Tag Archives: General Electric

What Would Thomas Edison Say About GE’s Expulsion From The Dow?

In 1896, Dow Jones created an Industrial Average of the equity values of twelve corporations that dominated the American stock market. Thomas Edison’s company General Electric was one of those twelve firms.

The other eleven corporations are long gone from the Industrial Average. Some continue to operate as smaller entities. Others merged into larger firms. And others dissolved or were broken up by court order.

Only General Electric remained in the Industrial Average until, last week, S&P Dow Jones Indices decided to expel it. Apparently, GE can no longer be characterized as a dominant American corporation.

So what would Edison, the American entrepreneurial icon who founded GE, say about this downgrade? Ironically, he’d probably wonder how his firm managed to remain in the Industrial Average until now.

That’s because GE was founded by Edison by 1890 to serve as a holding company for a variety of his electricity-related business interests. A hodgepodge of lamps, motors, and other items were tossed together under the General Electric brand name.

Had Edison been alive today, he likely would’ve explained that he always expected his application product businesses to wax and wane over time. He’d then return to his New Jersey laboratory and roll up his sleeves, determined to invent the next generation of applications.

Edison understood that the capitalist process of destruction and innovation would ensure that no application product would be popular forever. He undoubtedly realized that, just as his electric lamps and motors replaced predecessor products that ran on kerosene and steam, his own inventions would eventually yield to more efficient and effective products.

In other words, Edison would’ve likely put aside the existing application products of General Electric, and would’ve turned his attention to the solar panels and wind turbines of the future. And, while doing so, he would’ve relished the opportunity to build a better company than today’s GE.

GE Applies The Pressure

How far should American firms go when playing economic hardball with government officials? Is there a point where “tough but fair” corporate behavior crosses the line into inappropriate ethical behavior?

For instance, consider General Electric (GE), which has been rolling up its sleeves and engaging in hard nosed negotiations lately. A few months ago, it announced that it was interested in moving its corporate headquarters out of its long time Connecticut home because of its state tax burden.

State government leaders might have been nonplussed by GE’s position, given that the global goliath only pays Connecticut $250 per year in state income taxes. But Governor Malloy is negotiating with the firm any way, offering additional incentives to keep its headquarters in the Nutmeg State.

Texas, well known for its low tax, light regulation, business friendly tradition, has also entered the fray. The city of Dallas met with GE executives in an attempt to attract their corporate headquarters to the Lone Star State.

But then GE announced that it was no longer interested in moving to Dallas. Its reason? Apparently, Texas’ senators and representatives in the federal Congress oppose the continued existence of the national Export Import (Exim) Bank, a governmental fiscal entity that helps GE structure financing packages for its global customers.

Is it fair to punish Dallas’ municipal government and citizens because its federal representatives oppose what CNBC calls one of hundreds of obscure federal agencies you don’t usually hear much about ? Whether or not you believe so, perhaps we can all agree that GE is politically even-handed in its hardball tactics. After all, Texas is one of the reddest of all red Republican states, while Connecticut is one of the bluest of all blue Democratic states.

And GE hasn’t stopped there. Last month, it announced that it is moving hundreds of jobs out of the United States entirely because of the possible expiration of the Exim Bank. And last week, GE declared that it is ending its clean-up of toxic pollutants in the Hudson River, even though women of childbearing age and children under 15 are still advised to avoid eating fish caught in its waters.

To be sure, no one has accused GE of doing anything illegal regarding these matters. It is simply choosing to play hardball in a manner that benefits the financial position of the firm.

But is it possible that such perfectly legal behavior can simultaneously represent ethically inappropriate activities? If you believe that corporations bear some responsibility to their human neighbors and their natural environments, it is a question well worth pondering.