November 13, 2010

Recession, Jobs, and Business Ethics

There used to be a saying: to launch a power supply company you need to have a two-car garage and one car. This is sort of how Todd Products, where I have worked for 11 years, was launched. Paul Todd himself was an engineer and an inventor. It was really nice to work for a company where a president could walk into your cubical and discuss the electronic circuits with you. As an engineer himself he understood that experienced engineers are holders of important expertise and are not commodity-- you get a drop in business, you lay them off; you get more business, you hire some more. Another example of engineer-entrepreneur for whom I had an opportunity to work is Richard Blake -- the founder of Transistors Devices. I feel it is always refreshing to work for a company whose owner could argue about the circuits and not just financial reports. In general, in the past, companies used to be owned by someone -- an entrepreneur, an inventor, an engineer, etc. -- who devoted his/her life to the company and cared about its long term growth. Now most of the companies are owned by shareholders, which means by everyone and by nobody. They are controlled by a board of directors who seem to care only about the bottom line, and who begin what they call “downsizing” as soon as they see a drop in business.

Last week’s issue of The Jewish Press featured an article, “The Media's Madoff Moment” by A.H. Foxman. It describes a story about a 1995 fire in a textile plant, Malden Mills, that employed 2,400 people. The fire destroyed three of the four factory buildings and caused $500 million in damage. Two days later Aaron Feuerstein, an Orthodox Jew who owned the company and who followed Biblical values in his business, announced that all his employees will be paid their full salaries. He also gave $80,000 in gifts to charitable organizations, as he did every holiday season. Feuerstein ended up paying full wages to his idle employees for up to four months while the plant was rebuilt. Whatever became nowadays of business owners with a human face? I was lucky to keep my job during the recession, but during the worst of it, unemployment rates of all engineers exceeded 5% and overall jobless rates were 10%. If the companies who have cash in a bank or enough assets to get loans tried to keep their employees in spite of the losses and let them do some R&D for example, they might wind up getting out of recession sooner and stronger. The people who keep getting their paychecks would keep buying things, which would stimulate the manufacturing and job growth better than unnatural injections in the form of the government’s “stimulus plans.” And the old employees who know your business would contribute more effectively than new ones who need to go through a learning curve.