Nowadays, anytime a corporation is involved in a scandal, they’ll insist that no one did anything wrong and that “communication problems” are the real to blame. For instance, if a business releases toxic waste into an aquifer, it did so because “the board failed to adequately communicate the new environmental policy to the local management,” not because of greed.
When General Electric (GE) participated in widespread price fixing in the late 1950s, this assertion was tested in one particular instance. A total of 29 electronics companies banded together to fix the pricing of $1.75 billion worth of machinery, with more than $500 million coming from governmental organizations. The consumer may be required to pay up to 25% extra for the repair than usual.
The embarrassing situation was taken before the court and a senate panel when it became clear that GE was the mastermind behind the price fixers. No higher level executives were charged, despite the fact that certain supervisors received fines and prison sentences. why not They insisted that everything was the result of a miscommunication between middle management, who misunderstood their directives.
There were reportedly two different kinds of policies approved at GE at the time: formal ones and implied ones. If executives gave you a directive while maintaining a professional demeanor, you were supposed to abide by that instruction.
If someone issued you an order while winking at you, however, it was up to you to decide how to take it. Usually, you had to act in the exact opposite way to what was said, but occasionally, you had to infer what the CEO was getting at. And you would be the one in danger if you didn’t figure out what was implied.
Because of this, many managers believed that GE’s strategy, which barred discussing prices with competitors, was merely a show. However, they recognized they couldn’t hold the executives responsible once they found themselves in court for the price rigging. This incident demonstrates to us that business leaders can exploit communication issues as an excuse for a variety of criminal activities.
It’s likely that you have never heard of Piggly Wiggly unless you reside in the southern or middle of the United States. In any case, the idea of the self-service supermarket was patented in 1917. For instance, it was the first supermarket to provide shoppers shopping carts, price tag every item, and have check-out counters.
Despite the fact that Piggly Wiggly is still in business today, few people are familiar with it because of the eccentric owner Clarence Saunders’s extreme measures to combat financial speculation. Piggly Wiggly was widely growing in the United States in the 1920s. However, some investors attempted to profit from the failure of a few franchises in New York in 1923 by launching a bear raid against Piggly Wiggly.
A bear raid is a strategy in which investors make investments that are profitable only if the stock price of a firm declines and then exert all reasonable efforts to drive the stock price down. In the case of Piggly Wiggly, they asserted that the failure of the New York franchises was to blame for the company’s overall problems.
Saunders launched a campaign to “corner” Piggly Wiggly’s stock, or buy back the vast majority of it, out of rage and a desire to teach Wall Street a lesson. And he nearly pulled it off.
He publicly declared his intention to purchase all outstanding shares of Piggly Wiggly, and after taking on significant debt, he was able to acquire 98 percent of the company’s stock. As a result, the stock price increased from $39 to $124 a share, which was disastrous for the bear raiders because they were hit with huge losses as the price increased.
The raiders were able to persuade the stock market to give them a longer deadline for making good, though. Due to his debts, Saunders’ position was untenable, and eventually he incurred such significant losses that he was had to file for bankruptcy. Instead of going to a huge box retailer like Wal-Mart, you may be wriggling your way through the aisles of a Piggly Wiggly if Saunders had more sway on the stock exchange.
Many individuals are prone to call someone a sell-out when they see a powerful government official go into the business sphere and use his previous contacts to generate money. But in David Lilienthal’s instance, that wouldn’t be a fair charge to level.
Under the reform-minded President Roosevelt in the 1930s, Lilienthal was a competent government employee. Then, in 1941, he was named chairman of the Tennessee Valley Authority, a body in responsibility of creating and distributing inexpensive hydroelectric electricity in regions not serviced by private providers.
He later served as the first head of the Atomic Energy Commission in 1947, highlighting the significance of the utilization of nuclear energy for peaceful purposes. Finally, after he left public office He was open about his reasons for moving in 1950, stating that he needed to earn more money to support his family and put money aside for his own retirement. Upon entering the commercial sector, Lilienthal also demonstrated his abilities as a dedicated businessman.
He was ideally qualified for the mineral industry given his background in energy, and because he wanted to learn how to be an entrepreneur, he took over the critically failing Minerals and Chemical Corporation of America. He made a small fortune as a result of his success in saving the company from certain disaster.
His new line of employment also had an impact on his personal beliefs; he wrote a contentious book about the value of large business to the American economy and national security. Lilienthal was accused of being a sell-out by his former government colleagues, but he was only very dedicated to both sides of the issue.
Lilienthal eventually came to the conclusion that he wanted the best of both worlds, so in 1955 he formed the Development and Resources Corporation, a consulting firm that assisted developing nations in implementing significant public works initiatives. With equal responsibility for shareholders and humanity, Lilienthal truly is the model businessman, as demonstrated by his most recent venture.
Who do you consider to be the nation’s most powerful individuals? It ought to be the stockholders, in theory. Particularly given that they own the greatest firms in the country, which have such sway over American culture that many political scientists have hypothesized that the country is more like an oligarchic feudal system than a democracy.
The board of directors of these large organizations is always chosen by the shareholders, providing the stockholders the real power. Shareholders gather at an annual meeting once a year to choose the board, approve policies, and ask questions of the company’s leaders.
But these meetings are typically a complete farce, far from being the dignified, solemn occasions one might think. This is due to the management of the company not truly believing that the shareholders are their superiors. They hold meetings distant from the company’s headquarters, making it difficult for shareholders to attend. They talk endlessly about the company’s stellar record and promising future during the meetings in an effort to keep the shareholders from participating.
Most stockholders respond favorably to this strategy. These meetings are only engaging because of the professional investors that engage the firm board and management in discussion.
At AT&T’s 1965 shareholders meeting, investor Wilma Soss chastised board chairman Frederick Kappel and even suggested he consult a psychiatrist, providing a humorous illustration of this. Soss and other seasoned investors seek to keep corporations accountable because they frequently hold shares in numerous businesses. In this instance, Soss fought to increase the number of female directors.
There is nothing more passive and submissive than a little investor who is consistently fed dividends, thus trying to rouse indifferent investors is a fruitless task. Shareholders could prevent management from acting arbitrarily if they used their influence more frequently.
You’d be able to accept it if you ever got a very alluring job offer from a company that’s not your current employer, wouldn’t you? Actually, you have a researcher by the name of Donald Wohlgemuth to thank for creating the precedent that permits you to do as you choose. Your right to do so was not always so obvious.
Wohlgemuth was in charge of the B.F. Goodrich Company’s space suit engineering division in 1962. During the race to the moon, the market for space-related goods was expanding quickly, and Goodrich was the market leader in space suits. But at the time, International Latex, the company’s primary rival, had just won the contract for the now-famous Apollo project. Wohlgemuth promptly accepted an offer from International Latex to work on the prestigious Apollo project with increased responsibilities and pay.
However, when Wohlgemuth informed his bosses at B.F. Goodrich that he was leaving, they were worried that he would reveal the trade secrets he had discovered on the manufacture of space suits. B.F. Goodrich later filed a lawsuit against Wohlgemuth as a result of this worry and the fact that Wohlgemuth had first signed a confidentiality agreement.
When the contentious matter proceeded to trial, two significant questions with a nearly philosophical bent emerged. Can action be done against someone even if they haven’t actually broken an agreement or demonstrated any intent to do so? And should a person be prevented from applying for a job that would make them feel tempted to commit a crime?
Wohlgemuth was certainly in a position to hurt Goodrich by disclosing what he knew, but the judge determined that he could not be adjudged preemptively guilty and was therefore allowed to accept a position with International Latex. This judgment set the standard for comparable decisions, making it a significant victory for employee rights.
Due to its age and great worth in the 1960s, the British pound sterling was perhaps one of the most prestigious currencies in the world. So, when financial speculators attacked the pound in 1964, central bankers all around the world felt compelled to defend it.
The Bretton Woods Conference in 1944, where the world’s main countries decided to establish a global monetary exchange system with fixed exchange values for all currencies, served as the impetus for the attack. As a result, governments frequently had to buy or sell currencies on the currency exchange market in order to maintain these fixed prices.
Britain encountered economic problems in 1964 as a result of a significant trade deficit. Currency speculators thought that Britain would have to weaken the pound if the fixed exchange rates could not be maintained. As a result, they began placing market bets against the pound because they wanted its value to decrease.
A large coalition of monetary policy decision-makers led by the US Federal Reserve staged a defense in response to the threat facing not only the prestigious pound sterling but also the entire international monetary exchange system. To resist the urge to devalue the currency, they started to purchase pounds.
The initial round of attacks was repelled, giving the impression that the strategy was working. However, the speculators persisted in their attacks, prolonging them for years. Finally, in 1967, the alliance was unable to afford to purchase any more pounds, forcing Britain to weaken its currency by more than 14%.
In retrospect, the conflict over the value of the pound sterling was simply the first indication of the Bretton Woods system’s underlying flaws, which would be resolved just four years later, in 1971. In many circumstances, significant historical events can be used to explain how we interpret the financial market and corporate ethics. For instance, the struggle of one individual to switch jobs had a long-lasting effect on employee rights.
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