Lorna Wendt spent 30 years helping her husband climb the corporate ladder. While she moved the family from city to city, drove the carpools and entertained the clients, Gary Wendt rose to be CEO of GE Capital. When he told her he wanted a divorce in 1995, Wendt offered his wife an $8 million settlement. But she wanted half of the $100 million she estimated he was worth. In January, a Connecticut judge awarded her $20 million -- which includes half of his so-called hard assets.
The case has drawn unusual attention: Nightline, the New York Times, the cover of Fortune, The Oprah Winfrey Show. It also raised the profile of Stanford's Myra Strober, a professor of education who served as an expert witness for Lorna Wendt. In five hours of courtroom testimony, Strober, who is president of the International Association of Feminist Economists, outlined how the legal system should place a value on at-home work. Since then, she's been hired by four other corporate wives in divorce cases. In January, she talked with Stanford Editor Bob Cohn about the Wendt case and its implications.
Stanford: What do you make of the decision in the Wendt case?
Strober: The judge seems to have accepted the notion that the parties should share equally in what he called the hard assets. But he has yet to release the entire 450-page opinion, so the reasoning he used, which is what's really important, is not yet known.
You've written that corporate wives do invisible work. What do you mean by that?
A lot of work that's done in the home is invisible: cooking, cleaning, marketing, clerical work. Plus there's emotional work, which is particularly invisible -- whether it's child-rearing, dealing with problems at school, providing support to your spouse.
Some people will read that and say -- OK, but $20 million for that? It seems like an awful lot.
These corporate wives perform other kinds of work which is more business-
related. They move frequently, so there's the challenge of finding houses, buying new houses, fixing them up, settling children into new schools. They're also directly involved in the business in terms of entertaining, meeting clients, being a confidante, helping their husbands make hiring decisions, knowing the business. They really are playing the roles that ambassadors' wives would play or even that the first lady plays.
Is it your view that the women who play these roles successfully deserve half of the assets accrued during the marriage regardless of how huge that amount might be?
That's right. The size of the estate does not enter into my opinion of how it should be distributed. But it does seem to enter into judges' opinions. Most states generally give half the estate to each spouse -- unless the assets get above $10 million to $20 million. That's when judges seem to balk.
What do they do then?
When estates grow beyond a certain size, judges move away from equal distribution and over to the old doctrine of "he who earns it owns it." Normally in divorce cases, you hear about dividing the couple's assets. In these very large asset cases, you hear it discussed in terms of what he should give her.
You've become an expert on how society should value the work of an at-home spouse. What are your conclusions?
Mrs. Wendt made a human capital investment in Mr. Wendt's career; just look at all the different kinds of labor she performed. When you make an investment, you expect a return. Had the marriage not ended, Mrs. Wendt would have received a very handsome payoff on her investment for her whole life. Enter divorce. This was a divorce that Mrs. Wendt did not want, and from an economic point of view, the divorce interferes with the return on her original investment.
Isn't this a rather unromantic view of marriage?
It's important to underscore that I don't view marriage simply as an economic partnership. It's a spiritual partnership; it's an emotional partnership; in some cases, it's a partnership for the purpose of raising children. But it is also an economic partnership. So in the context of the capital investments that both parties were making, I ask: How should we value Mrs. Wendt's contributions? First, I detail what those contributions are. Then I ask, how should we value nonmarket work that has no intrinsic dollar value associated with it? I say that in a legal partnership where there's no prenuptial agreement to the contrary, we have to assume that the parties meant to have a 50-50 economic partnership. And so at the time of the divorce, Mrs. Wendt is entitled to 50 percent of the assets plus a declining percentage of future assets -- because part of the reason Mr. Wendt can earn this future income has to do with her investment in his career early on.
Your model is based on traditional human capital theory?
We usually talk about people making human capital investments in themselves, by going to school or doing on-the-job training. Sometimes we talk about parents making human capital investments in their children. I'm applying that to one spouse making a human capital investment in the other spouse's career.
Are there other economic theories that might apply here that you reject?
There are two -- market replacement theory and opportunity cost theory. Market replacement theory suggests that the way you would value Mrs. Wendt's contributions to the marriage would be to figure out how many hours a day she spent on various chores throughout her marriage, and then you go to the state employment service and you ask how much it costs to buy the services of a chauffeur for three hours a week, of a cook for four hours a week, of a clerical worker, of a hostess and so on.
And the opportunity cost theory?
We ask what would have happened if Mrs. Wendt had continued her work as a music teacher or had become a concert pianist. We figure out what she would have earned over a 30-year period, and that's the worth of Mrs. Wendt.
Mr. Wendt told one interviewer: "I've worked hard, she didn't."
Mrs. Wendt worked hard. It was invisible work. Not even her husband recognized it. Sometimes I think that all fathers should take a couple of months off and do the kind of work that homemakers do.
What's the lesson here for young people getting married?
There are two lessons. One is to be very clear with your partner about the financial arrangements. Lots of folks say that interferes with love, but people need to recognize that marriage is a financial and emotional arrangement. There also needs to be some recognition by the partner who doesn't do the unpaid work that his wife or her husband is doing some very valuable work. That might need to be reinforced by a change of roles for a day or two.
What's the proper role of the courts in these cases?
Full-time homemaking is probably the riskiest occupation around. It has no protections except the ones that the courts give it. If we as a society want to encourage caring behavior in our families, we need to make decisions in the courts that promote it.
