Saturday, June 5, 2021

Multinational corporate accountability and control during the Nazi period

In a previous post I considered the question of the culpability of multinational corporations with affiliates in wartime Nazi Germany (link). There I discussed a number of books that address this question, including Billstein, Fings, Kugler, and Levis' very important 2000 contribution, Working for the Enemy: Ford, General Motors, and Forced Labor in Germany during the Second World War. This book provides a detailed business history during the Nazi period of the activities of General Motors (through its subsidiary Opel) and Ford Motor Company (through its German subsidiary Ford Werke in Cologne), including especially the use of forced labor by both companies. Here I want to focus on a crucial question of corporate responsibility: to what extent were these practices under the knowledge and control of the US-based corporate executives? 

Begin with General Motors. Adam Opel AG was General Motors' subsidiary in Germany, and was the largest producer of automobiles and trucks for the Reich. GM acquired Opel during the Great Depression and took full ownership and control in 1931. Ample evidence is provided in Billstein et al concerning Opel's use of forced labor during the war years. However, there is disagreement over the degree of management control exercised by General Motors in the US over its Opel subsidiary in Germany. 

Bradford Snell's testimony to Congress in 1974 addressed this question (link, pp. 16-23). The Snell report to Congress maintained that US senior executives continued to exercise virtually full control over Opel’s operations for the first 11 months of declared war between Germany and the US. However, GM and other researchers have rebutted this claim vigorously. GM claimed that the “enemy property custodian” appointed by the German authorities had sole authority over the management and operations of Opel. Billstein et al take a nuanced view of the question in Working for the Enemy. They take issue with Snell's assessment that GM exercised "complete management control" at Opel (35), but they argue that Opel executives and managers continued the general strategies preferred by GM before the war. And they argue that US executives of GM during the pre-war years were eager to gain contracts for vehicles and other materials that were crucial for the Nazi government's military buildup. "In fact, the evidence suggests General Motors's willing collaboration in the conversion [to armaments production]" (36).

Billstein et al raise a crucial and foundational question: could GM have vetoed the conversion of Opel’s manufacturing capacity to wartime production in the 1930s and the use of forced labor in the 1940s if they had wished to do so? Henry Ashby Turner, Jr.'s General Motors and the Nazis: The Struggle for Control of Opel, Europe’s Biggest Carmaker sheds more light on the business activities and decision-making of General Motors during the Nazi regime. Turner has special expertise on this question, since he directed the documentation project during 1999-2000 sponsored by General Motors to review its private corporate archives during the Nazi period. Turner has special authority in his judgments about GM's wartime behavior because of his direct involvement in the 1999-2000 review of General Motors' internal documents and records during the relevant time period. Further, Turner is an acknowledged expert on the corporation's behavior during the period. (The complete archive of all documents recovered and reviewed has been deposited in digital form at Yale University' Sterling Memorial Library, designated as the General Motors-Opel Collection.) Based on systematic review of massive quantities of internal GM documents in 1999-2000, Turner concludes that GM's management control over Opel was extremely limited after 1941. 

The question of management control of Opel's operations is a crucial one. To what extent did GM's headquarters in the US direct operations and strategies at Opel? Turner addresses this question directly. Legally GM had complete authority over Opel prior to 1941, as the sole owner of its shares; so GM had the ability to remove members of the board and the director, and to accept or reject the annual report. In practice, however, its ability to control was attenuated by distance and language. And its investment in Opel was entirely hostage to the Nazi regime: profits could not be repatriated, the enterprise could not be sold to a German buyer at a "fair market value", and the Nazi regime had the political and legal ability to compel compliance with its policies -- including "Aryanization".

The American executives assigned to Opel exercised wide-ranging discretionary authority. Under Sloan's leadership, GM operated on a managerial principle of "co-ordinated decentralization" that reserved control over allocations of capital to the central leadership but otherwise left most decisions to the corporation's various divisions, which were monitored by a hierarchical system of committees. The Americans at Opel were, however, from the outset heavily dependent upon the German members of the managerial staff, who far outnumbered them. Of necessity, they had to rely upon these colleagues for information about what was happening at the firm and elsewhere in the country as well as for communications with employees and government officials. Returning to the United States frequently for vacations and for consultations at GM's New York headquarters at a time when trans-Atlantic sea travel required a week or more each way, the American executives were absent for substantial periods of time. As a result, those charged with responsibility for Opel exercised at best a tenuous control over the firm. (6)

The archives reviewed in 1999-2000 establish clearly that while under ownership and legal control by General Motors (between 1940 and the end of the war), Opel made extensive use of forced labor. However, Turner's considered view is that General Motors had little actual management control over Opel's decision-making after the declaration of war between Germany and the United States in 1941. The American strategy from the United States was to "camouflage" the US ownership of Opel and to maintain the value of their investment of Opel pending the end of the war. And in fact Alfred P. Sloan expressed an explicitly non-interventionist philosophy of business management in a letter to a shareholder quoted in the book: "an international business operating throughout the world, should conduct its operations in strict business terms, without regard to the political beliefs of its management, or the political beliefs of the countries in which it is operating" (Turner, 27).

By 1936, after three years of Nazi rule, Opel and the GM executives in charge of it had undergone a far-reaching adaptation to the Third Reich. Faced with a ruthless regime and a company workforce the Nazis had brought under their control, the Americans responsible for the firm had acquiesced in the politicization of factory life and intimidation of their employees. To cope with the xenophobia promoted by the regime, they had withdrawn into the background and sought to conceal the firm's foreign ownership. (30)

What about Ford Motor Company and the corporate relationship between Dearborn and its subsidiary in Germany, Ford Werke Cologne? The view taken by Billstein et al of Ford's corporate behavior during the Nazi period is quite negative. The primary source of evidence upon which they depend is a set of interviews conducted by the city of Cologne of individuals who had been forced workers at Ford Werke during the war years, and who had accepted an invitation to return to Cologne to help to document the realities of forced labor at the complex during this period. Excerpts of these interviews are included in the book, and they are very powerful. But they do not shed light on the organizational question: where does responsibility for the use of forced labor fall -- in Cologne or in Dearborn?

The key finding of the Ford archive review (link) mentioned in the prior post is the conclusion, endorsed by Simon Reich, that Ford headquarters in Dearborn had essentially no knowledge or control of Ford Werke management decisions after the declaration of war in 1941 -- including the use of forced labor. Further, the review finds that Ford Werke made minimal profits over the period of wartime manufacture. (Here is a summary statement by Simon Reich of the central findings of the archival research; link.) The Ford report confirms that Ford Werke Cologne made use of forced and slave labor during the wartime period, but the report is unequivocal in asserting that there is no documentation in the 98,000 pages of archive materials that suggests either knowledge, acquiescence, or control by Dearborn of this practice in Cologne, and Reich endorses this conclusion. The report takes the view that Ford Werke was functionally autonomous from its nominal owners in the US during the wartime years, and that its management in Cologne was eager to cultivate business and military relationships with the Nazi regime in order to maintain the business viability of the operation.

This discussion is a complex one. It is clear that Opel, Ford Werke, and all other heavy industries in Germany were fully involved in the Nazi war effort, and searched aggressively for opportunities to gain military contracts for trucks, tanks, aircraft, engines, and other technologies that were essential for Hitler's ability to wage war against Poland, Czechoslovakia, France, Belgium, Ukraine, Lithuania, and the USSR. Further, it is clear that these companies conformed to Nazi policy concerning the use of forced labor, Aryanization, and slave labor. Moreover, from other case studies in the auto industry, it seems clear that refusing the use of concentration-camp labor was a feasible choice -- witness that Opel largely avoided making use of KZ labor while Daimler-Benz was very willing to use that labor (Gregor 194). Rightly, officials of these German companies were investigated and interrogated after the war concerning their conduct towards workers during the war. (It would be very interesting to see a case study of a major business under Nazi jurisdiction where management nonetheless managed to avoid committing crimes against their own workers and other civilians. Were there industrial companies in Norway that managed to maintain decent labor practices under Nazi occupation?) 

This suggests that it is important to assess culpability for illegal and immoral actions taken by these companies when these actions are uncovered. If Opel or Ford Werke provided only starvation rations for its forced workers; if these companies used lethal force as a way of controlling their forced-labor contingents; if the companies provided unconscionably low levels of medical care for their unwilling workers; if these companies actively sought out the use of concentration-camp prisoners as slave labor; then the officers and executives who were responsible for these actions should be held responsible.

But what about the parent corporations? In the cases of Opel and Ford Werke, the balance of available documentation today seems to indicate (based on largely independent study of corporate archives) that it is most credible that the US headquarters had little knowledge and virtually no effective control over its subsidiaries in Germany after about 1940. If we find the independent reviews of GM and Ford archives largely credible -- along with the assessments of these reviews by independent and respected historians Turner and Reich -- then it would appear that the responsibility for corporate decisions made by Opel, Ford Werke, and Daimler-Benz falls chiefly on the German officers and decision-makers who conducted the affairs of those companies in the period from about 1940 until the end of the war, as well as the Nazi agencies and divisions that largely governed them. In particular, it would appear that responsibility for the use of forced labor in Russelsheim and Cologne cannot be assigned to New York and Dearborn headquarters for the parent companies. 

Does this mean that multinational corporations bear no responsibility for the actions of their subsidiaries? Certainly not. Rather, we might judge that World War II seems to represent a special case for multinational corporate responsibility. The circumstances of total war appear to have severed the arrangements of oversight and control that normally exist between parent and subsidiary. In more normal circumstances -- Ford in Argentina, Coca Cola in India, Exxon in Nigeria -- we should expect that the multinational corporation has an overriding duty to oversee and control the actions of its subsidiaries in other countries. Those duties extend to ensuring minimal labor standards, a non-violent relationship to labor unions, and a good-faith environmental stewardship of its operations. And if it fails in these duties, its officers should be held accountable. And the "non-interventionist" language put forward by Alfred P. Sloan cannot be accepted. Rather, the multinational corporation has a duty to be vigilant about the political and military choices being made by the governments of the countries in which it does business.

Three war-crimes trials took place after the end of World War Two involving German industrialists who were responsible for making use of forced labor by conquered civilians, use of slave labor from concentration camps, plundering and despoliation, membership in the Nazi party, and other crimes. These were among the "subsequent Nuremberg trials" conducted by US military authorities. These included trials of executives from IG Farben, Krupp, and Friedrich Flick. Here is an important finding from the dissent by Judge Paul Hebert in the Farben trial concerning the charge of the use of slave labor and the defense of "necessity" by Farben executives: "Willing cooperation with the slave labor utilization of the Third Reich was a matter of corporate policy that permeated the whole Farben organization... For this reason, criminal responsibility goes beyond the actual immediate participants at Auschwitz. It includes other Farben Vorstand plant-managers and embraces all who knowingly participated in the shaping of the corporate policy." Jonathan Wiesen's West German Industry and the Challenge of the Nazi Past, 1945-1955 is an important exploration of the moral responsibility of German industry and corporations for the crimes of the Nazi period.

Much of the evidence currently available to historians about corporate behavior by the auto companies and other major industries resulted from class-action lawsuits by survivors of the use of forced labor, including especially a suit led by the Ukrainian woman Elsa Iwanowa in 1998 and 1999. These lawsuits led to a sudden willingness on the part of General Motors and Ford Motor Company to make their corporate archives from the Nazi period available for study by researchers. Here is the 1999 judicial opinion issued by U.S. District Court for the district of New Jersey dismissing the Iwanowa class-action lawsuit by against Ford Motor Company and Ford Werke; link. Though the lawsuits were largely unsuccessful, they contributed to the establishment in Germany of a $1.7 billion fund, the German Companies Foundation Initiative: Remembrance, Responsibility, and Future, which was designed in part to provide financial compensation for individuals who had been forced to work in German factories, mines, and construction sites during World War II (Wiesen, kl 203). (The fund has now grown substantially.) The US District Court opinion is worth reading carefully, in that it provides a reasonably full background to the use of forced labor at Ford Werke; the conditions of labor in the Ford Werke factory; and the structure of international and German law with respect to the issue of forced labor.

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