Forms of Industrial Organization

Forms of Industrial Organization

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Horizontal Integration occurs when a business expands its control over other similar or closely related businesses. For example, an oil refining business would be horizontally integrated if it owned or controlled other oil refineries.Vertical Integration occurs when a business expands its control over other business that are part of its overall manufacturing process. For example, an oil refining business would be vertically integrated if it owned or controlled pipeline companies, railroads, barrel manufacturers, etc.

Similar terminology is also used to describe the forms of labor organization.

A pure monopolist is a hypothetical market structure in which a firm faces no competition and is able to earn a significant economic profit. If other firms could enter the market, then they would do so, attracted by the profit opportunity. Therefore, a profitable monopoly could only exist if there were barriers to entry. For example, a patent can give the patent owner a legal monopoly on the production of the patented product.

One barrier to entry is high fixed costs. If it takes a large investment to enter a market, new firms may be deterred from making the attempt. High fixed costs thus can create a natural monopoly.

The monopolist faces the entire demand curve. To sell an additional unit of output, the monopolist must lower its price. It would prefer to lower its price only to the next customer, keeping its price high for existing customers. If it can price discriminate in this way, it earns a higher profit. Oddly enough, this would enhance economic efficiency, by increasing output to the point where price is equal to marginal cost.

If the monopolist is unable to price discriminate, then it will hesitate to try to get an existing customer by lowering its price. That is because it would lower its revenue from existing customers by giving them the lower price. Without price discrimination, the monopolist will restrict output. Relative to the efficient outcome, the monopolist will produce too little and charge too much.

Today in labor history: The CIO is created in 1935

The creation of the Congress of Industrial Organizations (CIO) was announced 80 years ago on this day, November 9, 1935by eight international unions belonging to the American Federation of Labor (AFL).

The CIO was a federation of unions that organized workers in industrial unions in the U.S. and Canada from 1935 to 1955. Created by John L. Lewis, it was originally called the Committee for Industrial Organization, but changed its name in 1938 when it broke away from the AFL.

The CIO supported Franklin D. Roosevelt and the New Deal Coalition, and was open to African Americans. Its advocacy for industrial unionism echoed the philosophy of the Industrial Workers of the World (IWW), founded in 1905. Both the CIO and the AFL grew rapidly during the Great Depression. The rivalry for dominance was bitter and sometimes violent.The CIO declared it had formed to encourage the AFL to organize workers in mass production industries along industrial union lines, but it failed to change AFL policy from within. On September 10, 1936, the AFL suspended all ten CIO unions (two more had joined in the previous year). In 1938, these unions formed the Congress of Industrial Organizations as a rival labor federation.

The CIO was born out of a fundamental dispute within the U.S. labor movement over how to organize industrial workers. Those who favored craft unionism believed in defending the advantages they had secured through their skills. They focused on the hiring of skilled workers, such as carpenters, lithographers, and railroad engineers, attempting to maintain as much control as possible over the work their members did through enforcement of work rules, zealous defense of their jurisdiction to certain types of work, control over apprenticeship programs, and exclusion of less skilled workers from membership.Craft unionists opposed organizing workers into unions that represented all of the production workers in a particular enterprise. They preferred separate units divided along craft lines.

The proponents of industrial unionism, on the other hand, generally believed that craft distinctions may yet be appropriate in certain industries such as construction or printing, but that they were unworkable in industries such as steel or auto production. In their view, dividing workers in a single plant into a number of different crafts represented by separate organizations, each with its own agenda, would weaken the workers’ bargaining power and leave the majority, who had few traditional craft skills, completely unrepresented.

The AFL did include certain industrial unions, such as the United Mine Workers and the Brewery Workers, but the more dogmatic craft unionists still dominated the federation, and used their power to quash drives toward industrial organizing.

Industrial unionism became even more necessary in the 1930s, when the Great Depression caused large membership drops in some unions, such as the United Mine Workers and the International Ladies’ Garment Workers’ Union. A number of labor leaders, and in particular John L. Lewis of the Mine Workers, came to the conclusion that their own unions would not survive while the great majority of workers in basic industry remained nonunion. They started to press the AFL to change its policies in this area.

The AFL did respond, and added even more new members. The AFL had long permitted the formation of “federal” unions affiliated directly with the AFL in 1933 it proposed to use these to organize workers on an industrial basis. The AFL did not, however, promise to allow those unions to maintain a separate identity indefinitely. That meant these unions might be broken up later in order to distribute their members among the craft unions that claimed jurisdiction over their work. The AFL, in fact, dissolved hundreds of federal unions in late 1934 and early 1935.

While the bureaucratic leadership of the AFL was unable to win strikes, three victorious strikes suddenly exploded onto the scene in 1934. These were the Minneapolis Teamsters Strike, the West Coast Longshore Strike, and the Toledo Auto-Lite strike. Victorious industrial unions with militant left-wing leadershipscatalyzed the rise of the CIO.

Shortly after the AFL’s convention in Atlantic City in 1935, John L. Lewis called together the leaders of the International Typographical Union, the Amalgamated Clothing Workers of America, the ILGWU, the United Textile Workers, the Mine, Mill and Smelter Workers Union, the Oil Workers Union and the Hatters, Cap and Millinery Workers to discuss the formation of a new group within the AFL to carry on the fight for industrial organizing. Whether Lewis always intended to split the AFL over this issue is debatable, but at the outset, the CIO presented itself as only a group of unions within the AFL gathered to support industrial unionism, rather than to oppose the AFL itself.

The AFL leadership, however, treated the CIO as an enemy from the outset, refusing to deal with it and demanding that it dissolve. The AFL’s opposition to the CIO only increased the stature of the CIO and Lewis personally in the eyes of those industrial workers keen on organizing and disillusioned with the AFL. Lewis continued to denounce the AFL’s policies, while the CIO offered organizing support to workers in the rubber industry who went on strike in 1936 and formed the Steel Workers Organizing Committee (SWOC), in defiance of all of the craft divisions that the AFL had required in past organizing efforts.

The first major industrial union to be chartered by the CIO, on November 16, 1938, was the United Electrical, Radio and Machine Workers of America, also called the UE.The subsequent explosive growth of the UE was instrumental for the survival in those early days of the CIO. By the end of 1936, the UE had organized the General Electric plant at Schenectady, N.Y., and went on to organize 358 more local unions with contracts covering over 600,000 workers in 1375 plants.

The Taft-Hartley Act of 1947 required union leaders to swear that they were not Communists. Many CIO leaders refused to obey that requirement, later found unconstitutional. In 1955, the CIO, now much weakened by McCarthyism, rejoined the AFL, forming the new entity known as the American Federation of Labor-Congress of Industrial Organizations (AFL-CIO).

African Americans and the American Labor Movement

The records of the National Archives and Records Administration (NARA) have been, and will remain, indispensable to the study of African American labor history. Thirty NARA record groups (approximately 19,711 cubic feet of documentary material) document the activities of federal agencies whose core missions pertained to labor and labor management relations. There are also many other record groups that contain material of interest to students of American labor history even though they document the activities of federal agencies whose primary concern was not the resolution of labor disputes or the control of labor management relations. Locating records that document the role of African Americans in American labor history can be difficult because the federal agencies and offices that created these records arranged their indexes and files by name of institutions such as the name of the company or the name of the union involved in a controversy. This overview briefly traces the growth of black labor relations and provides an introduction to the research value of several NARA record groups.

African Americans are known to have participated in labor actions before the Civil War. In the early nineteenth century, African Americans played a dominant role in the caulking trade, and there is documentation of a strike by black caulkers at the Washington Navy Yard in 1835. 1 Caulking was of great importance in shipbuilding, for a ship was not fit for service unless it was caulked to prevent leaking.

At the end of the Civil War, ex-slaves had to adjust to freedom and a new labor system. The National Archives contains millions of documents concerning this transition. Luckily, researchers can avail themselves of Freedom: A Documentary History of Emancipation, a multivolume documentary editing project.

The Freedom volumes were compiled from twenty-five National Archives record groups, including Records of the Bureau of Refugees, Freedmen, and Abandoned Lands (Record Group 105) Records of Civil War Special Agencies of the Treasury Department (RG 366) Records of the United States General Accounting Office (RG 217) the Records of the Adjutant General's Office, 1780's-1917 (RG 94) the Records of the Office of the Paymaster General (RG 99) and Records of District Courts of the United States (RG 21). 2

Other record groups are less obvious sources of information. The General Records of Department of State (RG 59) and the General Records of the Department of Justice (RG 60) contain documentation of the black dock workers in Pensacola, Florida, who, in the winter of 1873-1874, organized a Workingman's Association and successfully defended their jobs against Canadian longshoreman brought in by dock owners. 3

The formation of American trade unions increased during the early Reconstruction period. Black and white workers shared a heightened interest in trade union organization, but because trade unions organized by white workers generally excluded blacks, black workers began to organize on their own. In December 1869, 214 delegates attended the Colored National Labor Union convention in Washington, D.C. This union was a counterpart to the white National Labor Union. The assembly sent a petition to Congress requesting direct intervention in the alleviation of the "condition of the colored workers of the southern States" by subdividing the public lands of the South into forty-acre farms and providing low-interest loans to black farmers. 4 In January 1871, the Colored National Labor Convention again petitioned Congress, sending a "Memorial of the Committee of the National Labor Convention for Appointment of a Commission to Inquire into Conditions of Affairs in the Southern States." 5

Congress evidently showed little interest in either petition. Five years later the disputed presidential election of 1876 led to the Compromise of 1877 and the selection of Rutherford B. Hayes as President of the United States, the end of Reconstruction, and the beginnings of "Redeemer Rule" and "Jim Crow." When the Supreme Court handed down the Plessy v. Ferguson decision in 1896, giving official recognition to the "separate but equal" doctrine, the official relegation of blacks to second-class status was complete.

A systematic review of the records and reports of the Bureau of the Census (RG 29), the Bureau of Labor Statistics (RG 257), the U.S. House of Representatives (RG 233), and the U.S. Senate (RG 46) will reveal volumes of information concerning the lives of African Americans during this period. A small sampling of these reports and publications includes the U.S. Bureau of the Census, Bulletin No. 8, Negroes in the United States (1905) the U.S. Bureau of Labor, Sixteenth Annual Report of the Commissioner (1901) and the U.S. Senate Committee on Education and Labor, Forty-ninth Congress, second session, Testimony Before the Committee to Investigate the Relations Between Capital and Labor (1885). W.E.B. Du Bois provided some of the statistical data on black labor to the Bureau of Labor and wrote reports for the Census Bureau. 6

The decline in the relative position of African Americans vis à vis organized labor can also be seen in the railroad industry. During the Great Strike of 1877, for instance, rallies and marches in St. Louis, Louisville, and other cities brought together white and black workers in support of the common rights of workingmen. By 1894 Eugene Debs, leader of the American Railway Union in a strike against the Pullman Company, was unable to convince members of his union to accept black railroaders. Blacks in turn served as strikebreakers for the Pullman Company and for the owners of Chicago meatpacking companies against whom stockyard workers struck in sympathy with the Pullman Company employees. 7

In 1909 white employees of the Georgia Railroad, represented by the Brotherhood of Locomotive Firemen and Enginemen, walked off their jobs, demanding that lower-paid black firemen be replaced by higher-paid whites. A Federal Board of Arbitration, appointed under the provisions of the Erdman Act of 1898, ruled two to one against the Brotherhood, stating that blacks had to be paid equal pay for equal work, thereby eliminating the financial advantage of hiring blacks. Erdman docket file 20, the Georgia Railroad Co. v. The Brotherhood of Locomotive Firemen and Enginemen, is found in the Records of the National Mediation Board (RG 13). 8

The National Mediation Board was created by the amended Railway Act of June 21, 1934, to mediate railroad and, later, airline disputes. The board inherited the functions of an assortment of boards and panels created to mediate railroad disputes. The records of the National Mediation Board and its predecessors date from 1934 to 1965 and consist of 1,362 cubic feet of records.

The creation of the various federal railroad arbitration boards is significant, for it marks the beginning of federal efforts during the Progressive Era to stabilize and rationalize labor relations. An act of March 4, 1913, upgraded the U.S. Department of Labor to cabinet rank and authorized the secretary of labor, William Wilson, to act as a mediator or to appoint commissioners of conciliation in labor disputes. This conciliation function was assumed by the United States Conciliation Service, which became the Federal Mediation and Conciliation Service under the Labor Management Relations Act of 1947.

The Records of the Federal Mediation and Conciliation Service (RG 280), 1913-1948, contain approximately 1,300 cubic feet of information. This material includes an index with four sections: a subject index with perhaps seven hundred topics a geographic index a name index arranged by name of person, organization, or firm and a name index to the conciliators and arbitrators. Approximately 180,000 dispute and arbitration case files are indexed. The files may range in size from one to several thousand pages and include intermediate and closing reports, agreements and other documentation of settlement, awards, and related correspondence (which may include union and company documents, transcripts of testimony, and newspaper articles). A reasonable estimate of the total number of extant Federal Mediation and Conciliation Service files pertaining to African American labor is nine thousand to eighteen thousand. 9

During the Great Migration of 1916-1930, over one million blacks moved from the south to the north in search of better lives. It is conservatively estimated that 400,000 left the South during the two-year period of 1916-1918 to take advantage of a labor shortage created in the wake of the First World War. 10 African Americans made significant gains in industrial employment, particularly in the steel, automobile, shipbuilding, and meatpacking industries. Between 1910 and 1920 the number of blacks employed in industry nearly doubled from 500,000 to 901,000. 11

The U.S. government, under pressure from African American leaders who demanded representation in the policymaking and administrative councils of government, established special offices concentrating on the mobilization of the black community. One such office, set up by Labor Secretary Wilson in 1918, was the Office of the Director of Negro Economics. The office, originally designed to help mobilize the black work force for the war effort, developed into a rudimentary economic employment opportunity agency. Except for the postbellum Freedmen's Bureau, the division was the first agency of its kind in the nation. 12 Records concerning the office are found in the Chief Clerks Files and the records of the Division of Negro Economics, both part of the General Records of the Department of Labor (RG 174). Other sources of information concerning African American labor during World War I may be found in the Records of the Council of National Defense (RG 62), the Records of the U.S. Shipping Board (RG 32), the Records of the United States Food Administration (RG 4), and the Records of the National War Labor Board (NWLB)— World War I (RG 2). During the NWLB's brief existence (April 1918-June 1919), 1,251 controversies were presented for settlement.

The U.S. government set up an intense security apparatus during World War I to monitor, detain, and prosecute those suspected of hampering the war effort. These offices included the Department of Justice (RG 60), the (Federal) Bureau of Investigation (RG 65), and the War Department General and Special Staff—Military Intelligence Division (RG 165). The security apparatus watched over the African American labor situation and kept tabs on individuals such as A. Philip Randolph, Ben Fletcher (president of the IWW-associated Marine Workers Association), and Marcus Garvey, leader of the "Back to Africa Movement." Information concerning Fletcher and Garvey is also in the Records of the Office of the Pardon Attorney (RG 204).

The Records of the United States Coal Commission (RG 68), 1922-1923, document the efforts of the federal government to control upheavals in the coal mining industry caused by the end of the war. The United Mine Workers of America Union was light years ahead of other AFL unions in its organization of black miners, but white miners and employers, however, more often than not shared fundamental ideas of black inferiority. Despite the uneven relationship between black and white coal miners, a substantial degree of solidarity arose among miners of all colors and nationalities. The Public Health Sanitary Surveys and the Mining Community Schedules prepared by the Living Conditions Section of the Coal Commission provide an opportunity to glimpse the lives of African American mining families living in Alabama and West Virginia during the early twenties. The Records of the Federal Mediation and Conciliation Service (RG 280) contain a substantial amount of information regarding black and white miners during these postwar years. 13

In 1925 A. Philip Randolph began his twelve-year fight to gain recognition of the Brotherhood of Sleeping Car Porters by the Pullman Car Company, the American Federation of Labor (AFL), and the U.S. government. Randolph ultimately succeeded in his quest in 1937 and in the process became a leader in the fight against racism in the workplace and the nation. The Records of the National Mediation Board (RG 13) and the Records of the U.S. Railroad Administration (RG 14) document the efforts of African American railroad workers and their unions to procure satisfactory compensation and job security. 14

The Roaring Twenties came to a crashing halt with the Great Depression. Seeking ways to alleviate the massive unemployment, President Franklin Roosevelt and his New Deal advisers sought ways to put people back to work and to increase purchasing power. Among the alphabet soup of federal agencies created during the New Deal were the Civilian Conservation Corps (RG 35), the Work Projects Administration (RG 69), the National Youth Administration (RG 119), and the National Recovery Administration (RG 9). The Division of Negro Affairs of the National Youth Administration was headed by the noted educator and African American leader Dr. Mary McLeod Bethune. The Records of the Women's Bureau (RG 86), founded in 1920, and the Records of the Bureau of Employment Security (RG 183) also provide researchers with extensive coverage of labor issues and African Americans. These records span the depression, World War II, and postwar eras.

Another agency created during the Great Depression was the United States Housing Authority, established in the Department of Interior by the U.S. Housing Act of 1937. The act authorized a system of loans, grants, and subsidies to assist local housing authorities develop low-rent housing projects. Local Housing Authority boards from across the nation sent in reports detailing their progress toward setting aside a portion of the public housing construction work for African Americans. The portion was to be based on the size of the black population in a particular locale. Included among these twenty thousand pages of records are a number of letters from local labor unions providing information concerning black laborers in skilled and nonskilled positions or attempting to explain the lack thereof. 15 The Housing Administration generally observed local racial customs, and neither the administration nor the Housing Authority proposed, advocated, or supported legislation to specifically assist blacks.

New Dealers sought to institute the collective bargaining process by guaranteeing labor the right to organize and to designate representatives for collective bargaining purposes under the auspices of the National Labor Relations Board. 16 African American leaders were disappointed that the Wagner Act of 1935 did not contain prohibitions against union race discrimination. In 1930 no more than 50,000 out of 1,500,000 black workers engaged in transportation, extraction of minerals, or manufacturing were members of any trade union. Furthermore, the AFL remained a conservative organization. A large number of member unions did not permit African Americans to join their ranks, and the AFL leadership showed little apparent interest in organizing black and white laborers in mass-production industries. 17

The organization in 1935 of the Congress of Industrial Organizations (CIO), which sought to organize industrial workers regardless of race or ethnic background, contributed to an alleviation of the historic conflict between African Americans and trade unions. Thousands of African American workers joined unions, and much of this growth is documented in the Records of the National Labor Relations Board (RG 25, approximately 5,140 cubic feet). 18 These records include formal and informal case files as well as transcripts of hearings and exhibit files.

Protective labor legislation of the 1930s, such as the Social Security Act, the National Labor Relations Act, and the Fair Labor Standards Act, did not extend to agricultural workers, although 31.8 percent of the African American population in 1940 was employed in agriculture (40.4 percent in the South). A 1945 Bureau of Labor Statistics survey of American agricultural unionism noted that "labor unionism in agriculture has been a rather anomalous and transitory development in the American economy. It has been composed of literally hundreds of organizations that were sporadic, scattered, and short lived." 19 The reasons why most labor unions failed in the 1930s were "the same reasons that made them vulnerable to agitation and strikes . . . [T]heir extreme mobility, the high seasonality of their work, and the low wage rates all combined to make unionization among them costly." 20

Agricultural workers were further hampered in their efforts at unionization because of their low social status and political impotence, public perception of the traditional family farm, and agriculture laborers who had more "solicitude of their employers" than industrial workers had. 21 The survey noted that the "more obvious hardships which periodically led to conflict were mitigated to some degree by appropriate Government action" including the work performed by the Farm Security Administration (RG 96). 22 Although one piece of New Deal legislation, the Agricultural Adjustment Act (AAA), adversely affected agricultural workers, it contributed to the rise of a remarkable agricultural labor union: the Southern Tenant Farmers Union (STFU). 23

The STFU was founded in 1934 in eastern Arkansas, an area of large cotton plantations worked by sharecroppers and owned in many cases by absentee owner-investors. Immediately after World War I, the collapse of cotton prices led to strained landlord-tenant relations as planters sought to shift some losses to tenants by manipulating accounts and, in some cases, outright fraud. A group of African Americans organized the Progressive Farmers and Householders Union to protect themselves against exploitation and "advanc[e] the intellectual, material, moral, spiritual, and financial interests of the Negro race." The union was destroyed in the "Elaine Massacre" of 1919 in Phillips County, Arkansas, when white law enforcement officials and vigilantes from neighboring counties and states attacked union officials and members, killing up to one hundred African Americans. 24

Economic conditions for the sharecroppers of eastern Arkansas did improve slightly during the 1920s, but with the depression of the 1930s, conditions were again ripe for agricultural labor revolt. Sharecroppers were faced with declining earnings, increased farm mechanization, and the Agricultural Adjustment Act of 1933, which worked against their interests.

One way the AAA sought to raise the income of farmers was through a series of allotments and subsidies prescribing the amount of land that could be placed in production and paying farmers not to farm additional land. The Agricultural Adjustment Administration, which administered the act, worked with local AAA committees. In Arkansas, these committees were dominated by white plantation owners. These owners often used the local committees to circumscribe the common law rights of tenants and sharecroppers, did not pay sharecroppers their fair share of government compensation payments, and altered the sharecroppers' status to wage hands to disqualify them from receiving government payments. 25

The STFU, ostensibly inspired by Socialist Norman Thomas and founded by Henry L. Mitchell and Henry Clay East in Tyronza, Arkansas, was an interracial union from its very beginning. Posing a direct challenge to the established order in Arkansas, in two years the union boasted twenty-five thousand members, which included former Ku Klux Klansmen as well as survivors of the "Elaine Massacre," and by the end of 1936 claimed thirty-one thousand members in seven states. 26

With the assistance and support of individuals such as Secretary of the NAACP Walter White, Norman Thomas, and A. Phillip Randolph, and through the strategic use of strikes and public demonstrations under the leadership of Harry L. Mitchell, the STFU was able to directly alleviate some of the oppressive living and working conditions of its members. Perhaps more important, however, was the attention it focused on the living and working conditions of tenant farmers and sharecroppers. Due to the efforts of the STFU, Franklin Roosevelt established the President's Committee on Farm Tenancy soon after his 1936 reelection. The efforts of this committee helped lay the foundations for the Bankhead-Jones Farm Tenant Act, which established the Farm Security Administration and the Resettlement Administration, agencies that developed programs to assist migrant workers and authorized low-interest loans to farm tenants, sharecroppers, and farm laborers. 27

By World War II, however, the STFU's day had passed. Mechanism within the cotton industry continued to increase, decreasing the need for tenant farmers. Approaching war clouds at the end of the 1930s shifted the focus of the U.S. government from domestic problems toward a more international outlook. Although the STFU was never fully integrated (most of its locals were all black or all white), it did leave an indelible mark upon the United States and symbolized for many what labor could accomplish if racial identity could be ignored. 28

The improvement in the status of African American workers in American society on the eve of World War II should not be overstated. The 1940s would be a decade, however, when African Americans would achieve their greatest economic gains, in terms of real advances and in relation to whites, since the Civil War.

The advance of African Americans in American industry during World War II was the result of the nation's wartime emergency need for workers and soldiers. In 1943 the National War Labor Board issued an order abolishing pay differentials based on race, pointing out, "America needs the Negro . . . the Negro is necessary for winning the war."

Early in 1941, A. Philip Randolph announced the creation of a March on Washington Committee, promising that unless President Roosevelt issued an executive order ending racial discrimination in hiring by unions and employers and eliminating segregation in the armed forces, ten thousand Americans would march through Washington demanding an end to segregation. The number of threatened marchers grew from 10,000 to 50,000, and then to 100,000. Despite the entreaties of Roosevelt and his intermediaries, Randolph made it clear that nothing less than a presidential executive order would stop the march. Roosevelt gave in and issued Executive Order 8802. 29

After asserting that national unity was being impaired by discrimination, the executive order declared it to be the "duty of employers and of labor organizations to provide for the full and equitable participation of all workers in defense industries, without discrimination because of race, creed, color, or national origin." All federal agencies concerned with defense production were ordered to administer such programs without discrimination, and all defense contracts were to include a provision "obligating the contractor not to discriminate against any worker because of race, creed, color, or national origin." Executive Order 8802 also established the Committee on Fair Employment Practice (FEPC).

The Records of the Committee on Fair Employment Practice (RG 228) document its activities from June 25, 1941, to June 28, 1946. The committee formulated and interpreted policies to combat racial and religious discrimination in employment received, investigated, and adjusted complaints of such discrimination and assisted government agencies, employers, and labor unions with the problems of discrimination. The committee handled fourteen thousand complaints of discrimination from all regions of the country, 80 percent of which were filed by African Americans.

Executive Order 8802 was Roosevelt's compromise with Randolph, and as such it had some inherent weaknesses. For instance, the executive order did not mention military segregation. Nor could the FEPC require compliance with its decisions and directives. To obtain compliance, it depended on its own powers of persuasion or the prestige of other government agencies concerned with manpower and labor relations.

Despite its weaknesses, the FEPC had some notable successes. Its own investigations and directives against discriminating corporations, unions, and government agencies helped to increase the African American presence in the nation's defense industry from 3 to 8 percent. For the first time, the federal government admitted that blacks suffered from discrimination and that government had a responsibility to remedy it.

The National War Labor Board for World War II was established in the Office for Emergency Management by an executive order of January 12, 1942. The board was to act as the final arbiter of wartime labor disputes and to pass on adjustments in certain wages and salaries. There are approximately 3,187 linear feet of record material in Record Group 202, of which approximately 2,486 feet is case file material. Among those records are dispute case files, accompanying transcripts, and transcripts of executive sessions of the National Defense Mediation Board (1941-1942), the predecessor agency to the World War II NWLB the board's headquarters dispute case files and transcripts a complete set of case files from the twelve regional NWLB offices and case files for some of the board's commissions and panels on industries.

At least ten cases in these files concern racial discrimination. Moreover, the number of individual files from all regions of the United States, and the presence of records of special commissions on industries in which blacks were particularly concentrated (for instance, shipbuilding and meatpacking), suggests that the records of the National War Labor Board may well be an underused source of information on African American workers during World War II. 30

Other record groups of interest to researchers of the World War II period include the General Records of the Department of Justice (RG 60), which contain files concerning the Fair Labor Standards and Civil Rights the Records of the Office of Labor of the War Food Administration (RG 224), which contain extensive information concerning African American farm laborers and migrants the Records of the Federal Maritime Commission (RG 178), which contain information concerning labor and discrimination in the shipbuilding industry the Records of the Occupational Safety and Health Administration (RG 100), formerly the Bureau of Standards the Records of the Wage and Hour and Public Contracts Divisions (RG 155), which contain information on black workers in the tobacco, paper, lumber, and other industries and military record groups such as the Records of the Army Staff (RG 319) and the Records of the War Department General and Special Staffs (RG 165). 31

Black labor unionism became part of a wider campaign for civil rights after World War II. After the merger of the CIO and the AFL in 1955, it seemed that the AFL had placed a conservative pall over the entire organization, dividing white and black unionists. It was also the era of the civil rights movement, and black union officials such as Ed Nixon and A. Philip Randolph were among the leaders during the Montgomery bus boycott and the 1963 March on Washington. African Americans were to continue to press their demands for justice within unions in the 1960s and 1970s through internal union organizations such as the Ad Hoc Committee of Steel Workers and the Dodge Revolutionary Union Movement. Confronting continued union and corporate discrimination, African American civil right groups sought redress through a number of court cases under Title VII, Equal Employment Opportunity, of the Civil Rights Act of 1964, which prohibits discrimination in employment because of race, color, religion, sex, or national origin.

A number of record groups document the intersection of the civil rights and labor movements. General Records of the Department of Labor (RG 174) include numerous files of concern to African Americans and the civil rights movement among the records its secretaries, 1953-1976. Records of Temporary Committees, Commissions, and Boards (RG 220) include the records of the President's Committee on Migratory Labor, the President's Committee on Equal Employment Opportunity, and the National Advisory Commission on Civil Disorders. Records of Agencies for Economic Opportunity and Legal Services (RG 381), the Equal Employment Opportunity Commission (RG 403), and the Commission on Civil Rights (RG 453), as well as the Records of the United States District Courts (RG 21), the Records of the U.S. Court of Appeals (RG), and the U.S. Supreme Court (RG 267) present a number of opportunities for the student of African American and trade labor relations.

There are, no doubt, opportunities that this paper overlooks. The scholar with the Guide to Federal Records in the National Archives of the United States in hand can find many more. Finding aids, such as Debra Newman's Black History: A Guide to the Civilian Records in the National Archives and her compilation of Selected Documents Pertaining to Black Workers Among the Records of the Department of Labor and Its Component Bureaus, 1902-1969, as well as Tab Lewis's essay "Labor History Sources in the National Archives" (Labor History, volume 31, numbers 1-2 [Winter-Spring 1990]: 98-104) will be of great assistance to the researcher.

1. Norman A. Hill, "Forging A Partnership Between Blacks and Unions," The Monthly Labor Review (August 1987): 38. There is probably further documentation of this event among the Records of Naval Districts and Shore Establishments, Record Group 181, National Archives and Records Administration, Washington, DC (hereinafter, records in the National Archives will be cited as RG ___, NA). See also Philip S. Foner, Organized Labor and the Black Worker (1981), p. 11, for information concerning the importance of African Americans in the caulking trade.

2. Ira Berlin, ed., Freedom: A Documentary History of Emancipation, 1861-1867, series I, vol. 3, The Wartime Genesis of Free Labor: The Lower South (1990), pp. xxxiii-xxxiv.

3. Jerrell H. Shofner, "The Pensacola Workingman's Association: A Militant Negro Labor Union During Reconstruction," Labor History (Fall 1972). Both Record Groups 59 and 60 are cited in Freedom: A Documentary History.

4. Philip S. Foner, Organized Labor and the Black Worker (1981), pp. 22-33. Foner cites the petition as U.S. Senate, 41st Cong., 2d sess., S. Misc. Doc. 3, which is in fact an "Address of the Republican State Convention held in Richmond, Virginia, on the 24th and 25th of November 1869." Foner was referring to U.S. Senate, 41st Cong., 2d sess., S. Misc. Doc. 8.

5. U.S. Senate, 41st Cong., 3d sess., S. Misc. Doc. 25, serial 1442.

6. William H. Harris, The Harder We Run: Black Workers Since the Civil War (1982), pp. 22, 229.

7. Alan Dawley, "Paths to Power After the Civil War," in Working for Democracy: American Workers from the Revolution to the Present, ed. Paul Buhle and Alan Dawley (1985), pp. 44-45 William M. Tuttle, Jr., "Labor Conflict and Racial Violence: The Black Worker in Chicago, 1894-1919," in Black Labor in America, ed. Milton Cantor (1969), pp. 88-90.

8. Hugh B. Hammett, "Labor and Race: The Georgia Labor Strike of 1909," Labor History 16 (Fall 1975): 470-484. See also Eric Arnesen, "Like Banquo's Ghost, It Will Not Down: The Race Question and the American Railroad Brotherhoods, 1880-1920," American Historical Review 99 (December 1994): 1601-1633.

9. Based on the author's previous estimates of 180,000 Federal Mediation and Conciliation Service Files, and multiplied by 5% (.05) to 10% (.10).

10. Carole Marks, Farewell— We're Good and Gone: The Great Black Migration (1989), p. 1.

11. Harris, The Harder We Run, p. 61.

12. Henry P. Guzda, "Social Experiment of the Labor Department: The Division of Negro Economics," Public Historian 4 (1982): 8 Jane Lang Scheiber and Harry N. Scheiber, "The Wilson Administration and the Wartime Mobilization of Black America," in Black Labor in America, pp. 126-127.

13. Harris, The Harder We Run, pp. 43-44 Joe William Trotter, Jr., Coal, Class, and Color: Blacks in Southern West Virginia, 1915-1932 (1990), esp. pp. 111-115.

14. Harris, The Harder We Run, pp. 77-94. See also Herbert Hill, Black Labor and the American Legal System: Race, Work, and the Law (1977). Hill provides an extensive overview of the struggles of African Americans and the railroad industry and unions in chapter 13. Using Records of the Fair Employment Practice Committee (RG 228) as well as other legal material, he traces the struggle of African American railroad employees from the Civil War to as recently as 1976.

15.Labor Records, boxes 1-20, Records of the Intergroup Relations Branch, 1936-1963, RG 196, NA.

16. Raymond Wolters, "Closed Shop and White Shop: The Negro Response to Collective Bargaining, 1933-1935," in Black Labor in America, pp. 137-138.

17. Ibid., pp. 139, 152. Jessie Carney Smith and Carrell Peterson Horton, eds., Historical Statistics of Black America, vol. 1, Agriculture to Labor and Employment (1995), p. 1106, provides a figure of 110,000 unionized African American workers in 1930.

18. James S. Olson, "Race, Class and Progress: Black Leadership and Industrial Unionism, 1936-1945," in Black Labor in America, pp. 153-164 and Sumner M. Rosen, "The C.I.O. Era, 1935-1955," in The Negro and the American Labor Movement, ed. Julius Jacobson (1968), pp. 188-208. For a different view of African American-CIO Relations see Richard Thomas, "Blacks and the C.I.O.," in Working for Democracy.

19. Stuart Jamieson, U.S. Department of Labor, Bureau of Labor Statistics, Labor Unionism in American Agriculture, Bulletin 836 (1945), p. 410 Smith and Horton, eds. Historical Statistics of Black America, p. 115.

20. Jamieson, Labor Unionism in American Agriculture, p. 406.

22. Ibid. The records of the Farm Security Administration are part of the Records of the Farmers Home Administration, RG 96, NA.

23. Harris, The Harder We Run, p. 102.

24. Jamieson, Labor Unionism in American Agriculture, pp. 302-305.

25. Jerold S. Auerbach, "Southern Tenant Farmers: Socialist Critics of the New Deal," Labor History 7 (Winter 1966): 4-5 Melvyn Stokes and Rick Halpern, introduction to Race and Class in the American South Since 1890 (1994), pp. xii-xiii Jamieson, Labor Unionism in American Agriculture, pp. 305-306.

26. Auerbach, "Southern Tenant Farmers," pp. 6-16 Harris, The Harder We Run, pp. 102-103 Jamieson, Labor Unionism in American Agriculture, pp. 306-316.

27. Auerbach, "Southern Tenant Farmers," pp. 16-17 Jamieson, Labor Unionism in American Agriculture, p. 325-326 Richard B. Morris, ed., Encyclopedia of American History (1953), p. 356.

28. Auerbach, "Southern Tenant Farmers," pp. 17-18 Jamieson, Labor Unionism in American Agriculture, pp. 305-306 Harris, The Harder We Run, p. 103.

29. Harris, The Harder We Run, pp. 116-117.

30. For information concerning industries with high concentration of African American workers, see Harris, The Harder We Run, pp. 117-122 and Rosen, "The C.I.O. Era," in The Negro and the American Labor Movement, pp. 202-205.

31. See the Preliminary Inventory to the Records of the U.S. Maritime Commission, entry 90, Labor Relations, which contains some information on African American labor in shipyards. Records of the War Department General and Special Staffs (RG 165), Records of the Office of Intelligence (G-2), 1917-1949, and Records of the Army Staff (RG 319), Records of the Office of the Assistant Chief of Staff, G-2, Intelligence, 1939-1955, will contain an extensive amount of information concerning African Americans and Labor.

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1962: Strategy and Structure & 1988: The Theory of Industrial Organization

Alfred D. Chandler (d. 2007) is considered the founder of the modern field of business history. His MITP book Strategy and Structure: Chapters in the History of the American Industrial Enterprise came out in hardcover in 1962, in paperback in 1969, and then was reissued in 1990 in paperback (with a new intro by the author).

Its key cases treat in depth DuPont, Standard Oil, General Motors, and Sears Roebuck.

Paper sales with MITP total just over 57,000 copies.

Chandler may be the only MITP author to win the Pulitzer Prize, for his famous 1977 work, The Visible Hand: The Managerial Revolution in American Business.

Emily Taber, Assistant Acquisitions Editor, Economics, Finance, and Business, on The Theory of Industrial Organization (1988) by Jean Tirole:

Industrial organization is a field of economics that expands the traditional model of a perfectly competitive marketplace to include such real-world factors as price discrimination, barriers to entry into the market, and the effects of new technologies. When it first emerged as a field in the 1930s, industrial organization made use of empirical studies to describe numerous variables but it could not define causal relationships between them. A second wave of scholarship in the 1970s resulted in noncooperative game theory being adopted as the unified methodology of the field and a theory of industrial organization emerged. Jean Tirole set out to write the first primary text to present the new form of industrial organization to advanced undergraduates and grad students. The Theory of Industrial Organization was first published in 1988 and is still one of the top texts assigned on the subject today.

Our 50 influential journal articles are listed here. The articles are in chronological order and will be freely available through the end of 2012.

For information about the MIT Press’ history, check out our 50th anniversary page.

What is Organizational Structure?

A worker reports to a manager. A manager reports to a director, a director reports to a vice president, and a vice president reports to a C-level senior leader, like a chief executive officer or a chief administrative officer. If you’ve ever worked in a corporate setting, you’re likely to recognize this as the basic set of layers of an organization’s structure.

Organizational structure defines how job tasks are formally divided, grouped, and coordinated. The structure of an organization usually features six different elements:

  • Work specialization
  • Departmentalization
  • Chain of command
  • Span of control
  • Centralization and decentralization
  • Formalization

Practice Question

Now that we understand just what organizational structure is, let’s take a look at each one of its elements, so we can better understand how organizations choose to structure themselves to maximize productivity.

Work Specialization

Earlier, we studied Frederick Winslow Taylor, who researched time and motion and determined the most efficient ways for workers to do their tasks. Taylor’s “one right way” was the birth of work specialization. When Henry Ford conceived the assembly line, he tossed aside “one best way” and viewed work specialization with an eye toward continued improvement. Work specialization describes the degree to which activities in the organization are divided, and then subdivided, into separate jobs.

If you put one worker on the task of building an automobile, he might still be building it a month or two later. But if you have one worker that’s focused on installing right front tires, and another who is focused on left front fenders, then those tasks become standardized. Employees learn to do them quickly with practice.

By the 1940s, most manufacturers were practicing work specialization, or “division of labor” as it’s sometimes called. Work specialization was ideal from a task point of view—easy tasks could be done by unskilled labor, and those tasks that required more skill could be separated out and addressed by employees that possessed those skills. Those skilled employees weren’t wasting their time on tasks they didn’t have to be doing.

Work specialization was also ideal from a productivity point of view. Installation of brake pads requires different tools than the installation of a tire, and when workers were assigned to one of those tasks instead of both, tools didn’t need to be taken out and put away. Employees could cheaply be trained to do one specific task, and many employees, each trained to do their specific task, could assemble highly complex machinery quicker and easier than one highly trained employee that possessed all the skills to complete the assembly.

Manufacturers continued to tinker with and fine-tune worker specialization to increase productivity until the 1960s, when it became clear that a good thing could be taken too far. Boredom, stress, low productivity, increased absenteeism and turnover offset higher productivity. Manufacturers responded by enlarging worker specialization, including more tasks within a position to increase engagement.


Once jobs are divided up through work specialization, those jobs need to be combined together to coordinate common tasks. Departmentalization is the basis by which jobs are grouped together. Jobs can be grouped in the following ways.

  • Function. This is among the most popular way to group activities. Corporations might have a supply chain function, a finance function, a human resources function. All the worker specializations for those areas are grouped together, and people with common skills work in common units.
  • Product. A large manufacturing company might group its common tasks together by product. A paper products manufacturer might have a department for office paper, and other department for bathroom tissues, and yet another for cartons. The major advantage of organizing common tasks this way is to increase employee accountability for the success of those products.
  • Geography. If an organization’s customers are scattered over a geographic region, an organization might choose to group common tasks geographically. A company that has a South, Midwest, and Eastern sales function is organizing around territory, or geography.
  • Process. A manufacturing plant might choose to organize common tasks around process. A tubing plant might organize departments around casting, pressing, finishing, packaging, etc. Each department specializes in one particular part of the manufacturing process. The same kind of departmentalization is true of the Department of Motor Vehicles, where you proceed from one area to another to renew your license plates or your driver’s license.
  • Customer. A business might choose to combine tasks around the type of customer it serves. For instance, a service like has free file sharing and cloud storage for its individual users, but there is also a department of Dropbox that services business clients.

Large corporations can use any or all of these types of departmentalization to organize themselves. They might have a manufacturing area that organizes itself around process, but then a sales department that is organized geographically and a corporate support center that’s organized functionally.

Chain of Command

The chain of command is the unbroken line of authority that extends from the top of the organization (e.g., the CEO or the President) to the lowest echelon and clarifies who reports to whom. At the beginning we talked about managers reporting to directors, who reported to vice presidents who reported to C-level leaders. Such is the chain of command.

Two additional concepts go along with the idea of chain of command. The first, authority, describes the rights inherent in a managerial position to give orders and to expect the orders to be obeyed. The second, unity of command, describes the concept that a subordinate should only have one superior to whom he or she is directly responsible. If unity of command doesn’t exist, there’s a likelihood that a subordinate will be responding to commands from different people and experiencing a dilemma of competing priorities, which isn’t productive.

We learned about Henri Fayol and his theories around management, particularly chain of command and unity of command. These principles used to be a cornerstone of organizational structure, but advancements in technology and the trend toward empowering employees makes this less relevant today, but the chain of command element is not going to disappear any time soon.

Span of Control

Span of control deals with the number of subordinates a manager can effectively direct. The wider an organization can make its managers’ spans of control the more efficient it will be. Wider spans of control save money.

Consider the span of control of the company represented in the drawing above in blue. The blue company has 5,461 employees and six levels of managers to manage them (all but the bottom layer of 4,096). Let’s say those managers make $50,000 apiece. The total payroll for 1,365 managers making $50,000 apiece is $68,250,000.

If we look at the green company, we still have a bottom layer of 4,096, but less managers overall managing them. If the green company’s 585 managers each make $50,000, the green company’s total payroll for those managers is $29,250,000. That’s a huge savings.

Small spans of control are not only expensive, but they tend to complicate communication up and down the organization. The more layers, the more the message has to travel from manager to manager. Narrower spans of control also encourage overly tight supervision and less employee creativity and empowerment. In recent years, the trend has been toward wider spans of control.

Centralization and Decentralization

Centralization refers to the degree to which decision making is concentrated at a single point in the organization.

In a decentralized organization, employees are empowered to make decisions, so action can be taken quickly to solve problems, and employee input is considered. The more lower-level employees have the power to make decisions, the more decentralized an organization is.

In a centralized organization, upper management makes all decisions and lower management is there to carry those decisions out.


Formalization refers to the degree to which jobs within the organization are standardized. An employee in a highly formalized job has little input as to how that job is done, when it’s done or how it should be done.

A worker on the assembly line is probably in a highly formalized job, where he doesn’t have much say in how he does his job. An accounts payable associate also doesn’t have a lot of say in how those many invoices are processed, but her job is probably a little less formalized than the assembly line worker. A sales associate, out calling on customers, may have very little formalization in his job.

Practice Question

Now that we understand the six elements that figure into organizational structure, let’s take a look at some common configurations of organizational structure and in what instances they are used.

Working Conditions

Though many people in Britain had begun moving to the cities from rural areas before the Industrial Revolution, this process accelerated dramatically with industrialization, as the rise of large factories turned smaller towns into major cities over the span of decades. This rapid urbanization brought significant challenges, as overcrowded cities suffered from pollution, inadequate sanitation and a lack of clean drinking water.

Meanwhile, even as industrialization increased economic output overall and improved the standard of living for the middle and upper classes, poor and working class people continued to struggle. The mechanization of labor created by technological innovation had made working in factories increasingly tedious (and sometimes dangerous), and many workers were forced to work long hours for pitifully low wages. Such dramatic changes fueled opposition to industrialization, including the “Luddites,” known for their violent resistance to changes in Britain’s textile industry.

Did you know? The word "luddite" refers to a person who is opposed to technological change. The term is derived from a group of early 19th century English workers who attacked factories and destroyed machinery as a means of protest. They were supposedly led by a man named Ned Ludd, though he may have been an apocryphal figure.

In the decades to come, outrage over substandard working and living conditions would fuel the formation of labor unions, as well as the passage of new child labor laws and public health regulations in both Britain and the United States, all aimed at improving life for working class and poor citizens who had been negatively impacted by industrialization.

A Brief History of the Corporate Form and Why it Matters

Take a brief moment to look around at your surroundings. Ask yourself, “how much of the ‘stuff’ in the room is directly or indirectly related to a corporation?” 150 years ago, the answer would have been very little. But today, there can be no doubt that corporations are intimately involved in all aspects of our lives. In light of that fact, it is appropriate to consider: (1) why we have corporations (2) where they come from and (3) how they will impact our future.

Part One: What Exactly is a Corporation?

A corporation is a legally distinct entity that has many of the rights attributed to individuals.[1] These rights include the ability to enter into contracts, take out loans, sue others, be sued, own assets, pay taxes, and so on.[2] A corporation is formed when individuals exchange consideration (usually in the form of cash) for shares of the corporation, which in turn creates a right to a portion of profits.[3] Generally, the losses incurred by a shareholder of a corporation are limited to the amount invested this concept is known as limited liability.[4] Limited liability allows individuals to avoid personal liability for a business entity’s losses, thereby allowing risk-averse individuals to assume risks they otherwise would not have undertaken.[5] Corporations also allow individuals to pool resources to achieve goals that would be unattainable by a person acting in an individual capacity, and can last longer than an individual’s lifetime.[6] The benefits of the corporate form also create opportunities for abuse, which will be discussed below.

Part Two: The Development of the Corporate Form

The roots of the corporate form can be traced into antiquity.[7] Below, I will discuss important developments which have shaped the corporations we know today. I will begin with the emergence of limited liability.

Early Notions of Limited Liability: The corporate form emerged from economic arrangements that mirrored the concept of limited liability offered by modern corporations. One such arrangement was the commenda, a system developed in Eleventh Century Italy, wherein a ‘passive partner’ provided funding for a merchant vessel to be sailed by a ‘managing partner’ who invested no capital.[8] Upon completion of the voyage, the partners divided up the profits under a predetermined formula.[9] This arrangement allowed the passive partner to limit his or her liability of their investment, while the managing partner assumed the risks associated with the cargo and the voyage.[10] Soon, investors began pooling their funds to diminish the risk of losing their entire fortune on a single voyage.[11] In doing so, the investors realized the benefits of pairing limited liability with diversification.[12]

Development of ‘Joint-Stock’ Companies: In the 1600s, the British Crown began granting monopolies to groups of investors willing to undertake certain ventures.[13] These monopolies took the form of “joint-stock” companies that allowed labor and capital to be aggregated for the purpose of undertaking tasks that would be too large for any one person.[14] A famous example was that of the East India Company, in which investors pooled capital into a single “joint-stock” company from which profits would be distributed according to capital invested.[15] Only members of the East India Company had the privilege of conducting trade with India.[16] The East India Company eventually came to form a government over large portions of India and maintain a standing army. [17] Other notable “joint-stock” companies, such as the Virginia Company, helped expand British control of North America.[18] In fact, the Virginia Company established the General Assembly, which was the first legislature in North America.[19] These examples show that by allowing the aggregation of resources, corporations can be organized to carry out tasks too big for one person, or even one government.

Government-Chartered Corporations in the U.S.: Considering that America was literally settled by corporations,[20] their early popularity in the U.S. should not be surprising. In Alexander Hamilton’s second Report on Public Credit, he argued for a federally chartered national bank to help provide centralized direction for the financial sector.[21] The bank was established soon thereafter.[22] In his Report on Manufacturers, Hamilton argued for a comprehensive federally backed plan to expand public works, which was not immediately accepted.[23] In later years, however, the government would embrace its ability to direct industry through the creation of industrial corporations.[24] A famous example of this was the chartering of the Union Pacific Railroad, and other railroad companies, for the purpose of constructing the transcontinental railroad.[25]

Emergence of Truly Private Corporations: Throughout the 1800s, and particularly in the late 1800s, corporations began to shift away from the strict limitations of their legislature-approved charters.[26] This shift was illustrated in 1896 when New Jersey passed a statute allowing corporations to define the scope of their charters themselves, independent of the government.[27] Many of the benefits of the corporate form discussed above quickly came to be abused in the late 1800s.[28] For example, John D. Rockefeller’s Standard Oil Company came to control 90-95% of oil refineries in the U.S..[29] Journalists, such as Ida Tarbell, exposed the nefarious methods used by John D. Rockefeller to push out honest competitors.[30]

Federal Regulation of Privately-Owned Corporations: The government responded to harmful corporate behavior through the passage of the Sherman Antitrust Act, which sought to limit large corporations’ ability to fix prices and exclude competition.[31] Under the administration of Theodore Roosevelt, the Sherman Act was vigorously enforced through over 40 antitrust suits.[32] The most famous of these cases, Northern Securities Company v. United States, resulted in a 5-4 decision where the Supreme Court ordered the dissolution[33] of J.P. Morgan’s Northern Securities Trust.[34] Justice Harlan, writing for the Court, stated that “the court may make any order necessary to bring about the dissolution or suppression of an illegal combination that restrains interstate commerce.”[35]

For the Benefit of Shareholders: Traditionally, directors of corporations, governed by American law, must manage corporations primarily for the benefit of shareholders.[36] The effect of this principle is made clear in a famous case, Dodge v. Ford Motor, wherein Henry Ford decided to stop paying dividends “to employ still more men, to spread the benefits of this industrial system to the greatest possible number, [and]to help them build up their lives and their homes.”[37] The court held that the profits of a corporation cannot be withheld from stockholders for the benefit of the general public and that a dividend must be reinstated.[38]

Further Federal Regulation Following the Great Depression: The abuses of the corporate form, which caused the 1929 stock market crash, led to the passage of the Securities Exchange Act in 1934 under President Franklin Roosevelt.[39] The focus of this legislation was to promote transparency in the market for public securities by requiring disclosure of audited financial records and empowering the Securities and Exchange Commission to enforce compliance with the law’s objectives.[40]

State Regulation of Corporations: While federal regulation has had a significant impact on corporate law, the bulk of regulation occurs at the state level. State law largely defines the duties of corporate directors,[41] the shareholder voting process,[42] the procedures for amending bylaws and certificates,[43] and other areas central to proper corporate governance.[44]

Status as Individuals for Purposes of Free Speech: Under the law, the status of corporations as “individuals” has taken on new meaning in recent years. In Citizens United v. FEC, the Supreme Court held in a 5-4 decision that corporations have a political right to free speech under the First Amendment.[45] Under Citizens United, corporations’ right to free speech includes the right to “use money amassed from the economic marketplace to fund their speech.”[46] In effect, this gives corporations the ability to capitalize on their vast resources to engage in political speech protected under the First Amendment. This decision adds another dimension through which corporations have a great impact on our day-to-day lives.

Collectively, the events described above deliver three main takeaways: (1) historically, corporations have had a vast impact on our economic, political, and social relationships – a phenomenon that will likely continue into the future (2) corporations have the beneficial capacity to facilitate large-scale, risk-intensive endeavors that would be impossible for individuals or governments to achieve alone, and (3) the opportunity for abuse of the corporate form may, in appropriate cases, call for government regulation to ensure that corporations serve legislatively-defined societal interests.

Part Three: Corporations and Public Benefit

The shape and evolution of the corporate form through the Colonial Era, the Industrial Revolution, the Great Depression, and Citizens United demonstrate how the government has expanded and limited corporate power to ensure that corporations are working for the benefit of society. This begs the question: where will be we 100 years from now? This is a very important question, especially considering the vast impact that corporations have on our lives.

Some states, including New York, allow companies to incorporate as “benefit corporations” (“B-corps”).[47] In New York, B-corps may be run for a specific public benefit, which may include but is not limited to, “‘(1) providing low-income or underserved individuals or communities with beneficial products or services (2) promoting economic opportunity for individuals or communities beyond the creation of jobs in the normal course of business (3) preserving the environment (4) improving human health (5) promoting the arts, sciences or advancement of knowledge (6) increasing the flow of capital to entities with a public benefit purpose and (7) the accomplishment of any other particular benefit for society or the environment’ (BCL §1702(e)).”[48]

To become a B-corp in New York, a new corporation must define the specific benefit it aims to pursue within its certificate of incorporation.[49] Existing corporations can become B-corps through amendments to their certificates.[50]

The effects of laws like these are significant. B-corps do not have the same duties as other corporations to run the business exclusively for the profit of shareholders,[51] like Henry Ford was compelled to do. Instead, directors of B-corps can actively consider the interests of other stakeholders.[52] If Ford Motor Co. was defined as a B-corp in 1919, perhaps Henry Ford would have been allowed to provide for his workers and make cars more affordable for the general public, to the possible detriment of other shareholders. There will likely be court cases that decide that question in coming years. Today, well-known companies such as Patagonia, Eileen Fisher, Warby Parker, Method, Seventh Generation, Ben & Jerry’s, and Etsy are already designated as B-corps.[53]

The development of B-corps has coincided with a larger corporate trend of corporate social responsibility (“CSR”), which calls for companies to be held accountable to stakeholders in addition to their traditional duty to shareholders.[54] An apt example of a traditional corporation practicing CSR is Starbucks, which has made efforts to ethically source its coffee, sponsor community service endeavors, and reduce the environmental impact of its products, amongst other stakeholder-oriented initiatives.[55]

B-corps and traditional corporations practicing CSR present many questions that remain unanswered, including: (1) how will these operate in the era of Citizens United, (2) will consumers favor these companies over traditional shareholder-oriented companies, (3) what limitations do B-corps pose on businesses, (4) what are the legal obligations of B-corps to provide profit for shareholders versus benefits for stakeholders, and (5) will existing corporations voluntarily convert to B-corps? The answers to these questions will determine whether B-corps and trends involving CSR will have a significant societal impact in the future. Legislative bodies, at the federal, state, and local levels, will be called upon to resolve these intricate policy issues, with input from all stakeholders.

[1] Corporation, Investopedia,, (last visited Nov. 11, 2018).

[5] Cf. Limited Liability, Investopedia,, (last visited Nov. 11, 2018) (discussing how limited liability “protects the partner’s personal assets from the risk of being seized to satisfy creditor claims in the event of the company’s or partnership’s insolvency…”).

[6] Cf. Williston, infra note 13, at 109 (discussing how joint-stock companies enabled individuals to pool their capital and labor to achieve results that would be difficult for one person to achieve).

[7] Robert W. Hillman, Limited Liability in Historical Perspective, 54 Wash. & Lee L. Rev. 613, 617 (1997) (discussing an arrangement in Ancient Rome called the peculium).

[13] Samuel Williston, History of the Law of Business Corporations before 1800, 2 Harv. L. Rev. 105, 109 (1888).

[14] See id. (discussing how the structure of the East India Company was the result of a determination by Queen Elizabeth that it was easier to conduct trade with India when the efforts of “noblemen, gentlemen, shopkeepers, widows, orphans” are combined by “employ[ing]their capital in a joint stock,” rather than on an individual basis).

[17] Peter Marshall, The British Presence in India in the 18th Century, BBC (Feb. 17, 2011),

[18] Virginia Company, Encyclopaedia Britannica,, (last visited Nov. 11, 2018) see also Zephyr Teachout, How Corporations Became People, N.y. Times (Mar. 5, 2018),

[21] Hamilton’s Economic Plan,,, (last visited Nov. 11, 2018).

[25] Union Pacific Railroad,,, (last visited Nov. 11, 2018).

[26] See Harwell Wells, The Modernization of Corporation Law, 1920-1940, 11.3 U. Penn. L. Rev. 573, 581 (1888).

[28] See Eduardo Porter, The Politics of Income Inequality, N.y. Times, (May 13, 2014),

[29] Standard Oil Company and Trust, Encyclopaedia Britannica,, (last visited Nov. 11, 2018).

[30] Gilbert King, The Woman Who Took on the Tycoon, (Jul. 5, 2018),

[31] Sherman Antitrust Act, Encyclopaedia Britannica,, (last visited Nov. 11, 2018).

[32] Trust-Busting,,, (last visited Nov. 11, 2018).

[33] Northern Securities Co. v. United States, 193 U.S. 197, 317 (1904).

[36] See Dodge v. Ford Motor Co., 204 Mich. 459, 507 (1919) (“A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end.”).

[39] Securities Exchange Act of 1934, Investopedia,, (last visited Nov. 11, 2018).

[41] Richard W. Jennings, The Role of the States in Corporate Regulation and Investor Protection, 23 L. and Contemp. Prob. 193, 200 (1958).

[44] See id. at 202-205 (discussing various provisions of corporate governance which are governed by state law).

Economic or industrial espionage takes place in two main forms. In short, the purpose of espionage is to gather knowledge about one or more organizations. It may include the acquisition of intellectual property, such as information on industrial manufacture, ideas, techniques and processes, recipes and formulas. Or it could include sequestration of proprietary or operational information, such as that on customer datasets, pricing, sales, marketing, research and development, policies, prospective bids, planning or marketing strategies or the changing compositions and locations of production. [3] It may describe activities such as theft of trade secrets, bribery, blackmail and technological surveillance. As well as orchestrating espionage on commercial organizations, governments can also be targets – for example, to determine the terms of a tender for a government contract.

Economic and industrial espionage is most commonly associated with technology-heavy industries, including computer software and hardware, biotechnology, aerospace, telecommunications, transportation and engine technology, automobiles, machine tools, energy, materials and coatings and so on. Silicon Valley is known to be one of the world's most targeted areas for espionage, though any industry with information of use to competitors may be a target. [4]

Information can make the difference between success and failure if a trade secret is stolen, the competitive playing field is leveled or even tipped in favor of a competitor. Although a lot of information-gathering is accomplished legally through competitive intelligence, at times corporations feel the best way to get information is to take it. [5] Economic or industrial espionage is a threat to any business whose livelihood depends on information.

In recent years, economic or industrial espionage has taken on an expanded definition. For instance, attempts to sabotage a corporation may be considered industrial espionage in this sense, the term takes on the wider connotations of its parent word. That espionage and sabotage (corporate or otherwise) have become more clearly associated with each other is also demonstrated by a number of profiling studies, some government, some corporate. The United States government currently has a polygraph examination entitled the "Test of Espionage and Sabotage" (TES), contributing to the notion of the interrelationship between espionage and sabotage countermeasures. [6] In practice, particularly by "trusted insiders", they are generally considered functionally identical for the purpose of informing countermeasures.

Economic or industrial espionage commonly occurs in one of two ways. Firstly, a dissatisfied employee appropriates information to advance interests or to damage the company. Secondly, a competitor or foreign government seeks information to advance its own technological or financial interest. [7] "Moles", or trusted insiders, are generally considered the best sources for economic or industrial espionage. [8] Historically known as a "patsy", an insider can be induced, willingly or under duress, to provide information. A patsy may be initially asked to hand over inconsequential information and, once compromised by committing a crime, blackmailed into handing over more sensitive material. [9] Individuals may leave one company to take up employment with another and take sensitive information with them. [10] Such apparent behavior has been the focus of numerous industrial espionage cases that have resulted in legal battles. [10] Some countries hire individuals to do spying rather than the use of their own intelligence agencies. [11] Academics, business delegates, and students are often thought to be used by governments in gathering information. [12] Some countries, such as Japan, have been reported to expect students to be debriefed on returning home. [12] A spy may follow a guided tour of a factory and then get "lost". [9] A spy could be an engineer, a maintenance man, a cleaner, an insurance salesman, or an inspector: anyone who has legitimate access to the premises. [9]

A spy may break into the premises to steal data and may search through waste paper and refuse, known as "dumpster diving". [13] Information may be compromised via unsolicited requests for information, marketing surveys, or use of technical support or research or software facilities. Outsourced industrial producers may ask for information outside the agreed-upon contract. [14]

Computers have facilitated the process of collecting information because of the ease of access to large amounts of information through physical contact or the Internet. [ citation needed ]

Origins Edit

Economic and industrial espionage has a long history. Father Francois Xavier d'Entrecolles in Jingdezhen, China revealing the manufacturing methods of Chinese porcelain in 1712 to Europe is sometimes considered an early case of industrial espionage. [15]

Historical accounts have been written of industrial espionage between Britain and France. [16] Attributed to Britain's emergence as an "industrial creditor", the second decade of the 18th century saw the emergence of a large-scale state-sponsored effort to surreptitiously take British industrial technology to France. [16] Witnesses confirmed both the inveigling of tradespersons abroad and the placing of apprentices in England. [17] Protests by those such as ironworkers in Sheffield and steelworkers in Newcastle, [ clarification needed ] about skilled industrial workers being enticed abroad, led to the first English legislation aimed at preventing this method of economic and industrial espionage. [18] [17] This did not prevent Samuel Slater from bringing British textile technology to the United States in 1789, for to catch up with technological advances of the European powers, the US government in the eighteenth and nineteenth centuries actively encouraged intellectual piracy. [19] [20]

American founding father and first U.S. Treasury Secretary Alexander Hamilton advocated rewarding those bringing "improvements and secrets of extraordinary value" [21] into the United States. This was instrumental in making the United States a haven for industrial spies.

The 20th century Edit

East-West commercial development opportunities after World War I saw a rise in Soviet interest in American and European manufacturing know-how, exploited by Amtorg Corporation. [22] Later, with Western restrictions on the export of items thought likely to increase military capabilities to the USSR, Soviet industrial espionage was a well known adjunct to other spying activities up until the 1980s. [23] BYTE reported in April 1984, for example, that although the Soviets sought to develop their own microelectronics, their technology appeared to be several years behind the West's. Soviet CPUs required multiple chips and appeared to be close or exact copies of American products such as the Intel 3000 and DEC LSI-11/2. [24]

"Operation Brunnhilde" Edit

Some of these activities were directed via the East German Stasi (Ministry for State Security). One such operation, "Operation Brunnhilde," operated from the mid-1950s until early 1966 and made use of spies from many Communist Bloc countries. Through at least 20 forays, many western European industrial secrets were compromised. [25] One member of the "Brunnhilde" ring was a Swiss chemical engineer, Dr. Jean Paul Soupert (also known as "Air Bubble"), living in Brussels. He was described by Peter Wright in Spycatcher as having been "doubled" by the Belgian Sûreté de l'État. [25] [26] He revealed information about industrial espionage conducted by the ring, including the fact that Russian agents had obtained details of Concorde's advanced electronics system. [27] He testified against two Kodak employees, living and working in Britain, during a trial in which they were accused of passing information on industrial processes to him, though they were eventually acquitted. [25]

According to a 2020 American Economic Review study, East German industrial espionage in West Germany significantly reduced the gap in total factor productivity between the two countries. [28]

Soviet spetsinformatsiya system Edit

A secret report from the Military-Industrial Commission of the USSR (VPK), from 1979–80, detailed how spetsinformatsiya (Russian: специнформация i.e. "special records") could be utilised in twelve different military industrial areas. Writing in the Bulletin of the Atomic Scientists, Philip Hanson detailed a spetsinformatsiya system in which 12 industrial branch ministries formulated requests for information to aid technological development in their military programs. Acquisition plans were described as operating on 2-year and 5-year cycles with about 3000 tasks under way each year. Efforts were aimed at civilian as well as military industrial targets, such as in the petrochemical industries. Some information was garnered so as to compare levels of competitor to Soviet technological advancement. Much unclassified information was also gathered, blurring the boundary with "competitive intelligence". [23]

The Soviet military was recognised as making much better use of acquired information, compared to civilian industry, where their record in replicating and developing industrial technology was poor. [23]

The legacy of Cold War espionage Edit

Following the demise of the Soviet Union and the end of the Cold War, commentators, including the US Congressional Intelligence Committee, noted a redirection amongst the espionage community from military to industrial targets, with Western and former communist countries making use of "underemployed" spies and expanding programs directed at stealing such information. [29] [30] The legacy of Cold War spying included not just the redirection of personnel but the use of spying apparatus such as computer databases, scanners for eavesdropping, spy satellites, bugs and wires. [31]

Industrial espionage as part of US foreign policy Edit

According to an article from news website, "potentially sabotaging another country’s hi-tech industries and their top companies has long been a sanctioned American strategy." The article was based on a leaked report issued from former U.S. Director of National Intelligence James R. Clapper's office that evaluated a theoretical scenario on how intelligence could be used to overcome a loss of U.S. technological and innovative edge. The report did not show any actual occurrence of U.S. conducted industrial espionage, and when contacted the Director of National Intelligence office responded with, "the United States—unlike our adversaries—does not steal proprietary corporate information to further private American companies' bottom lines", and that "the Intelligence Community regularly engages in analytic exercises to identify potential future global environments, and how the IC could help the United States Government respond". The report, he said, "is not intended to be, and is not, a reflection of current policy or operations". [32]

Former CIA Director Stansfield Turner stated in 1991 "Nevertheless, as we increase emphasis on securing economic intelligence, we will have to spy on the more developed countries-our allies and friends with whom we compete economically-but to whom we turn first for political and military assistance in a crisis. This means that rather than instinctively reaching for human, on-site spying, the United States will want to look to those impersonal technical systems, primarily satellite photography and intercepts". [33]

Former CIA Director James Woolsey acknowledged in 2000 that the United States steals economic secrets from foreign firms and their governments "with espionage, with communications, with reconnaissance satellites". He also stated it is "not to provide secrets, technological secrets to American industry." He listed the three reasons as understanding whether sanctions are functioning for countries under sanction, monitoring dual-use technology that could be used to produce or develop weapons of mass destruction, and to spy on bribery to uphold the Foreign Corrupt Practices Act. [34]

In 2013 The United States was accused of spying on Brazilian oil company Petrobras. Brazil's President Dilma Rousseff said at the time it was tantamount to industrial espionage and had no security justification. [35]

In 2014 the former US intelligence officer, Edward Snowden, stated America's National Security Agency is engaged in industrial espionage and that they spied on big German companies that compete with US firms. He also highlighted the fact the NSA uses mobile phone apps such as Angry Birds to scoop up personal data. [36]

In September 2019, security firm Qi An Xin published report linking the CIA to a series of attacks targeting Chinese aviation agencies between 2012 and 2017. [37] [38]

Israel's economic espionage in the United States Edit

Israel has an active program to gather proprietary information within the United States. These collection activities are primarily directed at obtaining information on military systems and advanced computing applications that can be used in Israel's sizable armaments industry. [39] [40]

Israel was accused by the US government of selling US military technology and secrets to China. [41]

In 2014 American counter-intelligence officials told members of the House Judiciary and Foreign Affairs committees that Israel's current espionage activities in America are "unrivaled". [42]

Personal computers Edit

Computers have become key in exercising industrial espionage due to the enormous amount of information they contain and the ease at which it can be copied and transmitted. The use of computers for espionage increased rapidly in the 1990s. Information has commonly been stolen by individuals posing as subsidiary workers, such as cleaners or repairmen, gaining access to unattended computers and copying information from them. Laptops were, and still are, a prime target, with those traveling abroad on business being warned not to leave them for any period of time. Perpetrators of espionage have been known to find many ways of conning unsuspecting individuals into parting, often only temporarily, from their possessions, enabling others to access and steal information. [43] A "bag-op" refers to the use of hotel staff to access data, such as through laptops, in hotel rooms. Information may be stolen in transit, in taxis, at airport baggage counters, baggage carousels, on trains and so on. [13]

The Internet Edit

The rise of the internet and computer networks has expanded the range and detail of information available and the ease of access for the purpose of industrial espionage. [44] This type of operation is generally identified as state backed or sponsored, because the "access to personal, financial or analytic resources" identified exceed that which could be accessed by cybercriminals or individual hackers. Sensitive military or defense engineering or other industrial information may not have immediate monetary value to criminals, compared with, say, bank details. Analysis of cyberattacks suggests deep knowledge of networks, with targeted attacks, obtained by numerous individuals operating in a sustained organized way. [44]

Opportunities for sabotage Edit

The rising use of the internet has also extended opportunities for industrial espionage with the aim of sabotage. In the early 2000s, it was noticed that energy companies were increasingly coming under attack from hackers. Energy power systems, doing jobs like monitoring power grids or water flow, once isolated from the other computer networks, were now being connected to the internet, leaving them more vulnerable, having historically few built-in security features. [45] The use of these methods of industrial espionage have increasingly become a concern for governments, due to potential attacks by terrorist groups or hostile foreign governments.

Malware Edit

One of the means of perpetrators conducting industrial espionage is by exploiting vulnerabilities in computer software. Malware and spyware as "a tool for industrial espionage", in "transmitting digital copies of trade secrets, customer plans, future plans and contacts". Newer forms of malware include devices which surreptitiously switch on mobile phones camera and recording devices. In attempts to tackle such attacks on their intellectual property, companies are increasingly keeping important information off network, leaving an "air gap", with some companies building "Faraday cages" to shield from electromagnetic or cellphone transmissions. [46]

Distributed denial of service (DDoS) attack Edit

The distributed denial of service (DDoS) attack uses compromised computer systems to orchestrate a flood of requests on the target system, causing it to shut down and deny service to other users. [47] It could potentially be used for economic or industrial espionage with the purpose of sabotage. This method was allegedly utilized by Russian secret services, over a period of two weeks on a cyberattack on Estonia in May 2007, in response to the removal of a Soviet era war memorial. [48]

France and the United States Edit

Between 1987 and 1989, IBM and Texas Instruments were thought to have been targeted by French spies with the intention of helping France's Groupe Bull. [49] In 1993, U.S. aerospace companies were also thought to have been targeted by French interests. [50] During the early 1990s, France was described as one of the most aggressive pursuers of espionage to garner foreign industrial and technological secrets. [49] France accused the U.S. of attempting to sabotage its high tech industrial base. [49] The government of France has been alleged to have conducted ongoing industrial espionage against American aerodynamics and satellite companies. [51]

Volkswagen Edit

In 1993, car manufacturer Opel, the German division of General Motors, accused Volkswagen of industrial espionage after Opel's chief of production, Jose Ignacio Lopez, and seven other executives moved to Volkswagen. [10] Volkswagen subsequently threatened to sue for defamation, resulting in a four-year legal battle. [10] The case, which was finally settled in 1997, resulted in one of the largest settlements in the history of industrial espionage, with Volkswagen agreeing to pay General Motors $100 million and to buy at least $1 billion of car parts from the company over 7 years, although it did not explicitly apologize for Lopez's behavior. [52]

Hilton and Starwood Edit

In April 2009, Starwood accused its rival Hilton Worldwide of a "massive" case of industrial espionage. After being acquired by The Blackstone Group, Hilton employed 10 managers and executives from Starwood. Starwood accused Hilton of stealing corporate information relating to its luxury brand concepts, used in setting up its Denizen hotels. Specifically, former head of its luxury brands group, Ron Klein, was accused of downloading "truckloads of documents" from a laptop to his personal email account. [53]

Google and Operation Aurora Edit

On 13 January 2010, Google announced that operators, from within China, had hacked into their Google China operation, stealing intellectual property and, in particular, accessing the email accounts of human rights activists. [54] [55] The attack was thought to have been part of a more widespread cyber attack on companies within China which has become known as Operation Aurora. [55] Intruders were thought to have launched a zero-day attack, exploiting a weakness in the Microsoft Internet Explorer browser, the malware used being a modification of the trojan "Hydraq". [46] Concerned about the possibility of hackers taking advantage of this previously unknown weakness in Internet Explorer, the governments of Germany and, subsequently France, issued warnings not to use the browser. [56]

There was speculation that "insiders" had been involved in the attack, with some Google China employees being denied access to the company's internal networks after the company's announcement. [57] [58] In February 2010, computer experts from the U.S. National Security Agency claimed that the attacks on Google probably originated from two Chinese universities associated with expertise in computer science, Shanghai Jiao Tong University and the Shandong Lanxiang Vocational School, the latter having close links to the Chinese military. [59]

Google claimed at least 20 other companies had also been targeted in the cyber attack, said by the London Times, to have been part of an "ambitious and sophisticated attempt to steal secrets from unwitting corporate victims" including "defence contractors, finance and technology companies". [55] [54] [56] Rather than being the work of individuals or organised criminals, the level of sophistication of the attack was thought to have been "more typical of a nation state". [54] Some commentators speculated as to whether the attack was part of what is thought to be a concerted Chinese industrial espionage operation aimed at getting "high-tech information to jump-start China's economy". [60] Critics pointed to what was alleged to be a lax attitude to the intellectual property of foreign businesses in China, letting them operate but then seeking to copy or reverse engineer their technology for the benefit of Chinese "national champions". [61] In Google's case, they may have (also) been concerned about the possible misappropriation of source code or other technology for the benefit of Chinese rival Baidu. In March 2010 Google subsequently decided to cease offering censored results in China, leading to the closing of its Chinese operation.

CyberSitter and Green Dam Edit

The US based firm CyberSitter announced in January 2010 that it was suing the Chinese government, and other US companies, for stealing its anti pornography software, with the accusation that it had been incorporated into China's Green Dam program, which was used by the state to censor children's internet access. CyberSitter accused Green Dam creators of copying around 3000 lines of code. They were described as having done 'a sloppy job of copying,' with some lines of the copied code continuing to direct people to the CyberSitter website. The attorney acting for CyberSitter maintained "I don't think I have ever seen such clear-cut stealing". [62]

USA v. Lan Lee, et al. Edit

The United States charged two former NetLogic Inc. engineers, Lan Lee and Yuefei Ge, of committing economic espionage against TSMC and NetLogic, Inc. A jury acquitted the defendants of the charges with regard to TSMC and deadlocked on the charges with regard to NetLogic. In May 2010, a federal judge dismissed all the espionage charges against the two defendants. The judge ruled that the U.S. government presented no evidence of espionage. [63]

Dongxiao Yue and Chordiant Software, Inc. Edit

In May 2010, the federal jury convicted Chordiant Software, Inc., a U.S. corporation, of stealing Dongxiao Yue's JRPC technologies and used them in a product called Chordiant Marketing Director. Yue previously filed lawsuits against Symantec Corporation for a similar theft. [64]

Brazil Edit

Revelations from the Snowden documents have provided information to the effect that the United States, notably vis-à-vis the NSA, has been conducting aggressive economic espionage against Brazil. [65] Canadian intelligence has apparently supported U.S. economic espionage efforts. [66]

China Edit

The Chinese cybersecurity company Qihoo 360 accused Central Intelligence Agency of the United States of a 11-year-long hacking campaign [67] that targeted several industries including aviation organizations, scientific research institutions, petroleum firms, internet companies, and government agencies. [68]

United States Edit

A 2009 report to the US government, by aerospace and defense company Northrop Grumman, describes Chinese economic espionage as comprising "the single greatest threat to U.S. technology". [44] Blogging on the 2009 cyber attack on Google, Joe Stewart of SecureWorks referred to a "persistent campaign of 'espionage-by-malware' emanating from the People’s Republic of China (PRC)" with both corporate and state secrets being "Shanghaied" over the past 5 or 6 years. [69] The Northrop Grumann report states that the collection of US defense engineering data through cyberattack is regarded as having "saved the recipient of the information years of R&D and significant amounts of funding". [44] Concerns about the extent of cyberattacks on the US emanating from China has led to the situation being described as the dawn of a "new cold cyberwar". [70] In response to these and other reports, Amitai Etzioni of the Institute for Communitarian Policy Studies has suggested that China and the United States should agree to a policy of mutually assured restraint with respect to cyberspace. This would involve allowing both states to take the measures they deem necessary for their self-defense while simultaneously agreeing to refrain from taking offensive steps it would also entail vetting these commitments. [71]

According to Edward Snowden, the National Security Agency spies on foreign companies. [72] In June 2015 Wikileaks published documents about the National Security Agency spying on French companies. [73]

United Kingdom Edit

In December 2007, it was revealed that Jonathan Evans, head of the United Kingdom's MI5, had sent out confidential letters to 300 chief executives and security chiefs at the country's banks, accountants and legal firms warning of attacks from Chinese 'state organisations'. [74] A summary was also posted on the secure website of the Centre for the Protection of the National Infrastructure, accessed by some of the nation's 'critical infrastructure' companies, including 'telecoms firms, banks and water and electricity companies'. [75] One security expert warned about the use of 'custom trojans,' software specifically designed to hack into a particular firm and feed back data. [75] Whilst China was identified as the country most active in the use of internet spying, up to 120 other countries were said to be using similar techniques. [75] The Chinese government responded to UK accusations of economic espionage by saying that the report of such activities was 'slanderous' and that the government opposed hacking which is prohibited by law. [76]

Germany Edit

German counter-intelligence experts have maintained the German economy is losing around €53 billion or the equivalent of 30,000 jobs to economic espionage yearly. [77]

In Operation Eikonal German BND agents received "selector lists" from the NSA – search terms for their dragnet surveillance. They contain IP addresses, mobile phone numbers and email accounts with the BND surveillance system containing hundreds of thousands and possibly more than a million such targets. [78] These lists have been subject of controversy as in 2008 it was revealed that they contained some terms targeting the European Aeronautic Defence and Space Company (EADS), the Eurocopter project [79] as well as French administration, [80] [78] which were first noticed by BND employees in 2005. [79] After the revelations made by whistleblower Edward Snowden the BND decided to investigate the issue whose October 2013 conclusion was that at least 2,000 of these selectors were aimed at Western European or even German interests which has been a violation of the Memorandum of Agreement that the US and Germany signed in 2002 in the wake of the 9/11 terror attacks. [78] After reports emerged in 2014 that EADS and Eurocopter had been surveillance targets the Left Party and the Greens filed an official request to obtain evidence of the violations. [78] [81]

The BND's project group charged with supporting the NSA investigative committee in German parliament set up in spring 2014, reviewed the selectors and discovered 40,000 suspicious search parameters, including espionage targets in Western European governments and numerous companies. The group also confirmed suspicions that the NSA had systematically violated German interests and concluded that the Americans could have perpetrated economic espionage directly under the Germans' noses. [78] [82] The investigative parliamentary committee was not granted access to the NSA's selectors list as an appeal led by opposition politicians failed at Germany's top court. Instead the ruling coalition appointed an administrative judge, Kurt Graulich [de] , as a "person of trust" who was granted access to the list and briefed the investigative commission on its contents after analyzing the 40,000 parameters. [83] [84] In his almost 300-paged report [85] Graulich concluded that European government agencies were targeted massively and that Americans hence broke contractual agreements. He also found that German targets which received special protection from surveillance of domestic intelligence agencies by Germany's Basic Law (Grundgesetz) − including numerous enterprises based in Germany – were featured in the NSA's wishlist in a surprising plenitude. [86]

"Competitive intelligence" involves the legal and ethical activity of systematically gathering, analyzing and managing information on industrial competitors. [87] It may include activities such as examining newspaper articles, corporate publications, websites, patent filings, specialised databases, information at trade shows and the like to determine information on a corporation. [88] The compilation of these crucial elements is sometimes termed [ by whom? ] CIS or CRS, a Competitive Intelligence Solution or Competitive Response Solution, with its roots in market research. Douglas Bernhardt has characterised "competitive intelligence" as involving "the application of principles and practices from military and national intelligence to the domain of global business" [89] it is the commercial equivalent of open-source intelligence.

The difference between competitive intelligence and economic or industrial espionage is not clear one needs to understand the legal basics to recognize how to draw the line between the two. [90] [91]

What Were the Technological Advances of the Industrial Revolution?

Between 1775 and 1908, the Industrial Revolution brought about technological advances in transportation, communication and productivity. These inventions shaped the modern world and continue to influence technological inventions.

In 1775, James Watt's steam engine sparked the Industrial Revolution by creating a new mechanism for powering locomotives and machinery. This made it possible to build factories and run machinery even when no water power was available. It also inspired Robert Fulton to launch steamboats on the Hudson River in 1807, opening the door for transatlantic travel. The steam engine led to the development of the electric motor in 1888 and the diesel engine in 1892, which fueled the development of the auto industry.

Samuel Morse invented the telegraph in 1836, a major technological development in communication. This device used electromagnetic currents to create codes that could be transmitted great distances via paper strips, leading Cyrus Field to invent the transatlantic cable in 1866, and Alexander Graham Bell to make the first telephone call in 1876.

Other developments of the Industrial Revolution that increased industrial productivity were Eli Whitney's cotton gin in 1798, Elias Howe's sewing machine in 1844, and Thomas Edison's harnessing of electricity to create the first light bulb in 1879.

Papua New Guinea Consolidated Legislation

Industrial Organizations Act 1962
This reprint of this Statutory Instrument incorporates all amendments, if any, made before25 November� and in force at ف January�.

Legislative Counsel
Dated 25 November�



The Register shall be in Form 1.

An application for registration under Section 9 of the Act shall be in Form 2, in duplicate, and shall be accompanied by two copies of–

(a) a list of the members of the industrial organization, showing the name, occupation and postal address of each member, and the name of the branch (if any) to which he belongs and

(b) a list of the officers of the industrial organization, showing the name, office, occupation and postal address of each officer and

(c) Form 13 in respect of each of the branches of the industrial organization and

(d) the rules of the industrial organization and of its branches and

(e) the resolution agreeing to the registration of the organization as an industrial organization, with details of the date and place on and at which the resolution was passed.

A notification under Section 13(2) of the Act of the alteration of the rules of an organization shall be in Form 3, in duplicate, and shall be accompanied by a statutory declaration certifying that the alterations to the rules were properly passed by resolution in accordance with the Act and this Regulation.

A notice of objection under Section 14(1) of the Act shall be in Form 4, in duplicate.

A certificate of registration shall be in Form 5.


A notice under Section 41(3) of the Act shall be in Form 6, and shall contain the particulars specified in that form.

A notice under Section 42(4) of the Act shall be in Form 7, and shall contain the particulars specified in that form.

Where, under Section 42(6) of the Act, the Registrar registers a federation, he shall–

(a) issue a certificate of registration in Form 8, on which there shall be endorsed the names of the industrial organizations within the federation and

(b) record in the Register details of the certificate of registration and

(c) amend the entries in the Register in respect of the organizations that are members of the federation to record that they are members of the federation and

(d) require each of the organizations referred to in Paragraph (c) to surrender to him their certificates of registration, which the organization shall surrender accordingly, and–

(i) endorse on the certificates particulars of registration as a federation and

(ii) return them to the organizations concerned.

On being notified under Section 42(4) of the Act that an industrial organization has federated with a registered federation, the Registrar shall–

(a) require the registered federation to surrender its certificate of registration, which the federation shall surrender accordingly and

(b) require the industrial organization to surrender its certificate of registration, which the organization shall surrender accordingly and

(c) amend the entry in the Register relating to the federation to show that the organization has joined the federation and

(d) amend the entry in the Register relating to the organization that has joined the federation to show that it is a member of the federation and

(e) amend the certificates of registration to show that the industrial organization has joined the federation, and return them to the federation and the organization respectively.

(1) A notice under Section 43(4) of the Act shall be in Form 9, in duplicate, and contain the particulars specified in that form.

(2) On receipt of a notice referred to in Subsection (1), the Registrar shall require the organizations and the federations concerned in the affiliation to surrender their respective certificates of registration (which the organizations and federations shall surrender accordingly) and shall–

(a) endorse the certificates accordingly and

(b) return them to the respective organizations and federations.

A notice under Section 44(2) of the Act–

(a) shall be in Form 10, in duplicate and

(b) shall contain the particulars specified in that form and

(c) shall be accompanied by two copies of the branch rules.

A notice under Section 45(2) of the Act shall be in Form 11, in duplicate, and shall contain the particulars specified in that form.

(1) Where, under Section 41 or 45 of the Act, the Registrar registers–

(a) an amalgamation of industrial organizations or

(b) a change in the name of an industrial organization,

he shall require each of the organizations concerned to surrender to him the certificate of registration issued to it for cancellation or amendment which the organizations shall surrender accordingly.

(2) On the surrender under Subsection (1) of a certificate of registration, the Registrar shall–

(a) issue a new certificate of registration or, if he thinks fit, amend the original certificate to record details of the amalgamation or change of name and

(b) cancel or amend the original entry in the Register and

(c) if a new certificate is issued, enter in the Register particulars of it.

(1) Details of the situation and postal address of the registered office of an industrial organization, as required under Section 47(2) of the Act shall initially be included in Form 2.

(2) Where there is any subsequent change in the situation or particulars originally stated, notification in duplicate, of the following details shall be given to the Registrar:–

(a) the address of the registered office as stated in Form 2

(b) the location and postal address of the new office

(c) the date on which the new office was or is to be occupied.

(1) A notice under Section 53(1) of the Act–

(a) shall be in Form 12 and

(b) shall contain the particulars specified in that form and

(c) shall be accompanied by the certificate of registration of the organization.

(2) Where the Registrar has caused notice of dissolution to be published in the National Gazette under Section 53(3)(b) of the Act, he shall, by endorsement on the certificate, cancel the certificate of registration of the organization.


The books of account to be kept under Section 56 of the Act are–

(a) books containing original and duplicate receipts consecutively numbered and

(b) a bank deposit book containing original and duplicate sheets and

(c) a cash journal and

(d) a general journal and

(f) a petty cash journal and

(g) a register of receipt books and

(h) a register of fixed and other assets and

(i) such other books of account as the Registrar requires.

The form of account to be given under Section 57(2) of the Act shall be in Form 13, or in such other form as the Registrar in a particular case approves.

The records to be kept under Section 59(2) of the Act are–

(a) a register of members in a form approved by the Registrar, in which there shall be recorded–

(i) the names of members, alphabetically and

(ii) particulars of their respective occupations and postal addresses and

(iii) the payment of fees, levies and other sums required to be paid and

(b) a register of officers and trustees in a form approved by the Registrar, recording–

(i) their names and the positions to which they are appointed and

(ii) the dates of their respective appointments, terminations of office and resignations and

(c) an account of the receipts, payments, funds and effects of an organization and each branch kept in the books of account specified in Section 16 and

(d) a financial statement in duplicate for the period ending on 31 December in each year in Form 14, or in such other form as is approved by the Registrar and

(e) such other records as are required by the Registrar.

A copy of the records referred to in Section 59(4) of the Act shall be forwarded so as to reach the Registrar not later than 28 February in each year, and shall be a true and certified copy of those records as at 31 December of the previous year.

On payment of the prescribed fee, a document filed with the Registrar under Section 59 of the Act may be inspected by any person during the usual office hours observed at the office of the Registrar.



A notice under Section 63A(1) of the Act shall be in Form 15.

(a) a form is not prescribed for a document or

(b) a prescribed form is not suitable to the circumstances of a particular case,

the form shall be such as the Registrar directs or approves for the purpose.

The fees specified in Schedule 2 are payable to the State in respect of the matters specified in that Schedule.


Form 1 – Register of industrial Organizations.

Act, Sec. 7(1). Form 1.Reg., Sec. 1.


Form 2 – Application for the Registration of an Industrial Organization.

Act, Secs. 8,9,47. Form 2.Reg., Sec. 2.


Form 3 – Application for Leave to Alter Rules.

Act, Sec. 13(2). Form 3.Reg., Sec. 3.


Form 4 – Notice of Objection.

Act, Secs. 14(1), 41(8), 42(9), 45(7). Form 4.Reg., Sec. 4.


Form 5 – Certificate of Registration.

Act, Sec. 21(1). Form 5.Reg., Sec. 5.


Form 6 – Notice of Amalgamation.

Act, Sec. 41(3). Form. 6.Reg., Sec. 6.


Form 7 – Notice of Federation.

Act, Sec. 42(4). Form 7.Reg., Sec. 7.


Form 8 – Certificate of Registration of a Federation of Industrial Organizations.

Act, Sec. 42(6). Form 8.Reg., Sec. 8.


Form 9 – Notice of Affiliation.

Act, Sec. 43(4). Form 9.Reg., Sec. 10(1).


Form 10 – Notification of the Establishment of a Branch of an Industrial Organization.

Act, Sec. 44(2). Form 10.Reg., Sec. 11.


Form 11 – Notice of Change of Name of an Industrial Organization.

Act, Sec. 45(2). Form 11.Reg., Sec. 12.


Form 12 – Notification of the Dissolution of an Industrial Organization.



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