General Motors, Poletown, Mi and the Executive Compass

In 1980, General Motors’ executives were faced with a dilemma regarding new plant construction in Detroit, Michigan. GM intended to close two of its aging facilities and rebuild new assembly plants at a different site location although still in the Detroit metro area. The only land site matching the construction specifications was a settlement called Poletown, Michigan. This township was home to more than 3,500 residents, all of whom would have to be relocated if construction were approved. The following is an analysis of this dilemma according to the four quadrants of The Executive’s Compass: Liberty, Equality, Community, and Efficiency.

Liberty Liberty, as defined by J. S. Mill, “is that of pursing our own good in our own way, so long as we do not attempt to deprive others of theirs, or impede their efforts to obtain it” (p. 38-39). GM, without careful decision, stands to violate political and economic liberties by exercising powers of eminent domain in the Poletown, Michigan case of 1980. Eminent domain, the power granted by the government allowing private property to be seized for public use, has been the source of political debate for centuries. Legal cases ruling on different sides of the issue date back more than 167 years. The most recent case to note is Kole v.

The City of New London, which was just decided by the U. S. Supreme Court in June 2005. Although the court sided in favor of granting eminent domain, Justice O’Connor quoted the following in her dissent: “Law that takes property from A and gives it to B: It is against all reason and justice, for a people to entrust a Legislature with such powers. ” The concept that governmental power should exceed that of the individual right is a cruel violation of political liberty. As stated in The Executive’s Compass, “it degrades the dignity of the individual to make him or her subservient to the will of the state” (p.

39). If GM chooses to remove the approximate 3,500 occupants of Poletown from their homes, it would be a brutal infringement on the individual independence of those residents. Economic liberty is an ideal initiated in the late eighteenth century by philosopher Adam Smith (p. 40). This domain of liberty pertains to the freedom of the marketplace. It was Smith who stated in The Wealth of Nations that “the consumer is king”, urging also “that government, interfering in the market by granting mercantilist monopolies, abetted this injustice” (p. 40).

In the Poletown case, GM has been afforded the option of using governmental interference through eminent domain. GM must be reminded, however appealing eminent domain may be, the success and survival of the marketplace centers on limited governmental interference. The same government today that permits eminent domain, will be the same government tomorrow enforcing unfavorable regulations on GM and the marketplace as a whole. In accordance with the Libertarian ideals set forth in The Executive’s Compass, GM must not remove unwilling citizens from their homes in Poletown, Michigan.

The organization must find a more suitable location where the political and economic intrusions of liberty are absent. Equality Equality is the second of the four “great themes of political argument. ” The concept of equality in and of itself displays varying positions of Egalitarianist’s. From Aristotle’s summation of the notion, we derive “Ipso facto,” social inequality is natural. More contemporary Egalitarians argue “for the creation of a true meritocracy in America, in definition, the removal of all barriers to social mobility. ” (p. 59).

Most Egalitarians fight for investment in full-employment policies. American economist Arthur Okun suggests “the market is also said to encourage short-term thinking, which has led to the failure of corporations to reinvest, this causing a loss of American jobs to foreign competition. ” (p. 59). It is upon this view that GM would conduct most of their analysis of the Poletown case. The quadrant of equality would force GM to look at two issues: 1) jobs created by the new plant and 2) the Poletown neighborhood. The first issue as it relates to equality is a simple one.

Creation of the new plant would make room for 6,150 workers. Destruction of the old plant would eliminate 500 jobs. The net gain of employment is 5,650 jobs. Additional employment not only increases the value of GM to stockholders, but also to all other interested parties. Regardless of where the new plant is built, the potential to shrink the gap in the unemployment rate would favor the notion of equality. The second issue involves the Poletown neighborhood. Building the new plant in the Poletown would result in 3,500 residents losing their homes. Although John A.

Ryan stated that “the right to liberty and property are not absolute…but…these rights are sacred and inviolable,” (p. 53) the principal of equality questions the right of society to take property earned by honest means. GM need not exercise their power of eminent domain when they have the ability to build the plant in another Midwestern state. The sheer option of an alternative “green field” lets the residents of Poletown remain in pursuit of happiness and GM can attempt to regain market share and net income. Community Community is an important factor in GM’s decision to bring their new plant to the Poletown area.

GM’s dilemma becomes rooted in the Communitarians need to design work that is intrinsically rewarding for all those who participate in it. (p. 85) Equally important is the need to keep the interests of the local community ahead of those of the national. (p. 96) Thus, according to Communitarians, GM, putting cost and individual goals aside, should proceed with plans to build the new plant in the Poletown area in order to enhance the rejuvenation of the local Detroit families, neighborhoods, and professional, social, religious, and voluntary associations.

It is important to note that the Poletown Neighborhood Council has strongly opposed GM’s plan but has made it clear that they are willing to work with the city and GM to come to a resolution. The Communitarian belief that it is a responsibility of all not to “harm others” becomes important when GM decides what will become of the Poletown community. (p. 83) GM should take into consideration the possibility of a community restoration project in collaboration with the building of the new plant.

While the new plant could displace approximately 3,500 residents, GM could offset the impact by supporting a neighborhood rebuilding effort in conjunction with the city of Detroit that would benefit all parties in that community. This would essentially be an increased cost to GM and the city of Detroit but would take into consideration the Communitarian belief not to take wealth to be strictly for the individual’s sake and instead use it as a way to support the means of the good life. (p. 86) According to Marx, the increase in the wealth of a few reduces the dignity of the many who are forced to labor to support them.

(p. 86) While the community of Poletown would essentially be supporting the wealth of GM with the new plant, GM can take the position of recycling some of their wealth and injecting it back into the community with a neighborhood-rebuilding project. This could possibly satisfy the Poletown Neighborhood Council’s objectives. While there are many additional costs associated with GM remaining in the Detroit area, Communitarians would argue a common responsibility to create a community of interdependence keeping in mind that economic progress has vast social implications.

(p. 89) Associating this Communitarian belief to the fact that the initial plant closing will eliminate 500 positions but in turn a new plant opening would create approximately 6,150 jobs, GM should take this huge social implication into serious consideration when making their decision. While their individual economic gain may take a small hit by staying, the Detroit community is at a greater risk to plunge further into unemployment if the original plant closes and new plant is not rebuilt.

This greater rate of unemployment might in turn, help increase the already rising public debt and contribute greatly to the budget deficit and high tax rate. Efficiency Followers of the efficiency theory are sometimes referred to as Corporatists. Corporatists believe that the world economies are intertwined. In order to improve our standard of living, advances in science and technology should promote advances in our society. When the corporation becomes more profitable, effective, efficient, and productive, we improve our materialism and create more wealth. Corporatists feel “that a good society is often equated with efficiency.

” (p. 62) As the GM management team grappled with various stakeholder issues during the planning of the new assembly plant, The Executive’s Compass that James O’Toole discusses would provide direction to the Corporatist’s thinking – using a scientific rationale. O’Toole describes the language used by a Corporatist as “that of planning, technology, optimization, power, and organization. ” (p. 75) The GM managers would need to initiate productive dialogue between the United Auto Workers union, state and city government officials, local Poletown community groups, suppliers, and current and retired employees.

The management team needs to strategically evaluate the opportunity costs associated with the different options facing each of the decision parameters. Even proponents of the efficiency theory realize that basing all of their business solutions solely on economic returns would garner too much negative public relations backlash from the Communitarians. Corporatist cannot ignore social responsibilities in their own communities, industry, and customer base as they seek economic growth. As GM considered short term vs. long-term benefits for the stockholders, these factors had to be prioritized and weighted with the various stakeholder interests.

The Corporatist understanding of the views of the Union executives, assembly line employees, Poletown advocacy groups, and state/city officials needs to be taken into account during the analysis and development of the plant selection site. Ultimately, the efficiency theorists will opt to keep the plant in the Detroit, Michigan area, providing a long-term benefit to the local stakeholders, and the General Motors shareholders. Objectively, none of the four quadrants, liberty, equality, efficiency, or community can be valued higher than another.

(p. 105) “Values are, after all, matters of individual preference and, like questions of taste, are never to be disputed. ” (p. 105) The executives of General Motors must determine the values of The Executive’s Compass that are most important to their corporation, and make their decision based on those findings. References O’Toole, James. The Executive’s Compass, pg. 39-105. New York: Oxford University Press, Inc. , 1993. 2 Cornel Law website: http://www. law. cornell. edu/supct/html/04-108. ZD. html – Dissent by Justice Sandra Day O’Connor