Nicholas Lemann's New Yorker article, "Transaction Man," about Mitt Romney is divided into sections Church, Business, Politics, and The Rescuer. The business section has some handy summaries.
This section put Mitt's father's business era in context and connects it to now.
In the nineteen-seventies, the balance of power began to shift from production to capital, and corporate America started to seem lumbering and inefficient. This shift was the business world’s version of the sixties—one (younger and impatient) group of politically conservative businesspeople challenging another (older and more traditional) group. The field of battle was not politics, culture, dress, or taste in music. It was the American corporation, and the consequences for the whole society were profound. The business sixties wound up rearranging most of the American economy. General Motors has fewer than half as many employees today as it did in 1955, and, among the American corporations that were great at mid-century, it’s hardly alone. George Romney was an organization man. Mitt Romney became a transaction man: someone who moves assets around with a speed and force that leaves many of the rest of us bewildered. The insurrection in business has profoundly affected the lives of most people who work, pay taxes, and get government benefits. It is the backdrop to this Presidential election.
Lemann also looks at proposed the corporate innovations that informed Mitt Romney's own practices.
In 1976, two members of the faculty at the University of Rochester’s business school, Michael Jensen and William Meckling, published an article in the obscure Journal of Financial Economics called “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure.” It provided the intellectual foundation for bringing together one set of ideas about how to change the ownership structure of a company with another set of ideas about how to change the way it operated. That consolidation led to the creation of Bain Capital, in 1984, and made Mitt Romney very rich.
Jensen and Meckling argued that publicly held corporations were poorly managed, because their chief executives, with their generous salaries and high job security, had no real incentive to “maximize the value of the firm.” If a company could be restructured so that it was run by the owner, and if it could take on a lot of new debt that it had to pay down with cash, then it would maximize its value, rather than the comfort and prestige of its C.E.O. In the nineteen-eighties, Harvard Business School hired Michael Jensen as a faculty member, and the battles between him and the pro-corporate professors defined the intellectual life of the school just as much as the battles over critical legal studies defined Harvard Law School when Obama was a student there. Jensen argued in favor of junk bonds, hostile takeovers, leveraged buyouts, and stock options for chief executives. Mitt Romney and others, with these new techniques at their disposal, were able to raise pools of capital and use it to slice, dice, and rearrange the American economy. In a speech in 1993, Jensen announced that the country was experiencing a “third industrial revolution.” It was as economically consequential, he said, and likely to become as politically and culturally controversial, as the industrial revolutions of the nineteenth century.
via www.newyorker.com
Gore Vidal, who died in July, was one of our greatest novelists and essayists – and yet he never went to college. In a 2007 interview I asked him why not.
