Corporate Zombies and Vampires

The corporation is probably one of capitalism’s greatest inventions. It allows the pooling of investor capital great enough to undertake commercial ventures too complex or expensive for an old world trading houses, merchants, or artisans to tackle. Corporations can build immense factories, employ hundreds of thousands of people, and produce prodigious amounts of goods and services for consumers or corporations or consumers.

But a corporation’s greatest strength is also its greatest weakness. Such a concentration of capital leads to corruption and influence peddling on a scale unheard of in even the largest governments. For the winners who control the reigns of a prosperous corporation it means immense financial rewards that can total hundreds of millions and even billions of dollars in annual compensation and benefits. For the losers it can mean the dashing of hopes and dreams at best and years of unemployment and financial devastation at worst.

The Two Types of Corporations

How businesses become corporations boil down to essentially two different scenarios. I call the two different types Vampires and Zombies.

A vampire, according to common mythology, requires some sort of blood or life force from a continual stream of victims in order to stay healthy. Victims who don’t die outright from the severe blood loss or drain of life force become vampires themselves, creating an ever growing need for new victims. Eventually the whole ecosystem collapses when there are not enough available victims to support all the vampires or the populace rises up and wipes out the vampires.

The vampire scenario aptly describes the capital intensive businesses that needs huge amounts of cash to sustain its business model. These corporations can be found in the airline industry, the vehicle manufacturing industry, the metals refining industry, and the energy industry. The need for cash to replace aging production or processes is constant as retooling is so colossally expensive that bankruptcy reorganization is often the end-game. Thus only the early bond holders and shareholders make money while late stakeholders are left holding the empty bag.

Zombies, on the other hand, are commonly mythologized as being animated corpses. Zombies are reduced to the primal need for protein sustenance, whether they be animals or people. Although not indestructible they are essentially perpetual eating machines, capable of surviving years without food, but gorging themselves on meat when the opportunity arises. Sometimes the victims of zombies survive the disemboweling attack of a zombie or pack of zombies and reanimate into a new zombie. Thus as old zombies decay beyond their ability to remain animated, new ones take their place.

The zombie scenario aptly describes businesses that capitalize themselves through an IPO or through successive new offerings of equity. The needs of a business to offer shares to the public vary, but are usually to enrich the founders or to cash out the financial backers. As a result ownership is diluted among a wide variety of entities and individuals such that none control the company outright. Instead the newly minted zombie corporation is controlled by management. Freed from any worries over reductions in the return-on-investment of shareholders and paying lip service to short term profit growth (as measured by earnings per share), management can siphon off the corporation’s assets for themselves through huge salaries, generous benefits, and unlimited amounts of new shares of stock. The most robust zombie corporations can maintain this arrangement for decades through sheer inertia alone if their market share is high enough or their product or service is ubiquitous enough. Successive incompetent or greedy management teams (or both) can come and go and the corporation marches on. Eventually the corporation weakens enough to fall prey to another zombie corporation, which eats it, shedding employees and assets like trailing pools of viscera.

It is at the zombie corporation where the worst forms of employee depredation occur. Employees exist as grist for the machinery of the corporation. Management needs employees to improve products, offer new services, run factories, process paperwork, and sell to customers. Ambitious employees want to be part of management. Thus successfully ladder-climbing employees promote themselves by either attrition or sabotage. Rivals are eliminated. Lower rung employees that do not promote the aims of ladder climbers are cast aside. Finding pretext for manipulative activities becomes imperative.

As Mary Ham and Guy Benson observe in their book on political correctness “End of Discussion“, “grievance mongering, apology demanding, and scalp collecting are modeled…by ruthless professionals, then replicated straight down the line.” The culture of a zombie corporation becomes a toxic stew of ambition, depredation, and sanctimoniousness perpetrated by the exempt white collar workforce, among whose ranks management is drawn.

Amazon

It is the recent attention being paid Amazon that has drawn me back to the discussion of vampire and zombie corporations. The company is still controlled by the original founder, although he only owns 18% of the company. Amazon, which for all intents and purposes has never made any money since its founding in 1994, is a hugely capital intensive business (e.g. warehouses, data centers, inventory, R&D). The intensity of the owner has created a strained 80 hour per week corporate culture that features a number of egregious management practices. Management has benefited to the tune of billions of dollars in stock awards and options, diluting shareholder returns.

So which type of corporation is Amazon? Zombie or Vampire? Or both?

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