Avoiding Corporate Breakdowns

The crew members, engineering supervisors, and contractor specialists on board the Deepwater Horizon must have felt both pleased and proud on the morning of April 20, 2010. They had successfully completed drilling what BP (formerly British Petroleum) termed the Macondo well to a near-record depth. The “wellhead” (the partially embedded top structure of the well, where the valves, controls, and emergency disconnects were located) was on the ocean floor, 5,000′ beneath the surface of the sea, and the “pay zone” (the large reservoir of oil and natural gas that had been reached) was 20,800′ further down, past numerous layers of hard sedimentary but easily fragmented rock. Everyone involved, both those on board the drilling rig and those on shore in company offices, recognized that this was a remarkable achievement.

What individuals, groups, organizations, and societies should people in managerial positions include in considering the nature of their managerial responsibilities? We assume that almost everyone will agree that managers have some degree of responsibilities to themselves, to their families, to the owners of the organizations at which they work, to the clients and customers served by those organizations, and to the other individuals and groups with whom they work within those organizations. Less clear, and doubtless more open to debate, are their responsibilities to the societies in which they live, and to the political and physical aspects of those societies.

Foreign tax havens tend to be small independent states with stable governments, low taxes, strict privacy rules, good communication and transportation facilities, and discrete legal and financial services. They often are located in pleasant tourist destinations such as the Caribbean islands (Antigua, Bahamas, Barbados, Bermuda, et cetera) or the Alpine regions of Europe (Switzerland and Liechtenstein) that citizens from economically advanced countries could quietly visit and confidentially make arrangements for the transfer of substantial sums of money that would then be immune from all of the income, investment, and inheritance taxes of their home countries.

Nucor Corporation is a new and very different type of steel company. Traditional steel companies smelt iron ore, coal, and limestone in blast furnaces to produce cast iron, which is then refined while still in molten form through the use of Bessemer converters to generate steel ingots, which in turn are rolled into steel sheets, plates, bars, and beams for eventual sale to industrial customers. Nucor avoids the blast furnace and Bessemer converter processes; instead this company melts scrap steel in electric arc furnaces, and then directly rolls the output into the needed sheets, plates, bars, and beams. It is a business model that is termed “mini-mill” because the plants are much smaller, with far lower capital investments, and are dispersed throughout the country, with far lower transportation costs for the incoming raw materials and the outgoing finished products. It is a business model that for years was exceedingly successful in the globally competitive steel industry. Company growth rates and profit percentages did level off following the financial services collapse of 2008 and during the subsequent market downturn in the national economy that seems now to just drag on and on, but throughout this awkward period of slow growth and near recession Nucor has been able to maintain a leadership position.