March 4, 2001 

Gipper Meets 'Survivor' as G.E.'s Image Hardens

 

By KIRK JOHNSON

 

G. Paul Burnett/ The New York Times In December, demonstrators in Saratoga Springs, N.Y., showed support for dredging. G.E. has spent millions fighting it. G.E. has mounted an aggressive advertising campaign over the last year to fight plans by the federal government to dredge the Hudson River near Albany. The E.P.A. has proposed a $460 million plan to remove the river's pollution at G.E.'s expense. Reagan Presidential Library Ronald Reagan was the genial face of G.E. when ``General Electric Theater'' was on TV. ``Now they're tough in all the areas it's fashionable to be tough in,'' one analyst said, noting G.E.'s ads against dredging on the Hudson.

ne of the more upbeat theories of postmodern capitalism is that nice companies will eventually finish first. In a market of instant information, where perception and image are increasingly linked to stock prices, investors will reward the environmentally green and the socially conscious because such companies have fewer potential liabilities, or so the thinking goes. 

But the nice-guy theory is getting a major test in upstate New York, where General Electric is waging a vehement, line-in-the- sand battle against dredging the Hudson River to remove the PCB's that its factories leaked or dumped into the water in the decades after World War II. 

Environmentalists, economists and stock market experts say that as the company has poured tens of millions of dollars into a campaign of television infomercials, billboards and lobbying over the last year, an argument about the future of the river has increasingly mutated into an argument about G.E. itself. The messenger has become the message. Whether the federal Environmental Protection Agency's proposed $460 million dredging plan to remove the river's pollution at G.E.'s expense is the right scientific answer has become a battle instead over which side to trust.

And that in turn presents a whole series of questions, not only for the local residents who are being bombarded with sound-bites about E.P.A. high-handedness and river hydrology, but for the legions of investors who for years on end have worshiped the company and its chief executive, John F. Welch Jr. Last month, G.E. was declared the most admired corporation in the world for the fourth year in a row by Fortune magazine.

Is there a point at which G.E.'s Hudson strategy backfires and becomes an environmental liability? Is G.E.'s dismissive tone about the federal government a mark of arrogance, as critics suggest, or the righteousness of a just cause in the face of a dictatorial federal bureaucracy, as company officials claim? 

Perhaps most crucially, what does the campaign say about its intended audience? What, in the end, do Americans really admire — the stand-up citizen who admits responsibility and takes a poke in the eye, or the win-at- any-cost competitor? Do people want the most decent person in the Australian outback to win a million dollars, or the most cunning?

Some experts on corporate behavior and the environment say the most revealing thing about the Hudson- G.E. fight is that it could occur at all.

"It's a testament to how much times have changed that a company can even float a campaign like this," said Andrew J. Hoffman, a professor of management at Boston University who has studied the frontier of business and the environment. In the early days of environmental regulation, Professor Hoffman said, corporate public relations efforts mostly focused on damage control — like Exxon's strategy after the Valdez oil spill or Union Carbide's after the chemical disaster in Bhopal, India.

A proactive campaign like G.E.'s, charging that the environmental regulators are simply wrong, incompetent or politically motivated, shows not only how much more complex environmental issues have become, he said, but also how much the power bases have shifted. Fewer people believe the government has all the answers, and corporations have charged in to fill the gap.

General Electric used polychlorinated biphenyls for nearly three decades at two factories in the towns of Hudson Falls and Fort Edward. An estimated 1.3 million pounds of PCB's, oily chemicals that were later linked to cancer in humans and various problems in wildlife, leaked or were discharged into the river. Most of it is gone, E.P.A. officials say — absorbed into the tissues of fish, animals and people, or washed out to sea. The government's plan, announced in December, would try to recover about 100,000 pounds of PCB's from the most polluted hot spots along a 40-mile stretch north of Albany. 

The company's counterattack to dredging — on which it has spent by some estimates $60 million or more over the last year in the Albany media market alone — is stark and stylistically striking. The G.E. spokesmen are invariably tieless and looking relaxed, often before an inviting river backdrop. Everyone looks windblown and outdoorsy — at home in the natural world. 

Film clips of E.P.A. officials, by contrast, especially the former administrator, Carol M. Browner, show her standing awkwardly at a lectern, with the clear suggestion that she is a woman of the indoors — or worse, a Washington insider. Harsh, metallic background music that sounds like something from the movie "Hannibal" surges up whenever a clip is shown of an E.P.A. dredging site. Even city buses in Albany now carry anti-dredging billboards. 

General Electric's vice president for corporate communications, Beth Comstock, said that G.E.'s strategy was simply to educate. The company's scientific inquiries have shown the E.P.A.'s dredging plan to be ill conceived and potentially disastrous for the Hudson's ecosystem and the local economy, Ms. Comstock said, and G.E. has an obligation to make sure residents are informed of that. Under the E.P.A.'s rules, the government must consider local opinion in the area of any proposed environmental remediation — a comment period that in the Hudson case runs through mid-April.

The fight is not about saving the company half a billion dollars, Ms. Comstock said. "The easiest thing in the world would be for G.E. to write a check, but that's not what this is about; it's about finding the right answer for the river. People admire G.E. because we're willing to fight for what we believe in."

Stock market analysts say that for now G.E. seems to be suffering not at all for its defiance.

"Those appreciative of G.E. tend to be appreciative of Jack Welch's hard-charging style," said James N. Kelleher, a senior analyst at Argus Research in New York. "G.E.'s aggressive brand of capitalism and unwillingness to kowtow to environmentalists may not be winning them any enemies in the investment community, and may be winning them some adherents."

But there are also some subtle indications that what had been a kind of fire wall within G.E.'s image — investors cheering on one side, environmentalists booing on the other — may be eroding a little. Last year, a resolution put to the company's shareholders by a coalition of religious groups asking G.E. to give a full report of how much it was spending on media and lobbying drew more than 8 percent of all votes cast. That was nearly three times the number needed to keep the resolution alive for presentation a second year. And in February, a column in Fortune magazine — in the same issue crowning the company as most admired — forcefully called on G.E. to "just do it," and announce a cleanup of the river.

Sociologists and other researchers who study corporate behavior say that G.E. has long been a mirror for American society, because so much of its culture has been bound up in the presentation and cultivation of its own image. In the 1950's, for example, when Ronald Reagan became G.E.'s front man and "General Electric Theater" was the company's national television platform, G.E. was paternal and competent, an unflappable commander just back from the war, said Peter D. Kinder, the president of Kinder, Lydenberg, Domini & Company, a Boston-based firm that does social research for institutional investors. But beginning in the 1980's and 1990's, he added, a different ethos emerged in America, and at General Electric.

"Now they're tough in all the areas it's fashionable to be tough in," Mr. Kinder said. And while he stressed that G.E. failed most of his tests to qualify as a socially responsible investment, he confessed to a certain admiration for its "They're brilliant," he said.

Some experts on science and economics say that part of the backdrop of G.E.'s fight is that environmentalism itself has changed. The anti- establishment, anti-business youth culture groups that put together the first Earth Day in 1970 have in many cases become powerful and well-financed environmental lobbying organizations. Many corporations, meanwhile, have seen that environmentalism can be good for business, and have actively marketed themselves as ecologically correct pillars of hardheaded real world expertise.

Instead of passively embracing the values of environmentalism, some business researchers say, companies are redefining what it means to be green at all. In the same way that many once-radical environmentalists of the street were tamed, so too were anti-environmentalists of the boardroom.

What has not changed, at least at the E.P.A., is the idea that rational science will carry the day. The agency's mission on the Hudson, a spokeswoman said, is not to manipulate public opinion, or use emotion on the river's behalf, but rather to put forward the best evidence available and trust in the intelligence of the public.

"We are not out there to sell this like a can of soup," said Ann C. Rychlenski, a spokeswoman for the agency.