Corporations Are People Too, Right? Part 2

6 Dec

In my previous blog we discussed the difference between a human being and a corporation; a conscience, or lack thereof. Let’s pretend that a large corporation has a manufacturing plant in a small Midwestern town. 100 years ago it was started by John Smith who was born and raised in the town. Over the years that the Smith family owned their company the company prospered and grew, and so did the town. Often a local family could boast of three or four generations who worked for the Smiths.

In the 1970’s John Smith’s descendants were no longer interested in manufacturing and decided to sell the company to one of their competitors. The company prospered under the new owners and so did the town. A decade later the new owners sold their company to Mega Corporation, one that didn’t directly manufacture any products but made their profits strictly by buying and selling these portfolio companies.

The new owners of John Smith’s company, looking to maximize their profits, and thus increase shareholder value, realized that they could increase their margins by 3% if they moved their manufacturing facilities to Mexico. To top management and the board of directors this seemed like a good plan. The company wins and the shareholders win. The only people who lose are the employees and all the local businesses in this Midwestern town that depend on the salaries of those employees.

Let’s suppose that the John Smith company had 500 employees, and the average household had 3.5 people. Laying off those 500 people directly affects 1,750 people with no means of support and few prospects for employment. With those 1,750 people having less income (or none at all) they spend less at the local stores; supermarket, pharmacy, coffee shop, clothing store, service station, local bank, etc. With less everyday sales these stores start hurting and soon start laying off workers. With less revenue from property taxes and retail sales taxes the local and county government begin reducing services and laying off workers. Fewer teachers to teach the town’s children. Fewer police to protect its citizens. Longer response times for the fire department and emergency medical technicians. Crumbling roads and bridges.

In addition, the John Smith Company bought raw materials and supplies from a wide range of regional companies. When the manufacturing plant closed these companies lost a long standing customer. If they could not replace the lost revenue, they too would have to lay off workers.

All this happens because a group of “suits” felt that a 3% increase in margins was best for the company’s shareholders, plus the CEO keeps his job for another 90 days. (If you think I don’t know what I’m talking about – I was a “suit”).

The above fictional scenario is a classic example of what has happened to America. It is an example of the Law of Cause and Effect. Mega Corporation had no qualms about moving manufacturing to Mexico for a 3% increase in margins. The survival of the town was never a part of the equation. After all, as the Mafia says, “it’s only business!”

Would the Smith family, in good conscience, have done the same? Somehow I doubt it.

Still think corporations are people too?

Love,

Michael

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