Headline: Vanishing American corporations headline????
By: Dylan Grosser
The Koeze Business Ethics Initiative invited University of Michigan business professor Jerry Davis to speak to students in the Eberhard Center. Davis wrote a new book titled “The Vanishing American Corporation and the Hazards of the New Economy” and was brought down by the director of the Koeze Business Ethics Initiative, Michael DeWilde, to share some of the key points of his book to students.
Davis pointed to the widely believed concept that big corporations rule the world. In reality, however, they are actually in decline. In 1997, the number of publicly traded companies was at an all time high, 7,322. Today, there are less than 3,700 publicly traded companies, an all time low. Consolidation and competition have caused many public companies to delist, but the larger reason for the disappearance of large corporations comes from the culture itself.
The creation of new companies are on the rise, which sounds optimistic. However the majority of new startups hire few new employees and use private contractors for most of the work in the company. These contractors typically don’t receive benefits, and reflect a shift from the old model of working at a job, to working at a task instead. Davis said this shift has hurt employees by allotting them few opportunities to move-up in a company.
Also, these new companies have different voting structure than the old typical publicly traded company. Since the 2008 financial crisis, companies have been giving their founders more control over the company, Davis said. Everyone in a company gets some vote per share that allows some democracy in business, but companies like Facebook, or Zynga place most of the votes or shares with the CEO itself, making them more powerful than ever, and able to control aspects like a company’s direction and the potential for job creation.
Numerous factors have played into the disappearing number of corporations, Davis said, and it’s difficult to place blame in any sector. Davis said it is really the underlying nature of technology that has pushed for cheaper alternatives for things and have encouraged a minimalistic business style.
“Once it becomes possible for Vizio to make TVs half the price of Sony’s, it’s just going to happen,” Davis said. “So it’s not really a question of blame, it’s more like attributing causality to certain directions in technology.”
With jobs being outsourced to different countries and other human jobs being replaced by technology and algorithms, Davis said the only safe haven people should go to is their liberal education.
“Why I still love liberal education is because it makes you flexible and adaptable. Even when there’s big changes out there, liberal education can give you some of the tools to be able to adapt and figure out what comes next,” Davis said. “That being said, I’m also a big fan of learning Python and SQL.”
Davis said there have been multiple ways the disappearance of corporations have effected Michigan. The automotive industry was damaged badly by the 2008 financial crisis, an industry that can’t be mentioned without mentioning Detroit. General Motors, Ford and Chrysler were companies that hired Michiganders in great numbers and gave them generous benefits until 2008. Now, Davis said, some of the most revolutionary experiments in self-sufficiency are being tested in Detroit, from urban agriculture, to makerspaces, to different ways of organizing production.
“I’m optimistic that I’m going to see some of those community self sufficiency experiments” Davis said. “We’re going to see a lot of the progress in places like Detroit, not in Palo Alto, where they’re looking for new apps for valet parking your Tesla, but in Detroit where people are trying to make a living using very limited resources.”
Davis said there is a lot of “gloom-and-doom stuff” about the U.S. economy in his book, however he said there is a positive chapter in it too.
“We should be celebrating that it takes so little human effort to be able to sustain ourselves, we should be having these great lives, but instead we’re worried about jobs disappearing,” Davis said. “It feels like that should be a solvable problem. It shouldn’t be a giant problem that we can get all this stuff we need with so little labor input.
“It should be cause for celebration. We just have to figure out how do we get over that chasm to the other side.”