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Anticipating plant closures: the role of advance notification




The 1988 advance notice legislation has become another incremental step in the democratization and humanization of the employment relationship and in the process of enhancing the transparency of the modern corporation. As such, the required disclosure of such a substantial corporate action as plant closure, vitally important not just for the corporation but also for employees and communities, is now becoming part of a growing list of social and environmental disclosure requirements.

It remains to be seen how much teeth the WARN Act will actually have. Early "reports from several states suggest that several hundred companies have complied with the act so far with no major problems" (Feder, 1989). It is unlikely that the Act's ambiguity can be removed by the Labor Department's interpretive regulations without future court actions. Cases in point were the uncertainty about the act's effective date (Seattle Times, 1988b; Feder, 1989) and about its applicability to the closure of brokerage offices (Business Week, 1989). Potentially more difficult to Interpret might be the exemption of plant closings or Mass layoffs based on "business circumstances that were not reasonably foreseeable as of the time that notice would have been required" (WARN Act, 1988, Sec.3b2A). In multi-product, multi-locational corporations, there are bound to be disagreements as to what unforeseen circumstances will apply to which plant or employment segment. At the insistence of business lobbyists, there were other exemptions inserted into WARN which resulted in ambiguities, including the provision that companies pursuing attempts to keep the plant open would be exempted if such efforts would be stymied by closure publicity (Feder, 1989).

The desirability of employment related disclosures remains to be further conceptualized and empirically studied. It would seem that better knowledge of the circumstances under which employees or other stakeholders might prefer other kinds of adjustment assistance to prior disclosures or specific notifications is particularly urgent. A better understanding of various aspects of the Interface between corporate information systems and stakeholder- oriented early warning systems would also be useful. Given the variations in re-employability of displaced workers, diversification and size of local labor markets, search capability and Mobility of workers, prior expectations and preparations for layoff and so on, any narrow disclosure mandates ignoring such variations would be arbitrary. By the same token, any evidence of positive or negative repercussions of narrowly conceived advance notification mandates can hardly serve as ultimate proof of the desirability of a better or worse informed labor force or stakeholder- public.

The plant closure issue represents an appropriate focus in the discussion of the role of information and corporate disclosure in urban- industrial development. Past attempts to rekindle an analytical interest in information processes other than those associated with technological change have remained sporadic. It is difficult to understand why only lip service has been given to the importance of Information flows as precursor to, and explanatory variable for, other kinds of interaction in the complex interdependencies of a modern industrial locality:

"In the industrial organization literature, an enormous number of publications have analyzed the effects of uncertainty and asymmetrical information availability... Almost no such analysis is in a spatial context and none seems to have influenced urban economists. Yet the analysis may have important urban spatial implications." (Mills and Nijkamp, 1987, p.712)

In terms of theory development, the plant closure and advance notice issues overlap with a wide range of research contexts, including corporate locational strategy, information and communication processes, corporate social responsibility, behaviors in financial and labor markets and urban economic relations. This paper has touched on some of these perspectives. However, the tools for the analysis of such behaviors have to go beyond those associated with traditional location, search or urban-economic methods of analysis. Agency-, transaction-cost, organization- and structuration- theoretical approaches offer themselves for a better understanding of the redistribution and transmission of risks between Job-providing/ -eliminating organizations and their Internal and external stakeholders at different locations (Eisenhardt, 1989; Hill et al, 1989; Palmer and Friedland, 1987). A variety of concepts related to interorganizational relations and quasi- integration appear useful for dealing with asymmetrical informational relationships in open localities (Luke et al., 1989; Pfeffer, 1987). Accounting-, disclosure- and other information related approaches may assist in developing better explanations for some other geographic facets of corporate disclosure decisions (Diamond, 1985; Dye, 1985; Vermaelen, 1986; Verrecchia, 1983). The fact that this author found only one attempt (Eliasson, 1977) to introduce advance notification into a formal model, may be evidence for either a lack of theoretical or empirical understanding of notification behavior or for a perceived lack of significance of the problem. It is interesting to note that the cited attempt was part of a national-scale model of the Swedish economy based on simulations of micro activities. At the regional and local levels, such micro-based models are at least as urgently needed.


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