Question

In one of this week’s assigned articles (The Berle-Dodd Exchange), Berle stated that “it must be conceded, at present, that relatively unbridled scope of corporate management has, to date, brought forward in the main seizure of power without recognition of responsibility - ambition without courage.” This statement was made in the early 1930s. How do you think this quote might apply to the financial crisis of 2007–2008? Please provide an example of corporate management that abused its power without recognition of responsibility to stakeholders.

Answer 1

Corporate management responsibility is that of the chief executive officer, vice president, chief financial officer, chief information officer, and operating officer that oversees and handles specified tasks in his/her area or division within an organization (Vitez, n.d).

Berle accepts as true that corporate management is incapable of taking responsibility for its actions concerning the impact on the community it serves. And that lack of proper controls within the corporate management structure fosters an uncontrolled governance environment that often leads to abusive corporate practices. Both the market crash of 1929 and the financial crisis of 2008 share an element of unrestricted management controls that resulted in decisions that solely maximized their well-being without regard to their stakeholders. While Berle’s quote surfaced in the 1930s, its sentiments can easily apply to the financial crisis of 2008. Americans faced difficult times during both crises, including a significant increase in unemployment rates and home foreclosures.

The Great Depression of 1930 was the beginning of a worldwide downward economy. It began after the stock market crashed in 1929 in the United States. The financial crisis of 2007-2008 began when the housing market crashed which in turn caused a worldwide economic crisis.

I feel the Berle quote from “The Berle-Dodd Exchange” applies to the economy crisis 2007-2008; made it hard for families, individuals to survive in an uneasy economy due to scandals, the irresponsible of corporate management and government lack of or harsh regulations. Corporation management only thought of profit when Mylan, a pharmaceutical organization, decided to increase the price on Epi-pen, for individuals who have severe allergic reactions. The injection gives the patient a short time to get to medical help. The Epi-pen medication that only costs $30 to produce, the price spiked to a 500% increase. Instead of the company taking ownership, responsibly to the medication increase, they blamed the Afford Care Act and the price increase of medical and pharmacy plans (Tuttle, 2016). The organization did not care who they hurt nor to what extent their abuse of power caused to patients; health industry and the economy.