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Jerry Davis, Wilbur K. Pierpont Collegiate Professor of Management and a professor of sociology, Ross School of Business, University of Michigan Jerry Davis, Wilbur K. Pierpont Collegiate Professor of Management and a professor of sociology, Ross School of Business, University of Michigan Courtesy Photo

Q&A: Jerry Davis, professor, University of Michigan

BY Friday, September 30, 2016 02:15pm

Over the last 20 years or so, several of America’s institutional corporations have vanished for a number of reasons, ranging from bankruptcy to a shifting technological landscape. University of Michigan professor Jerry Davis thinks that pattern will continue. In his recent book, The Vanishing American Corporation: Navigating the Hazards of a New Economy, Davis contends that our existing political and economic systems aren’t set up to handle a future where everyone is a self-employed entrepreneur in an on-demand economy. Before a talk at Grand Valley State University, Davis spoke with MiBiz about how intrinsic corporations are to American culture and why their diminishing power could lead to an “apocalypse” scenario. 

Describe what you mean by this notion that American corporations are disappearing. 

The number of companies listed on the stock market in the U.S. has dropped by half over the last 20 years. So while we think that corporations are taking over everything, to a surprising extent, you can think of all of these century-spanning corporations that just disappear like the rapture: Westinghouse, Kodak, Sears is going to be doomed, Blockbuster. There’s been a surprising sort of continuous drop since about 1997, and it shows no sign of letting up.

What makes corporations so important to the American way of life?

That’s where you get your health care, your retirement security, where you invest your retirement funds. … The U.S. is unique in being totally reliant on the corporation as a way of life. So because it’s so much more important for the U.S., it’s also much more disruptive for corporations to disappear because (it’s) where I do my health care and retirement. In the rest of the world, you get those things from the government, but in the U.S. it’s from corporate employers. 

In your view, what does the disappearing corporation say about the shifting economy?

Companies with big market capitalizations, no one actually works at them. … Kroger is the second biggest employer in the U.S. (behind Wal-mart) … but their market cap is one-tenth of Facebook, even though their revenues are eight times as big as Facebook. They’re still bigger than Amazon, but no one thinks of Kroger as being this powerful thing. 

Aren’t the Ubers and Amazons making the world a better place?

Information and communication technologies have greatly reduced the cost of market transactions. When you make it cheap to do things in markets, it comes at the expense of institutions. 

What do you mean by that?

Corporations with jobs, that’s an institution. You work for an employer for an extended period and that feels like an institution with obligations. With Uber, there’s no obligation. There’s a specific price for a specific performance. … And you don’t get promoted from Uber driver to (Uber) programmer. It’s the definition of hand-to-mouth existence. We used to talk about dead-end jobs, but at least jobs were jobs. 

From your perspective, the death of the corporation leads to a bleak outcome. What are the stopgap measures you recommend?

Politically, we have to have a national health care system. Our system is such a crazy Rube Goldberg jalopy that doesn’t make any damn sense. Every civilized country on earth has nationalized health care, and then there’s us. If you want people to move from job to job, you have to separate the basics of social welfare from employers. 

Everyone loves the notion of small business and lowering barriers to entry. Political candidates talk about that all the time. You don’t buy it?

On the one hand, it’s great because it means the barriers for outsiders to enter are a lot lower and that can be a good thing. … The potentially good thing is that people can start something small and see it grow very big, very fast. That didn’t used to be true. But there’s a bunch of flip sides to that. We thought corporations controlled our politics and now there aren’t so many corporations doing that anymore. 

Post-Citizens United, you don’t think corporations have an influence on politics? 

Would you rather have General Motors influencing your policies or would you rather have the Koch brothers or Sheldon Adelson, the casino owner? It’s really rich people and families more than corporations, per se, that are controlling the politics. … The flipside is, it’s a lot easier to beat a big corporation into shape than to beat an ecosystem into shape. 

Those corporations can also help lead change in society, too.

When Wal-mart decides to green their supply chain and force all of their suppliers to lower the carbon content, that’s pretty badass. That’s something a Wal-mart can do that 1,000 independent stores can’t do. … If they use their power for good, they can do an awful lot of good. 

What does this show about our common notions of corporations?

Rather than seeing corporations as inherently evil or a good thing, corporations are like diesel trucks. They’re a tool for getting stuff done. If the stuff you’re doing is rescuing people from refugee camps, that’s a good truck. And if it’s running down children, then that’s a bad truck. But the truck itself … corporations are a means and not an end in itself. It’s a tool. We don’t want to attribute any intrinsic morality or immorality to them.

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