When America Does Work

The Cabletron Success Story

The 1980s was the decade of golden parachutes. Top executives in corporations like Time Warner paid themselves millions of dollars . . . while the company’s financial ground crumbled beneath them.

It was enough to give capitalism a bad name. As a result, President Clinton is considering reform measures that would cap the amount of money a company can deduct as a business expense for executive salaries.

This is a vivid example of the way government increases external controls when we allow internal moral controls to erode: when business executives put personal gain before the welfare of the company and shareholders.

But there still are companies that illustrate honest work at its best. Consider Cabletron, America’s fastest-growing computer equipment manufacturer. Cabletron is being hailed as the wonder company of the nineties. The company started out less than 10 years ago in a garage. Since then its stock has risen from about $15 to over $100 per share.

What’s the secret to Cabletron’s success? Only the classic Christian virtues of thrift, hard work, and concern for employees. At Cabletron, all the offices are small cubicles, frugally furnished with scratched metal desks. Executives can holler across the hall to each other. The company has no sit-down conference rooms. None. When a group has to meet, everybody stands—which has the effect of keeping most meetings down to about 20 minutes.

Cabletron sets strict limits on travel expenses. If an employee books a hotel room for more than $70 a night, he pays the difference out of his own pocket. That includes executives.

Speaking of executives, the average salary for top executives in the computer industry is $300,000 a year plus bonuses. But at Cabletron, the president and the CEO earn $52,000, with no bonuses. Most of their income comes from shares in the company, which ties their fortunes directly to the company’s success or failure.

No golden parachutes here.

The system obviously works well. Money magazine lists Cabletron as the number one company in the nation. Business Week calls it “the hottest of all growth companies.”

Cabletron hasn’t forgotten its employees, either. When the company went public a few years ago, it gave more than 600,000 shares of stock to its employees. Dedicated employees call themselves “Cabletronians.”

In my book Why America Doesn’t Work, I argue that economic productivity depends ultimately on a restoration of the Protestant work ethic. Work is the natural arena for expressing a whole range of biblical virtues: things like thrift, creativity, self-discipline, serving others.

The backbone of the economy is not government programs or incentives. It’s personal character. The thrift to use old, dented steel desks. The moral responsibility not to abscond with company money in the form of golden parachutes. Generosity toward employees.

Businessmen who fail to cultivate these virtues have only themselves to blame when the name of capitalism is blackened—and when government imposes standards and controls in the name of reform.

In any area of life, if we fail to govern ourselves, we invite others to govern us. At the cost of the loss of our freedoms.


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