After the unprecedented and historical bailout of corporations through out “West”, you would have expected some restrains in corporate spending, perhaps a bit of grievance for the misdeeds, or at least the depiction of socially responsible behavior. Well, you would be disappointed knowing that so far Corporate America exhibited behavior exactly to the contrary. And, that too in a very shameful way indeed!
It is now public, as time magazine puts it, “Washington’s Bailout will boost Wall Street Bonuses” (Time, 2009). A collective bonuses of more than USD$19 billions are being consumed by Wallstreeters. And, for the poor employees, guess it, job cuts at the horizon. Right at the heart of Wallstreet when billions of tax payer’s money are consumed in compensation expenses for the lucky few, corporations like Golman Sachs is slashing nearing 10% of it’s workforce instead of utilizing compensation bonuses to stabilize the market.
You would think, corporation will get a dose of discipline this time and learn from the consequence of their irresponsible behavior, perhaps would be educated from a lesson of sustainability 101 or risk management 101, guess what, you are wrong.
Well, who cares, American society is there to pay for the misdeed of Corporate America. When nearly 70% of world economy equates to the revenue of only 200 top corporations, there is little society can do without the collaboration of the corporate world.
With America’s biggest GDP contraction in decades with 3.8% in the last quarter of 2008 (Aversa, 2009), our society and the country herself are at the behest of corporate America.
[Please view the video report from BBC below:
http://news.bbc.co.uk/1/hi/world/7861558.stm ]
Americans are not alone in this debacle; citizens of many other countries through out the “West” have voiced their concern. After several weeks of upheavals at Greece, people of France took out their anger on government yesterday.
[Please view the video news report about unrest in France below:
http://cosmos.bcst.yahoo.com/up/player/popup/?rn=3906861&cl=11780657&ch=4226714&src=news ]
However, lashing out government or cursing the “Uncle Sam” for bailout will not help. Collectively, we have more to do. We are dealing with corporate behavioral pathologies in one hand and socio-economic condition on the other.
The issue here is that, our understanding of the correlation between industry and corporate exit is wrong. We are predisposed with an understanding that “Industry decline” influences corporate exit, well the truth in the recent era has been that it is other way around. Collective corporate exit will undermine industry.
Therefore, engaging with corporate world would be better remedy than looking ways to fix the effect of “industry decline”. The first and the foremost, is to encourage increased employee participation in the reduction of wasteful corporate spending. Intel’s recent announcement that employees will have a say in executive compensation is a way forward. Nevertheless, employees could do more to effectively reduce wasteful spending and augment the corporate culture. Let’s not allow job cuts the easy way out of corporate down turn. We need to look beyond the temporary fixes. For example, capital budgeting scheme could require an overhaul. Sometimes, managers are required to comply with “use or lose” budgeting scheme encouraging for wasteful spending in equipments or resources that is unnecessary. Next, derive strategy very carefully, resources are finite in nature and therefore, use it wisely. It is a common sense; expert calls it principle of “corporate sustainability”. Decision of today will surely affect suitability of tomorrow. Henceforth, much of the corporate spending should be carefully evaluated. For example, have a dose of discipline in spending, do wise formulation based upon ROI. Estimate your next course of action based upon COPQ (cost of poor quality) metrics or perhaps QMM for development.
Moreover, consider the leaders or executives carefully and wisely. Emphasize on basic understanding of the industry and marketplace before choosing your leaders. Last but not the least; ensure a corporate culture of fairness and management of referent and expert power rather than doses of coercive powers.
The bottom-line, think of corporation’s culture is like a fruit, a little indulge of pathology will surely spread very quickly to blemish the fruit. And, like the rotten fruit spreads the smell of decay in the environment, pathology will adapt and spreading throughout forming clustered pathological phenomena. Add, few of those rotten corporate fruits, collective spread of decay surely bring down the industry. At the end, we get the economic woe that we are facing today.
Reference
Aversa, J., 2009. Economy shrinks at 3.8 percent pace in 4Q: Economy shrinks at 3.8 percent pace in fourth quarter, worst showing in quarter-century. Associated Press (AP). Available from the website at http://biz.yahoo.com/ap/090130/economy.html (Accessed on January 30, 2009).
Time, 2009. How Washington's Bailout Will Boost Wall Street Bonuses. Stephen Gandel, Business & Tech section. Time, Inc. Available at from the website at: http://www.time.com/time/business/article/0,8599,1853846,00.html (Accessed on January 29, 2009).
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