Leslie Hannah, an eminent business historian, has shown how the ‘rationalisation’ of industry, which was favoured by the British Government (represented by the Bank of England), set the stage for the new ‘corporate economy’ which would characterise Britain for decades. The 1920s saw the creation by merger of ICI (chemicals), the Distillers Company (Scotch whisky) and Unilever (soap and margarine). A similar wave of mergers in Germany established IG Farben and Vereinigte Stahlwerke as the dominant chemical and steel producers respectively. (Both these companies were dissolved by the victorious Allies in 1945.)

21: Not a Pretty Picture

“The finance sector, and its associated legal and accounting advisers, is rewarded for making a transaction happen, not for the commercial success of that transaction. The ‘advice’ expensively provided is not primarily about the merits of the deal, but principally about how to get the deal done. Bruce Wasserstein, architect of KKR’s takeover of RJR Nabisco, was the doyen of Wall Street M&A advisers for more than two decades before his death in 2009. Wasserstein became known as ‘bid-em-up Bruce’ for his role in encouraging his clients to pay whatever was necessary to get the deal done. The ‘dare to be great’ speech with which he massaged the egos of corporate executives became famous. While the businesses concerned paid his fees, his real client was the ambitious executive teams.

23: The Finance Curse

“But between 1981, when Welch took control at GE, and 2005, when Lampert took control of Sears, a new approach to business developed. Managers like Sir Denys Henderson and Simon Marks, Alfred Sloan and Owen Young, had seen themselves as public figures with associated responsibilities to a wide range of constituencies. The generation that succeeded them had a narrower conception of their role. A successor generation of corporate executives paid close attention to quarterly reporting and the stock price.

PART 6: The Corporation in the 21st Century

24: Combinations and Capabilities

“The modern firm is a community, rather than an office or a factory. It is defined not by its plant and machinery but by its capabilities. The successful business is characterised by the distinctive nature of its collection of capabilities and the match between these capabilities and the needs of its customers – and other stakeholders. The claim that George W. Bush told Tony Blair that ‘the problem with the French is that they don’t have a word for entrepreneur’ is, sadly, apocryphal.

Appendix:

Grove’s 1983 book High Output Management deserves the cult status it achieved in Silicon Valley.

Mayer, C., Capitalism and Crises