IS ANYBODY LISTENIN TO CAMPUS VIEWS?
BUSINESSMEN ARE.
Three chief executive officers—The Goodyear Tire & Rubber Company's Chairman, Russell DeYoung, The Dow Chemical Company's President, H. D. Doan, and Motorola's Chairman, Robert W. Galvin—are responding to serious questions and viewpoints posed by students about business and its role in our changing society . . . and from their perspective
as heads of major corporations are exchanging views through means of a campus/corporate Dialogue Program on specific issues raised by leading student spokesmen.
Here, David G. Clark, a Liberal Arts graduate student at Stanford, is exploring a question with Mr. DeYoung. Administrative activities in Greece and Austria, along with broadening experience in university administration, already have claimed Mr. Clark's attention and auger well a
career in international affairs.
In the course of the entire Dialogue Program, Mark Bookspan, a Chemistry major at Ohio State, also will exchange viewpoints with Mr. DeYoung; as will David M. Butler, in Electrical Engineering at Michigan State, and Stan Chess, Journalism, Cornell, with Mr. Doan; and similarly, Arthur M. Klebanoff, in Liberal Arts at Yale, and Arnold Shelby, Latin American Studies at Tulane, with Mr. Galvin.
All of these Dialogues will appear in this publication, and other campus newspapers across the country, throughout this academic year. Campus comments are invited, and should be forwarded to Mr. DeYoung, Goodyear, Akron, Ohio; Mr. Doan, Dow Chemical, Midland, Michigan; or Mr. Galvin, Motorola, Franklin Park, Illinois, as appropriate.
Mr. DeYoung: Can you justify foreign exploitation?
Dear Mr. DeYoung:
"It is an extraordinary fact, that at a time when affluence is beginning to be the condition, or at least the potential condition of whole countries and regions, rather than of a few favorite individuals, and when scientific feats are becoming possible, which stagger mankind's wildest dreams of the past, more people in the world are suffering from hunger and want than ever before. Such a situation is so intolerable and so contrary to the best interest of all nations that it should use the determination on the part of the advanced and developing countries alike to bring it to an end."
This eloquent statement by the Secretary General of the United Nations points up a problem of which any informed citizen must certainly be aware. Corporations, also doubtless sense the magnitude of the disparity between the rich and the poor, between the thriving and the hungry. As the chief executive officer of a giant multi-national corporation, and as an individual who has had considerable working experience around the world, you have seen first-hand the wretched state of mankind referred to by Mr. Thant.
At the same time, as Chairman of Goodyear, you are the one most responsible for the long-run maximization of stockholders' interests in the company. To that end, you have led Goodyear through a period of significant growth in sales and capital investment, most dramatically in areas outside the United States.
In response to a rapidly growing market for rubber goods abroad, more than 50% of Goodyear's capital expenditures during 1963-1967 were for expansion of international operations. Consider the earnings on total assets at home and abroad for the same period.
Earnings on Total Assets 1963-1967 Foreign Operations Domestic Operations Range 8.5%-11.5% 5.3%-6.0% Average 9.8% 5.6%
Had Goodyear International's return for 1967 been at the same percentage level as the home company's, foreign earnings would have been $12.5 million lower.
Whether the countries where these operations are located have
gained as much as Goodyear has gained is questionable, especially so in the developing countries. Exploitation is, after all, nothing more than taking advantage of the favorable circumstances of another country which may lack capital and/or know-how while justifying to ourselves that it is in their best interest. Admittedly such undertakings do provide jobs, educational facilities, medical care, better clothing and shelter to employees and their families. But this gives rise to other questions.
Are these direct benefits for a few people really enough?
Where are the "above normal" foreign earnings going?
What right do we as Americans and you as Goodyear have to take resources from another country for our own profit?
What is Goodyear doing to help developing countries become economically viable and independent members of the world community? Is Goodyear doing anything to help build up indigenously owned businesses?
Isn't it possible that several U.S. and other foreign firms operating in a small, developing country could become so centrally linked to the economic health of the country and hence to its financial base as to be able to strongly influence the composition and style of its government?
Mr. DeYoung, perhaps the fundamental issue in all these questions relates to the evergrowing gap between the prospering and starving nations. Can American firms really justify their position in the developing countries when even the most conservative population biologists tell us that the world will be experiencing severe food shortages by 1980? Certainly firms investing abroad may expect a normal return on their investment, but when so many of the emerging nations are so desperately in need of resources for development in the broadest sense, are we really justified in taking so much out from those countries for our own material aggrandization?
David G. Clark Graduate Studies, Stanford
Dear Mr. Clark:
Whether measured by economic or social yardsticks, the direct results of most modern multinational corporate activities in the emerging nations is the fostering of progressive development not exploitation under the outdated concepts of 19th Century mercantilism.
Any casting of accounts reveals that corporate policies, and their implementing operations, are focused toward growth within a country. There is also a realistic understanding that those operations can be the essential motivating force for any viable progress of the region Essentially, the "in-put" is far greater than the outflow all factors considered.
This is clearly revealed from an economic perspective by the fiscal policy planning and profit position of many major companies abroad. As demonstrated by Goodyear's own position, we have repatriated considerably less than half of our foreign earnings over the past ten years. Conversely, more than half of our earnings have been re-invested abroad. This has been buttressed further by additional capital investment both equity capital and long-term loans—in the emerging nations.
Even with this continuing infusion of additional capital, coupled with re-investment, for the past three years, returns on capital investment in these areas still does not equal—let alone exceed—returns on domestic operations.
This disparity is broadened further by the tax factor. Taking into account an overall tax rate abroad of some 40 per cent, as compared to the U.S. corporate tax rate of 52.8 per cent, foreign investment returns still are markedly less than in our domestic operations, notwithstanding the more favorable rate
Implicit to this picture is the posture of the major corporation abroad both in terms of its relationship to the hosting foreign government,and the effects of its operations on economic and social growth. Essentially operations are designed to establish a base for growth while meeting immediate local needs, disciplined by the realities of the profit-motivated free enterprise system.
In direct consequence the host-country's GNP is increased, tax revenues swelled, local manufacturing stimulated, local employment is expanded broadly with a wide range of new jobs,and local consumer needs satisfied which is of crucial importance in conserving "hard-money"reserves or foreign exchange credits.
Equally, the impact of these operations upon local living standards cannot be dismissed casually. For many it has meant the incredible step forward from "bare-survival" existence to a viable way of life.To an inordinate number this can be as basic as obtaining an adequate supply of potable water, treatment of diseases we've forgotten about in this country sufficient food,and at least literacy level education.
The dimensions of this picture are broadened further by the fact that an investment climate is generated that begins to attract other major enterprises to the area resulting in broader diversification.
The simple truth is,Mr. Clark that the modern multi-national corporation, disciplined by the profit and loss risk,is the only mechanism capable of creating implementing and managing change. Accordingly it is through its operations that rapid social and economic development will occur in the emerging nations. Don't you agree that its position is justified?
Sincerely,
Russell DeYoung, Chairman The Goodyear Tire & Rubber Company
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