Content
Chapter One starts by examining the corporate scandals of recent years, explaining how and why those in power closed ranks. The Reagan/Thatcher revolution and the emergence of an appealing and radical worldview - an internally consistent pattern of beliefs, notions, desires and pursuits that guided the successful throughout the Nineties - is key to this account. Despite the scandals, this worldview and the American Enterprise Model based on these principles are still considered superior. This conviction prevents any meaningful change from taking place, to the detriment of corporate competitiveness.
In Chapter Two, the performance of the US economy and US companies is re-assessed to show that the Nineties were not what they seemed. Growth, productivity, employment, inflation and poverty reduction were far less impressive than is generally assumed, not to mention corporate efficiency, profitability and investment. Contrary to what many would like to believe, differences with Europe in macro-economic performance with Europe were small or non-existent. European companies fared even better than their American competitors. Moreover, the Nineties left an impressive legacy of vulnerabilities both in the American economy and the American business community.
Chapter Three presents evidence that many cherished notions, intrinsic to the American Model and developed and nurtured during the Nineties, have run their course. Market liberalisation, deregulation and privatisation have lost their lustre. In the corporate world the law of diminishing returns is in full force: mergers and acquisitions, corporate restructuring, cost cutting and decentralisation of decision-making are yielding less and less and resistance to these steps is growing. Moreover, companies are increasingly operating in saturated markets and sales and marketing instruments are becoming less effective. Many have noticed that new innovations are in short supply.
Chapter Four deals with the unintended consequences and unaccounted costs of the American Model. These spring from the choice for shareholder return on investment rather than increasing the free cash flow of the company. Strong CEOs - always balancing on the edge of assertiveness and aggression - with short tenure and their remuneration linked to shareholder return, compound the problem. The reduction of the size of business units to serve smaller and smaller market segments make gradual and persistence decline irreversible.
Chapter Five focuses on Europe. If, as the book argues, the American Enterprise Model cannot be reformed, the road to fundamentally new models is the only way forward. In this area Europe enjoys a major advantage over the US in that only 25 and not 75 percent of the financing needs of companies is met by stock markets. Therefore, thousands of private companies can escape the straightjacket of ever increasing stock market regulations and the attachment of the financial world to the American Enterprise Model. Their tailor-made shareholder and loan agreements fix the degree of control the financiers can exercise and the distribution of the economic value that the company will generate. These companies enjoy far greater flexibility in the design and management of their enterprises.
An attractive European Model for large companies is presented under the banners of ownership, governance, management, the strategic agenda, organizational development, and performance planning and remuneration. The design is based on the premise that the quality of people and the quality of their cooperation -not the availability of technology and capital - are constraining corporate and economic development.
Chapter Six argues that this European Enterprise Model is more efficient and more effective. It is argued that vigorous implementation of the American Enterprise Model has destroyed the foundations of cooperation at the very moment when new and innovative forms of cooperation, both within companies and between them (with or without other institutions), are essential to take full advantage of the opportunities for growth.
The epilogue puts the discussion on enterprise models in the context of the drama of the relationship between the US and Europe. It is argued that political and cultural forces are not sufficient to withstand the proponents of the American Model. The emergence of European Enterprise Models will go hand in hand with the emergence of a European worldview, which has always existed but was submerged throughout the Nineties. Only succesful European companies can turn the tide.