Corporations serve five constituencies:
(1) The shareholders, who invested their money and expect a reasonable return on their investment. They are also entitled to an accurate accounting of the corporation’s financial status, ethical behavior on the part of top management, and a reasonable effort by management to maintain the value of the corporation’s stock.
(2) The customers, who spend money purchasing a corporation’s goods or services, and reasonably expect quality, value, safety, and performance as advertised.
(3) The employees, who, in return for a fair day’s work, reasonably expect competitive pay, fair treatment, a safe work environment, decent benefits, and some degree of job security in return for their loyalty.
(4) The suppliers, who expect prompt payment according to terms, orders placed within agreed-upon lead times, being able to make a reasonable profit, and not having orders canceled or postponed once the goods have been manufactured. In return, the suppliers are expected to provide quality goods within specifications in a timely manner.
(5) The community in which the corporation operates, which expects the corporation to be a good citizen, paying its fair share of taxes, utilizing local suppliers when possible, not polluting, and providing employment for the community’s residents.
There’s a sixth constituency that I don’t believe is legitimate, but often is the driving influence behind corporate decision-making, and that is, the corporation’s top management. Often top management makes decisions that are self-serving, and not necessarily in the best interests of the other five constituencies.
Moving Jobs Overseas
For years, American corporations have been moving manufacturing overseas, so that it is now difficult to find an article of clothing, a pair of shoes, a small appliance, an electronics item, or many other goods still made in the USA. Our manufacturing capacity is dwindling, as is our manufacturing workforce.
To make matters worse, now service and other non-manufacturing jobs are moving overseas, primarily to India. Moving jobs overseas, particularly customer service jobs, is not good because:
(a) It shows a callous disregard for the customer, who must deal with heavily-accented reps who know little about what they are doing (I have dealt with them, so I’m speaking from personal experience). I know of one company I deal with that moved its customer service operation back to the USA after many complaints.
(b) It takes away jobs from qualified Americans, thus doing a disservice to local communities and the nation as a whole.
(c) It benefits primarily that sixth constituency, top management, because they give themselves big bonuses for having made the “tough decisions” to cut costs at the expense of the other constituencies. The shareholders may benefit to some extent from these lower costs if management issues dividends or the value of the company increases because of higher profitability. But these gains are at the expense of the employees, the community, and often the customer.
(d) We have to clearly understand that the community and the nation loses out whenever jobs go overseas or the decision is made to buy foreign-produced items instead of domestically produced goods.
Hurts the Nation
Whenever jobs go overseas or the decision is made to buy foreign-produced items, the nation and community lose out in several ways:
(a) Our unfavorable balance of trade continues, which is not healthy for the economy.
(b) People lose jobs, thus increasing the unemployment burden for the community as a whole.
(c) When these laid-off workers do get a job, it will probably be lower paying, thus lowering the community’s standard of living because of less purchasing power.
(d) We as a nation lose manufacturing capacity and technical expertise, and we are being gradually reduced to a nation of shopkeepers rather than a manufacturing giant which used to be the envy of the world.
(e) Communities are decimated, resulting in a “rust belt” where once thriving industrial communities provided a good livelihood for its residents. Have you been to Gary, Indiana, recently? It's not a pretty picture.
More on this dilemma in a future post.