E.J. Salmon left Cuba with his sister at age fifteen, after the Communists confiscated his family's land. He arrived in the United States poor, but he was eager to participate in an economic system that would help his family prosper again. But today, the U.S. economy is in bad shape, and it could get worse. A nation that was once the greatest and most powerful in the world has been shaken to its core, and it could collapse. To prevent such a calamity, industry and government must work together. Salmon draws upon his experiences in Cuba and in the United States to encourage the people to turn things around. He considers the following: How the failure of the Obama administration to learn lessons derived from the successful government initiatives of the Great Depression Why the government's response to the current crisis has eliminated more jobs than it has created How brazen and corrupt executives and politicians are destroying corporate America. Take steps to understand the problems confronting us and discover solutions to renew the partnership among business, government, and the people. It's not too late to reverse the course if you understand The Rise and Fall of Corporate America.
The Rise and Fall of Corporate America
By E. J. SalmonTrafford Publishing
Copyright © 2010 E. J. Salmon
All right reserved.ISBN: 978-1-4269-4062-0Contents
I. Prologue..................................................1II. Setting the Stage........................................18III. In the Beginning........................................54IV. The Birth of an Industrial Giant.........................87V. From Misery to Recovery...................................113VI. The Industrial Giant Awakes..............................145VII. Pinnacle of Success.....................................172VIII. Staring into the Abyss.................................242IX. Failure is not an Option.................................343X. Industrial Reinvigorating Initiatives.....................374XI. Epilogue.................................................411XII. References..............................................431
Chapter One
Setting the Stage
It is essential to start this historical analysis by understanding where Corporate America is at the present time and determining how it got there. That position reflects the culmination of a sequence of steps leading to its establishment, development, and growth to its present status. Once that picture is framed and understood, the next step becomes one of isolating elements that have proven beneficial from those found to be detrimental thus defining a point of reference for future comparison purposes. When that preliminary overview is completed, it becomes possible to compare the present situation with that reference point for the purpose of drawing suggestions to chart a future course of action to follow. Hopefully, the impact of that new direction would be beneficial in raising the standard of living in the US. It is expected that the end result of that effort would be to keep US preeminence intact in the technological, industrial and military arenas.
It is undisputed that the corporate sector has played a central role in the emergence of the United States of America as a major world super power. But, sustaining that economic and military status is contingent on maintaining a strong and viable manufacturing base capable of satisfying all the needs of the United States independently of foreign sources. Consequently, the American Way of Life as we know it today depends on being able to create a strong manufacturing base generating high paying job opportunities to keep up with the growing population base. Anything that threatens the industrial sector also threatens our standard of living and the status of the US as the most powerful industrial and military nation in the world. The industrial sector has to become stronger and more efficient to not only compete on an intrastate basis but also on the international arena against very formidable competitors.
This book focuses on tracing the roots of the corporate world from its humble beginning, and it does that by exploring its historical origin and subsequent growth from its inception to the present time. That historical perspective becomes the basis for understanding the contributions made by corporations to our society and, more importantly, to decipher how past problems have been successfully solved. That provides a set of tools to use in solving the problems our society presently faces as a result of adverse economic conditions being experienced by many leading and, at one time extremely powerful, US corporations. These conditions have led many of these pillars of corporate power to declare bankruptcy and, in many cases, go out of business. That situation is of great concern to all of us because it leads to permanent job losses at a time when many American families are struggling to survive economically. It is also concerning from the point of view of not being able to create new jobs for the growing population.
The term "Corporate America" refers to an agglomeration of corporations, partnerships, and other types of commercial entities operating as individual businesses. Those entities are created by state law and granted the legal right to conduct business in a predetermined format.
A corporation, being a legal creation, is granted a very important legal status analogous to that of juridical "person". This means that a corporate entity can act in more or less the same fashion as a human being. In many cases, this position leads to some confusion because corporations do not act directly but through its officers. Those individuals are granted immunity when they perform their duties in conformance with their corporate authority for the corporate entity. That immunity, however, does not relieve officers from liability resulting from their acts outside the scope of their corporate authority. In other words, corporate officers are shielded from liability if they act within the scope of their authority and consistent with the corporate charter and for the benefit of the corporation.
Officers can be held accountable when, for example, they seize a corporate opportunity for their own financial benefit. For example, an officer can be held liable for appropriating a corporate opportunity such as diverting customers to a competitor. In most cases, however, corporate officers are protected from financial ruin by insurance carried by the corporation.
The most relevant feature distinguishing corporations from human beings is that, unlike human beings, corporations do not have a life of their own but act through and reflect the actions of corporate officers. In a sense, corporations are similar to a governmental unit. A corporation acts in accordance with its corporate charter, which is analogous to its constitution. Government units follow the state and/or federal constitutions in performing duties delegated to that particular governmental unit.
Corporations have officers including a president and a board of directors. In a manner mimicking state and federal government, the president of the corporation is responsible for enforcing the rules and policies directed by the board of directors, which is analogous to the congress. The board of directors is charged with the duty of developing and setting policies to be implemented by corporate officers in the performance of daily activities; this is analogous to congressional functions. Edicts mandated by the board are designed to achieve goals described in the corporate charter thereby satisfying the conditions for which the corporation was founded.
Some corporations have larger operating budgets than the governments of many countries; this is the case of ExxonMobil. It is possible that the growing power and influence of a given corporation may transform it into an "empire" capable of influencing the national well being of any nation in a positive or negative manner. When that happens, corporate leaders may ignore or simply overlook the national interest over their selfish goals and desires, which is what has happened in the US. Given that corporate owners are immune from legal liability of the corporation and that officers are also immunized from actions taken in accordance with the corporate charter, one can imagine the immense power corporate officers and executives exert on our lives and our status as a nation.
There is no question that corporations such as ExxonMobil, GM, and many others are or were very powerful at one time or another during our history and have influenced governmental action either positively or in a negative fashion. These corporations have made many significant positive contributions to our American Way of Life including providing employment opportunities. That has enabled many Americans to realize their American Dream. Lately, however, many corporate officials and executives have acted in a way that undermines previous contributions; these are the end results of greed, ineptness, and corruption. That course of action is having a detrimental impact on our society and causing the American Dream of many of our citizens to be shattered.
It would be worthwhile to define the meaning of the term "greed" as used in the context of this book. Greed is defined in the dictionary as "excessive or rapacious desire for wealth". Greed is defined as the motivation to accomplish a task or tasks creating or resulting in wealth. In other words, we all know that greed is what drives entrepreneurs to the achievement of goals. Greed in that sense is the driving force resulting in achievement of goals. Greed in that sense of a motivational drive to achieve personal goals is good. If in the achievement of that goal wealth is created then it is an even better result. In that sense, greed is a motivator and a good thing; that is what I would refer as constructive greed. At the other end of the spectrum is the desire for more wealth regardless of how that wealth is achieved. That is a very destructive kind of greed; it is avarice plain and simple. Avarice is malicious and destructive. Avarice is a blinder driving a person to place greater importance on wealth than on anything else regardless of the destructive impacts it may have on other human beings, corporate entity, society as a whole, or even on the person. Avarice, unlike greed, is not a motivator to achieve goals but rather a driver to acquire wealth regardless of the means used to get that.
Corporations exert power by pressuring politicians and government officials through their lobbying efforts, which is the politically correct term for the act of bribing politicians. In many instances, these corporate lobbying campaigns cause politicians to act in the most advantageous way to the corporation regardless of impact on voters or society as a whole. In effect, these actions on the part of our national and local governments reflect a malicious kind of greed, which is different from the role contemplated by our founding fathers. The ideal set forth by our country's founding fathers is the creation of a government for the people, by the people, and of the people. Instead, corporate lobbying has replaced that fundamental ideal with their own principle and that is a government for the benefit of corporations, run by corporations and owned by corporations. That is the end result of corporate lobbying, and it simply corporate avarice.
Corporations, like historical empires, have grown and become powerful; this has led to the beginning of a complacency period causing the status quo to remain stagnant and unchallenged. That attitude ultimately leads to decadence and an eventual downfall. That's where Corporate America is today.
The corporate sector needs to return to its roots and renew its commitment to the same pursuit of excellence that, in the past, has led to success and to their once enjoyed prestigious status. Corporate decadence is the end result achieved when corporations are driven by inept executives focusing only on the short term to satisfy their avarice. Present executives prefer the short term over a broader long term outlook ensuring growth and prosperity in the future; they do that to ensure getting a good bonus regardless of impact on the corporate entity. Executives are great believers in manpower reductions and political correctness as the only feasible means to solve problems faced by their corporations and to improve the so called "bottom line". These executives fail to consider other more valuable and less destructive alternatives to improve the long term outlook for their companies.
These executives focus on personnel reductions because that leads to an immediate cost reduction that translates into a momentary spike in profit margin that does not last; it lasts long enough to result in the award of performance bonuses to executives. But, that solution leaves the corporation in a weak position to address future growth in demand for their products or causes other detrimental impacts including poor employee morale and loss of employee loyalty. Corporate executives could care less about the long term viability of the corporation; they are concerned only about themselves and prefer having the company deposit bonus money in their bank accounts now so that they can spend it playing golf immediately rather than at a future date. That attitude is an example of what is termed malicious greed or avarice.
The survival of the private industrial sector is a long term goal rather than a short term objective. It is essential that cost reductions achieved by Corporate America be representative of an improvement in the process manufacturing technology or a reduction in raw materials and utilities usage. This ensures long term survival. Labor cost is only a small part of the entire cost picture and not the total answer. Labor cuts usually result in imaginary cost reductions. In fact, personnel reductions last only for a short period of time and usually result in additional cost increases. These cost increases are manifested in terms of additional training costs, worker frustration, reduced productivity, and liability from accidents.
These cost increases are best reflected by the cost resulting from accidents occurring as a direct result of overworked and fatigued workers. Fatigue leads workers to act unsafely raising the potential risk for industrial accidents with many fatalities and adverse impacts on the environment. Another adverse impact to the corporation is when those workers who remain become frustrated by being overworked and change employers. That leads to an increase in training costs and reduced productivity. In short, labor is the most valuable asset a corporation has, but employers fail to understand that. We say employers, but keep in mind that corporations are not human beings; these entities reflect the actions of executives.
In the event Corporate America fails to improve its efficiency and cost structure, it will be unable to compete against foreign competitors thus paving the way for its demise. That, definitely, would be a tragedy. It would be a national calamity dragging the entire nation to an economic precipice leading to a potential economic downfall and ending our American Way of Life as we know it.
The present economic crisis is the result of lobbying efforts, avarice of corporate officers, and lack of regulatory enforcement against corporate abuses. It is a fact of life that there are no enforcement actions to prevent political abuses of power; lawmakers steal with impunity. When they get caught, the only thing that happens to them is to get their hands slapped softly; they get to keep the fruits of their transgressions and perhaps get a retirement package. These corrupt lawmakers should be sent to prison as common criminals for they have violated the sacred trust of constituents. These acts boil down to corruption not only in corporate America but also at all levels of government. This is criminal activity at its best.
Empires throughout recorded history have risen and prospered. Some of these have lasted longer than others, but without exception all of them have fallen. Recent empires such as the British and Japanese empires have collapsed in the same fashion of earlier empires. Common causes leading to the collapse of empires include malicious greed or avarice, abuse of power, corruption, political correctness, internal enemies, war, and complacency with the status quo. All of these elements are now part of our corporate world and firmly embedded in our political system in the US.
The American industrial sector since its inception has grown and prospered, and in some cases become extremely powerful in a manner analogous to that of historical empires. In fact, some corporations can be considered present day empires. The thought provoking statement by the American philosopher George Santayana to the effect that "Those who cannot learn from history are doomed to repeat it" provides an incentive to learn the causes for the demise of historical empires. Once those lessons are learned, they can be applied to present day corporations to prevent their collapse and that of our American Way of Life. The aim of this book is to learn historical lessons to ensure survival of our present day corporate world and our American way of life.
Abuse of power, avarice, corruption, political correctness, internal enemies, intercompany warfare, and complacency with the status quo are part of present day Corporate America and of our political system. If those were the causes leading to the collapse of historical empires then we have to be worried about the very future viability of our corporate entities. That is a very disturbing thought because anything that threatens our corporations also threatens the very existence of the US.
In this context, it is worthwhile recalling the words of John Edward Dalberg Acton relating to power whether it is corporate or governmental power. Lord Acton is a historian and moralist who cautions, in a letter to Bishop Mandell Creighton in 1887, that....
"Power tends to corrupt, and absolute power corrupts absolutely".
Corporate America has substantial power to act and to influence government institutions. The exercise of that corporate power corrupts not only corporate officers but also government officials thus setting the stage for the collapse of the corporate empire and, in the larger context, the collapse of the nation itself. Isn't that what we are experiencing today in the United States where we see many corporate officials being sent to prison for stealing millions of dollars from unsuspecting consumers? Isn't that exercise of corporate power in the form of bribes to politicians and regulatory agencies officials what prevents the discovery of major fraudulent schemes? Isn't the exercise of corporate influence over regulatory agencies enough to raise conflict of interest flags?
(Continues...)
Excerpted from The Rise and Fall of Corporate Americaby E. J. Salmon Copyright © 2010 by E. J. Salmon. Excerpted by permission of Trafford Publishing. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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