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Institutional Transplant and American Corporate Governance: The case of Ferodyn

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  • Suzanne Konzelmann
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    Abstract

    This paper examines the relationship between employment relations and American corporate governance using the case of Ferodyn*. In response to difficult industry conditions and sagging performance, American-owned Landis* Steel Corporation and Japanese-owned Daiichi* Steel Corporation jointly financed and built Ferodyn, a state-of-the-art high quality steel finishing facility. Although the joint venture was extremely successful in terms of quality, productivity and industrial relations, it came under severe stress from both external and internal pressures. Ferodyn's success was moderated by the market in that it was never able to extract a price premium for the quality of steel it produced. At the same time, pressures in the form of corporate governance and the parent / subsidiary relationship were substantial. Institutional investor demands for improvements in short run shareholder value ultimately resulted in the sale of Landis to Maxi-metal*, a global steel conglomerate, committed to a strategy of minimising costs. In this case, the organ transplant provides a useful metaphor: Ferodyn was like a strong and healthy 'organ transplant' in a weak and ailing corporate 'body.' So long as there were buffers in place to protect it from rejection by its host, Ferodyn could prosper, giving rise to exceptionally high labour standards and quality of life for its employees. In effect, the American system of corporate governance and the nature of power relations in the corporation created antigens that weakened both Landis's ability to support the joint venture and Ferodyn's ability to survive in an alien and hostile corporate, industry and macro-economic environment. * Ferodyn, Landis, Daiichi and Maxi-metal are fictitious names.

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    Bibliographic Info

    Paper provided by ESRC Centre for Business Research in its series ESRC Centre for Business Research - Working Papers with number wp231.

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    Date of creation: Jun 2002
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    Handle: RePEc:cbr:cbrwps:wp231

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    Web page: http://www.cbr.cam.ac.uk/

    Related research

    Keywords: industrial partnership; co-operation; corporate governance; corporate restructuring; steel industry;

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    1. Armen A. Alchian & Harold Demsetz, 1971. "Production, Information Costs and Economic Organizations," UCLA Economics Working Papers 10A, UCLA Department of Economics.
    2. Sandra E. Black & Lisa M. Lynch, 1997. "How to Compete: The Impact of Workplace Practices and Information Technology on Productivity," NBER Working Papers 6120, National Bureau of Economic Research, Inc.
    3. Peter B. Doeringer & Christine Evans-Klock & David G. Terkla, 1998. "Hybrids or hodgepodges? Workplace practices of Japanese and domestic startups in the United States," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 51(2), pages 171-186, January.
    4. Charles W. Calomiris & Carlos D. Ramirez, 1996. "Financing the American Corporation: The Changing Menu of Financial Rela-tionships," NBER Historical Working Papers 0079, National Bureau of Economic Research, Inc.
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