Snapshot of a broken system: How a profitable company justifies laying off 1,400 people & moved their jobs to Mexico - industrial air conditioner

A viral video shows that at a United Air-conditioning plant in Indiana, 1,400 workers were told that their work would be outsourced to Mexico, which has become a shocking example of the destructive forces of globalization
Bernie Sanders and Donald Trump both highlighted the videos that appeared earlier this year and vowed to crack down on the behavior of these businesses.
But until an article in The New York Times this weekend, what most people don't understand is that the carrier's air-conditioning business is actually quite profitable.
Last year, the company brought a large part of the profits to the United technology company. Of $7.
Revenue in 2015 was $6 billion.
9 billion come from the climate, control and security sectors where the operators are located.
Profits in this sector have grown steadily in recent years, which is not your expectation for a unit that desperately cuts labor costs.
Looking at the annual report of United Technologies, more good news will be found: business and industrial products in the operator Category account for more than half of UTC's $56 billion net sales.
Climate, control and security grew by 3% per cent in 2015, the company's highest growth rate;
This is the only department to increase profit margins --over-year.
"Organic sales growth in UTC's climate, control and security sectors is driven by the United StatesS.
Heating, ventilation and air conditioning for commercial and residential buildings (HVAC)
Transport the refrigeration business according to page 14 of the report. ".
In other words, air conditioning-the air conditioning that workers produce in Indiana-has driven the growth of the best air conditioning --
Performance aspects of United technologies business.
So why does a profitable, growing business need to ship jobs to Mexico because of shareholder requirements?
The statement on maintaining global competence and maintaining market position is backed by joint technology.
But the fact is that, as a key measure of executive performance, the company feels pressure to boost its share price.
According to The Times, "Wall Street is looking for United Technologies to increase earnings per share by 17% in the next two years, although sales are expected to increase by only 8% . ".
Transfer the worker's $20 per hour job from Indiana to Monterey, Mexico, where they get $2
$3 is a way to increase earnings per share.
The response to shareholders will not end with cutting labor costs.
According to the annual report, United Technologies last year "returned about $12 billion in dividends and share buybacks to our shareholders ".
Shareholders account for about 75% of the company's profits, which hinders the company's ability to remain competitive through investment. (
R & D fell 13% last year. )
United Technologies has promised investors that they will cut costs by $0. 5 billion a year for the foreseeable future.
The president of the climate, control and security department told investors in a recent conference call,
Their manufacturing industry has moved to the lower end.
Cost countries, "there are some opportunities there" change more.
This is entirely driven by share prices and has nothing to do with the strong sales and profits of United Technologies.
Executive compensation linked to stock options or stock performance results in loyalty to shareholders far exceeding loyalty to employees.
Like free trade and opening the door to competition with China, these are all tools to make shareholders profitable.
But the reason is the philosophy of shareholder value, that is, the company exists only for the benefit of investors.
While this may sound intuitive, it's just because every business page and CNBC have been yelling at our heads for decades.
Shareholder value is actually a relatively new phenomenon.
It doesn't seem to work either.
As Lynn Stout, a law professor at Cornell University, pointed out, the rise of shareholder value theory coincided with the decline in investor stock value, and the faster dissolution of enterprises.
When business managers use their own best judgment to serve the stakeholders, including investors, employees, customers and communities, they get a greater return.
Their interest in making good products that can survive in turbulent times exceeds the interest in ensuring dividends grow before the next earnings report.
Milton Friedman (Milton Friedman) 1970 of the view is that the company must operate entirely for the benefit of shareholders, which makes the business world a shareholder --value path.
But Stout has long argued that this is not even true as a matter of law.
The board has the legal right to exercise independent judgment and takes into account many factors other than the interests of shareholders.
Shareholders do not "own" the company, but a contract that gives them limited rights.
In order to apply this to the situation of the operator, the board could have decided that the growing revenue of the air-conditioning sector supports the idea of keeping the operating structure unchanged.
They can certainly refuse to withdraw $12 billion from shareholders last year, when they can put that cash into things that increase worker productivity and customer satisfaction, which could have a similar impact on profits.
Shareholder value supporters believe that they play a vital role as a supervisory body for managers to improve corporate governance.
In fact, you can point out that analysts advise Citigroup to disband on the grounds of shareholder value and see a positive side from some of their theories.
But in fact, shareholder value creates a rear-end competition.
Workers in the United States cannot compete in such an environment, forcing them to make concessions is the whole reason for their employer's existence.
When shareholder pressure leads companies to seek any advantage they can gain in environmental, safety, public health or tax rules, politics will not prosper.
We need to figure out how to curb capital outflows and howand middle-
The tech workers abandoned by factory jobs are not just giving them a paper McDonald's hat and a spatula.
We need to be honest about what the free trade with China is doing for the job security and career prospects of millions of Americans.
However, until we rethink the purpose of the company and implement it into the company's charter, we will not resist the functional requirements that the company considers.
The company can do more than just make shareholders rich.
The meaning of "profit" may be more than US dollars and cents.
We don't need to treat Carrier workers like this.
We just need to say no to the tyranny of shareholder value and set a more appropriate role for companies in our society.