're going to have some sort of financial motivation or reward. And there's nothing wrong with that. And we have proved in the Corning system and with some other manufacturers with whom we have similar arrangements that there is nothing wrong with financially rewarding people for observing safety factors because the cost of not having good safety practices in the factories is very expensive.
You add the total lost time incidents, the medical care and all the related factors -- the loss of productivity, the loss in training, perhaps you have to bring people in on overtime and pay a premium in order to cover for them -- the cost of safety, of not good safety procedures in the factory can be very expensive. So there's nothing wrong with financially motivating people or the work force with that consideration. And we've done well at it. We've established a program that I believe is unique in America for factory workers.
We have a program, for example, we have a continuous joint committee of our union members and management representatives who travel the country and visit hospitals and medical facilities to gauge and determine whether or not they provide adequate, good health care, whether they are the highest-quality provider of cardiac surgery or lung surgery, or whatever it may be. And when we discover and mutually agree that this is the finest in the market, one of our members needs that service, he is sent there -- not to his own local community, which may not have a hospital up-to-date to handle that specific procedure. And he is sent there, and his or her spouse is sent there. And all travel, expenses, lodging is paid for by Corning, Incorporated.
And I think that's a fantastic program because I have been the recipient of some rather sophisticated surgery a couple of years ago. And I know what it means when you have something wrong with you and maybe, in your small community, it's not available. And many of our glass factories are in small communities. So in this partnership we have been working with this extraordinarily good company in America, good corporate citizen, we developed that program, which I think our people appreciate sometimes more than about any other single thing.
We recently negotiated our contract, and I can recall members of our local negotiating committee standing up and saying, God bless you Larry and the union and Corning for being compassionate and caring about its employees and working continually all year -- not just at contract time, but continually all year -- to make certain they're provided with the finest health care when needed. And we're very proud of it.
THE PRESIDENT: Thank you very much. (Applause.)
MR. ACKERMAN: You know, I didn't pay him to say any of that, by the way. (Laughter.)
THE PRESIDENT: You wrote each other's speeches. (Laughter.)
Let me thank you and thank Ralph and Johnson & Johnson for your example and your words today. We have given a lot of thought to what we might be able to do in a positive way, rather than in a kind of a negative way, through the Occupational Safety and Health Administration, to make it possible for there to be more stories like the two you just heard.
And I'd like to ask the Vice President to take just a brief minute and explain what we tried to do with our experiment and with OSHA and what the results have been.
THE VICE PRESIDENT: Thank you, Mr. President.
Companies that take the kind of approach that Roger Ackerman and Ralph Larsen have just described obviously should not be running into a lot of interference from a public effort to force them to do the kind of stuff that they're doing. In the federal government, there's always the problem of distinguishing between actors, corporate or individual, who are taking the high road and those that are taking the low road. There are a lot of employers that still don't take this kind of approach. But the safety and health system that's primary designed for them should not create a lot of headaches and hassles for the kinds of companies that are doing what you guys are doing.
The President asked our work force in OSHA to come up with a new approach. This one began in Maine with a fellow named Bill Freeman. He and his fellow inspectors were getting lots of awards, but the workplace safety record was not improving. They were getting awards based upon how many citations they issued and how many fines they levied. And so they said, hey, wait a minute, let's change this. And they developed a new approach, which the President is now asking OSHA to adopt on a nationwide basis.
One quick example. You have to have under the regulations a big poster describing what employees can do for redress of grievances on safety and so forth. And they were given lots of fines whenever the employer didn't have the poster up there. Under the new approach, they go out to the trunk of the car and get a poster and give them the poster instead of the fine.
But they identified 200 employers who were taking the high road in the state of Maine with the good record and went to them and said, you work with your own employees to develop and implement a comprehensive plan that does a good job, and then we'll put you at the very bottom of the priority list for inspections. And 98 percent of the companies said, yeah, we like that deal and we'll take that.
During the first 18 months of the program, they identified 100,000 workplace hazards. That is a rate 14 times higher than what OSHA was getting when they were going the old "gotcha" route. And among the Maine 200 companies, injuries are down by 47 percent, productivity is up, S.D. Warren is up 25 percent up in 18 months. Now OSHA is implementing this approach in nine other states in the next few months, and it will be put into effect over the next year or so in the entire nation. We're also implementing it in federal agencies, incidentally. So an additional reward for companies that take this kind of approach will soon be in every state, freedom from some of the hassle that has been associated with OSHA in the past.
THE PRESIDENT: Thank you very much. I'd like to go on now to the final topic of the first panel, and that's health and retirement security. And just to note what is obvious, that is, that over the last 10 years there has been a steady decline in the percentage of people in the work force who have been covered with employer-based health insurance; that the decline has been most pronounced among employees with the lowest levels of education and skills, probably in companies with the smallest profit margins; that there has been a similar change in retirement, although very often it was a change in the form of retirement from defined benefit to defined contribution plans, but there have been other changes and also some loss of coverage.
In 1995, it was the first year in more than a decade that the percentage of people in the work force with health insurance tied to the job did not decline and that could be in part a result of the fact that the inflation rate in 1995 in health care insurance plans was below the general rate of inflation for the first time in a decade.
But, at any rate, this is something that is an issue and a greater issue if you believe that people will change jobs more frequently over the course of the work life than they have in the past. So I wanted to call on, first, Howard Schultz, the Chairman and CEO of Starbucks Coffee, a remarkable Seattle-based company that, doubtless, many, perhaps most of you, have frequented in some city or another in this country and I think they have -- they're growing so fast. I don't know how many employees they have, but I know they have 9,000, maybe there are more -- how many do you have now?
MR. SCHULTZ: Fifteen thousand.
THE PRESIDENT: Fifteen thousand? This was put together last week. They're growing pretty fast. (Laughter.) At any rate, Starbucks has been recognized for its rather extensive benefit program for the work force, including the scope of its health care plan. So I'd like for Mr. Schultz to talk about that.
MR. SCHULTZ: Thank you very much, Mr. President. I think the Starbucks story, we need to go back to 1987. At the end of 1987, we had 11 retail stores, less than 100 employees. We were losing a fair amount of money, like most start-ups. But we were passionate about the dream we had to really create a national retail company. And for the most part, I think we were still in the imprinting stages of our business.
At the end of that year we, with great discipline, set out and created a very thorough, strategic business plan for the company that called for Starbucks to really achieve national presence by the year 2000. And given that we were in the imprinting stages of our business, I think we asked ourselves a lot of questions that perhaps most companies don't get to ask themselves. And I think the key question was, what do we really want to stand for? Obviously, we have a passionate commitment to the quality of our coffee and serving our customers, but what is this company really going to be about?
And, for me, I've had a personal experience growing up I'd just like to share with you for just a few minutes. I grew up in a federally-subsidized housing project in Brooklyn, New York. And I saw firsthand what a family goes through when there is a series of blue-collar jobs, not a lot of money to go around, not a lot of health insurance, no pension plan. And it had a very profound imprinting experience for me and my brother and sister. So in the year 1987 I found myself reflecting back on what I had endured as a child and what I wanted our company to stand for. And it was our values and our guiding principles.
I think, unfortunately, there is a lot of distrust among employees when they go to work for the first day of any company in America. If there is a lot of cynicism, certainly the media has hyped this thing up over the last few months, but I think for the most part, people have distrust, and management is now called on not only to talk about its products and services, but to talk about its values.
So for us, given the fact that we wanted to grow a company very rapidly and create a national retail brand, we set out to do something very unusual, and that was to redefine the paradigm of shareholder value. To look at shareholder value in a very, very different way, and to make sure that if our shareholders were going to win, and our customers were going to win because that's what we're in business to do, that we had to link shareholder value, the customer experience with the reward system for our employees.
And you can imagine, in 1987 we were losing a couple of million dollars a year, we were seeking new money for capital to grow our company, there was a young CEO who had a lot of dreams, but not a lot of experience, and we wanted to give benefits and equity to all our employees -- how that went over with our shareholders at one of our annual meetings.
I think our shareholders and our board deserve a lot of credit for believing that we could change the paradigm. And what we've done, first and foremost, is, we've recognized that 62 percent of Starbucks work force then, and even more today was going to be part-time. Our stores are open for about 20 hours a day, and actually the flip side for Starbucks is that part-time people are actually more of a premium to us than full-time people, because we have a lot of different hours for our stores.
So we had to reeducate ourselves and our shareholders to look at our employees, and specifically our part-timers as equals in terms of the value system and what we were going to create for them. We became the first privately-owned company in 1988 to author a comprehensive medical-dental, 401K, vision, not only to every single employee in our company, but I think the first company in America to do it all across the board for part-time people.
A year later, we recognized that one of the great aspects of what we were doing is that we were not franchising our stores; all our stores were company-owned, and the relationship that we were building with our customers who were visiting our stores sometimes 18, 20 times a month, in talking to them, was based on the loyalty of trust and confidence they had in the equity of the Starbucks brand but, most specifically, the relationship they were building with the people behind the counter.
If some of you go into a Starbucks store, there's no greater pleasure, I think, that when you go up there, they know your name, they make you your drink, it's handed there for you before you can get to the bar, and it's because our people believe passionately in what they're doing. And what we did a year after giving health care to everyone is, we became the first privately-owned company in America in 1989 to offer equity to all employees.
Now, it's easy to talk about this in a way because we've been successful, we've had a lot of growth, Starbucks has grown at a rate of 60 percent a year consecutively now for eight consecutive years. But the reason for that, the absolute reason for that is the relationship that Starbucks has with its employees, who we call partners, because they are partners in the business. We've linked shareholder value to every single employee. As a result of that, our attrition rate in an industry which is sometimes up to 400 percent in retail and restaurants is less than 55 percent. And if you talk to our people -- why they are staying at Starbucks, it's because of the health care plan, it's because of the values and guiding principles, and it's because of ownership.
If we win as a company, at the end of the race it was not going to be justifiable to us as a management team if a group of white-collar workers and a group of shareholders, private then and public today, won at the expense of our employees, we had to be in a position where we all won the race together. And the future of our company is bright because we have established a very strong, competitive differentiation in terms of our competitive advantage, and it is the relationship with our people. (Applause.)
THE PRESIDENT: I'd like to now call on David Guiliani, who is the Chairman and CEO of Optiva Corporation -- actually a fascinating company that was started less than a decade ago with a team of University of Washington scientists who developed a new electronic toothbrush that uses high frequency vibrations to remove plaque, something I care more and more about as I get older. (Laughter.)
MR. GUILIANI: Well, it was just three-and-a-half years ago when we started and sold our first Sonic Air. It was a grand notion to build a company out of such humble beginnings. We were 10 people, at the time. We had a lot of obstacles. One of those was how to build a company.
We decided, in the early days, to build our Sonic Air in the United States -- despite, I must say, lots of advice to the contrary -- what, you're going to build it in the United States? Because all the competitive products were foreign. But we decided to bet on American productivity and automation technology. That caused us to face a tight labor market in the Seattle area. I think Starbucks has taken them all in. (Laughter.)
So it became very clear from the very beginning that we had to be very competitive and offer an excellent package in order to attract the very best. And the cost of doing that -- interestingly, the difference between an okay package and a good package might wind up being five percent of the labor cost. It's really very small by comparison to the productivity that can be gained by choosing, motivating and rewarding the best employees. And as a very small company -- even at 300 now, after three-and-a-half years -- we have lots of challenges as to how to be effective. There's excellent work done by all companies, many companies throughout the country, in putting together packages and plans.
One of the things we've noticed is there's a wide difference in how those plans are executed. Sometimes relatively small touches really work. Like, once one of our employees was being hassled by the IRS over something that turned out to be not her problem. So our CFO called up the IRS and, after a few telephone calls, got it straight. We have a very good health program, but it's only as good as being implemented. Once, one of our employees was taken in by an unscrupulous doctor, so we called up the doctor and got that straight. When we chose our health care program we wanted to make that there was language translation services available for those people who didn't speak English as their first language, in order to make sure they got the health care they needed. We've also told certain banks that we aren't going to do business with them because of what we consider to be unfair practices.
So even though we're small, we've found leverage to help get the results that the employees really need out of these relatively standard programs. The concept of retirement security for a company that's as young as we are is a fascinating one. People came to us in the beginning and said, what's your retirement program? And we went, "Hhmmm." And we found that retirement is essential for people to think about because, unless they are feeling that all of their needs are being taken care of, then they'll be stuck on what is still bothering them. It's Maslov's (phonetic) Triangle, we need to move up in order to obtain the productivity advantages that result by unleashing human potential. That gives us a factor of two productivity improvement that we really need in order to succeed.
So what we've done is to offer stock option programs to all of our employees, even the elderly ones. The 401K system is beautiful. We do fund it with company profit as we exceed our profit goals. And a very important part of it is education -- teaching people how to manage their own portfolio so they can see what they're aiming for and hence, not reliant on Social Security. Take out the anxiety of what's going to happen to the Social Security system by building their very own transportable package. Transportable health care that is, of course, still a problem.
As we think about what remains to be accomplished, it's a huge and long and daunting list, especially as we look into the rest of the decade. The highest leverages that seem apparent to us now are all in the form of education. And I think we have to break down some of the traditional barriers. There's company, there's family, there's the educational system. These are walls. And I think to the extent we can change them, we will do better. For example, we have English language lessons on-site, at lunch, for our employees, where they can sit there and learn about the American culture and its language. That is more convenient than having to go to a university at night, leaving your kids at home.
We offer people free loans on computers, or low-cost loans, in order to get computers into their homes, so they can teach themselves these higher skills in the information-rich society, moving up, out of the ranks of their initial condition.
We also think it's essential to go out into the community by participation, by teaching, by getting involved, because our educational system is our future and it's also one of the serious limits that people feel. They can't be productive if they're sitting there wondering if their kids are on drugs or being properly educated or molested in the hallways. So there are walls to break down.
Overall, we're just one of many companies that I'm aware of who think this way and, more importantly, act this way. It's all in the acting. There is plenty of programs and projects. There is no real solution except acting. And the acting is as serious for us as it is as we think about our investors. We are accountable to our investors. They have supplied us valuable assets, their money, and they want to see a return on that. And so also have our employees. They have contributed their assets, their education and their skills, their desires and their energy. And together with them, we will obtain a return on that asset, not only for ourselves but also for the employee as we work forward -- no matter how long they stay with us because, after all, the bottom line is that employees are the bottom line. (Applause.)
THE PRESIDENT: You were pretty modest, but tell us how fast you are growing.
MR. GUILIANI: We have been tripling each year, and we're now the number two brand in America in powered brushes, and we're a major exporter into Europe and Japan, where our product is marvelously popular.
THE PRESIDENT: And how many employees do you have?
MR. GUILIANI: Three hundred.
THE PRESIDENT: We don't need to discuss this here, but one of things I would like to know from you, I sent a package of proposed pension reforms to Capitol Hill, basically designed to make it earlier for even smaller companies than yours to access the 401K program.
If you or any of the others out here, particularly from smaller businesses, have any suggestions about what else we can do to make this a more user-friendly option for companies, I would very much like to have it, because I think it's important. And there are things you can do that we have asked for Congress to support, and I believe that it has almost unanimous support, it's just a matter of time working it through. And one of the top three priorities of the White House Conference on Small Business -- that will make these things much more user-friendly for self-employed people, small businesses, and then also help people when they move from business to business to maintain the fund, even if they're unemployed for a period of time. So if you or any of the others here have any suggestions about what further improvements we can make in that, I would certainly like to have it.
MR. GUILIANI: I'm sure the SBA could do very well with some conferences and seminars with small businesses participating, because everybody sees the value of starting 401Ks early in the workers' life as well as the company's life.
THE PRESIDENT: That's the next question I -- you answered the next question. Do you believe -- then I just want to make it explicit -- do you think that the program is a little more accessible than some people know, and that more people would use it if they knew more about it? Do you agree with that?
Q We have no particular issues in setting it up quite early, I think when we were about a 100 people, probably.
Q Most of it is teaching people how to use it, understanding it.
Q Yes, it's the education process, I think.
Q Part of it is the name. Anything that has a 401K sounds like it's bad. (Laughter.)
Q It's very bureaucratic.
THE PRESIDENT: I wonder, before we take a brief break -- we're going to take about a -- I'm going to shorten the break, because we started a little late -- about a 20-minute break. Before we take a break, before we start the next panel, I wonder if anyone else in the audience would like to make a comment about any of the three topics that were discussed here. And if you would, would you please just identify yourself and say whatever is on your mind.
THE PRESIDENT: Let me ask before you sit down, why don't we just -- we'll take about 10 minutes here. There are at least two other companies whose representatives I see out here who have no-layoff policies. If you can say in a minute or two, I'd like for anybody who's here who can say in a minute or two, if you have a no-layoff policy, how you've been able to maintain it -- besides making a bunch of money.
And there is at least another company here that has had wide variations in their orders and has come up with some innovations in managing that problem to reduce layoffs. If you could just describe in a minute or two how you manage this problem, I'd -- we'll just start with you, sir, and then we'll go with anyone else who wants to talk for a minute.
THE PRESIDENT: Who would like to go next? Yes, sir. Go ahead.
THE PRESIDENT: So as things go down, they share the work that's available with the same number of workers?
Q That's right. And nobody gets laid off. Could I just add one thing about 401k's? They're great, but couldn't we raise the limit a little bit? People could invest a little more. (Applause.)
THE PRESIDENT: Thank you. You want to raise the limit. That's what you said? Okay. I'm told we're going to address some of this in the next panel, but I'll call on another person or two and then we'll break. Mr. Correnti (phonetic).
And answer this question right: You can only talk about -- you've got to talk about what you do in the down times as well as the up times, everybody. It's not fair to only talk about finding more business.
MR. CORRENTI: I'm John Correnti, with Newcore (phonetic) Corporation. And we have a saying that's called, "share the gain and share the pain." We're in the steel business. We manufacture steel. We have not laid an employee off or shut-down a plant in the past 23 years.
When times get tough, a recessionary period, we like to think we're the low-cost quality producer. So our employees have a saying, when the good Lord shuts the lights off, the last ton of steel is going to get shipped out of Newcore Corporation. But when times do get slow, we go to four-day work weeks, or we go to 3.5-day work weeks. Nobody is worried about their job, nobody is getting laid off. And when the employees have to share a little bit of the pain, I can assure you the management and the officers share some of the pain, too. They all take a pay cut. So the boat either rises and everyone goes up together, or when the boat sinks a little everybody sinks together.
And you sure develop a heck of a lot of employee loyalty and trust. We don't even measure our turnover in a Newcore plant, it's so minimal. You have to be willed a job in one of our established plants today. Thank you very much. (Laughter and applause.)
THE PRESIDENT: I can personally vouch for the truth of that last assertion. (Laughter.)
I think what we should do now is take a little break. I think the panelists were terrific, and I think that this is a very good panel. I can't wait for the next one. So I'm going to start -- it's now 1:15 p.m. -- I'm going to start at 1:35 p.m., in 20 minutes. We're adjourned briefly.
Give them all a hand. (Applause.)
END 1:20 P.M. EDT