We recently had a good example of this in Japan. The local energy concern (Tepco) covered up serious faults in it's nuclear plants over a period of 10 years or so. All 17 of it's nuclear reactors which supply Tokyo were taken offline for safety inspections and old fossil fuel ones were brought back online (yay environment, just think of how many old ones have to come back to replace 40% of the lost nuclear capability).
In any case, there was a big push for energy conservation because they were afraid of blackouts and the resulting economic chaos that would plague and already troubled fiscal situation (10 year depression). We had disaster recovery plans at my firm if it went bad and there was a web site for how likely a blackout was, that's how bad it was.
So why did they hide multiple cracks in the reactors, or rig a measuring instrument to give falsified data or any of the other things in the big list of infractions? I really can't see any reason other than to protect the bottom line.
There's this idea that corporations do this because they are all evil, or greedy or wicked. Sometimes this is true (Enron). It also seems likely that when this sort of common manager first finds out about stuff like this, they are stunned by the potential impact it could have on the company and, more importantly, their jobs. The are frightened by it, go into denial and look for a cheap and easy solution for a problem that, surely (hoping...), is no big deal. Everything's fixed, and they go back to their old life. Happens again in another plant, but hey, we fixed it last time so no problem. After a while it just becomes normal. Our little corporate secret. Nothing to see here, wink wink.
This is not to say that they are not also motivated by the enormous fiscal pressure to increase profits at the behest of the investors. It's never said that way of course. It's usually, "I'm really getting a lot of pressure to improve productivity and reduce operating costs by 4%". And when you're being whipped to reduce operational expenditures, it becomes pretty hard to suggest that you shutdown a reactor for 8 months while a multi-million dollar repair job is getting done. It's the right thing to do, but also the hard one (isn't that typical).
This pressure, it seems to me, derives in large part from the stupidly unreasonable, but pervasive idea that investors have that their stocks ought to go up in value every year. Forever. It's *not* OK to get big and profitable and stay that way year after year, but you have to keep becoming more profitable. Well you can only squeeze so much until you start squeezing things and doing things that you probably shouldn't. It's funny, we (society, not necessarily you the reader) bitch alot about corporate evils and so forth, but if our stock doesn't go up, we're all pissed about it and put more pressure on the companies (or our fund manager who does it for us with a lot more clout), who guess what, resort to more and more extreme measures to give us what we want.
One might say, "But I don't have enough shares to put pressure on anyone". Sure you do, many institutional traders know that if they don't perform well, you and several million others just like you (not to mention those pesky rich people) will pull out if they think they can do better elsewhere. Why stay in this fund which does 2% when that other guy's fund get 7%? So the institutional investor wants to keep his job and puts big pressure on the company to perform well and be more profitable, using the big collection of little moneys he got from ordinary investors.
Add globalization into the mix and you have a really fun situation, with lots of powerful, hyper-competitive global companies duking it out for every last dollar, because all of them are under this huge pressure to perform (in that impossible ever growing way). And since all of them are somewhat lean to begin with, is it any wonder they start
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http://edition.cnn.com/2003/WORLD/asiapcf/e ast/06/ 17/tokyo.scandal/
We recently had a good example of this in Japan. The local energy concern (Tepco) covered up serious faults in it's nuclear plants over a period of 10 years or so. All 17 of it's nuclear reactors which supply Tokyo were taken offline for safety inspections and old fossil fuel ones were brought back online (yay environment, just think of how many old ones have to come back to replace 40% of the lost nuclear capability).
In any case, there was a big push for energy conservation because they were afraid of blackouts and the resulting economic chaos that would plague and already troubled fiscal situation (10 year depression). We had disaster recovery plans at my firm if it went bad and there was a web site for how likely a blackout was, that's how bad it was.
So why did they hide multiple cracks in the reactors, or rig a measuring instrument to give falsified data or any of the other things in the big list of infractions? I really can't see any reason other than to protect the bottom line.
There's this idea that corporations do this because they are all evil, or greedy or wicked. Sometimes this is true (Enron). It also seems likely that when this sort of common manager first finds out about stuff like this, they are stunned by the potential impact it could have on the company and, more importantly, their jobs. The are frightened by it, go into denial and look for a cheap and easy solution for a problem that, surely (hoping...), is no big deal. Everything's fixed, and they go back to their old life. Happens again in another plant, but hey, we fixed it last time so no problem. After a while it just becomes normal. Our little corporate secret. Nothing to see here, wink wink.
This is not to say that they are not also motivated by the enormous fiscal pressure to increase profits at the behest of the investors. It's never said that way of course. It's usually, "I'm really getting a lot of pressure to improve productivity and reduce operating costs by 4%". And when you're being whipped to reduce operational expenditures, it becomes pretty hard to suggest that you shutdown a reactor for 8 months while a multi-million dollar repair job is getting done. It's the right thing to do, but also the hard one (isn't that typical).
This pressure, it seems to me, derives in large part from the stupidly unreasonable, but pervasive idea that investors have that their stocks ought to go up in value every year. Forever. It's *not* OK to get big and profitable and stay that way year after year, but you have to keep becoming more profitable. Well you can only squeeze so much until you start squeezing things and doing things that you probably shouldn't. It's funny, we (society, not necessarily you the reader) bitch alot about corporate evils and so forth, but if our stock doesn't go up, we're all pissed about it and put more pressure on the companies (or our fund manager who does it for us with a lot more clout), who guess what, resort to more and more extreme measures to give us what we want.
One might say, "But I don't have enough shares to put pressure on anyone". Sure you do, many institutional traders know that if they don't perform well, you and several million others just like you (not to mention those pesky rich people) will pull out if they think they can do better elsewhere. Why stay in this fund which does 2% when that other guy's fund get 7%? So the institutional investor wants to keep his job and puts big pressure on the company to perform well and be more profitable, using the big collection of little moneys he got from ordinary investors.
Add globalization into the mix and you have a really fun situation, with lots of powerful, hyper-competitive global companies duking it out for every last dollar, because all of them are under this huge pressure to perform (in that impossible ever growing way). And since all of them are somewhat lean to begin with, is it any wonder they start