America’s Economic Woe: Is there psychological elements at play?

Today’s massive layoffs announcements by Caterpillar, Sprint and Home depot have caused more harm than good to the already sliding economy adding to the 185,000 job cuts since beginning of 2009 (CNN, 2008).

Such decisions of Job cuts tally to cognitively negative “psychological effect” to consumer adding panic to the marketplace. Our tendency to offload burden to either society or to government is a matter of concern.

I am sometimes baffled by the reckless greed of the few (Chowdhury, 2008) and unjust decisions of the Corporate America to inflict further harm to already overwrought marketplace. From the reckless voracity of the few to the very decisions of Corporate America, a collective pathological cluster is causing “negative cognitive effect” to the marketplace nay to consumers. I have long been argued that corporate behavior (including it’s governance, leadership construct, strategy and decisions etc) influences socio-economic condition. My assumption is further buoyed up today, when I observed a poll by Maria Bartiromo of CNBC at linkedin. The poll requested the respondents to answer the question: Who should restore trust & rebuild confidence in the global economy?

Out of 7,794 respondents, 50% supported “Business Entities”, 21% supported “Government as shareholder” and 14% supported “Multilateral Institutions” to rebuild the confidence in global economy (CNBC, 2008).

Figure 1. CNBC poll on "who should restore trust and rebuild confidence in the global economy?" (CNBC, 2008).

Although such poll does not exclude the presumption that irresponsible consumer behavior also should be held accountable for socio-economic impact, it would not be entirely out of context to assume that corporate can and should be able to shape consumer behaviors. For example, irresponsible consumer behavior of indulging debt up to the throat would not been possible if financial industry upheld the principle of socially responsible corporate behavior. Therefore, whether it is irresponsible consumer behavior or socio-economic issues, corporation should contribute more for the social well being and own up to the responsibility of socially responsible behavior. However, the reason that the business entity often fail to uphold principles of sustainability, CSR (Corporate Social Responsibility) and/or appropriate corporate behavior is due to the fact that the very entity itself is misaligned.

Henceforth, to cure the organizational ailment and improve socio-economic condition, I have put forward hypotheses as follows,

H1: Addressing Organizational Elements improves corporate behavior (Chowdhury, 2008).

H2: Addressing corporate behavior will improve CSR (corporate Social Responsibility) and Sustainability (Chowdhury, 2008).

However, the irony is that Corporate America is not living up to the expectation of owning the influence on both societal and economic impact. Perhaps it would be a premature assumption that corporate America can do more to cut down the wasteful spending than to announce job cuts, yet, this argument remains very imperative to examine and understand due to the compelling socio-economic fall out of America today.

Corporation should be able to formulate strategy based upon the condition that resources are not finite and the decision made today can be positive or negative influence on sustainability of tomorrow. Therefore, decisions of corporation should adhere to the norm of sustainability and sustainable development criterion. I could argue and prove that more 22% of the R&D and/or engineering cost can be reduced through augmented lean design. Such reduction of waste can be applicable to other operational segments of the corporation.

Let us take the example of the debacle of Nortel. Being an ex employee of Nortel, I have witnessed some of the wrongful decision of it’s leaders to gobble up few temporarily tasty ventures. Yet, those decisions have little or no regard on the principle of sustainability. The result is devastating for 100 year old corporation.

It is not Nortel alone, leadership misconduct have brought down Worldcom, Enron and many other corporations both high tech and financial industry. On contrary to the viewpoint express by many experts that corporate exits do not influence industry, I contend that “collective effect” of corporate exits could undermine industry and even “global economy”.

Therefore, leaving the eclectism of variable correlations between corporate behavior and socio-economic impact to the experts and researchers, we could draw the attention of corporate leaders to do more to cut down wasteful spending than to initiate job cuts.

Whether you call it patriotism or corporate social responsibility (CSR), I believe corporate leader should explore ways to stabilize their entity and own CSR and sustainability decisions before adding burden to society through job cuts.

Today’s socio-economic condition demands a fundamental change in corporate behavior.

Reference

CNBC, 2008. Poll: Who should restore trust & rebuild confidence in the global economy? - Maria Bartiromo at CNBC Davos '09 Special Coverage. Available from the website at : http://partner-polls.linkedin.com/polls/373/answers?question_373=multilateral_institutions&source=vote&vote_result=success (Accessed on 26^th January, 2008).

CNN, 2008. Bloody Monday: More than 50,000 jobs lost: Six companies announce massive job cuts in a scary start to the week. Julianne Pepitone, CNNMoney.com. Available from the website at http://money.cnn.com/2009/01/26/news/economy/job_cuts/index.htm (Accessed on 26^th January, 2008).

Chowdhury, D., 2008. Is it greed or pathology? - Who is to blame for corporate crime? - Dhiman Deb Chowdhury’s Blog. Available from the website at http://dhimanchowdhury.blogspot.com/2009/01/is-it-greed-or-pathology-who-is-to.html .