Pride and Congressional Sausage-Making
In 1984 I was the senior vice-president in charge of all product pricing and finance functions related to insurance products sold to individual retail customers for Maccabees Mutual Life Insurance Company in Southfield, Michigan. Because I managed multiple functions and made many difficult decisions almost every day, I relied heavily on my faith in God for guidance and was driven by a determination to do the right thing.
A very important consideration in product pricing was the level of corporate income taxes that would be paid by the company—a cost that ultimately had to be covered in the price of products sold to consumers. For many years, there had been a dispute in the industry over what would be fair and equitable taxes for mutual insurance companies and stock insurance companies—companies with quite different structures. The dispute had triggered the formation of several industry committees and task forces to find a solution that was acceptable to both types of companies.In this complicated industry there is also a third category of nonprofit companies called fraternal benefit societies. Often set up by religious organizations to provide benefits to their members, these companies represent a very small percentage of the industry and are not subject to federal corporate income tax. However, a number of fraternal benefit societies have converted to mutual or stock insurance companies, which resulted in converting them into a tax-paying status. My company, Maccabees Mutual, fell into this category, as it had converted from a fraternal benefit society to a mutual company in March 1961.In 1984, Congress finally made a serious effort to resolve this difficult taxation issue and enacted comprehensive tax law changes that spelled out specifically how the new law would determine annual taxes for mutual versus stock insurance companies. In response, many company executives, feeling the proposed law imposed an onerous tax burden on mutual life insurance companies, launched major, ultimately fruitless, battles and lobbying efforts before resigning themselves to higher taxes.
Though I had an interest in the emerging tax law, I had not actually read the text of the proposed legislation; instead, I had relied on summaries provided by my staff and by industry analysts and consultants. I understood the technical details of the new tax calculations and was concerned about the added cost it would create for my company. But I was even more concerned about our ability to pass those costs on to consumers without significantly damaging our competitive position in the wider market.
By mid-1984, when the proposed tax law had been passed by Congress and was in the joint Senate and House conference committee process for finalization, I decided to read the original legislation. “Hold all my calls,” I told my assistant, as I carried the three-inch-thick printed draft into my office. “No interruptions for the whole afternoon.” I shut my door and began to read.
I read as slowly as was necessary to understand the lengthy legalese. I read with total concentration. And, to my surprise, after several hours of this, I suddenly discovered something amazing: a provision in the law providing relief from this surplus tax for any mutual company that had converted from a fraternal benefit society to a mutual company in 1950. I had been reading to understand our fate; it had never occurred to me that there might be some relief for my own company in this legislation.
But there was a catch. Although the logic for the exemption made sense, it applied only to a single company in the industry—in spite of the fact that there were twenty companies in the nation that had converted from fraternal benefit societies to mutual companies. This was obviously one of those special “pork-barrel” provisions pushed through by an influential congressman or senator to benefit a company in his or her district. This was my first personal encounter with such a law, and I prickled at the injustice of it.
Something had to be done! I grabbed the phone and called the chief tax officer at Maccabees. “Jerry,” I said, “is there any way this provision can be expanded to encompass all mutual companies that have previously converted from a fraternal benefit society?”
“Oh, Fred,” he said, sounding tired. “It’s way too late in the process to accomplish such a major change. The bill is already in conference committee!”
I was discouraged but not deterred. There had to be a way to do the right thing. Maccabees had no internal department of governmental affairs but it did have an external lobbyist. So I called him . . . only to receive the same response. “Isn’t there something you can do?” I pleaded.
“Fred,” he answered, “it really is too late but I’ll try contacting Representative Guy Vander Jagt’s office. I believe he’s a member of the conference committee and he’s from Michigan. But don’t get your hopes up; I suspect he will confirm that it’s too late.”
This was so unfair. Why had I not read the law earlier? I was embarrassed that I hadn’t, but my discouragement gave way to even greater determination to see that the right thing was done.
Even before hearing back from the lobbyist, I quickly formed a team at Maccabees to research all other mutual companies that had historically converted from a fraternal benefit society. “I’d like you to estimate the potential federal revenue loss if the pork-barrel provision of the legislation were expanded to apply to all such companies,” I told them.
In less than forty-eight hours, they identified all twenty companies and estimated potential lost revenues to be roughly $100 million per year. Although this number seemed large, it was actually extremely small in terms of total annual federal tax revenues. The team also determined the name of the company that was indirectly referenced in the existing “pork-barrel” provision and the name of the senator who successfully introduced the exemption on behalf of that company.
I personally called the top tax officers at all twenty of the other companies, and was I surprised at their response: none of them wanted to help in this effort; each was certain it was too late in the process to be successful; and many had already used up their political capital in lobbying for, or against, other provisions.
So I called the office of the senator who had introduced this provision. “Drop it if you know what’s good for you,” said the staff member I spoke to.
So this was the way Congress functions. It was disconcerting to say the least. And I was even more determined!
The research team I had assembled rapidly compiled materials making the theoretical case for similar tax relief for all twenty companies that had converted from fraternal benefit societies. Meanwhile, our lobbyist had contacted Rep. Vander Jagt who surprisingly agreed to review and consider introducing our data and analysis. “We need it yesterday!” he declared.
Fortunately the work was done and our lobbyist delivered it the next morning to Rep. Vander Jagt—who informed us we would now have to wait. Until the law was released in its final form, we would not know what, if any, changes had been made to the final language.
It wasn’t until a few weeks later that I received a copy of the final published law. Nervously I carried the thick book into my office, shut the door, and began to scour it for the appropriate section. There were at least two possible outcomes. The first—which seemed the most fair and appropriate—was for Congress to apply the exemption to all twenty similarly situated companies. If that were the outcome, I’d have accomplished my goal to do the right thing. The other possibility—not optimal, but certainly fairer than a single company’s exemption—was to remove the original pork-barrel provision altogether.
Imagine my shock, thrill . . . and upset . . . at an outcome I’d never even considered. There in the final language was a new qualification on the original pork-barrel exemption that I’d discovered: now it applied to “mutual companies that had converted from fraternal benefit societies in 1950 or in March of 1961.” Despite my determination to do the right thing, I had succeeded in achieving yet another pork-barrel provision for the benefit of my company and for Guy Vander Jagt’s constituents. We had received the same preferential treatment afforded to the original sponsoring senator.
I was in an emotional whirlpool. On one hand, I was exhilarated and proud that my company would benefit from millions of dollars in reduced taxes annually for years to come, but how quickly pride turned to embarrassment and shame; I felt I had done something inappropriate, if not sinful. In my efforts to do the right thing, I’d become the major agent of an injustice. Add to that the fact that my company—and even many of my peers in the industry—exalted me for this remarkable “achievement.”
What message was God sending me? I knew that my accomplishment would greatly enhance my career—but at what cost? Nothing was worth the inner turmoil and shame. If I had it to do over again, I’d push even harder. I would ensure equal treatment; I’d choose fairness over results that produced personal gain. Perhaps this was the message from God that I needed.
From then on, I watched out for business dealings that might be inconsistent with my underlying value system and ethics. I also caught myself often in moments of prideful egotism. I shared the story of the pork-barrel exemption often with many colleagues, friends, and employees, which gave me an opportunity to speak out against the unfair dealings in Congress. More importantly, however, it helped me emphasize the importance of humility in personal achievement and integrity in business—and that lesson was a positive testimony to many friends and colleagues.
Firsthand experience with the lawmaking process in Washington can be both enlightening and shocking. Plunged into the center of it, the greatest business success in my career came through a process that both embarrassed and astounded me. It also revealed my own inclination to experience sinful pride.
This difficult situation was so unlikely and such a long shot that I felt certain God was involved in its orchestration—not only for my benefit, but also for the benefit of thousands of Maccabees’ policyholders. However, my immediate reaction to this remarkable success, one of great pride, was quickly overcome by shame and guilt. The lasting message from God was to avoid pride, to be on the alert for unethical business dealings and practices, and to set an example for others by demonstrating ethical behavior and integrity in all of my dealings.
Do you occasionally get caught up in your own successes and demonstrate pride or even hubris? The Bible has literally hundreds of verses addressing the sin of pride. In most cases the emphasis is on the fact that pride leads us to feel superior and then to behave in an arrogant or condescending way to our fellow men and women. Think back on how often you have fallen into this trap.
It is appropriate to enjoy a sense of accomplishment, especially when we recognize and thank God for His role in producing results aligned with our own spiritual gifts and divine calling. Such actions and accomplishments please God—and, as Paul indicates in his second letter to the Corinthians, commendations from the Lord are far superior to commendations of self.