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The buyout spree has created yet another powerful incentive for restructuring: fear of takeover. In many cases, corporations have fought off raiders only by buying up huge amounts of their own stock, and along the way accumulating huge amounts of debt. Once the threat has passed, firms have been forced to restructure to regain profitability. In other cases, they have slashed costs and boosted profitability precisely to keep their stock prices above the level at which they would attract bargain-hunting takeover sharks, who are likely to chop far more brutally and indiscriminately than the present managements. No less a titan than ITT warily shook off a takeover bid by Raider Irwin Jacobs in 1985. That effort gave renewed impetus to a slimming exercise already begun by ITT Chairman Rand Araskog. Since 1980, Araskog has sold off more than 100 businesses, and last year he cut ITT's work force by 100,000, or 44%, and slashed headquarters staff from about 850 to 350. Says Araskog: "Corporate executives have to learn to do things for themselves. Pick up the telephone if it rings. Draft their own memos."
The corporate fitness trend is cresting at a time when some Government officials have taken pointed aim at businessmen for their inefficient ways. Last November, Deputy Treasury Secretary Richard Darman stirred controversy when he used the terms bloated and corpocracy to describe the U.S. business hierarchy. Darman's epithets rebutted executives who blamed federal tax and budget policies for problems with U.S. competitiveness. Both Darman and other officials, however, acknowledge that Big Business is changing its ways. Robert Ortner, chief economist for the Commerce Department, acclaims the present restructuring efforts of corporate America as "amazing."
Amazing, perhaps, but like any radical surgery, however necessary, inevitably painful. The new leanness of U.S. business means, above all, a crackdown on heavy payrolls. A large portion of the layoffs from restructuring have taken place in manufacturing. From 1979 to 1986, total U.S. manufacturing employment declined from some 21 million jobs to 19.1 million. But partly because of this slimming down, U.S. manufacturing productivity -- hourly output -- has risen by an average of 3.8% annually over the past five years, compared with 1.5% in the '70s. But no such productivity improvement is yet evident outside of manufacturing. Says Treasury's Darman: "We have to make ourselves more efficient in the service sector."
High corporate rank has provided no immunity from the restructuring effort that has taken place so far. "The efficiency problem," Darman points out, "is a white-collar problem even more than a blue-collar problem." Between 1983 and 1987, some 600,000 to 1.2 million middle- and upper-level executives with annual salaries of $40,000 or more lost their jobs. An additional 200,000 to 300,000 such executives are expected to receive pink slips over the next two years.