American vs. German Corporations

By Hunter Wallace

Today I Learned …

“A problem in the United States is that American corporations are literally chartered by the various state governments rather than by the United States federal government – a situation that produces a race to the bottom in the sense that the states vie with each other to be the incorporating state and get the resulting state revenues. However, the competition is in the form of offering the most nondemanding conditions for incorporation. My home state of Delaware seems to have mostly won the competition, and I am sorry to say that it has done so by demanding little in return for the benefits it confers. As a result, the formal responsibility of a CEO is primarily to the shareholders – the stakeholders be damned. In virtually every other country in the world, corporations are chartered nationally and there are quid pro quos in terms of organization, responsibility, and performance.

Germany is the best example. There, the corporate charter establishes a supervisory board on which stakeholders representing labor, shareholders, the community, and other groups serve by overseeing the company’s management and its broad strategic goals. Under this board is a second board called the management board which consists of the company’s top managers and is responsible for development and execution of business plans and operations. The structure is very effective in ensuring both attention to stakeholder interests and alignment with broad national interests. Many German companies are quite global, but they also feel an obligation to keep the interests of Germany in mind. Other countries, such as Japan, France, Finland, and Singapore, have similar arrangements. The United States needs to have them, too.”

Is that right? This sounds significant.

If so, it would go a long way towards explaining why American multinational corporations seem so untethered to the United States in comparison to their German and Japanese counterparts.

Note: This excerpt is also from the Prestowitz book.

22 Comments

  1. I always thought that a union partnership with the corporations was possible, and I did my little bit to make that a reality in my industry. I had a lot of success with union-corporation partnership language. Of course, I wasn’t afraid to read the language, and argue the union’s point of view in the partnership.

  2. There are always trade offs associated with any “great” idea. There isn’t 100% upside to anything. Can anyone here explain the trade offs for chartering corporations with the FedGov. If anyone can’t think of any, I guarantee that you are not looking at the entire picture.

  3. The corporate charter route has been tried and found unconstitutional because it violates the corporations rights as a person under the 14th Amendment. Some think that the 14th Amendment was written to protect corporations, and not the newly freed slaves.

  4. America isn’t a country; it’s a global “commons”–a grab-bag of rent seekers and hustlers from the seven sewers of the world, presided over by jews (ZOG). Therefore, giving FedGov exclusive rights to charter corporations means giving ZOG exclusive rights to charter corporations. There would be very little difference in outcome.

    The problem with these great social democracy ideas is that they can work only if the country in question has some kind of ethnic identity. America doesn’t. We’re screwed. And they only want to screw us harder, opening the borders to 10, 20, 30, 40+++ million Mexicans and Central/South Americans. Bowling alone, defenseless. And there isn’t a White genocide policy in place? News flash: you don’t need “gas chambers” or firing squads to commit genocide.

  5. Even so, German corporations are the big behind the scenes force demanding the Camp of the Saints, to solve the problem of increasing wages and salaries.

    Personally, I’m not fond of the publicly traded corporation as a business model. It’s the business world’s analogue of the democratic republic.

  6. As I said in the previous thread, it really depends on the nature of the elites and the ideology motivating them. The Japanese, for example, have a similar set up to the Germans, but are not inclined to commit national suicide by accepting millions of Muslim refugees.

    Because the CEOs of American corporations are overwhelmingly responsible to shareholders (due to the leverage that state incorporation gives them), they are far more inclined to see themselves as global companies and abandon their American workers to ship production and jobs offshore.

  7. The downside? So many fewer small German companies. Small companies cannot afford the politically correct crap Germany forces down their throats. The notion you have a stake in a company you don’t have (in whole or part) ownership of is nothing less than theft.

  8. In the United States, when the Big Three and Wall Street got in trouble in 2008, who did they turn to? Was it the shareholders?

    GM and Chrysler were in trouble due to the “stakeholders” bankrupting the companies due to their legacy cost. Of note, Ford didn’t get a bailout.

  9. If it had been up to the shareholders, the American auto industry would have collapsed in 2008, and Lehman Brothers and Bear Stearns would have taken down Wall Street and the rest of the American economy.

  10. If it had been up to the shareholders, the American auto industry would have collapsed in 2008, and Lehman Brothers and Bear Stearns would have taken down Wall Street and the rest of the American economy.

    This is sort of like a chicken and egg question (which came first). Could corporations the size of Lehman Brothers and Bear Stearns exist in absence of a large consolidated state? I doubt it. These companies grew up around central power and authority. The 2008 financial crisis could not have occurred without the central bank (Federal Reserve) and its banking cartel that the Federal government authorized to create all of our currency. In 2008, the FedGov sought to solve a problem it created. Of note, only the too big to fails were bailed out. Numerous private enterprises and small/medium size corporations go bankrupt every year and they don’t get bailed out. Their shareholders and the debtors assumed risks and lose their shirts when these companies fail. Carly Fiorina had a good statement in the last debate as to how big government results in crony capitalism. She stated that as government grows, corporations merge/consolidate so that they can handle government. NBC pulled the video from her YouTube channel but here is an NRO article that discusses it.

    http://www.nationalreview.com/article/422402/carly-fiorina-republicans-crony-capitalism

  11. The German model is a part of Mussolini’s syndicalist program. The part the German’s left out is the industrial cartels. The cartels would have allocated production and raw materials between the members and set prices and wages.

  12. Wasn’t the Chinese acquisition of a tech fairylands blocked on national security grounds? The trouble here is that sociopathy isn’t punished: in fact it is rewarded, see Mitt Romney / Bain Capital.

  13. Wasn’t the Chinese acquisition of a tech company blocked on national security grounds? The trouble here is that sociopathy isn’t punished: in fact it is rewarded, see Mitt Romney / Bain Capital.

  14. Dissection:

    “My home state of Delaware seems to have mostly won the competition, and I am sorry to say that it has done so by demanding little in return for the benefits it confers. As a result, the formal responsibility of a CEO is primarily to the shareholders – the stakeholders be damned.”

    The fact that the “State of Delaware” offers corporations all kinds of “deal-deals” has absolutely nothing to do with the authors contention that “the formal responsibility of a CEO is primarily to the shareholders”. The chap penning the piece is apparently unaware of the legal case, “Dodge v. Ford Motor Company, 170 NW 668 (Mich 1919)” that meandered its way all the way up to the Michigan Supreme Court and their decision was never challenged. Google the case up and you will quickly see that in addition to the 1888 case Santa Clara County v. Southern Pacific Railroad which bequeathed to us the “Corporation as person” legalism, the Dodge Brothers case mentioned above presented us with the following:
    “A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end. The discretion of directors is to be exercised in the choice of means to attain that end, and does not extend to a change in the end itself, to the reduction of profits, or to the non-distribution of profits among stockholders in order to devote them to other purposes…” Adding to this dictum was this amoral comment by economist Milton Friedman in the later part of the 20th century: “The moral obligation of a corporation is to make a profit for its shareholders.” (My own thoughts about Uncle Miltie’s statement was, “Profits at what cost and to whom?” Given that he was the father of neoliberal, “shock doctrine – disaster capitalism” economics, “morality” as recognized by the moral mind of Western Christendom was not part of his use of the word “moral.”)

    New Jersey may be indeed a cesspool, but the precedent established for corporate behavior has nothing to do with the geography of the eastern seaboard. See above.

    That said, as the article points out, the German model is superior to “ours” in that “profit” comes second to the overall benefits of ALL concerned, not just the greedy bastards who own most of the stock and the CEO/Board of Directors whose interst is in self rather than the whole.

  15. What’s wrong with profits? Just as wages are the the prices of labor, profits are the cost of capital. If profits are secondary to benefits to other parties then don’t expect for people to risk their capital. The CEO of any company has the moral responsibility to not degrade or destroy the value of the company he is in charge of. Many people depend on that value to fund their retirements, their children’s education, or to have assets to pass down to their posterity.

    • If you look at the system we have today and our enormous trade deficit, there are plenty of jobs and profits – it is just that so much of it flows overseas to foreign countries.

      1.) There’s all the oil we buy from places like Mexico and the Gulf Arabs.

      2.) There’s all the merchandise we buy from Japan, China, South Korea, Vietnam, Malaysia, etc. The American consumer has created plenty of jobs in those countries and has done far more to stimulate China’s economy than Chairman Mao ever did.

      3.) Because China and Japan finance our budget deficit by buying Us Treasury bonds, we keep paying them enormous amounts of interest on our national debt.

      The system works fabulously for the ultra-rich of this country. If you exclude the top 1 percent and compare the average per capita income of 99 percent of Americans with foreigners, you will find that the average American has a far lower standard of living than the average European, particularly in the poorest parts of the South.

  16. No one is arguing against profits. Go read the Dodge v. Ford court case above as a case in point. Did Henry have a problem with profits? Hell no. But he also believed he and his firm had bigger obligations than simply amassing personal fortunes from profits, that being to his employees, the local community and the country at large. (The case stemmed from Henry’s desire to give Ford’s entire workforce significant raises to make their lives better. The Dodge Bros., then 10% owners, disagreed because they wanted higher dividend payments. I assume you can see where this has led?)

    Google up an incisive piece from May of 2008 (if I recall correctly) in Orion Magazine titled, “The Gospel of Consumption” (and the better future we left behind). You should find the woven tale rather interesting. You will also get to meet Mr. Bernays, your “programmer.”

  17. @John

    Was Henry Ford’s offering a higher wage to his employees an act of altruism or was it based on good business? It sounds like it was a business decision.

    http://www.forbes.com/sites/timworstall/2012/03/04/the-story-of-henry-fords-5-a-day-wages-its-not-what-you-think/

    At the time, workers could count on about $2.25 per day, for which they worked nine-hour shifts. It was pretty good money in those days, but the toll was too much for many to bear. Ford’s turnover rate was very high. In 1913, Ford hired more than 52,000 men to keep a workforce of only 14,000. New workers required a costly break-in period, making matters worse for the company. Also, some men simply walked away from the line to quit and look for a job elsewhere. Then the line stopped and production of cars halted. The increased cost and delayed production kept Ford from selling his cars at the low price he wanted. Drastic measures were necessary if he was to keep up this production.

    This apparently was a good business decision. Of note, at one point in time in his life, Henry Ford was the richest man in the World.

  18. “Is that right? This sounds significant.”

    I’d say John above has it right. The concept of maximizing short term profit as the *only* corporate metric is the real killer and that came about academically with people like Friedman, legally by a bunch of Wall St lawyers in the 1980s changing the rules on hostile takeovers and financially with people like Milken creating junk bonds as the practical means to force companies to ditch the moral component and off-shore or be taken over.

    They collectively removed the moral component that had up until then always been a part of the picture (only a part but critical).

    The incorporation thing is a thing – as if it was different it could act as a brake on the rest of the reasons – but not the cause.

    If the author is leaving out all the main reasons that drove off-shoring he’s probably just another banking mafia shill.

    #

    The key factor is ethnic loyalty. An elite might not have much ethnic loyalty but in terms of practical effect the difference between some and none is huge.

    #

    You can see an example of the difference in China and India.

    In China the elite are massively corrupt but they are at least a little bit Chinese nationalist.

    In India the population are broken up into castes so the elite are mostly only loyal to their caste and not the nation.

    #

  19. “If the author is leaving out all the main reasons that drove off-shoring he’s probably just another banking mafia shill.”

    Googled the guy – looks more likely he is just avoiding mentioning the elephant in the room so it doesn’t step on him.

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