National Academies Press: OpenBook

Is America Falling Off the Flat Earth? (2007)

Chapter: WELCOME TO THE 21ST CENTURY BOARD ROOM

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Suggested Citation:"WELCOME TO THE 21ST CENTURY BOARD ROOM." National Academy of Sciences, National Academy of Engineering, and Institute of Medicine. 2007. Is America Falling Off the Flat Earth?. Washington, DC: The National Academies Press. doi: 10.17226/12021.
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WELCOME TO THE 21ST CENTURY BOARD ROOM

Imagine, for a moment, that one is sitting in a board meeting of a Fortune 100 company with several billion dollars to devote to the establishment of a major new facility somewhere in the world. The board is reviewing management’s proposal as to where the facility—and the jobs it generates—should be located. In the past 2 decades, I have participated in over 500 board meetings of Fortune 100 firms and not infrequently wrestled with that very question.

Several books and numerous articles have decried the lack of “loyalty” of America’s CEOs and boards of directors to the American worker when making such decisions. Before attempting to address that accusation, it is instructive to ask, What is an American firm? For example, one respected company with which I have been associated as a director for 18 years was founded in the United States well over 170 years ago and maintains its headquarters in the United States, but some 10% of its owners (shareholders) are foreign; over half its customers are foreign; over half its employees are foreign; and not long ago its CEO was foreign. Is that an American firm, or is that a global enterprise? And even if it were judged “an American firm,” the most disastrous thing a CEO could do for any firm’s employees and shareholders alike would be to make business decisions designed to protect the interests of a few if those decisions are harmful to the competitiveness of the organization as a whole and thus endanger the prosperity, even survivability, of the enterprise itself—and the jobs and profits it sustains.

Turning from the topic of corporate nationality to the related subject of the heritage of specific products, Boeing’s new 787 has major assemblies manufactured in Europe, Asia, and North America and components from countries virtually thoughout the world.

Suggested Citation:"WELCOME TO THE 21ST CENTURY BOARD ROOM." National Academy of Sciences, National Academy of Engineering, and Institute of Medicine. 2007. Is America Falling Off the Flat Earth?. Washington, DC: The National Academies Press. doi: 10.17226/12021.
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A recent USA Today article pointed out that 59% of the parts content of the “US” General Motors Chevrolet HHR is not made in the United States or Canada (revealingly, the US government’s reporting system does not distinguish between the two countries) and, furthermore, is assembled in Mexico. In contrast, 85% of the parts content of the “Japanese” Toyota Sienna is made in the United States or Canada, and it is assembled in Indiana. The question is, Which is the American car? General Motors spokesperson Greg Martin helps to answer that question: “We’re a global car company,” he explains, “that happens to be based in the United States.” The world’s borders are becoming increasingly indistinct. Several years ago when traveling in Peru and visiting with the owner of a small kiosk, I asked whether the gentleman had ever been to the United States. “No,” he replied, “only to Miami!”

In the case of most large US employers, it is quite probable that a substantial majority of their shares are owned by institutional investors, and the primary, if not sole, interest of that set of shareholders is financial return—preferably near-term financial return—and certainly not the matter of preserving jobs. In fact, announcements of job layoffs in times of prosperity are almost always greeted favorably on Wall Street. Ironically, the institutional investors who own those companies often are fiduciaries for the pension funds of American workers—workers who, for their own part, have seldom displayed any great reluctance to purchase foreign-made cars, television sets, and DVD players if they thought doing so was in their immediate interest as consumers. Perhaps one should not be surprised by this proclivity, at least when it comes to cars: US-based Consumer Reports identifies only one traditional US brand in its top dozen automobiles as ranked by reliability.

Few would disagree with the observation that most large US firms are becoming global enterprises. A more recent and less noticed trend is that many US universities are following suit. It is well known that universities often have one or two foreign affiliations, but this practice is now expanding to the point where some institutions have numerous locations abroad. Thus, universities are also gradually losing their national identity. Not atypically, the University of Chicago states, “We educate the next generation of the world’s leaders, not just United States leadership,” and a few years ago, 260-year-old Princeton University changed its motto from “In the Nation’s Service” to “In the Nation’s Service and in the Service of All Nations.”

Suggested Citation:"WELCOME TO THE 21ST CENTURY BOARD ROOM." National Academy of Sciences, National Academy of Engineering, and Institute of Medicine. 2007. Is America Falling Off the Flat Earth?. Washington, DC: The National Academies Press. doi: 10.17226/12021.
×
Page 26
Suggested Citation:"WELCOME TO THE 21ST CENTURY BOARD ROOM." National Academy of Sciences, National Academy of Engineering, and Institute of Medicine. 2007. Is America Falling Off the Flat Earth?. Washington, DC: The National Academies Press. doi: 10.17226/12021.
×
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The aviation and telecommunication revolutions have conspired to make distance increasingly irrelevant. An important consequence of this is that US citizens, accustomed to competing with their neighbors for jobs, now must compete with candidates from all around the world. These candidates are numerous, highly motivated, increasingly well educated, and willing to work for a fraction of the compensation traditionally expected by US workers.

If the United States is to offset the latter disadvantage and provide its citizens with the opportunity for high-quality jobs, it will require the nation to excel at innovation--that is, to be first to market new products and services based on new knowledge and the ability to apply that knowledge. This capacity to discover, create and market will continue to be heavily dependent on the nation's prowess in science and technology.

Indicators of trends in these fields are, at best, highly disconcerting. While many factors warrant urgent attention, the two most critical are these: (1) America must repair its failing K-12 educational system, particularly in mathematics and science, in part by providing more teachers qualified to teach those subjects, and (2) the federal government must markedly increase its investment in basic research, that is, in the creation of new knowledge.

Only by providing leading-edge human capital and knowledge capital can America continue to maintain a high standard of living--including providing national security--for its citizens.

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