November 07, 2004|By JAY HANCOCK
THIS WAS going to be a column about how the $160 million haul to be gathered by top Rouse Co. executives for selling the company, assuming shareholders vote the deal through on Tuesday, violates all the tenets of visionary founder James W. Rouse.
Then I did some research.
We know that Jim Rouse was a religious man who transformed city landscapes and once drove an electric car. He founded a firm whose No. 1 stated mission was "to improve the physical environment and the quality of urban life" and whose No. 2 stated goal was "to provide continuing opportunities for personal growth and fulfillment for people working in the company."
Now the company is about to be sold. Many employees will probably lose their jobs. The No. 1 stated mission of the new owner, General Growth Properties, is "to provide increasing dividends and capital appreciation for our shareholders."
We can't ask Jim Rouse what he thinks of this, since he passed away in 1996. So I tried the next-best thing, communing with Rouse via his personal papers in an archive next to Columbia's Lake Kittamaqundi.
They contain the expected paeans to humankind, the aspersions on money as a motive, the promotion of a corporate "spirit of caring," as described in Rouse's valedictory speech as chief executive in 1979.
The proper priority for the bottom line, Rouse said, was "at the bottom," after the nation is bettered and employees are looked after. "It is when the bottom line is made the top line - the object of the enterprise - that business gets mixed up," he told assembled shareholders.
There are 1978 memos about minority promotion and "affirmative action," and impassioned letters and speeches opposing the Vietnam War.
But I also found evidence that Rouse knew return on capital was important, that he recognized minority shareholders had rights and that his appreciation for this grew over time. And he came to believe that giving executives big stakes in the company was part of looking after shareholders.
A 1957 prospectus selling convertible debt in what would become Rouse Co. makes no mention of transforming the world. Instead, it notes that "the automobile population has increased at an even more rapid pace" than birthrates and that money can be made building suburban shopping centers.
While the Rouse corporate goals of 1970 barely mentioned profits, and then only as a side effect of "creativity," by the time Rouse stepped down as CEO nine years later the mission included this No. 3 bullet point: "To increase earnings at a rate sufficient to provide adequate rewards to our stockholders. ..." This came after a stretch in which Rouse sometimes didn't have earnings, the stock sank to $1.50 and the company laid off employees, according to Joshua Olsen's biography.
To reverse the slide, Jim Rouse anointed a young lawyer named Matt DeVito as CEO heir and decided to pay him an enormous sum. In 1976 DeVito got a forgivable loan to buy $500,000 in Rouse stock, papers show. That's $1.7 million in today's dollars - not much for CEO boodle - but it was huge in those days.
It was "my idea," Jim Rouse told The Wall Street Journal. Then the place erupted.
"I was shocked and dismayed," wrote one shareholder, whose angry letter, apparently annotated by Rouse, is one of many in the archives.
"The compensation of various kinds often made available nowadays is beyond reason," wrote another, who suggested that "the normal American conscience ought to motivate Mr. DeVito very fully."
An employee wanted to know how boss bonuses could be justified "since the company terminated all forms of bonus to its working people."
The complaints foreshadow the strife over executive pay that expanded with the size of CEO spoils in the next three decades. To employees, Rouse responded, somewhat disingenuously, that "the arrangement with Matt was not for increased compensation but to make him a significant shareholder in the company."
To the Journal he added: "It takes the initiative and enterprise of someone with a significant stake in the business to effectively run a real estate company" - a claim that senior Rouse executives, whose payoffs from the General Growth merger derive largely from stock and option stakes, reiterate today.
For better or worse, Jim Rouse was a pioneer in big-time executive pay, too.
