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Let’s say you own a small business, maybe the local car dealership, assuming it is still extant. One day, you are feeling pinched and sell some shares of the business to a few folks in town. To keep things on the up and up, you create a board.
Every year you and the other shareholders get a report from the fellow you hired to manage the dealership. The business runs so smoothly you barely even think about it. Until one day, sales crash and profits, too. You would like to sell your stock, but it is in the tank. So you ring up the manager to see what happened. “Simple,” he says. “I quadrupled my bonus and I forgot to order a line of fuel-efficient cars. My bad.” Then he hangs up.
Feeling a little irritated, you try to contact some of the directors, but they are out driving gas-guzzlers that the manager supplied them and don’t seem inclined to return your calls. Now you are very irritated. As the biggest shareholder, you request that your name be included on the proxy ballot for the next election to the board. This the corporation refuses to do. Only the management (or its handpicked board) chooses nominees, and it is an iron rule of American corporations that ballots should not contain more nominees than seats. In the former U.S.S.R., this style of democracy endured for only 72 years. In American business it is timeless. Until last month, anyway, when the Securities and Exchange Commission proposed that shareholders who own at least 1 percent of the stock be able to nominate candidates to run in opposition to — and on the same ballot as — the slate offered by management. (Read the rest here)
Faced for the first time with competition from low-cost, high-mileage foreign imports, Iacocca set a specific target: Ford would design a new automobile that weighed less than 2,000 pounds and sold for under $2,000, and it would be on the showroom floor in time for the 1971 model year. What resulted was a mad dash to create the Ford Pinto.
The rush to roll out the Pinto had lethal consequences. Common-sense safety checks took a backseat to meeting Iacocca's deadline. In particular, engineers failed to examine the decision to place the Pinto's fuel tank only 10 inches behind the rear axle. When the Pinto was rear-ended, it often went up in flames. Fiery rear-end crashes caused 53 deaths, numerous injuries and a string of costly lawsuits. (Read the rest here)Overly ambitious goals and overly generous compensation: A heady mix.
It is with sad irony that the company which invented "planned obsolescence" -- the decision to build cars that would fall apart after a few years so that the customer would then have to buy a new one -- has now made itself obsolete. It refused to build automobiles that the public wanted, cars that got great gas mileage, were as safe as they could be, and were exceedingly comfortable to drive. Oh -- and that wouldn't start falling apart after two years. GM stubbornly fought environmental and safety regulations. Its executives arrogantly ignored the "inferior" Japanese and German cars, cars which would become the gold standard for automobile buyers. And it was hell-bent on punishing its unionized workforce, lopping off thousands of workers for no good reason other than to "improve" the short-term bottom line of the corporation. Beginning in the 1980s, when GM was posting record profits, it moved countless jobs to Mexico and elsewhere, thus destroying the lives of tens of thousands of hard-working Americans. The glaring stupidity of this policy was that, when they eliminated the income of so many middle class families, who did they think was going to be able to afford to buy their cars? History will record this blunder in the same way it now writes about the French building the Maginot Line or how the Romans cluelessly poisoned their own water system with lethal lead in its pipes.Moore insists, like others, that GM refused to build fuel efficient cars American drivers wanted to buy. I don't agree. Following Moore's train of thought, the roads would have been filled with SmartCars and Priuses (Prii?). Instead, we kept buying cars with gas mileage ratings that were nothing to boast about even in the 1980's. Like that chestnut from Richard Pryor (scrubbed for sensitive readers): we ordered poo, so we had no choice but to eat poo (not the same punch as Pryor).
Some retiree benefit obligations to be reduced by roughly two-thirds; hourly staff will hit 38,000 by 2011; salaried workforce to be trimmed to 23,000; and the number of dealers will drop to 3,600.Um, wow!
GM began its slide down the slippery slope in 1950, when it began picking up costs for medical insurance, pensions and retiree benefits. There was huge risk to GM in taking on these obligations -- but that didn't show up as a cost or balance-sheet liability. By 1973, the UAW says, GM was paying the entire health insurance bill for its employees, survivors and retirees, and had agreed to "30 and out" early retirement that granted workers full pensions after 30 years on the job, regardless of age.
Retirement plans have historically been based on an actuarial formula that "works" for employers when retirees die within 2-5 years of retirement. Having retirees leave the company at as young as 48 (in their "30 and out" system), they stood to pay retirees and their mates for decades beyond the usually and customary (and grisly) benefits and comp formula. This report from Boeing shows a bit of what I mean:
These problems began to surface about 15 years ago because regulators changed the accounting rules. In 1992, GM says, it took a $20 billion non-cash charge to recognize pension obligations. Evolving rules then put OPEB on the balance sheet. Now, these obligations -- call it a combined $170 billion for U.S. operations -- are fully visible. And out-of-pocket costs for health care are eating GM alive.
Like the "Rashomon Effect" Perry and I were talking about (based on the amazing Kurosawa movie--think CSI: Feudal Japan in which people posit plausible, but differing accounts of events), blame-shifting and the regrettable inability to parse "what's so" based on the limits of perspective can surely hamstring a team looking to make a quick shift.
Added by Lalita Amos
It's still Black History Month. And, yes, I still hate Black History Month. Let me start by re-posting my first Black History Month homage from a couple of years ago:
Why I Hate Black History Month
15 February 2009
… ContinueIt's officially the middle of Black History Month and I can't take it anymore.
I hate Black History Month.
Now, before your head gets sweaty, your commenting fingers get itchy and you decide that I'
Posted on February 4, 2009 at 2:20pm — 8 Comments

Posted on December 4, 2008 at 11:24am — 4 Comments
Our economy is ___________________ (enter your selection here)
People aren't poorer, they just ___________________ (enter your selection here)
Posted on October 13, 2008 at 11:20pm — 1 Comment
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