Know your history and your business

When it comes to U.S. corporations, David Sicilia sees the big picture. An associate professor of history at the University of Maryland, he specializes in the history of business, economics and technology in the United States. And as if that weren't enough, he can also discuss capitalism from a global perspective.Sicilia is the co-author of a number of books, including "The Greenspan Effect: Words That Move the World's Markets" (McGraw-Hill, 2000), "The Engine That Could: Seventy-Five Years of Values-Driven Change at Cummins Engine Company" (Harvard Business School Press, 1997) and "The Entrepreneurs: An American Adventure" (Houghton Mifflin, 1986).Deputy Editor William Welsh recently spoke with Sicilia about the rise of U.S. corporations, global competition and private equity groups. A lot of folks think that the logical outcome of such protections is that corporations get to take more liberties than they might have [otherwise]. I guess that is true in a legal sense. But what matters most over time is how the courts have dealt with corporations. There have been some pretty marked swings and periods of much greater oversight.? Over time, [corporations] have increasingly had more latitude in what they have been able to do. The structures of corporations and their strategies. If we are talking about larger terms, they have to think in terms of a struggle for global market share ? that's what it is all about. In the case of U.S. firms, what they really want is relief from American-style regulations because they are competing against firms on a global stage that don't have a lot of those restraints. Take antitrust [regulations], for example. Particularly since the 1980s, there has been a kind of silent revolution in antitrust. Some would argue that that has helped American business be more competitive. In Germany, you are allowed to have cartels and very tight oligopolies that are just not permitted in the United States. U.S. firms, if they are competing globally, want to be under the same sets of regulatory rules as their competitors. The creation of the modern, vertically integrated corporations happened in the late 19th and early 20th centuries, where you had a lot of big mergers and integration from raw materials to final consumer. And all of that has basically become obsolete. Now with information technology and modern communications, firms don't need to have all of those functions under a single ownership. Now the key will be strategic alliances and joint ventures and less formal arrangements. And reputation will matter a lot. Looking at it strictly in economic terms, the answer is no, they are not too high. However, if we compare the salaries historically or with any other industrialized nation, I think that the degree of attention that this issue gets is way underplayed. It is astonishing how high they are in absolute terms and how rapidly they have risen [since the 1980s]. So the fact that it is something that is not being talked about a whole lot more ? and there is no effort to try to do something about it ? is actually the story. Sarbanes-Oxley is almost meaningless. Some corporate leaders say it has made them reluctant to take entrepreneurial risks, but corporations and lawyers are very resourceful, and they will figure out ways to protect the signatories on documents. It's hard to know. It could be the beginning of a fairly significant trend. It allows a small group of people to have much more latitude without thinking about stakeholder interest. You can be much more limber and not have to worry about what shareholders think and be less transparent. It is like a return to the Gilded Age of the 19th century.