Changing Organizations: Business Networks in the New Political Economy

By David Knoke | Go to book overview

4
Making Connections

I wonder men dare trust themselves with men.

—William Shakespeare Coriolanus (1607)

Marriage between incompatible partners sometimes leads to separation, true for organizations as for couples. As one example, Northwest Airlines and KLM Royal Dutch Airlines tied the knot in 1989, with KLM investing $400 million in the Minneapolis company. The U.S. Justice Department blessed the nuptials with a unique "open skies" antitrust exemption that allowed both airlines to share costs—ground services, sales and marketing, inventory management, computer reservation, and frequent-flyer databases— and profits from routes in the United States and Europe. Over the next decade, the joint venture expanded to serve 400 destinations in 80 countries with more than 60,000 jointly listed monthly flights. When a steep fall-off in air travel during the 1991 Persian Gulf War threatened to bankrupt Northwest, KLM threw in another $50 million and helped the U.S. company to obtain a crucial $250 million loan. By 1994 the U.S. airline's income had returned to the black and the partners had almost doubled their share of the trans-Atlantic market. But the price for rescue was high: In addition to owning more than 20 percent of Northwest stock and controlling three seats on Northwest's board of directors, KLM forced a bylaws change requiring that all major transactions such as mergers, acquisitions, and asset sales obtain a 60 percent "super majority" vote from the board.

When the Dutch company declined a merger offer by three other European airlines and tried to increase its Northwest stockholdings, the Americans suspected that KLM was poised for a stealthy takeover. Northwest proposed an aggressive poison pill plan (see Chapter 3), reducing the super majority to a simple majority vote and limiting any shareholder's stake to 19 percent. KLM counterattacked in the press, publicly threatening a law

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Changing Organizations: Business Networks in the New Political Economy
Table of contents

Table of contents

  • Changing Organizations - Business Networks in the New Political Economy *
  • Contents vii
  • Figures and Tables xi
  • Acronyms xv
  • Pre Face xvii
  • Acknowledgments xxi
  • 1 - Generating Change 1
  • 2 - Theorizing about Organizations 37
  • 3 - Resizing and Resbaping 74
  • 4 - Making Connections 120
  • 5 - Changing the Employment Contract 164
  • 6 - Investing in Social Capital 204
  • 7 - Governing the Corporation 244
  • 8 - Struggling in the Workplace 287
  • 9 - Influencing Public Policies 319
  • 10 - Learning to Evolve 362
  • Appendix - Basic Network Concepts 395
  • Notes 403
  • References 407
  • Index 461
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