Term
Harper’s Weekly 1881 series on Newtown
Creek |
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Definition
(Reader pg. 172)For three weeks, the magazine ran pieces on residents' suffering from sludge acid stenches, intending to incite regulatory action.
City inspectors checked up on some factories after the publication, but no lasting changes came about.
Significance: This illustrates the the tremendous political power of the manufacturers during the time, as well as the fragmented nature of regulatory authorities. |
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Term
| Backlash against the railroads |
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Definition
(Lecture) As important as railroads were, consumers came to see them as a problem.
Farmers & other shippers targeted:
• Unfair pricing, monop profiteering
(Ag prices were in freefall due to oversupply)
Passengers & general public targeted:
• Monopoly pricing, scheduling
• Conditions & safety of trains, stations
• Collisions
• Grade crossing hazards
• Smoke & noise
In this regard, the legal system began shifting away from Will theory/caveat emptor towards forms of regulation, particularly regarding the rates.
The Interstate Commerce Commission (ICC) targeted:
• Rate discrimination (short hauls)
• Rebates etc.
• Quick price changes
• Pools
Significance: The irony was that GENERAL DEFLATION,
FLUCTUATING PRICES were the sources of most of the economic stress.
• Rate reg stabilizes RR rates
• NOT FARM OR OTHER PRICES
So it might be suggested that, at least socially, problems were likely to be blamed on the new technologies. |
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Term
Stages in the historiography (historical
analysis) of anti-trust |
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Definition
(Lecture? + Kolko, McCraw readings) Not only was there a backlash against the bigness of "Big Business", but BB continue to grow in scale regardless.
1890 - SHERMAN ANTI-TRUST
ACT
1888 NJ law allowed corp
mergers
1914 CLAYTON ACT, FEDERAL TRADE COMMISSION ACT
Classic Progressive view: TR as Trust-Buster, lead popular interests against business interests, food regulation, conservation...
1950s: R. Hofstadter began emphasizing some of the shortcomings of the Progressive Era. While middle-class citizens supported progressivism, support from the working class was less visible. Also, he made connections between populism & later Nazism and McCarthyism as potentially dangerous majority-tyranny movements. He theorized that middle-class support for Progressive regulation was not so much goodwill towards the working class, but to control the backlash against Big Business; it was anti-modern, whatever that means.
1960s-70s: G.Kolko: TR distinguished, rather arbitrarily, between “good” and “bad” trusts, mostly based on personal relationships that led him to evaluate leaders of the “good” trusts as fundamentally good people. Ultimately, TR believed that trusts were inevitable given the economic changes of the day. Furthermore, the Bureau of Corporations did not conduct third-party investigations, but obtained data from the companies themselves and were relatively lax when they cooperated. Also, meat regulation was again aimed to contain worker unrest; conservation movement aimed to manage resource use efficiently but not to protect them outright.
1970s-80s: “New Revisionism” & T. McCraw’s representation of “new school” perspective. He believed that, due to the unsophisticated understanding of economies of scale at the time, it was difficult to tell when antitrust laws were being validly enforced, and when they were just restricting business unnecessarily. McCraw criticized Justice Brandeis’ rigidly anti-Big Business stance and notion that Bigness bred inefficiency. This analysis is in line with the Reagan era’s generally pro-business stance.
Significance: American cultural
ambivalence and confusion towards Big Business...interpretation of antitrust legislation/the Progressive Era of late 1800s/early 1900s depended heavily on the outlook of each of the eras that followed.
• LOVE/HATE
• FEARS/HOPES
Business attitudes. Impacts on market structure....
Americans have largely learned to live with imperfect competition. |
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Term
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Definition
| (Lecture) 1911 Standard Oil case was a significant application of Rule of Reason; that is, not targeting structural monopoly but whether the firm in question was clearly unreasonably, abusively restricting free trade. (The doctrine, therefore, justified not breaking up structural monopolies.) |
|
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Term
1917 FTC investigation of the
meatpacking industry |
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Definition
1917-18 Meatpacking industry. Big 5 firms, high barriers of entry, economies of scale, vertically integrated. However, the FTC found no evidence of price-setting at monopoly levels (b/c their product was being sold more cheaply than smaller producers), nor any proof than they were abusing their power. 1920: the companies agreed to divest some assets, but allowed to continue operating its large-scale warehouses, refrigerated cars, etc., had to promise not to enter non-meat food categories.
(While the FTC had more experience and thus conducted more sophisticated analysis than Roosevelt’s Bureau of Corporations, third-party auditors are inevitably dependent on firms’ cooperation for research data.) |
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Term
| Key elements of Sloan’s strategy for dealing with GM crisis |
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Definition
(Sloan reading)
Key problems
• No coordination
• No internal transfer pricing
Outcome:
+MULTIDIVISIONAL ORGANIZATIONAL STRUCTURE
• Divisions based on product line
• Each division has its own organizational
structure based on function
• e.g. sales, operations, finance, R&D
+CENTRALLY PLANNED
PRODUCT STRATEGY
+Interdivisional committee structure
• Executive committee, Operations committee,
Finance committee, General Technical committee,
etc
+ Management accounting system
• Operating divisions created forecasts and
report results on
• Annual/monthly input output data
• Annual monthly demand data
• Rates of return on investment (ROI) |
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Term
| Alfred Chandler’s “visible hand” |
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Definition
(Lecture) According to Chandler, the "visible hand" of management had replaced the Smithian "invisible hand" of market forces in controlling capitalism.
-The US modern multiunit business replaced small traditional entreprise, when administrative coordination permitted better profits than the coordination by market mechanism;
-A managerial hierarchy has been created for this multiunit business enterprise;
-Multiunit business entreprise apperead for the first time in history in a time when the volume of economic activities reached a level that made administrative coordination more efficient than market coordination;
-Once a managerial hierarchy has been created and had successfully carried out is functions of administrative coordination, the hierarchy itself became a source of power, permanence and continued growth;
-The careers of the salaried managers became increasingly professional and technical;
-The multiunit business enterprise grew in size and diversity and as its managers became more professional, the management of the enterprise became separated from its ownership;
-Managers preferred policies that favored long-term stability and growth of their enterprises to those that maximized current profits.
-As the large enterprises grew and dominated major sectors of the economy, they altered the basic structure of these sectors and of the economy as a whole |
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Term
| GM Acceptance Corp (GMAC) |
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Definition
(Calder reading reader pg. 245) Auto financing corp set up by GM to deal with people buying cars on credit. Succeeded overwhelmingly over Ford's Weekly Purchase Plan, because it did not incur on customers the opportunity cost of NOT having a car.
Significance:
Part of the growing trend of buying on credit as socially acceptable consumer behavior. |
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Term
|
Definition
(Lecture) 1ST Store 1916 - ULTIMATELY 2,660
SELF SERVICE DESIGN,
PATENTED AND FRANCHISED
Significance:
Predecessor to the modern supermarket, an example of the consumer revolution |
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Term
|
Definition
Founder of the Investors Syndicate 1894.
Financial innovations:
+ Installment programs
+ New investment instruments
• “FACE AMOUNT CERTIFICATE”
•Customers purchased at discount and
held until underlying securities
matured
• PAID OUT 6%
• why enticing?
+ Innovative mortgage loan
repayment program
+ Diversified portfolios
+ Nationwide agent system
• Paternalistic marketing message
• Vehicles for reaching difficult-to-serve market
Significance:
He helped bring investing to the common man.By inventomg a “face amount certificate” with a 6% rate of return, he allowed people to invest on installment plans. |
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Term
|
Definition
(Lecture/Galbraith) Basically mutual funds of the pre-Crash era, they pooled money for investing from smaller investors.
Significance:
The development of investment trusts helped divorce outstanding shares from actual assets, and is one of the factors contributing to the over-leveraging that caused the 1929 crash, particularly when they began investing in stocks of other trusts. |
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Term
| National Business Survey Conference |
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Definition
(Lecture/Romasco reading): President Hoover called this meeting of business leaders in 11/1929 to 12/1929. The conclusion seemed to be a joint agreement to "short-circuit" the economic crash, i.e. Fed keeps interest rates low, businesses continue production, construction, refrain from job and wage cuts; state governments would continue investing in infrastructure, the media would refrain from reporting bad news.
However, the plan was hamstrung by the lack of enforcement; Hoover’s ethos of voluntarism led him to believe that voluntary cooperation was the best thing to do. Break from tradition: for the first time, it was believed that the business community could affect the macro-economy because of the landscape of integrated, merged economies of scale. Moreover, the prosperity of the 20s was such that everyone had much more to lose in the event of a depression.
Voluntarism failed; businesses, it turned out, weren’t up to the task of going against the natural business cycle by their sheer size and centralization alone. Railroads, US Steel, and other employers had to cut production, cut jobs; the 30+ percent drops of demand were beyond the powers of any one industry. Should we blame Hoover for screwing up? Well, maybe at worst he was just too idealistic and naive about the gravity of the situation.
The monetary policy was also problematic; the gold standard required gold to back new money, which had to be mined, and therefore the treasury could not simply print money like it does now to pump in liquidity. 1931-32 pump-priming measures…Nat’l Credit Corporation, Federal Land Bank, and so on failed to make a difference b/c even with the funds, it was too risky to lend like before. Gold standard ends in 1932.
Significance:
This was the federal government's immediate response to the 1929 crash; its failure showed that managerial capitalism was not all-encompassingly powerful to the point where it could overpower even market forces. |
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Term
| National Recovery Administration (NRA) |
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Definition
(Lecture) FDR's supply-side solution to get industry back on track.
To show immediate results, they first To show immediate results, they:
ISSUED BLANKET CODE
• MIN WAGE (30-40c/HR)
• MAX WORK WEEK (35-40 HRS)
• BANNED CHILD LABOR
Then:
+ All businesses had to join an
industry trade association
+ Associations drew up industry
codes
• AGREEMENTS ON
• PRICES
• PRODUCTION QUOTAS
• WAGE RATES ETC
Enforcement:
+ Trade associations drew up
codes
• President signed
• members required to sign
• Agree to follow
• Licensing provision
• Signers given license to operate – non-signers denied
How it was supposed to work:
+ Fair prices, quotas etc
+ Respect consumer and labor
• Industry associations supposed to
include consumer and labor reps
• Codes must respect labor and factory
safety regulations
• Maximum hours, minimum wages etc
• Union recognition
1935--NRA declared unconstitutional by Supreme Court.
Significance:
The language of the NRA showed fear of the market; it showed that the Depression was understood to be caused by a lack of control over market conditions. Attitudes toward market problems: securities = not enough information; banking = too much competition. |
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Term
| Corporate financial reporting, 1900 – 1932 |
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Definition
Pre-1933:
overall lack of disclosure, and fragmented legal standards across states. This was largely carryover from the days of individual proprietors prior to the rise of corporations, but factors like public apathy and accepted security-issuance methods (i.e. selling stock only to a select number of large, respected institutional investors) also contributed. Caveat emptor doctrine, it was believed, applied to the purchase of securities just as it did other contracts; company management simply did not believe in the public’s right to see their finances, and also feared transparency would inadvertently assist their competitors.
Securities Act of 1933
+ Financial reporting regulations
specify info firms must provide
in
• ANNUAL REPORTS
• Detailed balance sheets
• Profits and loss statements
• Exec compensation etc.
• NEW STOCK OFFERINGS
• detailed reporting made part of registration process
Significance:
The 1929 crisis helped bring attitudes toward financial reporting in line with the reality of the business environment. |
|
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Term
| New Deal regulation of securities industries |
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Definition
(Lecture/readings) 1933 GLASS-STEAGALL ACT
Separated commercial banking
from investment banking
• Terminated banks’ ability to use deposits to underwrite or speculate in stocks & bonds and to invest in financial institutions that do this
Plus: 1933 creation of the SEC
Significance:
The Depression forced a much more risk-averse attitude towards the stock market. |
|
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Term
|
Definition
(Lecture) COMPELLED MFRS AND
DISTRIBUTORS TO FIX PRICES
• Started in California 1931, 1933
• Federal laws followed
• 1936 ROBINSON PATMAN ACT
• Prohibited mfrs from selling goods to big distributors
at discounts
• 1937 MILLER TYDINGS ACT
• Prohibited retailers from discounting from list price
• NOT REPEALED TILL 1975!
Significance:
Again, more of a risk-averse shift during the Depression. |
|
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Term
| World War II war mobilization |
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Definition
(Lecture) Huge expansion of production (demand-side stimulus)
War mobilization ->
government/business/labor
collaboration
• FDR’s Business Council
•Led key agencies
•Negotiated terms under which firms
produced munitions etc
Significance:
GOVERNMENT became the
“VISIBLE HAND” of
managerial capitalism; it internalized supply/demand forces
Other results included:
- Anti-competitive mindset
- We’re all in this together
mindset
- Keynsian economic policies
- Military industrial complex
- Labor laws |
|
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Term
|
Definition
(Could not find - Lecture 18?) The practice of business providing welfare-like policies, e.g. health care, pensions, Ford's high pay in order to have a consumer base for his goods.
Significance:
...Ties in to rising consumerism and the modern version of the somewhat reduced paternal role of businesses for their employees |
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Term
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Definition
(Lecture 18)
Protects the rights of most workers in the private sector to organize labor unions, to engage in collective bargaining, and to take part in strikes and other forms of concerted activity in support of their demands. |
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Term
|
Definition
(Lecture 18)
The major strike of the post-WWII period. It epitomized:
•New management attitudes and
obligations
•Persistence of old attitudes
•New union powers
•Limits of these powers |
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Term
| Union achievements in 1950s and 60s |
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Definition
(Lecture 18, Brody reading)
Bargaining landmarks
Economic benefits:
•Wages, vacations
•Health insurance
•Pensions
Shop floor protections
•Work rules
•Grievance procedures
Significance:
BIG ECONOMIC WINS – but:
• No partnership
• No real control over work
• Rigid work rules
Increased demand for consumer goods, public services. |
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Term
Peter Drucker’s analysis of GM’s
management |
|
Definition
(Lecture 17) Greatness of GM's
multidivisional management
system
• Very decentralized
• How different the divisions were!
• Top management refrained from telling
division managers how to do their jobs
.....
HARMONY GOOD – NECESSARY
• Not just an internal organization
necessity
• Also a social and political necessity
Significance:
Drucker praised the democratic, participatory nature of this system. However, some of the downsides he may have overlooked included the slowdown to important decisions, among others. |
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Term
|
Definition
(Probably) The interdepartmental / interdivisional meetings Alfred Sloan encouraged as a part of the managerial revolution at GM he spearheaded.
Significance:
This was a big part of business during the Organization Man era of the 1950s and (early) 1960s. Emphasized communication, cooperation, and consensus. |
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Term
|
Definition
Result of the increasing treatment of management capitalism as a science unto itself.
Components:
- Group = source of creativity
- Belongingness = ultimate human
need
- Social science research = powerful
tool for increasing productivity
- Culture says: THIS IS GOOD
Significance:
Criticism began to emerge in the 60s, saying that:
- New ethos fosters:
• Mediocrity
• Group think
• Lack of interest in profit maximization
- Undermines
• Individualism
• Work ethic
• Leadership
• Creativity etc |
|
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Term
| Estes Kefauver's Senate investigation |
|
Definition
(Lecture 17)Looked into management strategies of firms in highly concentrated industries
+ Considered price fixing,
manipulation, noncompetitive
practices in
• Big steel
• Big auto
• Drug industry
• Bread industry
He concluded that some effects were:
+ Higher costs
+ Excess capacity
+ Less interest in technological
innovation
+ Piecemeal investment in new plant
and equipment
+ Opportunity for foreign competition
Significance:
Despite these growing discomforts with the direction of business philosophy, businesses continued to grow. |
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Term
| Pricing strategies of auto companies in 1950s |
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Definition
(Lecture 17) + Pricing strategies
• new management mentality
• Target profit rates
• Price leadership
• Attitudes toward market share |
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Term
| John Kenneth Gailbraith’s take on impact of oligopolistic market structure on efficiency of US industry |
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Definition
1967--American economy controlled by
corporate and government technocrats
• much like planned communists economies
in USSR and Eastern Europe
• “…industrial planning is in unabashed alliance with
size.”
• Not motivated primarily by profit
(“pecuniary motivation”) – but by desire to
control
• Keynesian policies are tools
Significance:
Even Galbraith missed some real problems:
• Society’s blind faith in system
• Marketing’s impact on consumers
• Technocrats' arrogance
• Inability to criticize military
• Planning lacunae – city planning, transportation |
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Term
| 1969 University of Michigan study of AOL |
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Definition
(Lecture 19)
Prevent, limit publication of research
on AOL and carcinogenic effects
Significance:
Industry's response to reaction to market imperfections (oligopolies, lack of accountability, etc) |
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Term
| 1962 Consumer Bill of Rights |
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Definition
(Lecture 19)
Pres. John F. Kennedy sent Congress a
“Consumer Bill of Rights”:
• Right to safety
• Right to a choice
• Right to know
• Right to be heard & to
obtain redress
• Right to value – to expect
product to perform as
advertised
Significance:
This was emblematic of the 1960s/70s shift towards "social regulations" to protect ordinary consumers from faulty products and misleading business practices. |
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Term
|
Definition
Silent Spring (1962)
• Excerpted in New Yorker
• 31 weeks on NYT bestseller list
• Congressional hearings
Significance:
Kick-started 1960s environmentalism that eventually led to the DDT ban and the establishment of the EPA. |
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Term
|
Definition
I.E. What consumerist/environmentalist movements in the 1960s and 1970s were largely indifferent to.
In the 1970s and 1980s, the US trade deficit worsened, and US goods (cars, steel, etc.) increasingly lost ground to Japanese and European competitors. Reasons included: general complacency, poor timing of social regulations on business, short-sighted management policies, OPEC energy crisis, failure to innovate...in particular, L. Iacocca found utter deterioration of the managerial system that once worked so well at Chrysler. The Japanese, by 1978, had something like a 30-35% cost advantage over American producers.
Significance:
This was a watershed moment for the US economy, as it could no longer rely on its manufacturing/industrial prowess...it was, thus, necessary for the US to start finding new ways to compete in the global economy. |
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Term
| US balance of trade with Japan in 1970s |
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Definition
(Lecture 20)
...Got a lot worse for Americans as Japan's exports boomed.
Significance:
Led to a lot of complaining from US businesses and some restrictive trade policies enacted in Congress to protect against "unfair competition", rather than addressing the business problems that were holding back American companies. |
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Term
|
Definition
(Lecture 20)
1973: OPEC oil producers in the Middle East decide to cut oil supply to the US in response to American support for Israel in the Yom Kippur war.
Results:
- Inflation
(stagflation)
- Shortages
- Problems for
• Managers
• Cost structure
• Material flows
• Consumers
• Workers
Significance:
The whole supply-side equation changed; Americans had to learn to live with scarcity. Since oil was such an essential raw material, manufacturing was severely impacted. The 1970s, then, are generally remembered for their economic malaise. |
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Term
| Chrysler’s problems in late 1978 |
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Definition
(Lecture 20, Iacocca reading)
Iacocca found, among other things, disorganization; lack of respect for the workplace; lack of interdepartmental communication; unpopular products; no centralized cost-accounting system; 35 VPs who all worked independently instead of for a common good.
Significance:
This was a startling end to the "Golden Age" of managerial capitalism. |
|
|
Term
US steel industry’s response to foreign
competition in 1970s and early 80s |
|
Definition
(Lecture 20)
Initially, they were all in disbelief and denial.
Steel execs:
• Literally in denial
• Irrational expectations re value of yen, Japanese energy, materials & labor costs etc
+ Looked to Washington for protection
• Subsidies, tax relief
• Import quotas 1968 – renewed in 70s and 80s
Then (towards the early 1980s):
• Began to close older mills
• Layoff workers
• Slash capacity
• Looked for other ways to grow
• Mergers, joint ventures
• Diversification
• US Steel – by 1983 only 25% of assets in steel
Significance:
US industry reformed and closed the gap somewhat, but it never totally recovered--it was still playing catch-up by 1988. |
|
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Term
Economic deregulation of the 1970s and
80s |
|
Definition
(Lecture 20)
Industry regulations established during New Deal dismantled
• In response to inflation
• New awareness of benefits of competition
•Competition becomes a good thing!
+ FINANCIAL INSTITUTIONS
+ RETAIL “FAIR TRADE” LAWS
+ TELECOMMUNICATIONS
+ TRANSPORTATION
• AIRLINES
• TRUCKING
+ ENERGY
Significance:
+ MANAGERS IN DE-REG INDUSTRIES NOW FACED COMPETITION TOO
• RESTRUCTURE
• More choices, technological innovation in airline and telecommunications industries
Excesses:
• Savings & Loan debacle
• California energy debacle |
|
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Term
| Drivers behind globalization of US business in 1970s and 80s |
|
Definition
(Lecture 21)
+ COMPETITIVE PRESSURES
• Minimize costs
• Labor, regulatory, US taxes
• Obtain benefits of host country incentives
- SATURATED US MARKETS
- FLUCTUATING EXCHANGE RATES
FACILITATORS:
+ TECHNOLOGICAL INNOVATIONS IN:
•Air and ocean transportation
•Telecommunications
•Computerization
•Internationalization of capital markets
Significance:
Opening of int'l capital flow restrictions and such lead to the emergence of the modern MNC. US built factories abroad, as did the Japanese and Europeans in the US.
The question that still remains today is...are we more worried about them (sweatshops, cultural imperialism, environmental damage) or ourselves (losing domestic jobs to foreign competition)? |
|
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Term
| Matrix organizational structure |
|
Definition
(Lecture 21)
...is a type of organizational management in which people with similar skills are pooled for work assignments.
Significance:
A big part of the restructuring that had to take place as a part of a MNC's initial overseas expansions. |
|
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Term
1960s - early 70s backlash against the
multinational corporation |
|
Definition
(Lecture 21, Barnett/Muller reading)
Strong condemnation of impacts
• Compared promised benefits with realities
•What were they most concerned about??
Answer: PROMISE VERSUS REALITY
- Why wasn’t it increasing wealth?
- Why wasn’t it promoting helpful
transfer of technology?
- What was wrong about its impact on
local culture?
- How was worsening plight of poor?
- How was it harming public health &
welfare? |
|
|
Term
Foreign investment in US in late 1970s and
1980s |
|
Definition
(Lecture 21, Glickman/Woodward reading?)
1980s: Recession, competitiveness crisis
--> Foreign investment in the U.S. increased greatly, both in the form of capital and new factories...
Critics' main concerns:
- State & local subsidies
- Export of profits
- Supply chain ramifications
- Job displacement
- Political influence
- Takeover by alien culture
Incentives viewed as keys to getting (U.S.) corporations to locate new facilities in their communities
Significance:
BIGGEST FEAR:
- CORP & NATIONAL INTERESTS INCREASINGLY
DIVORCED
Whereas 1960s-1970s critique worried about other countries, late 70s, 1980s critiques worried about the US and its workers. |
|
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Term
The Corporation (the movie) – focus of its
criticism of business |
|
Definition
The post-Civil War 14th Amendment was twisted by lawyers to grant corporations the same rights as individuals.
As individuals, officers in the corporate hierarchy are decent people. However, as a system, private profit motive inherently promotes abuse. |
|
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Term
|
Definition
(Lecture 22)
Functions & employees were sourced to places outside of a company itself. Less and less integrated in-house work.
Manufacturing processes were sourced out via contracts, joint ventures, and other outsourcing tools to other places and companies...
Significance:
The beginning of the 90s/modern supply-chain model, where parts of a production, services, etc. are broken up into separate entities and responsibilities... |
|
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Term
|
Definition
Cisco Systems, in particular, was a much-discussed example of the new economy, that was able to be more customer-focused than ever before, and using technology to manage its workforce , many of whom worked remotely, away from the office.
Significance:
Cisco was emblematic of the supply-chain/e-commerce model that got people excited in the 1990s' "new economy". |
|
|
Term
| Supply chain business model |
|
Definition
(Lecture 22)
The vertical disintegration of Big Business; VIRTUAL integration, outsourced suppliers, complex networks...
Significance:
Incredible impact of internet on market itself
• Auction markets
• Speed of transactions, efficiency, commodification
• Information flows
• Copying (no transaction between “buyer” and seller”)
• Network relationships
+ Convenience, speed
• New business opportunities
Versus:
• PRIVACY ISSUES
• SPAM, SPYWARE, VIRUSES, WORMS, ETC
• THREATS TO COPYRIGHTS
• IMPERSONAL “VIRTUAL” RELATIONS
- IS THIS ABOUT DESTRUCTIVE LAYOFFS AND PLANT SHUTDOWNS?
- URBAN DECLINE?
Or flattening organizations?
• Efficiency
• Squeezing out waste
- PROMOTING GROWTH IN DEVELOPING WORLD?
• Or perpetuating exploitation? |
|
|
Term
| Businessweek’s “Hollow Corporation” |
|
Definition
(Lecture 22)
Contemporary business leaders and economists dismissed the notion that the service economy could wholly replace the decline in US manufacturing prowess.
The net consensus, in 1986, was that the development was no good; the rise of services was not sufficient to outweigh the negatives of declining manufacturing and its multiplier effect on commodities suppliers. Another growing concern was the effect of outsourcing on the domestic job market, which by the 1990s was expanding beyond manufacturing to include services like financial analysis and stuff.
US manufacturing was going abroad, so...
- US know-how going too
- Negative multiplier effects
• U.S. suppliers of steel, parts,
machine tools, chemicals lose
business |
|
|
Term
| Monsanto’s genetically engineered crops |
|
Definition
(Lecture 22)
An example of the rising biotech industry of the 1990s. Raised serious questions about technology's impact on the food supply and natural ecosystems. |
|
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Term
|
Definition
(Lecture 22, Parker + Slaughter reading)
In an effort to keep up with foreign competitors, US manufacturers are adopting this management technique, with the "team" concept at the center, from the Japanese. Also known as "synchronous management", the technique involves organizing a production line so that workers are working as individual cogs in a machine-like system, with warning lights and stuff that go off and shame the ones who screw up.
Significance:
"NUMMI and other management-by-stress plants meet these goals (productivity and quality), but at great cost to a humane work environment."
Old “human resource mgmt” approach:
• Pay based on salary grades and hourly rates
• Bonuses tied to unit & co performance
• Benefits standard through organization
• Mgmt strategy modeled on best practices
New “human capital mgmt” approach
• Pay based on achieving goals
• Bonuses tied to individual performance
• Benefits tailored to employee groups
• Management strategy based on analysis of employees |
|
|
Term
|
Definition
(Lecture 22, Parker + Slaughter reading)
Inventory control method--a "demand-pull" approach: parts are made only when the next operation needs them...no buffer stocks are kept on hand.
Significance:
JIT saves interest costs on capital tied up in inventory and reduces warehousing costs...but the trade-off is severe time pressures on lower management and the workforce. |
|
|
Term
|
Definition
(Lecture 23, Reich reading)
Def: Creative accounting…tax/legal loopholes that allow for reporting more profits/gains than the actual.
An offshoot of the more profit/performance-focused approach to running business in the 1980s, companies began innovating "on paper" to reduce their tax liability, and to shift short-term losses to taxpayers, shareholders, and so on.
Source:
- Tax laws
- Accounting rules
- Mergers & acquisitions
- Litigation
Key Drivers:
- SEC laws that require companies to make quarterly reports
- Computer spreadsheet programs (80s)
- Financial deregulation
- Emergence of new generation of Wall Street financiers
Significance:
Can be considered one of the more negative results of the increased tie between performance and compensation in the 1980s.
Broader context:
Rethinking of corporate governance in new era of global competition
• Managerial accountability
• Tied pay to performance
• “Social responsibility of business is to increase profits” (Milton Friedman) |
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Term
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Definition
(Lecture 23)
Prominent financier and corporate raider of the 1980s who was brought down by the SEC in an insider-trading investigation.
Significance:
His downfall was representative of the surfacing problems with paper entrepreneurialism in the late 1980s. |
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Term
| Accounting frauds of 1990s |
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Definition
(Lecture 23, Salter reading)
90s rebound, 2001-02 dot-com bust, Enron debacle 2002. Neither of these were as bad as 1929, but they were real crashes. Still, Enron devastated its workers, and broke apart the public image of CEOs; Ken Lay was originally thought of as a highly ethically-conscious leader in the business community. Valhalla oil fraud: lying about profits, met with Lay, called it over-estimated profits from 1986 but rolled it over to 1987, which was not cool but Lay condoned it, which made it an accepted practice throughout the company.
Accounting firms, too, got into increasing levels of conflicts-of-interest, due to desire to continue working with big-name firm. A prime example was Arthur Andersen LLP—Andersen auditorium’s namesake—that got into consulting (which is Accenture today).
Significance:
Accounting firms shed their neutrality...as their profits became increasingly dependent on auditing big firms, they got into consulting, and fueled paper entrepreneurialism even more.
Also in the 1990s...
- Heightened exploitation of tax laws
- Increasingly abstract financial instruments
• Derivatives etc.
• “Pro forma” accounting
- Sheer complexity and opaqueness of
new “financial engineering” techniques
• Sarbanes Oxley didn’t apply to subprime mortgage derivative securities and their ilk |
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Term
| "Tyranny" of quarterly reports |
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Definition
(Lecture 23)
CONSENSUS EXPLANATION (mid 2000s) of how Paper Entrepreneurialism got so out of control in the previous decade.
Basically, having to show profits every quarter, there was increased pressure on companies to produce these results through financial engineering and creative accounting, in order to keep the Board and shareholders happy, even when things weren't as peachy as everyone would like. |
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Term
| Executive pay reforms of 1980s |
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Definition
(Lecture 23)
Increasingly tied pay to profits/performance--drove CEO greed, but also perhaps pressured them to "show" profits in order to keep their jobs |
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Term
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Definition
(Lecture 23)
Novartis CEO, who--in a 2002 Fortune issue--talked about CEO pressures...making the numbers, self-deception, and "the danger of craving success" |
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Term
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Definition
(Lecture 23)
- Competition for talent:
• Reward for relative talent, not just absolute talent
• “SUCCESS BREEDS SUCCESS”
• Desire for quick successes
• Fear of risk
- SOFTWARE COMPANIES SET SUCCESS BAR UNREASONABLY HIGH
• No manufacturing costs
• Huge profits and compensation
- CONVENTIONAL MANUFACTURERS COULDN’T COMPETE ON FUNDAMENTALS
• Forced to pay at Microsoft’s level to keep talent
- Impact on management
culture
- Corporate star system
• “Talent mind set” replaced “organizational man” ethos
• Fast track
• Huge rewards (incentives)
• Pay and power
• McKinsey consultants promulgated this
as key to success |
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Term
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Definition
(Lecture 24 + Schor reading?)
The American Dream was evolving to include more and more material gains; more wants were becoming "needs". Instead of keeping up with our family and friends, we’re trying to keep up with media “friends” and film stars.
Significance:
This is one of the components of critics' explanation of how modern Americans became overspent and overworked. |
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Term
| Valhalla oil trading fraud |
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Definition
(Lecture 23 + Salter/Enron reading, reader pg. 525-526)
1985-1987 CEO Ken Lay chose not to fire two lead traders at the Valhalla subsidiary of Enron for fraudulent accounting, the reason being that at the time Enron was building its credibility in the capital and product markets, and hiding the scandal avoided the pain of hurting the company's image. Plus, huge trading losses would have occurred if all of the lead traders' bad trades were revealed.
Significance:
By taking this course, Lay set the tone for the rest of Enron, that "rising earnings were more important than sound ethics." As a result, Enron employees in the 1990s and up until its collapse were routinely overstating the value of deals to inflate their own bonuses. |
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Term
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Definition
(Lecture 25)
Wikipedia:
"In 2005 GE launched its "Ecomagination" initiative in an attempt to position itself as a "green" company. GE is currently one of the biggest players in the wind power industry, and it is also developing new environment-friendly products such as hybrid locomotives, desalination and water reuse solutions, and photovoltaic cells. The company has set goals for its subsidiaries to lower their greenhouse gas emissions."
Significance:
This is in stark contrast to GM et al., who were slow to act on the sustainability thing, and paid for it handily when the recession came around. |
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Term
| Ford Escape Hybrid (2004) |
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Definition
(Lecture 25)
This new model "flunks the profit test", according to Fortune.
Significance:
So even though Bill Ford wanted to "green" his company, the business community seemed to write off its efforts. So, blame for the US auto industry's shoddy state of things can be spread around, from car companies to Congress to the business community and consumers themselves. |
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