Chapter 6: Marrying in the Cathedral: A Framework for the Analysis of Corporate Governance
* Ugo Pagano INTRODUCTION 1. On 2 July 1923, Alfred Sloan – the famous CEO of General Motors – wrote to a distressed Mr Kettering as follows: It was called to my attention recently that there were 143 copper cooled cars out in the territory and it appeared to be desirable to withdraw them and reassemble them. In other words, it was thought desirable, in view of the fact that there were more or less complaints, not dealing with the engine particularly but dealing with the whole car, that they should be taken in and an adjustment made. (Sloan 1963, p. 90) Charles Kettering had been head of research for General Motors since 1920 and, also thanks to Alfred Sloan’s efforts, he would remain in that position until 1947. However, at that time, Kettering was ready to resign. He believed that the copper-cooled car, which Kettering called the air-cooled car (and was later to be known by that name), was a major invention. It marked an improvement over water cooling systems because it avoided the problem of the water freezing in cold weather. Kettering, backed by Dupont, had pressed for the application of this technological innovation; but the results had been an outbreak of ‘technological accidents’ at GM. However, it was not clear whether the breakdowns were due * A first draft of this chapter was written for ‘Changing Perspectives on Corporate Law and Economics’, a conference in honour of Guido Calabresi, held in Rotterdam on 6 November 2008. I thank Guido Calabresi, Hans...
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