Institutional Transplant and American Corporate Governance: The Case of Ferodyn

Cambridge Centre for Business Research Working Paper No. 231

33 Pages Posted: 21 Sep 2011

See all articles by Suzanne J. Konzelmann

Suzanne J. Konzelmann

University of London - Birkbeck College - Faculty of Social Sciences, School of Management and Organizational Psychology; University of Cambridge - Faculty of Social and Political Sciences

Date Written: June 1, 2002

Abstract

This paper examines the relationship between employment relations and American corporate governance using the case of Ferodyn. In response to difficult industry conditions and sagging performance, American-owned Landis Steel Corporation and Japanese-owned Daiichi Steel Corporation jointly financed and built Ferodyn, a state-of-the-art high quality steel finishing facility. Although the joint venture was extremely successful in terms of quality, productivity and industrial relations, it came under severe stress from both external and internal pressures. Ferodyn’s success was moderated by the market in that it was never able to extract a price premium for the quality of steel it produced. At the same time, pressures in the form of corporate governance and the parent / subsidiary relationship were substantial. Institutional investor demands for improvements in short run shareholder value ultimately resulted in the sale of Landis to Maxi-metal*, a global steel conglomerate, committed to a strategy of minimizing costs. In this case, the organ transplant provides a useful metaphor: Ferodyn was like a strong and healthy ‘organ transplant’ in a weak and ailing corporate ‘body.’ So long as there were buffers in place to protect it from rejection by its host, Ferodyn could prosper, giving rise to exceptionally high labor standards and quality of life for its employees. In effect, the American system of corporate governance and the nature of power relations in the corporation created antigens that weakened both Landis’s ability to support the joint venture and Ferodyn’s ability to survive in an alien and hostile corporate, industry and macro-economic environment.

Keywords: industrial partnership, co-operation, corporate governance, corporate restructuring, steel industry

JEL Classification: G34, J53, L23, L61, M12

Suggested Citation

Konzelmann, Suzanne J., Institutional Transplant and American Corporate Governance: The Case of Ferodyn (June 1, 2002). Cambridge Centre for Business Research Working Paper No. 231, Available at SSRN: https://ssrn.com/abstract=1930886 or http://dx.doi.org/10.2139/ssrn.1930886

Suzanne J. Konzelmann (Contact Author)

University of London - Birkbeck College - Faculty of Social Sciences, School of Management and Organizational Psychology ( email )

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London, WC1E 7HX
United Kingdom
+44 (0) 207 631 6799 (Phone)

HOME PAGE: http://www.bbk.ac.uk/management/our-staff/academics/konzelmann

University of Cambridge - Faculty of Social and Political Sciences ( email )

ESRC Centre for Business Research
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United Kingdom
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