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The Treason of the Executives

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It looks as if General Motors will be bankrupted by its health insurance obligations to retirees. That was predictable two decades ago.

It’s hard to see the end of GM as anything but a gain for the art of automotive design, but it will be rather inconvenient for the shareholders, not to mention the employees and retirees.

The astonishing thing about the story is the fact that GM management was offered a way out, and turned it down. The Clinton health plan was disfigured by the inclusion of a provision that would have relieved the industrial dinosaurs, including GM, of the burden of their imprudence in promising health benefits when they were large that they could no longer afford after downsizing. Everyone knew it was an unjustified giveaway, but the idea was to peel off the big manufacturing firms from the coalition of small businesses (which didn’t want to give up the competitive advantage they gained from chintzing on health coverage for their employees) and the health-insurance and health-care giants whose bread and butter was on the line.

But GM and the other big-business beneficiaries turned the deal down flat. Partly this reflected the threats of payback from the Republicans on the Hill against any firm that did business with the Clintons. Partly it reflected the self-interest of the corporate Human Resources bureaucrats, whose importance within their firms would have shrunk if health care was no longer a corporate problem. But in large part it reflected an almost Marxian expression of class solidarity over individual interests. GM’s managers decided that denying a triumph to a Democratic President was more important than keeping their own firm from going broke.

Yes, I know that companies don’t have personalities, and therefore can’t be punished. But it’s hard not to take some satisfaction from the knowledge that an organization which made such bad decisions won’t be around to make them much longer.

It is not as if GM is never capable of learning from its mistakes. Dave Lindroff describes in Counterpunch that GM Canada lobbies for improvements in national health care in Canada by arguing that relieving companies of the health-care burden encourages investment and employment, while the parent company continues to oppose national health care here.

Matt Yglesias points out that, in opposing Clinton’s health care proposal, the GM managers were acting against the interest of their employer, but entirely consistently with their own financial interests. He writes:
…as long as corporate America is governed in such a way as to create incentives for this sort of irresponsible political behavior on the part of corporate managers, it will be very hard to cope with serious national problems.

That’s right. But it’s not just national problems that won’t get solved if managers act for themselves and not their companies, it’s business problems. As top corporate salaries have soared, the loyalty of the recipients of those salaries to their employers has become increasingly questionable.

John Stuart Mill thought that the shareholder-owned, employee-managed corporation, with its division of decision-making from ownership, wouldn’t work and would turn out to be a stepping-stone to socialism. So far, of course, that hasn’t turned out to be a problem. Indeed, we’ve had to deal with the opposite problem: corporate bureaucrats so fiercely loyal to their companies’ interests that consumers, workers, and the local environment need to be defended against their vicarious greed. (It’s been argued that business schools exist less to teach skills than to inculcate the value of loyalty to shareholder interests.)

Now, though, it’s clear that we can’t universally trust CEOs and CFOs and their tame board members to steal for their shareholders rather than from their shareholders. In the long run, that’s likely to be very bad for business. And, in the long run, what’s bad for business is bad for the country.

The article comparing overpaid disloyal CEOs to overpaid disloyal third basemen and quarterbacks is just begging to be written.

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About Mark Kleiman