How finance turned corporations into corporations into rootless cosmopolitans Jerry Davis ASA panel on “corporate citizenship” ASA panel on “corporate citizenship” August 17, 2010 © 2010 by The Regents of The University of Michigan • All Rights Reserved Can a corporation have citizenship? “The interests of a transnational company The interests of a transnational company are not the same as those of the country from which it originates or of the workers it from which it originates or of the workers it has historically employed. It has become, to coin a phrase a ‘rootless cosmopolitan ’” to coin a phrase, a rootless cosmopolitan. Martin Wolf, Why Globalization Works 2 Corporation ≠ organization: no fixed nationality 3 Corporation ≠ organization: no fixed boundaries Vizio now has the largest market share of LCD share of LCD televisions in the US (22%)—with 160 employees 160 employees 4
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How finance turned corporations intocorporations into rootless cosmopolitans
Jerry DavisASA panel on “corporate citizenship”ASA panel on “corporate citizenship”August 17, 2010
© 2010 by The Regents of The University of Michigan • All Rights Reserved
Can a corporation have citizenship?
“The interests of a transnational companyThe interests of a transnational company are not the same as those of the country from which it originates or of the workers itfrom which it originates or of the workers it has historically employed. It has become, to coin a phrase a ‘rootless cosmopolitan ’”to coin a phrase, a rootless cosmopolitan.
Martin Wolf, Why Globalization Works
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Corporation ≠ organization: no fixed nationality
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Corporation ≠ organization: no fixed boundaries
Vizio now has the largest market share of LCDshare of LCD televisions in the US (22%)—with 160 employees160 employees
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Corporation ≠ organization: no fixed identity
Poisonous pet chow fcontaining melamine from
China was made by an Ontario-based
f t b t ldmanufacturer but sold under dozens of different US brand names.
The global OEM model is not just for Nike anymore.
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Corporation ≠ organization: no fixed industry
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What is a “bank”?
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?
66?
Corporation ≠ organization: no employees
“Hermit crab organizations” maintain the brand but lose the people (e.g., Circuit ( g ,City’s 43,000 employees)
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Corporations are legal fictions configured to make profits not to caremake profits, not to care.
≠≠88
Can corporations be used as tools of public policy e g to create jobs?public policy, e.g., to create jobs?
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Why blame finance for t lit i ?corporate cosmopolitanism?
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There was a timeThere was a time when the owners of corporations werecorporations were “widows and orphans” andorphans and corporations were social institutionssocial institutions
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Now the widows and orphans buy mutual funds…
80
60
70
50
30
40
301980 1985 1990 1995 2000 2005
Mean ownership by institutional investors of 1000 largest corporations
1616
Mean ownership by institutional investors of 1000 largest corporations
Source: Spectrum 13F database, various years
…and mutual funds are highly concentrated
Number of US-listed firms in which Fidelity is largest shareholder
400
500
200
300
400
0
100
1990 1995 2000 20051990 1995 2000 2005
# of listed firms in US 3833 5187 5828 4423
Source: Spectrum 13F and 13G databases, various years
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Increased ownership by institutions has corresponded to increased devotion to “shareholder value”…
• “We exist to create value for our share owners on a long-term basis by building a business thata long-term basis by building a business that enhances The Coca-Cola Company'strademarks.”
• “Sara Lee Corporation's mission is to buildSara Lee Corporation s mission is to build leadership brands in consumer packaged goods markets around the world. Our primary purpose is p y p pto create long-term stockholder value.”
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…and an orientation to share price has induced massive restructuring favoring an “OEM model”
“Wall Street can wipe you out They are theWall Street can wipe you out. They are the rule-setters. They do have their fads, but to a large extent there is an evolution in how theylarge extent there is an evolution in how they judge companies, and they have decided to give premiums to companies that harbor thegive premiums to companies that harbor the most profits for the least assets.”
John Bryan CEO explaining Sara Lee’sJohn Bryan, CEO, explaining Sara Lee s “de-verticalization” program
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Corporations are not the only way to organize economic activity
• Producer co-operatives
• Consumer co operatives• Consumer co-operatives
• Mutuals
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The challenge for sociologists
• How can we build on legal and technological changes to create more “rooted” non-corporate organizations?– Legal changes
L3C enabling laws B corporation laws
T h l i l h– Technological changes ICTs and new methods of coordinated action
• The goal: the iPhone “workplace democracy app” that turns GM into a kibbutz
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that turns GM into a kibbutz
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