Profits vs. PC

A Silicon Valley CEO says no to boardroom quotas-on moral grounds

When T.J. Rodgers's assistant called me a few months ago to make sure REASON would have no objection to his using our trademark "free minds and free markets" in a letter he was sending to Cypress Semiconductor shareholders, I had no inkling of the impact that letter would have.

The founder and CEO of Cypress, T.J. is a powerfully persuasive writer, someone REASON has been pleased to publish over the years. And though he never strays from logic and data, he is particularly powerful when he's mad.

This time he was very, very mad. T.J. eats, sleeps, lives, and breathes Cypress--it is both his baby and his alter ego--and he hates being bossed around. When he got a rubber-stamped form letter from Sister Doris Gormley, stating that the order she represents would vote against the Cypress board--including T.J. Rodgers--because the board lacks women or minority members, he went ballistic: Cypress was, he believed, under attack from a know-nothing with a coercive political agenda. As The Wall Street Journal would later report, he was so pumped up that he recorded the first draft of his reply on his drive home, clamping his teeth down on the microcassette recorder when he had to change gears. He left teeth marks.

Sister Gormley got the letter and so did all Cypress shareholders. And the replies started pouring in, hundreds of them, almost all supportive. Then the Journal ran a page-one article on the subject, and T.J. got hundreds more letters. We reproduce here the original letter, along with an article by T.J. Rodgers on how it came to be and what happened next. (Readers who want to read more of Rodgers can check out his letter on immigration on REASON's Web page, http://www.reasonmag.com, under "the latest.")

                           -Virginia I. Postrel

The Letter

May 23, 1996

Doris Gormley, OSF
Director, Corporate Social Responsibility
The Sisters of St. Francis of Philadelphia
Our Lady of Angels Convent - Glen Riddle
Aston, PA 19014

Dear Sister Gormley:

Thank you for your letter criticizing the lack of racial and gender diversity of Cypress's Board of Directors. I received the same letter from you last year. I will reiterate the management arguments opposing your position. Then I will provide the philosophical basis behind our rejection of the operating principles espoused in your letter, which we believe to be not only unsound, but even immoral, by a definition of that term I will present.

The semiconductor business is a tough one with significant competition from the Japanese, Taiwanese, and Koreans. There have been more corporate casualties than survivors. For that reason, our Board of Directors is not a ceremonial watchdog, but a critical management function. The essential criteria for Cypress board membership are as follows:

? Experience as a CEO of an important technology company.

? Direct expertise in the semiconductor business based on education and management experience.

? Direct experience in the management of a company that buys from the semiconductor industry.

A search based on these criteria usually yields a male who is 50-plus years old, has a Masters degree in an engineering science, and has moved up the managerial ladder to the top spot in one or more corporations. Unfortunately, there are currently few minorities and almost no women who chose to be engineering graduate students 30 years ago. (That picture will be dramatically different in 10 years, due to the greater diversification of graduate students in the '80s.) Bluntly stated, a "woman's view" on how to run our semiconductor company does not help us, unless that woman has an advanced technical degree and experience as a CEO. I do realize there are other industries in which the last statement does not hold true. We would quickly embrace the opportunity to include any woman or minority person who could help us as a director, because we pursue talent--and we don't care in what package that talent comes.

I believe that placing arbitrary racial or gender quotas on corporate boards is fundamentally wrong. Therefore, not only does Cypress not meet your requirements for boardroom diversification, but we are unlikely to, because it is very difficult to find qualified directors, let alone directors that also meet investors' racial and gender preferences.

I infer that your concept of corporate "morality" contains in it the requirement to appoint a Board of Directors with, in your words, "equality of sexes, races, and ethnic groups." I am unaware of any Christian requirements for corporate boards; your views seem more accurately described as "politically correct," than "Christian."

My views aside, your requirements are--in effect--immoral. By "immoral," I mean "causing harm to people," a fundamental wrong. Here's why:

? I presume you believe your organization does good work and that the people who spend their careers in its service deserve to retire with the necessities of life assured. If your investment in Cypress is intended for that purpose, I can tell you that each of the retired Sisters of St. Francis would suffer if I were forced to run Cypress on anything but a profit-making basis. The retirement plans of thousands of other people also depend on Cypress stock--$1.2 billion worth of stock--owned directly by investors or through mutual funds, pension funds, 401(k) programs, and insurance companies. Recently, a fellow 1970 Dartmouth classmate wrote to say that his son's college fund ("Dartmouth. Class of 2014," he writes) owns Cypress stock. Any choice I would make to jeopardize retirees and other investors from achieving their lifetime goals would be fundamentally wrong.

? Consider charitable donations. When the U.S. economy shrinks, the dollars available to charity shrink faster, including those dollars earmarked for the Sisters of St. Francis. If all companies in the U.S. were forced to operate according to some arbitrary social agenda, rather than for profit, all American companies would operate at a disadvantage to their foreign competitors, all Americans would become less well off (some laid off), and charitable giving would decline precipitously. Making Americans poorer and reducing charitable giving in order to force companies to follow an arbitrary social agenda is fundamentally wrong.

? A final point with which you will undoubtedly disagree: Electing people to corporate boards based on racial preferences is demeaning to the very board members placed under such conditions, and unfair to people who are qualified. A prominent friend of mine hired a partner who is a brilliant, black Ph.D. from Berkeley. The woman is constantly insulted by being asked if she got her job because of preferences; the system that creates that institutionalized insult is fundamentally wrong.

Finally, you ought to get down from your moral high horse. Your form letter signed with a stamped signature does not allow for the possibility that a CEO could run a company morally and disagree with your position. You have voted against me and the other directors of the company, which is your right as a shareholder. But here is a synopsis of what you voted against:

? Employee ownership. Every employee of Cypress is a shareholder and every employee of Cypress--including the lowest-paid--receives new Cypress stock options every year, a policy that sets us apart even from other Silicon Valley companies.

? Excellent pay. Our employees in San Jose averaged $78,741 in salary and benefits in 1995. (That figure excludes my salary and that of Cypress's vice presidents; it's what "the workers" really get.)

? A significant boost to our economy. In 1995, our company paid out $150 million to its employees. That money did a lot of good: it bought a lot of houses, cars, movie tickets, eyeglasses, and college educations.

? A flexible health-care program. A Cypress-paid health-care budget is granted to all employees to secure the health-care options they want, including medical, dental, and eye care, as well as different life insurance policies.

? Personal computers. Cypress pays for half of home computers (up to $ 1,200) for all employees.

? Employee education. We pay for our employees to go back to school, and we offer dozens of internal courses.

? Paid time off. In addition to vacation and holidays, each Cypress employee can schedule paid time off for personal reasons.

? Profit sharing. Cypress shares its profits with its employees. In 1995, profit sharing added up to $5,000 per employee, given in equal shares, regardless of rank or salary. That was a 22% bonus for an employee earning $22,932 per year, the taxable salary of our lowest-paid San Jose employee.

? Charitable work. Cypress supports Silicon Valley. We support the Second Harvest Food Bank (food for the poor), the largest food bank in the United States. I was chairman of the 1993 food drive, and Cypress has won the food-giving title three years running. (Last year, we were credited with 354,131 pounds of food, or 454 pounds per employee, a record.) We also give to the Valley Medical Center, our Santa Clara-based public hospital, which accepts all patients without a "VISA check."

Those are some of the policies of the Board of Directors you voted against. I believe you should support management teams that hold our values and have the courage to put them into practice.

So, that's my reply. Choosing a Board of Directors based on race and gender is a lousy way to run a company. Cypress will never do it. Furthermore, we will never be pressured into it, because bowing to well-meaning, special-interest groups is an immoral way to run a company, given all the people it would hurt. We simply cannot allow arbitrary rules to be forced on us by organizations that lack business expertise. I would rather be labeled as a person who is unkind to religious groups than as a coward who harms his employees and investors by mindlessly following high-sounding, but false, standards of right and wrong.

You may think this letter is too tough a response to a shareholder organization voting its conscience. But the political pressure to be what is euphemized as a "responsible corporation" today is so great that it literally threatens the well being of every American. Let me explain why.

In addition to your focus on the racial and gender equality of board representation, other investors have their pet issues; for example, whether or not a company:

? is "green," or environmentally conscious.

? does or does not do business with certain countries or groups of people.

? supplies the U.S. Armed Forces.

? is "involved in the community" in appropriate ways.

? pays its CEO too much compared with its lowest-paid employee.

? pays its CEO too much as declared by self-appointed "industry watchdogs."

? gives to certain charities.

? is willing to consider layoffs when the company is losing money.

? is willing to consider layoffs to streamline its organization (so-called downsizing).

? has a retirement plan.

? pays for all or part of a health-care plan.

? budgets a certain minimum percentage of payroll costs for employee training.

? places employees on its Board of Directors (you forgot this one).

? shares its profits with employees.

We believe Cypress has an excellent record on these issues. But that's because it's the way we choose to run the business for ourselves and our shareholders--not because we run the business according to the mandates of special-interest groups. Other companies, perhaps those in older industries just trying to hold on to jobs, might find the choices our company makes devastating to their businesses and, consequently, their employees. No one set of choices could be correct for all companies. Indeed, it would be impossible for any company to accede to all of the special interests, because they are often in conflict with one another. For example, Cypress won a San Jose Mayor's Environmental Award for water conservation. Our waste water from the Minnesota plant is so clean we are permitted to put it directly into a lake teeming with wildlife. (A game warden station is the next door neighbor to that plant.) Those facts might qualify us as a "green" company, but some investors would claim the opposite because we adamantly oppose wasteful, government-mandated, ridesharing programs and believe that car-pool lanes waste the time of the finest minds in Silicon Valley by creating government-inflicted traffic jams--while increasing pollution, not decreasing it, as claimed by some self-declared "environmentalists."

The May 13, 1996 issue of Fortune magazine analyzed the "ethical mutual funds" which invest with a social-issues agenda, and currently control $639 billion in investments. Those funds produced an 18.2% return in the last 12 months, while the S&P 500 returned 27.2%. The investors in those funds thus lost 9% of $639 billion, or $57.5 billion in one year, because they invested on a social-issues basis. Furthermore, their loss was not simply someone else's gain; the money literally vanished from our economy, making every American poorer. That's a lot of houses, food, and college educations that were lost to the "higher good" of various causes. What absurd logic would contend that Americans should be harmed by "good ethics"?

Despite our disagreement on the issues, The Sisters of St. Francis, the ethical funds, and their investors are merely making free choices on how to invest. What really worries me is the current election-year frenzy in Washington to institutionalize "good ethics" by making them law--a move that would mandate widespread corporate mismanagement. The "corporate responsibility" concepts promoted by Labor Secretary Reich and Senator Kennedy make great TV sound bites, but if they were put into practice, it would be a disaster for American business that would dwarf the $57 billion lost by the inept investment strategy of the "ethical funds." And that disaster would translate into lost jobs and lost wages for all Americans, a fundamental wrong.

One Senate proposal for "responsible corporations," as outlined in the February 26 issue of Business Week, would grant a low federal tax rate of 11% to "responsible corporations," and saddle all other companies with an 18% rate. One seemingly innocuous requirement for a "responsible corporation," as proposed by Senators Bingaman and Daschle, would limit the pay of a "responsible" CEO to no more than 50 times the company's lowest-paid, full-time employee. To mandate that a "responsible corporation" would have to limit the pay of its CEO is the perfect, no-lose, election-year issue. The rule would be viewed as the right thing to do by voters who distrust and dislike free markets, and as a don't-care issue by the rest. But the following analysis of this proposal underscores the fact that the simplistic solutions fashioned by politicians to provoke fear and anger against America's businesses often sound reasonable--while being fundamentally wrong.

Consider the folly of the CEO pay limit as it applies to Intel: the biggest semiconductor company in the world, the leader of America's return to market dominance in semiconductors, the good corporate citizen, the provider of 45,325 very high-quality jobs, the inventor of the random-access memory, the inventor of the microprocessor, and the manufacturer of the "brains" of 80% of the world's personal computers. Suppose that Intel's lowest-paid trainee earns $15,000 per year. The 50 to 1 CEO salary rule would mandate that the salary of Intel's co-founder and CEO, Andy Grove, could be no more than $750,000. Otherwise, Intel would face a federal tax rate of 18% rather than 11%. Last year, Andy Grove earned $2,756,700, well over that $750,000 limit, and Intel's pretax earnings were $5.6 billion. Seven percentage points on Intel's tax rate translates into a whopping $395 million tax penalty for Intel. Consequently, the practical meaning of this "responsible corporation" law to Intel would be this gun-to-the-head proposition: "Either cut the pay of your Chief Executive Officer by a factor of four from $2,756,700 to $750,000, or pay the federal government an extra $395 million in taxes."

The Bingaman-Daschle proposal would limit the pay of the CEO of the world's most important semiconductor company to less than that of a second-string quarterback in the NFL! That absurd result is not about "responsible corporations," but about two leftist senators, out of touch with reality, making political hay, causing harm, and labeling it "good." Their plan is particularly immoral in that it would cause the losses inherent in practicing their newly invented false moral standard to fall upon all investors in American companies, even though the government itself had not invested in those companies.

Meanwhile, my current salary multiple of 25 to 1 relative to our lowest-paid employee would qualify Cypress as a "responsible corporation," only because we are younger and not yet as successful as Intel--a fact reflected by my lower pay. If Cypress had created as much wealth and as many jobs as Intel, and if my compensation were higher for that reason, then, according to the amazingly perverse logic of the "responsible corporation," Cypress would be moved from the "responsible" to the "irresponsible" category for having been more successful and for having created more jobs! A final point: Why should either Intel or Cypress, both companies making 30% pre-tax profit, be offered a special tax break by the very politicians who would move on to the next press conference to complain about "corporate welfare?"

How long will it be before Senators Kennedy, Bingaman, and Daschle hold hearings on "irresponsible corporations" that pay tens of millions of dollars to professional athletes? Or are athletes a "protected group," leaving CEOs as their sole target? If not, which Senate Subcommittee will determine the "responsible" pay level for a good CEO with 30% pre-tax profit, as compared to a good pitcher with 1.05 earned run average? These questions highlight the absurdity of trying to replace free market pricing with the responsible-corporation claptrap proposed by Bingaman, Daschle, Kennedy, and Reich.

In conclusion, please consider these two points: First, Cypress is run under a set of carefully considered moral principles, which rightly include making a profit as a primary objective. Second, there is a fundamental difference between your organization's right to vote its conscience and the use of coercion by the federal government to force arbitrary "corporate responsibilities" on America's businesses and shareholders.

Cypress stands for personal and economic freedom, for free minds and free markets, a position irrevocably in opposition to the immoral attempt by coercive utopians to mandate even more government control over America's economy. With regard to our shareholders who exercise their right to vote according to a social agenda, we suggest that they reconsider whether or not their strategy will do net good-after all of the real costs are considered.

Sincerely,

T. J. Rodgers
President CEO

Real Corporate Responsibility

Silicon Valley is an extraordinarily apolitical place. The simple fact is that we don't much care about Washington. The city is filled with wealth takers who redistribute taxes with the pork-barrel process, their surest route to re-election. On the other physical and intellectual side of the continent, in Silicon Valley, people turn their brainpower into billions of dollars of revenue and profit. They voluntarily work long hours to prevail in the intense technology free market competition that has changed the world, and they enjoy the true self-esteem that comes from competence and hard work, not as a gift from anyone else.

Despite my desire to focus on business, I testify about once a year before a Senate or House committee, but I don't make the 13-hour round trip to Washington to provide six minutes of sound-bite testimony just to improve government. I only travel to Washington when Congress is considering some "good idea" that is so potentially devastating to our company and shareholders that I cannot afford to stay home.

One recent political assault focused on legal immigrants, who represent 40 percent of our R&D staff and 40 percent of our executive staff. Sen. Alan Simpson (R-Wyo.) proposed to force legal immigrants who had just received college degrees in America back to their home countries for three years. Think about it: forcing legal immigrants, who make up 55 percent of recent advanced-degree recipients, to leave the country so they can compete against the country that educated them!

Unfortunately, another "good idea" is circulating in Washington these days. "Socially responsible corporation" legislation sounds innocuous, but it has the potential to do great harm to American companies. This is not a Beltway sideshow: Deputy Democratic Whip Jeff Bingaman (D-N.M.) leads the effort.

The first such legislation to make it into bill form comes from Sen. Byron Dorgan (D-N.D.). His right-sounding concept: American companies should not fire American workers and export their jobs offshore. Dorgan's "good idea" provides a justification for the federal government to step in and manage yet another aspect of American business. Under his proposal, any American corporation owning a foreign subsidiary will be charged an incremental punitive tax on that operation if it re-imports more than 10 percent of the subsidiary's output back to the United States. The idea is to discourage exporting American jobs. Like most government meddling, however, the concept falls apart as soon as it is moved from the ceiling of the Sistine Chapel and brought down to the real world.

Almost all American and Japanese semiconductor companies mold their chips in a protective plastic coating (assembly) and do their final testing in such Far Eastern countries as Thailand, Malaysia, and Indonesia. That's because the assembly and test operations in chip manufacturing are low-tech and extremely labor intensive, and, therefore, best performed where the labor rates are less than a dollar an hour. Most American companies manufacture a majority of their chips in the United States, because the chip-making job is difficult and adds tremendous value, easily justifying the $9.00 to $25 hourly wage of our clean-room workers. The most common manufacturing flow for made-in-America chips is processing in the South or West (Texas, Arizona, New Mexico, or California), export to the parent's offshore subsidiary for packaging and testing (a seven-day operation costing on the order of 25 cents), and, in a final step, re-importing the chips back to the United States for shipment. We therefore reimport much more than 10 percent of our subsidiary's output-because we want our chips back!

Our assembly and testing facility in Manila is across the street from a similar Japanese plant. If the Dorgan initiative becomes law, we would be taxed punitively; the Japanese would not. This is another example of what Milton Friedman calls the "invisible foot" of government--an ostensibly good idea that produces the opposite of its intended effect.

For a Silicon Valley CEO who has no political ambitions, no staff to implement political initiatives, no lobbyists, and no history of significant political contributions, the best way to prevent bad ideas from becoming bad laws is to tell legislators face to face that their idea is a big mistake and prove it with an indisputable argument. For example, a CEO might give this congressional testimony:

"Sen. Dorgan, have you considered the fact that your punitive tax on the foreign subsidiaries of American corporations will damage virtually every company in the semiconductor industry, making our companies less competitive relative to Japan and putting Americans out of work? Let me explain…."

Since most of the laws enabling social engineering are designed in a vacuum by Washingtonians detached from the realities of the marketplace, the most effective attack is to describe what's crushed--and whom--beneath the "invisible foot." Strangely, in the six minutes allowed for testimony, power changes hands. Real-world reason prevails over political platitudes. Having given politicians nothing and having asked nothing from them, an apolitical CEO can be a handful to deal with, especially if he or she is angry, loaded with facts, and prepared to use phrases such as "profoundly ignorant." The testimony cannot change the votes of socialists who want to regulate more, or the votes of the free marketeers who are always on our side, but it can scare the hell out of the undecided middle-politicians who know potential bad press when they see it.

Thus, to prevent social engineering from becoming counterproductive law, a CEO must have a well-reasoned argument that stands up to logical and factual scrutiny; enough interest from the press to convince Congress that it will have to take responsibility for its vote; and an invitation to testify. The invitation is usually extended to experts who have taken a strong public position on the issue in question.

Taking on the Nuns

Back in May, after reading about Dorgan's bill, I decided to write an op-ed piece on corporate responsibility. Since I deal only with issues that are potentially harmful to our company and our shareholders, I usually write op-eds in the form of a letter to our shareholders. Then, frequently, I modify the article for outside publication. The problem with that strategy on the issue of "social responsibility" legislation was that Dorgan's bill is a dry tome that has received little publicity, except for some White House hype coming from Clinton's day of praising do-good corporations.

Then, I had a stroke of luck: a form letter from Sister Doris Gormley, the director of social responsibility for the Sisters of St. Francis, an order in Philadelphia. The letter announced that the order, as a shareholder, had withheld its vote for me and our other directors because Sister Gormley had inferred from reading our proxy that we had no women or minorities on our five-person board. The good sister lectured further that it was obviously better to run a company with a diverse group representative of the population at large.

The opportunity that presented itself was to write the op-ed as a letter to Sister Gormley, explaining to a person who obviously meant well why she would harm people, not help them. The letter, which bluntly stated why I thought her requirements were immoral, attracted a flood of attention. The Wall Street Journal interviewed Sister Gormley and me, and published a front-page article. Our shareholders distributed copies of the letter to like-minded associates, and Cypress put it on the Internet. By early August, we had received more than 600 replies, 91 percent of them favorable, as shown in the chart below. The pro and con replies alike are intense and eloquent. I have selected quotes to describe the major themes that emerged.

The Response

The largest category of respondents, Cypress shareholders, favored 96 percent to 4 percent our decision to safeguard their investments (maximize profit) as a top priority. Some wrote to thank me for expanding shareholder value, while others emphasized that their interests as shareholders must be my primary focus.

"I have no idea what Cypress does, but I told my broker to buy 100 shares because of your action," and "This is where I want my money," were two of the comments I received. "I use the letter along with my annual report when I recommend your stock," noted the vice president of a major East Coast brokerage. Waxing philosophical, a small investor from New Mexico observed, "It seems the liberal-dominated media continue to push us further and further towards the society of Ayn Rand's Atlas Shrugged, and your position stands out as one of the few against the downward slide."

Chief executives from a broad range of large- and mid-sized companies supported by a 54-to-1 margin my refusal to compromise on running Cypress as a business. Several, including the head of a multibillion-dollar New York investment bank, sent me their own stories of run-ins with social engineers, while the head of a major technology company in Silicon Valley called to say that he had just received a letter from Sister Gormley herself. "It's way past time for people to do the correct thing, as you did, instead of the politically correct thing," said the chairman of a Texas construction machinery firm. The CEOs of a $200 million auto-parts retailer in Florida, a $200 million California bio-pharmaceutical company, and two multibillion-dollar semiconductor firms distributed copies of my letter to their staffs.

Twenty-eight male and two female small-business owners were unanimous in their desire to keep meddlers out of their companies. "As a former government employee, I have witnessed firsthand the demoralizing effect of institutionalized hiring of incompetent individuals in the name of racial or gender equality….Your comments are a brave volley in the war for sensibility," wrote the owner of a California transportation company. "You can't imagine" the business and personal penalties of veering from the politically correct line, added the principal of a public relations firm in Washington, D.C. "When the parents of one of my son's playmates found out that one of my clients was the National Rifle Association, the boy was prohibited by his parents from playing with my son."

A vice president of a South Carolina advertising firm put it best: "As a partner in a business whose majority owner is a woman, I am certainly aware of the need for opportunities for all people, but qualifying directors or employees by race and gender is not the answer."

Politicians and policy analysts wrote 12-to-0 to express support. "It strikes me that many in politics who seek to be recognized as purists on the issue of political correctness lose sight of the fundamental basis of American society, the free enterprise system," argued a congressman from Washington state. "I have heard over the last year and a half comments from many constituents and others across the country that our educational system is failing in part because it avoids the need to educate young people that capitalism, profits, hard work and achievement are not bad things."

Women writing on women's issues made up the only category with a significant number of negative responses (36 percent). The 43 women who wrote in support, however, observed that far from sexist, my arguments were inherently gender neutral. "As a woman starting my career in management, I expect to move up in the business world according to my hard work and abilities, not by positions granted to me through social or government mandates," said a business manager in Atlanta, underscoring the contradictions in Sister Gormley's position. "Perhaps religious organizations, especially Catholics, should concentrate on changing their own values concerning women and minority groups …before they wrongly demand the same of others. Catholicism has been and continues to be the worst suppressor of women's rights in history, and certainly hasn't done much for the plight of homosexuals, either."

The responses from women included a smattering of humor: "Corporate America needs you and Dilbert," joked Genevieve Segol, principal scientist of Bechtel Corp. in San Francisco. "Have you considered sending your form letter to the Pope and the College of Cardinals--along with your application to become a priest?" asked another writer, addressing Sister Gormley. "If you need a token female [on the Cypress board], I am willing to submit my name," quipped a Minnesota housewife. "As far as business experience, I have been a secretary and a Girl Scout leader for 12 years."

Another writer simply stated: "If I lived in Silicon Valley, I'd have my resume on your desk today, offering to work for peanuts, simply for the privilege of being associated with a company that has the courage to put into place and practice the responsible and well-balanced policies outlined in your letter."

Among the 24 women who wrote to dispute my position, some served up sound counterarguments: "Thirty years ago, many colleges formally did not admit women," wrote a second-year law student from Seton Hall. Another writer offered to submit resumes of potential board candidates, with any indication of gender removed, in hopes that I'd find a woman meeting our qualifications. (I accepted her offer.)

But a minority of the opposition--about a half-dozen women--flat-out raged: "I decided not to waste my personalized stationery" on a "money-grubbing, narrow-minded elitist…desperately holding onto [his] white-male bastion of power." Sarah A.B. Teslik, executive director of the Council of Institutional Investors, wondered whether "CEOs who insist on board clones failed to play high-school sports or other security-enhancing activities." Perhaps most eloquent--and courageous--was an anonymous submission to the Cypress Web site, simply encouraging me to "pull [my] head out of [my] ass."

"You are afraid and insecure about the power, intelligence and strength that many women and minorities possess," wrote a Washington resident of indeterminate occupation. "There are a number of educationally and professionally qualified women and minorities who can excel as board members of Cypress and other male/Anglo-Saxon-dominated companies." (Unfortunately, the writer failed to identify any of them; nor did she recognize that in fact just two of the five Cypress board members are Anglo males.)

Perhaps most significantly, each of the 27 lay Catholics who put pen to paper approved of my effort to seek business solutions to business problems. Some argued that Sister Gormley's position and tactics were antithetical to the true purpose of the Catholic Church. "My 16 years of Catholic education made me wince when you recommended a moral dismount, but hard times call for hard words," wrote an assistant vice president of an East Coast consulting firm. "The Sister Gormleys" of the world are "neglecting God's work for dilettante socialism," wrote another respondent.

There was an interesting statistical split among Catholic religious professionals: All six nuns who wrote defended Sister Gormley, while the two priests sided with me. The nuns who voiced their objections were members of orders including the Sisters of Mercy of the Americas, the Adrian Dominican Sisters, the Sinsinawa Dominicans, and the Sisters of the Blessed Sacrament. Balancing the scale somewhat was an Indiana priest, who wrote: "It is a violation of the teachings of Jesus" for a religious group "to hurl broad accusations at anything in or out of the church that they deem an appropriate target. I have a Master's degree in Sacred Scripture and another in Spiritual Direction, and for the life of me, I cannot figure out where they are coming from. I have the suspicion that much of it is self-generated. Perhaps because most of these people take a vow of poverty, they really do not know how to live in the real world."

Milton Friedman sent me a note, along with a copy of a piece he wrote for The New York Times in 1970. It was titled, "The Social Responsibility of Business Is to Increase Its Profits." He made every point I'd made, but 26 years earlier. Friedman says in his lead paragraph, "The businessmen who believe that they are defending free enterprise when they declaim that business is not concerned 'merely' with profit, but also with promoting desirable 'social' ends…[are] preaching pure and unadulterated socialism. Businessmen who talk this way are the unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades."

Fully half of the pro letters chimed in on the basic philosophical point of the morality of capitalism. Despite the tone of moral superiority of the world's Gormleys, morality is on our side. It is the socialists--those who would force companies to confiscate money from their shareholders, employees, and customers to spend it on some "higher good"--who are on the wrong side of this moral issue.

As I wrote to the president of an "ethical mutual fund" that holds our stock, after he wrote to complain about my letter to Sister Gormley: "When good works cease to be voluntary and become compulsory, charity becomes confiscation and freedom becomes servitude. Charity is a byproduct of wealth, and wealth is best created in free capitalist markets, the workings of which comprise the fundamental and true moral principles by which we run our company."

T.J. Rodgers ([e-mail]) is president and chief executive officer of Cypress Semiconductor and author of No Excuses Management (Doubleday).