Glass House: The 1% Economy and the Shattering of the All-American Town by Brian Alexander
GLASS HOUSE a story that shows the more base side of capitalism, where short-term profits are paramount, and people are just things in the way. The story is not a fun read--it's actually quite sad, and unfortunately, there isn't a cheery ending. Nevertheless, this tale is a story that needs telling, and a discussion worth having. The events documented in this book are sure to bring up lots of questions--especially regarding the ethics of corporate buyouts.
Brian Alexander explains what happened to Anchor Hocking Glass Corporation, a historic company in the town of Lancaster, Ohio. (The company is called "Hocking" because of the nearby river.) At one point, the company had 5,000 employees in Lancaster. For decades, Anchor and Lancaster had a good relationship. In times of crisis, the town and the company worked together. For example, in the 1970s, when there was a national shortage of raw material, "Anchor Hocking put out a call. Families loaded their cars with every bottle, jar, and tumbler they could spare."
This mutually beneficial relationship began to change in the 1970s as manufacturing began to dry up. Lancaster saw "steel mills in Youngstown, the NCR (National Cash Register) Corporation in Dayton, and the GM plant in Lordstown lay off thousands."
With Anchor Hocking, it wasn't a question of shipping jobs overseas. In the glass business, production is not so easily shipped off to China. (The logistics of making fragile glass is not at all the same as making electronics.) Nevertheless, businesses like Anchor got a lot more competitive:
"Big-box stores like Walmart, with their intense pressure on suppliers to reduce wholesale prices, nibbled away at Anchor’s margins."
GLASS HOUSE relates the story of what happens after repeated leveraged buyouts from sharp businessmen, each looking to extract profit to justify the deal. The buyouts included big names such as Carl Icahn and Cerberus Capital. Most of these "financial engineering" deals were designed to extract as much cash as possible from Anchor--no matter what else the cost. New management was "laser-focused on bottom-line performance."
All the buyouts and reorganizations eventually led to contentious union disputes, with management demanding concessions from the union. Several bitter strikes took their toll, and the union ended up making sizeable concessions.
Each buyout also created turmoil, confusion, and lowered moral. As one example of a morale-killing decision, new management was appalled at the high salaries paid to good sales people. They thought it outrageous that their best sales people made more than they did! So, the new management eliminated commissions, and "approved a decision to turn the sales force into salaried employees—effectively mandating a severe pay cut."
The town of Lancaster was ever optimistic (naive?) that each new buyout would be all for the better: "Lancaster was a place of strong belief. . .if everybody just worked harder," things would somehow work out. "There was an expectation of some renewal, some better outcome,”
All in all, I found GLASS HOUSE a fascinating, if sad read. The pages are filled with stories of hardship and suffering inflicted on the residents of Lancaster. It seems to me the central issue illustrated in this book is,
"Do corporate managers have any responsibility to society, or do corporations serve the shareholders' exclusively?"
I found this book easy to read--with just one exception: I found the ownership history of the company so bewildering, I could have used a chart showing me how ownership had changed.
Advance Review Copy courtesy of the publisher. Photos courtesy of Pexels.