Turning_their_backs_on_US-AMERICAN_CORPORATIONS.htm 3-15-04

Voices

"Clearly, American corporations are cutting costs. Clearly, such cost cutting will result in lower consumer prices for American consumers, assuming they have jobs...”

Turning their backs on US:
AMERICAN CORPORATIONS
Posted March 15, 2004 thepeoplesvoice.org

By: Ted Lang

Part of the format I have established when interviewing local area businesses for my business feature column in a local newspaper is a section on "corporate citizenship." By the term "corporate," I actually mean the businesses' implied responsibility to the community and its residents. I look for the contribution the business makes to the public good; things like cash donations to local charities, or if the owner or owners get involved in coaching Little League, or Scouts, or make free donations of goods and services to local churches and synagogues to establish goodwill.

Good corporate citizenship was once a basic standard that differentiated not only a socially responsible capitalist endeavor domestically, but distinguished American business ventures from the deplorable social behavior of foreign and overseas businesses. At one time, unscrupulous, vile and greedy American entrepreneurs herded workers into poorly lit and poorly vented sweatshops, required workers to work long hours six days a week, paid
poorly, and employed child labor as well.

Although most American businesses at the turn of the latter century were ethical for the most part, this is difficult to accept when many unscrupulous entrepreneurs had enriched themselves via outrageous labor and/or irresponsible business practices. It readily maligned capitalism with a reckless abandon of social responsibility. The motive to do wrong was always there in the frenzy of our booming industrial revolution during the age of the machine and the factory worker.

Government legislation was required to protect the masses from unscrupulous and unethical profiteers. Of course, there were probably more ethical businessmen than unethical ones, but that made little difference when women garment workers were burned to death in the Triangle Shirtwaist fire, or when "muckrakers" Upton Sinclair [The Jungle], Lincoln Steffens and Frank Norris [The Octopus] launched books and articles rallying the public to agitate for reform.

There were, though, instances where both businesses and government teamed up to force certain conditions upon the nation and its citizens. The Lincoln administration was notorious for championing westward railroad expansionism. The team of government and private railroad enterprises brutalized both American landowners in their way, as well as virtually exterminated the plains Indians by massacres as well as deliberately destroying buffalo herds that the Native Americans were so dependent upon. And bank foreclosures in the 1930s resultant of the Great Depression represented yet another general public abuse driven by "big business" and government foul-ups.

In addition to the folk heroes such corporate abuses generated, such as Jesse James, the public's anti-railroad hero, and the bank robber gangster heroes of the 1930s such as Dillinger, Bonnie and Clyde, the designation of big name corporate kingpins as "robber barons" kicked in. Whether or not that moniker was totally accurate in the many cases where invoked, enough anti-social and unethical behavior was ascribed to a significant number of high rollers to warrant a justified suspicion of big business in general.

Perhaps it is this latent revulsion on the part of the public that motivated Thomas Watson Sr., to conduct his business dealings at the highest level of social responsibility. Perhaps it was his humble beginnings in business, including the time when he stopped off for a quick drink in a saloon only to find his horse-drawn wagon and all his wares contained therein stolen. He was forced to reimburse his employer for the horse, the wagon, and the lost wares.

Thomas J. Watson Sr. was the founder of the International Business Machines Corporation, IBM or "Big Blue." He started from humble beginnings, and was swindled out of his life's savings by one fast-talking "salesman" but was then hired by yet another master of salesmanship and captain of industry while badly down on his luck. His capitalist savior was John Henry Patterson, founder and CEO of National Cash Register. Patterson paid his sales force extremely well, and Watson learned his techniques of selling and his successful management style as well. But Patterson was also a ruthless tyrant and egotist, and when he felt Watson becoming a threat, disgraced him so at a company meeting that "T.J." finally quit after a very successful 18-year executive run at the "Cash."

Writing with Peter Petre, Thomas J. Watson Jr., in his book Father, Son & Co. [New York: Bantam Books, 1990] describes how his father adapted what he learned from Patterson about running his own newly acquired company, the Computing-Tabulating-Recording Company, or CTR, the name of which was changed to IBM in 1924. Watson writes of his father: "Dad used some of Patterson's techniques to light a fire under CTR's ragged work force. He created CTR slogans and CTR songs, a CTR newspaper and a CTR school, all modeled on those of the Cash. Whatever seemed good about Patterson's way of doing business, Dad copied; whatever seemed bad, he boldly reversed. His code of discipline for CTR employees was as rigid as that of the Cash, but his philosophy of management was far more humane. Patterson loved to make heads roll, but when Dad arrived at CTR he made a point of firing no one." Compare the latter point to what happens in today's business environment of acquisitions and mergers.

Watson Jr. continues: "He told the men that he was going to depend on them, and that his job would be to build them up. Since he'd worked hard to pull himself up from the farm, Dad knew that the way to win a man's loyalty is by bolstering his self-respect. When I joined IBM many years later, the company was famous for high pay, generous benefits, and the intense devotion of the employees to Dad." And when Watson Jr. took over the business in 1956, he continued the company's tradition of great benefits, great pay and continued to inspire the astonishing loyalty of employees.

The Watsons developed their beneficent roles not as a result of government intimidation, but by being truly dedicated in a patriarchal sense to their employees. Having worked there 20 years, I can say that there was a sense that each and every employee represented the Watsons and their corporate citizenship in relation to their social responsibilities. Employees were told: You are better than the average employee - that's why we hired you. Go out to your community and help the people! You're more educated, intelligent, and gifted! Volunteer! This was the way my fellow workers and I were encouraged to spread goodwill in our towns and communities.

But all that changed between the time I started working there and the time I left. The growing corporation increased in layers of management, which greatly filtered and diluted the guiding principles that originated from Armonk, New York, the company's world headquarters. If I have to point to the one issue that hurt the company and changed its market share dramatically, it had to be the impact of the desktop personal computer. Key corporate executives didn't realize the PC's potential, and got the company out of the starting gate late.

Loss of market share, increasing office politics, and loss of their most important employee relations principle, "respect for the individual," began a change in the company. Retired employees have told me of the continuing cutbacks in their retirement benefits. Medical and dental expense that were totally paid for by the company, are now requiring increasing levels of co-pay on the part of the retiree. And current employees are now co-paying for benefits that were previously entirely paid for by the company.

Regrettably, I saw this all coming. The organization was a huge battleship, and slow to turn around. It's kind of similar to our increasingly bloated and inefficient government. Individualism, the cornerstone of IBM as well as the US, is disappearing. The "little guy" no longer matters. It was eventually going to happen: a company that never fired anyone would now start initiating layoffs [downsizing, rightsizing, etc.]. A company that always offered generous benefits to employees as an increased incentive to join and stay with the company now offers run-of-mill benefits available virtually everywhere. And the current level of office politics and backstabbing are beyond description according to reports provided to me by current employees.

In a Reuters news article entitled "IBM Is Cutting More Than 15,600 Jobs," dated August 13, 2002, the "new" IBM is now in operation. A company that never had a single layoff during the Great Depression is described this way in the article: "International Business Machines Corp. is cutting more than 15,600 jobs - above what had been expected - in its computer-services and microelectronics businesses, according to a regulatory filing made public."

And on November 4th of last year, an article from the Australian-based news.com.au entitled "IBM adds 10,000 jobs this year," seemed to indicate some sort of recovery. But a closer look reveals, "IBM has announced plans to create 10,000 jobs next year and will also retrain 100,000 employees for computer services and software work, according to chief executive Sam Palmisano." The article goes on quoting Palmisano, "'We are committing $282 million to train and educate 100,000 existing employees to compete for these new high-skill jobs,' Mr. Palmisano said." The article then offers, "But investors and analysts say most of the jobs will be added in low-wage countries such as India and China."

In yet another Reuters article carried in The New York Times on August 3, 2003, "IBM Ruling Creates Headache Over Pensions," the article describes yet another dimension of the shakiness of our American network of business empires. The article states: "A once popular pension plan adopted by many large companies to save money threatens to turn into a corporate headache, as conflicting rulings on whether they are unfair to older employees pile up. Underfunded pension plans and higher pension costs have been in the spotlight in recent months as the falling stock prices of the past three years and declining interest rates hurt portfolio returns at many major companies. The latest salvo over controversial pension plans came on Thursday, when a federal judge in Illinois ruled that [IBM's] switch to such a pension plan in the 1990s discriminated against older employees."

IBM was the front running corporation in terms of pay, benefits, job security and retirement security. It was apparent that when IBM began to hedge on these staples of the ideal American corporation that every college graduate or promising high school graduate could always hope to gain employment with began to lose vitality and stability, the rest of the corporate world would fare even worse. Our beginnings as a nation of farmers, even as that transition was experienced personally by IBM's founder, T.J. Watson Sr., was our launching pad to personal economic freedom, our high-tech service and information jobs are being farmed out and outsourced overseas to "low-wage countries such as India and China."

Clearly, American corporations are cutting costs. Clearly, such cost cutting will result in lower consumer prices for American consumers, assuming they have jobs to allow them any kind of serious purchasing power to begin with. But what about the high-paying jobs? Recent reports indicate that these too are being outsourced as well. This would tend to indicate a drop in consumer purchasing power. And should this happen, then the huge cost savings generated by foreign outsourcing will lead to just one outcome: a lower standard of living for America's workers and huge profits for those already wealthy and in control of the mighty corporations, corporations that once had intended only the best for both its workers and its customers.

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