This chapter delves into the intricate and often paradoxical world of corporate communication, using the example of the 1961 electrical manufacturing industry price-fixing scandal as a case study. The author starts by observing a widespread preoccupation with communication challenges among industrialists and intellectuals alike, questioning why, despite numerous studies, misunderstandings persist.
The Senate subcommittee hearings led by Senator Estes Kefauver on the price-fixing conspiracies offered a detailed look into the communication breakdown within General Electric (GE), the largest company involved. The scandal revealed that GE and other companies had conspired to fix prices and rig bids on large electrical equipment, costing taxpayers and utility customers millions. Executives from these companies had devised elaborate schemes to conceal their meetings, but were eventually exposed by the Justice Department.
The chapter highlights the apparent chasm between GE's public image as a paragon of free-market virtue and the actual practice of price-fixing. It explores the penalties imposed on the convicted executives, including prison sentences, and the subsequent reactions, from initial press coverage to suspicions of hypocrisy at the highest corporate levels. Judge Gainey's skepticism that the illegal activities could have been unknown to those responsible for the corporation points to a corporate culture where violating the law was condoned, and even implicitly encouraged, through winks and nods.
The core of the communication problem at GE, as revealed in the testimony, centers around "Directive Policy 20.5," a company rule forbidding collusion with competitors. However, it appeared that many employees did not take it seriously, seeing it as mere legal window dressing. Some executives, while reiterating 20.5, would wink, signaling that the rule should be disregarded.
The chapter focuses on the testimony of key figures like Robert Paxton, a GE executive known for his opposition to "winking," and William S. Gin, who admitted to disregarding Paxton's winkless order. Gin claimed he followed conflicting orders from other superiors, Urban and Fehrman, who were more "articulate, persuasive, and forceful." Gin's testimony introduces the concept of "degrees of communication" and emphasizes the importance of philosophical alignment in business decisions.
The chapter further examines how individuals interpreted and acted upon directives from superiors, and how a superior struggled to discern the actual meaning of a subordinate's words. Executives like Frank E. Stellick, who spoke of communication through visceral "impacts," demonstrated how perceptions of company culture influenced decisions. Raymond W. Smith described encounters with his superior Vincent who misunderstood the underlying nature of what Smith was communicating, a miscommunication that would affect Vincent's own status within GE.
Ultimately, the chapter concludes that the communication problem at GE was complex, involving a breakdown in trust, a lack of clear ethical guidance, and the influence of corporate culture. It implies that the technical aspects of communication are only part of the issue; personal identity within the corporation must be considered as well. The author suggests that communication can occur effectively whether intended or not. While the penalties may have discouraged price-fixing in the short term, the real question remained whether the fundamental ability to communicate effectively had improved.