Learning Team Case – Week 4A firm has five identified capital p.docx

Learning Team Case – Week 4
A firm has five identified capital projects they could fund in the
upcoming year. Each project has a initial capital cost of
$5,000,000, however the firm only has $15,000,000 allocated
for capital projects in the current year. The company needs to
decide which projects to fund. The firms initial cost of capital
(discount rate) is 8%.
Cash Flows ($ in thousands)
Projects
A
B
C
D
E
Year 1
$1,100
$6,000
--
$1,000
$500
2
$1,100
--
$1,000
$2,500
$1,500
3
$1,100
--
$2,000
$3,500
$3,000
4

$1,100
--
$3,000
$2,750
$3,500
5
$1,100
--
$2,200
$1,000
$4,500
1. What is the net present value of each investment?
2. According to the net present values, which investment(s)
should the firm make? Why?
3. What is the internal rate of return on each investment?
4. According to the internal rates of return, which investment(s)
should the firm make? Why?
5. Using the simple payback method which investments should
they choose?
6. If the firm could reinvest the $3,600,000 earned in year 1
from investment B at 10 percent, what effect would that
information have on your what the return would be on the
investment?

7. If the firm’s cost of capital had been 11 percent, what would
be NPV of the investments alternatives? What would be the IRR
for the investment projects?
NOTE: I need to see your method of calculation, I will not
accept only the answer. I recommend you use the Excel
spreadsheet for this assignment since the cell contents will show
your calculations.
Golden Talents
How to Generate Great Income from Your Unique Talents
Presented by:
Ronald Weber
Ronaldwebertraining.com
E-mail: [email protected]
Golden Talents
Learn How to Make a Great Living doing the thing you love
most.
“You…You…You…You have Talent!”

Write down 3-5 talents or skills that are unique to you. Keep an
open mind here. You don’t need to be the best, just generally
better than others.
_____________________________________________________
_______
_____________________________________________________
_______
_____________________________________________________
_______
Examples: Multilingual, good photographer, fast runner, good at
technical issues, cooking, etc.
Questions that may help you isolate your unique contributions:
1. What are the talents that you perform with the greatest of
ease?
2. What are the talents and/or skills that when you perform,
give you energy?
3. What are the talents and skills that people have said to you,
“Oh…you do that so well.”?
How can you combine several of these talents into a position in
a company, a service, a business, or a product? Take several of
the talents above and create 3 different types of services that
people need and would pay for.
Example:
· Cartoonist

· Speaking
· Marketing degree
Example: “With my desire to speak, I could teach other
cartoonists or photographers how to make money.”
Identifying Opportunities for You

Socio-Cultural Issues
_____________________________________________________
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__________________________________
Political/Legal
Issues________________________________________________
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_______________________________________
Economic
Conditions____________________________________________
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___________________________________________
Competition__________________________________________
_____________________________________________________
_____________________________________________
Technology___________________________________________
_____________________________________________________
____________________________________________
International
_____________________________________________________
_____________________________________________________
__________________________________
Please list two needs that are NOT being satisfied by others in
the market place.
Example: “Due to people’s busier lifestyle, I have noticed a
greater need for “Doggie –Day Care”, or “There is an increase

in Hispanic population in my area and noticed a greater need for
Hispanic style food.”
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_______________
Personal Objectives:
Consider specifically what do you want.
AccomplishmentsMaterial ThingsFinancialHealth
_____________________________________________________
_____
_____________________________________________________
_____
_____________________________________________________
_____
_____________________________________________________
_____
_____________________________________________________
_____
_____________________________________________________
_____

_____________________________________________________
_____
Take the top goals in each category and write a paragraph of the
reason WHY you must have this in your life.
1. Accomplishments
_____________________________________________________
_____________________________________________________
__________________________________
2. Things
_____________________________________________________
_____________________________________________________
__________________________________
3. Financial
_____________________________________________________
_____________________________________________________
__________________________________
4. Health
_____________________________________________________
_____________________________________________________
________________________________
Target Market Strategies

Identifying your target market helps you isolate the specific
needs, which allows you to adapt your talents to meet the needs
of the targeted customers.
The target market can be narrowed by these major areas:
· Geography
_____________________________________________________
_____________________________________________________
_____________________________________________________
_________________________________
· Demographic Characteristics
_____________________________________________________
_____________________________________________________
_____________________________________________________
_________________________________
· Psychographic Characteristics
_____________________________________________________
_____________________________________________________
_____________________________________________________
_________________________________
· Behavioristics
_____________________________________________________
_____________________________________________________
_____________________________________________________
_________________________________
Exercise:
Write a paragraph of the ideal customer who will need your
product or service.
_____________________________________________________
_____________________________________________________
_____________________________________________________

_____________________________________________________
_____________________________________________________
_______________
Adapting your talents and skills
Write down what areas of your talents and skills need to be
improved or changed to better meet the needs of your potential
customers.
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_______________
Product/Service Development: (Positioning Strategy)
Write down a description of your product or service and how it
will differ from others.
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_______________
How can you do this on a massive scale? How can you do this to
reach a large amount of people? i.e. Internet access, major
retailers, mass media, book, etc.
_____________________________________________________
_____________________________________________________

_____________________________________________________
___________________________________________________
Pricing Strategies:
Pricing Objectives:
· Maximize Profits
· Market Survival
· Meet Competition
· Gain Market Share
· Prestige Pricing
Different Pricing Strategies:
Price your product/service for perceived value.
Sell the right product to the right people at the right time and at
the right price.
· Every day low prices (Low Cost Leader)
· Loss Leader – price the product/service low to encourage
additional purchases
· Meet the competition – compete on different points of
difference
· Seasonal Discounts
· Bulk Discounts
· Cash Discounts
· Internet Discounts

Based on the target market’s needs, market position, positioning
strategy, and the overall message, write down three different
pricing strategies that will help you reach your goals. i.e. I will
price my services below the competition to gain market share
until my talents are more well known.
1.
_____________________________________________________
_____________________________________________________
__________________________________
2.
_____________________________________________________
_____________________________________________________
__________________________________
3.
_____________________________________________________
_____________________________________________________
__________________________________
Distribution Strategies:
The goal of distribution strategies is to create different channels
to sell your product/services.
Write down three distribution strategies you can deliver your
product or service to your target market. i.e. Retail locations,
kiosks, wholesale clubs, agents, going direct, Internet, etc.
1.
_____________________________________________________
_____________________________________________________

__________________________________
2.
_____________________________________________________
_____________________________________________________
__________________________________
3.
_____________________________________________________
_____________________________________________________
__________________________________
Promotional Strategies:
5 Elements of the Promotional Mix
· Personal Selling
· Sales and Trade Promotions
· Advertising
· Public Relations / Publicity
· Direct Marketing
Personal Selling Process
The following are Twelve Steps that will dramatically improve
your selling ability.
1. Prospecting7. Develop a

Solution
in your Head
2. Qualifying8. Presentation
3. Pre-approach9. Trial Close
4. Approach10. Handle Objectives
5. Ask questions and listen11. Final Close
6. Listen for needs12. Follow Up
Is Rapport important in selling? _________________
How to Build Instant Rapport?
Matching and Mirroring – People who are like each other tend
to like each other, people who are dislike each other tend to
dislike each other.

Your Selling Strategies:
_____________________________________________________
_____________________________________________________
_____________________________________________________
___________________________________________________
Who are the potential customers that will most likely buy my
product/service?
· What qualifications must the potential customer have to buy
my product or service?
· What can I do before hand to learn more about my potential
customer?
· Do I expect everyone to say “yes” without having any
objections?
· What will I do to follow up on the sales?

Sales and Trade Promotions
Examples of Sales Promotions
· Contests
· Coupons
· Discounts
· Rebates
· Sweepstakes
· Premium Products – t-shirts, hats, pens
The idea of the Sales and Trade Promotions is that is works in
conjunction with entire Marketing Mix.
Write down common sales promotions that are common in your
industry. Or, write down a common sales promotion that seemed
to work well.
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_______________

Your Selling Strategy
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_______________
Advertising
Advertising can be expensive but also very productive.
Advertising defined:
Advertising is a non-personal, paid communication, through the
various mediums, sponsored by an identified organization.
Advertising Mediums:
Internet Advertising (Google ad searches, banner ads, Facebook,
or blogging)

_____________________________________________________
_____________________________________________________
_____________________________________________________
___________________________________________________
Television Advertising (Which channels or time of day is best
to run the ad?)
_____________________________________________________
_____________________________________________________
_____________________________________________________
___________________________________________________
Radio (Broadcast, Internet, Satellite)
_____________________________________________________
_____________________________________________________
_____________________________________________________
___________________________________________________
Magazines
_____________________________________________________
_____________________________________________________
_____________________________________________________

___________________________________________________
Newspapers
_____________________________________________________
_____________________________________________________
_____________________________________________________
___________________________________________________
Your advertising strategies:
Advertising Mediums:
_____________________________________________________
_____________________________________________________
_____________________________________________________
___________________________________________________
Target Audience
_____________________________________________________
_____________________________________________________
__________________________________

What is your objective?
· Increase traffic flow?
· Increase number of phone calls
· Encourage Sales
· Build Awareness
· Differentiate your company from competition
_____________________________________________________
_____________________________________________________
_____________________________________________________
___________________________________________________
Public Relations and Publicity
The purpose of Public Relations is to try to shed “good light” of
the organization onto the community.
· Charity Events
· Volunteer to paint homes for the needy
· 5K Runs sponsored by your company
· Donations
· Free Stuff

Publicity- The goal of publicity is to get your organization
known. And the best way to reach a massive amount of people
is to get into the “News”. i.e. Television, Radio, Newspapers,
and Magazines.
Your Strategies to get into the News
_____________________________________________________
_____________________________________________________
_____________________________________________________
___________________________________________________
Ronald Weber “Golden Talents”
www.RonaldWeberTraining.com
Week 3
1

Week 3
Teddy 3
Rasmussen
Author Notes
This research is being submitted on October 26 2014, for teddy
3 B464/MAN Performance Based Training and Instructional
Design
In training the sales personnel to increase their efficiency and
increase the organizations profitability, a number of goals and
objectives will be set so as to make the training process
effective (Gill & American Society for Training and
Development., 1998). The training will take place for five
consecutive days. Accordingly, the training program will be
involving and will ensure that the different learning preferences

are considered. Individuals who prefer listening, seeing and
hearing will all be considered. They will be considered in the
sense that colorful presentations and audio aides will be a part
of the training program. Interactivity will be highly considered.
Below are goals for the training program:
1.To come up with a more efficient sales team
2.To come up with a more independent sales staff
3.Increase the sales staff bonding over a common goal
To achieve the goal of coming up with and efficient sales team,
the training program will first and foremost make the trainees
familiar with the basic terminologies used in sales. Once the
trainees are familiar with the terminologies, the sales methods
will be explained in details. The sales methods and their
importance will be explained to them. The sales agents will
then be described in the program. The various agents such as
the sales brokers, transaction brokers and sales persons will be
distinguished. Their importance in the sales process will also
be examined.
The objective that will ensure the goal is realized is: The sales
trainees will be able to identify the various sales methods by the
end of the first day.
To achieve the goal of coming up with more independent sales
staff, hands on activities will be incorporated in the training
program. That will make the trainees be able to make personal

decisions when faced with challenges. All trainees will
individually participate in the program.
To be able to achieve the goal, here is the objective: The sales
trainees will be able to explain the relationship that is existent
between sales and marketing by the end of the second day.
To increase the sales staff bonding over a common goal, the
program will incorporate group discussions and disclosure of
the importance of team work (Gill & American Society for
Training and Development., 1998).
To achieve the goal, here is the objective: The participants of
the sales training will be able to utilize 5 different closing
techniques by the last day of this training. The other objective
to assist in the achievement of the above goal is that, the
different sales agents will be examined by the fourth day of the
training.
Reference
Gill, S. J., & American Society for Training and Development.
(1998). Linking training to performance goals. Alexandria, Va:
American Society for Training
Week 2
1

Week 2
Teddy 2
Rasmussen
Author Notes
This research is being submitted on October 19 2014, for teddy
B464/MAN Performance Based Training and Instructional
Design
Just like my job sales skills are the most important in any job.
Selling skills are critical in organizations that rely on ongoing
buying from customers or clients. The ability to build

relationships with customers, persuade them to make purchases
and generate repeat business is at the heart of selling. Sales are
a component of a company's marketing and promotions. I feel
that selling is generally one of the most persuasive forms of
promotion a company has. Persuading prospects to make
purchases is a common objective of sales. Sales training is
essential to the achievements of a business. Perhaps its most
positive benefit is better employees. A company develops the
potential of an employee, and part of the way a company
encourages improvement is through sales training.
For employers, sales training allows them to locate a wider
range of people with the kind of outlook that matches the
company mission statement. The right kind of perspective is a
hard thing to cultivate, whereas workplace specific
proficiencies are easier to nature. The other advantage
employers should remember about sales training is it offers
them an improved retention rate. Employees are more loyal to
companies that value their growth and want to cultivate it, and
thusly provide a better performance and decrease the rollover
rate at any company, no matter how small or large. If an
employee thinks a company values him or her, that sentiment
will go into whatever the employee is designing, selling,
manufacturing, etc.
Developing a task analysis for sales training there are steps
where you can measure this.

Step one you have to define sales goals clearly before sending
your employees out to make their sales. Your team will not
know how to reach objectives properly if those objectives are
not clearly defined from the beginning. If you have strategies
you'd like to see implemented leading up to the accomplishment
of sales goals, clearly state what your game plan is and provide
copies of this plan to your team if necessary to ensure that
everyone is on the same page.
For Step two you have to assess the individual skill set of each
employee. You may have a team with varying degrees, work
experience and training, so a one-size-fits-all strategy to
complete a task may not work for all your salespeople.
For step three you have to monitor the environment in which
your salespeople work. For example, if they sell products or
services to clients in face-to-face meetings, quietly observe
these meetings. If your salespeople primarily use office phones
to conduct their sales, listen in on sales pitches they deliver
over the phone. Do not hover while you monitor, but instead
extend an ear to the situation to get a feel for how things are
going. Observe your salespeople carrying out various tasks in
and out of these situations. Use a pen and paper to take notes on
what you observe, including positives or negatives in selling
tactics, problems with appearance or demeanor, poor sales pitch
organization, a weak introduction and other facets you notice
such as lack of eye contact with the client.

For step four you have to organize your notes into individual
employment assessments. Meet with each salesperson on your
team and provide him with a copy of his employment
evaluation. Explain to your salespeople that after monitoring
their activities you were able to accurately assess their strengths
and weaknesses within your organization as they undertook
sales tasks. Do not only point out the negatives within an
employee's evaluation, but discuss positives as well. Set
individual objectives for each employee based on his task
performance. Tell your salespeople that these objectives will be
revisited on their next performance evaluation.
Last but not least the final step is to continue to monitor your
salespeople's tasks following their employee assessment. If
necessary, create mini-evaluations leading up to future
assessments with any concerns or advice you have about the
way they are completing individual tasks. Adult learners have
characteristics that set them apart from 'traditional' school or
college learners. All adults come to courses with a variety and
range of experiences, both in terms of their working life and
educational backgrounds. This impacts on how and why they
participate in learning.
Last but not least from the two bottom references I don’t think
people learning falls on the person learning rather the person
teaching. Be patient with yourself, and honest. Know what
you've done well and pat yourself on the back. Fix what needs

fixing. Being good art teaching a group is really hard to find,
like everything else in the world you don't want to burn out.
Take pride in what you do. And remember your actions impact
the people learning.
Geoffory J. (2014) The Most Important Sales Skill of All
Retrieved from http://www.inc.com/geoffrey-james/the-most-
important-sales-skill-of-all.html
Katie L. (2012) The 7 Styles Of Learning: Which Works For
You?
http://www.edudemic.com/styles-of-learning/
Week 1
1

Week 1
Teddy 1
Rasmussen
Author Notes
This research is being submitted on October 12 2014, for Teddy
1 B464/MAN Performance Based Training and Instructional
Design
People learn in different ways. And no one has a better learning
style than anyone else. Some experts say there are as many as
seven different learning styles; but it's easier to narrow it down
to three types of learning. I feel that every group has more than

one-way of learning it all depends on the person rather than the
group. There are three times of learners, listening learners,
seeing learners, touch learners. Most groups learn with groups
inside groups broken down groups by the ways people learn.
From my understanding the best way to reach a group is the
mind set that you are teaching student or kids. Think about it as
a teacher there are certain things you can and can’t do. I think
you have to teach like this in order to keep that teacher to
student mindset.
My personal opinion is that this is a muti-faceted, ever-
changing challenge. And I think instruction is only part of the
picture: you teach people all the time without even touching a
piece of paper...through discussion, how you approach them,
how you react to others in their presence, how you use
teachable moments in the classroom, etc. I have groundwork I
like to put in place before we start talking about content.
First, respect each student as an individual. Do not embarrass
them in front of their peers, but ask to see them after class
instead, and provide a pass if needed, if there is a problem.
Praise them all often, even if all you can find is the color of
someone's shoes or a new color of hair. "Interesting" is a great
response. The positive attention is what counts.
Be a good listener. Don't let students take advantage of your
good heart or willingness to work with them: they are very
savvy, very early. Be consistent. If one student breaks the rules,

if there is a consequence promised, it must be the same for all.
Be flexible in extenuating circumstances, privately...perhaps
with a guidance counselor if there is a serious problem. Do not
meet with students alone in a room. Stand at the door way or
with seats in front of an open door. Know your material. If you
don't know the answer, promise to get back to them with it...and
do so.
Try to mix your lessons up. If you do group work, give the kids
ownership: we can do this only if you get the work done and
follow the rules. It is becoming even more acceptable (I took
several classes with the Penn Literacy Program out of U. of P.,
and they look to posters and projects of ways to assess without
testing—less pressure for kids with test anxiety, and they can do
the work alone or with a friend as you see fit. And drawing
doesn't count: stick figures and speech bubbles allow their
characters to explain what the student knows with great artistic
talent. Do they get the concept? Then your lesson was a
success?
Let them know you truly care about each one, even those who
make you insane. I find it easier to tell a student, "I love you
dearly, but not the way you are acting right now." Or, "I really
need your help to reach the goal of today's lesson Don't judge
people by what you see or what other people tell you. Pack info
away and let the student prove him or herself to you, one way or
the other, I document everything and save everything even

progress reports or other timely things there where they will get
lost. Even save notes from administrators or copies of
disciplinary cards or letters you send home/to the office.
Let your passion show; laugh with your kids; admit to mistakes;
and, praise them whenever you can. Your voice may be the only
one that lifts them up all day. Be patient with yourself, and
honest. Know what you've done well and pat yourself on the
back. Fix what needs fixing. Take pride in what you do. And
remember your actions impact the lives of students, other
professionals, etc.
Love what you do, and give yourself a break from time-to-time.
Oh, and don't believe everything people tell you about others:
they probably make up stuff about you, too. Avoid lecture
when possible. Allow groups to help each other. Put students in
groups where you know they will function with the least amount
of disruption to each other. Try to create discussions about what
you're learning to engage the kids personally. And if you can
break your lesson into two parts for, say, a 50-minute period,
the change will help them, which will help you. I identify with
all the groups but not every one is like that. I am the kind of
person that is don’t matter what your teaching style is I can
adapt and overcome. Out of the three learning styles most
people fit into one but there are a few that can adapt and do any.

Peter D. The Myth of learning styles (2014) Retrieved from
http://blogs.edweek.org/edweek/finding_common_ground/2014/
04/the_myth_of_learning_styles.html
Annie M. Do students really have different leaning styles?
(2012) Retrieved from
http://blogs.kqed.org/mindshift/2012/04/do-students-have-
different-learning-styles/
WRPE Produced and distributed by Pluto Journals
www.plutojournals.com/wrpe/

tHe PoWer of economics
vs tHe economics of PoWer
introdUction
Michael Perelman
abstract: This article analyzes the systematic absence of power
in economic analysis, beginning
with early economist’s almost universal denial of the process of
primitive accumulation.
Microeconomics also excludes considerations of power, except
for what it considers to be
abuse of power by government and labor unions. Monetary
theory also avoids the application
of Federal Reserve power to create unemployment in order to
reduce wages. Businesses also
employ power in competing with other businesses. Economists
ignore such use of power,
emphasizing the benign consequences of competition: lower
prices, improved quality, and even
entirely new products. Business wields power against workers,
the power that might be limited
by labor unions, which themselves are limited because of
business’ application of political

power. Not only can business use monopolistic power in order
to increase prices, as buyers,
business can use monopsonistic power to reduce the prices it
pays. Business can also apply
power in order to hamper competitors. The final form of power
is the power of economists to
exclude power from their theory, except for the two exceptions
mentioned.
Key words: power; ideology; economics
While attending a conference of mostly very conservative
economists, I heard
a sophisticated and in-depth analysis of the development of
ronald coase’s
influential suggestion for environmental regulation through
voluntary negotiation
published as “the Problem of Social cost.” I found nothing in
the paper with
which to disagree—within the context of conventional
economics. In coase’s
setup, because voluntary arrangements can necessarily lead to
efficient outcomes,
regulatory power is an unnecessary intrusion that serves no
purpose.

michael Perelman is Professor of economics at california State
University, chico, USA, and is the author of 19 books. His latest
publications are The Invisible Handcuffs of Capitalism: How
Market
Tyranny Stifles the Economy by Stunting Workers (2011), The
Confiscation of American Prosperity: From Right-Wing
Extremism
and Economic Ideology to the Next Great Depression (2007),
and
Railroading Economics: The Creation of the Free Market
Mythology
(2006). Email: [email protected]
WRPE 5-3 284 01/09/2014 10:31
THE POWER OF ECONOMICS vs THE ECONOMICS OF
POWER 285
World Review of Political Economy Vol. 5 No. 3 Fall 2014
In reality, lacking power, I would be unlikely to get major
corporations to sit
down to negotiate with me, let alone satisfactorily compensate

me or anyone else
(save a few friendly politicians) for their destructive activities.
Even taking such
businesses to court is virtually impossible. In the unlikely case
that I could be able
to get a hearing at court, any legal help that I might afford is
almost certain to be
outgunned by the corporation’s powerful legal team.
In short, within the context of economic theory, coase’s
suggestion makes sense,
but only because of the exclusion of any consideration of
power. In a utopian
society in which universal consent was required for permitting
such investments,
all affected parties could arrive at a mutually satisfactory
solution.
most of the other papers at the conference discussed how
markets evolve
naturally and work efficiently. Nowhere was there any
consideration of power.
the participants clearly understood the discipline of economics,
but perhaps that
was also their problem. their training conditioned them to

instinctually avoid
any consideration of power, other than those presumptive
abuses of government
that interfere with the functioning of markets. In conventional
economics, power
is reduced to a metaphor. We have the power of the market or
the power of
competition, but corporate power is nowhere to be found.
A few days later at another conference, I heard another
interesting paper about
the problems created by the so-called experts working for the
government in the
area of financial regulation.
the idea of the paper was that regulators relied upon experts,
whose expertise
may be either limited or contaminated by what Schumpeter
called a pre-analytic
vision—what less academically inclined people might call bias.
the inefficiencies
resulting from flawed expertise reflect the misapplication of ill-
advised government
power, which could only gum up the works of an otherwise
efficient economy.

this paper posed an interesting challenge. Obviously, expertise
can be abused—
even economists’ expertise. Given that expertise is a very
important factor in
shaping many aspects of the economy as well as society as a
whole, some kind
of expertise on the subject of expertise might be useful, except
no one could be
sure that those experts would be any more objective or informed
than the existing
universe of experts.
I want to consider how a different treatment of power might
affect these two
papers. Begin with the example of the so-called coase theorem.
Suppose a large
corporation locates a toxic waste dump, which threatens my
property values or
even my health. the profits from this venture might well be
sufficient for the
company to offer me enough sufficient compensation to agree to
the establishment
of the toxic waste dump. If so, both the company’s management
and I could be

made better off by the creation of the toxic waste dump,
ignoring, of course, the
effects on others.
WRPE 5-3 285 01/09/2014 10:31
286 MICHAEl PERElMAN
Why in the world would the corporation bother to sit down and
negotiate
with me? many economists believe that corporations have the
legal and moral
obligation to maximize profits. I could threaten to sue, but the
corporation could
easily find experts who could undermine my claim to have been
harmed. lacking
standing, I would be unlikely to have my case heard before a
jury. Even if legal
proceedings are a possibility, I am unlikely to be able to mount
a legal team capable

of matching the power of the high-priced attorneys representing
the corporation.
Previously, individuals like me could sometimes band together
in the form of a
class action suit, but recent court decisions make that option
virtually impossible.
the best an individual like me can hope for is probably a
relatively inexpensive
settlement conditioned on secrecy in order that others will not
follow my example.
However, that outcome is exceedingly unlikely.
moreover, the judiciary has become increasingly pro-business,
minimizing the
chance of legal redress even more. For example, lee Epstein,
William m. landes,
and richard A. Posner ranked the 36 justices who served on the
Supreme court
between 1946 and 2011 according to their proportion of their
pro-business votes;
all five of the current court’s more conservative members were
among the top 10.
But the study’s most striking finding was that the two justices
most likely to vote
in favor of business interests since 1946 are the most recent

conservative additions
to the court, chief Justice roberts and Justice Samuel A. Alito Jr
(Epstein, landes,
and Posner 2013).
the charge about the harmful effects of incompetent or biased
expertise made
sense. I confess that I took special pleasure in listening to that
paper because
I imagined changing a few nouns to write a paper about the way
that abusive
expertise is a powerful weapon in the arsenal of regulatory
capture.
For example, in the current controversy of the Keystone Xl
Pipeline, the State
department, which has authority over the project because of its
transnational
character, recently published a report, which found no fault with
the project. this
conclusion should not have been a surprise to anybody because
the report came
from companies which had a commercial interest in a more
intensive reliance on
energy derived from tar sands.

Obviously, I could be wrong about my suspicions about this
report. I have not
read it. Even if I had, I am not sure that I have the expertise to
make a definitive
judgment about it. However, government regulators frequently
do heavily rely on
the expertise of those whom they regulate.
Both papers serve as a reminder that conventional economics
tends to overlook
the role of power, in large part because it emphasizes voluntary
transactions. the
exception to this rule is a willingness to single out destructive
interference of
government powers.
WRPE 5-3 286 01/09/2014 10:31
POWER 287

like you, I would appreciate a world in which publicly spirited
business would
try to find mutually beneficial outcomes for all concerned
parties. I would also
agree that the abusive use of expertise is inexcusable. Finally,
all of us have
examples of heavy-handed regulation. like me, you also are
probably able to
identify areas of insufficient regulation. However, power has a
pervasive influence
on the world we inhabit.
to say that economics has completely ignored power would be a
gross
exaggeration. Economists are often quick to criticize union
power or government
power. Besides, the institutionalists addressed the subject of
power. more
recently, John Kenneth Galbraith, himself a neoinstitutionalist
of sorts, titled
his 1973 presidential address to the American Economic
Association, “Power
and the Useful Economist” (Galbraith 1973). Of course, Adam
Smith, primarily

responsible for starting economic theory on its transactional
path, also offered
trenchant critiques of business proclivity to engage in
“conspiracy against the
public,” including the way business wielded power to both
extract monopolistic
rents and to dominate workers. Since then, economists have
been hesitant to take
issue with business power.
Forgive me, but in the examples that follow I am going to bend
the stick even
further in discussing power, although I am neither unaware nor
uncritical of
equally abusive government power.
Primitive accumulation
classical political economists’ cavalier attitude regarding what
marx called
primitive accumulation offers an excellent example of the
avoidance of the subject
of the abusive exercise of raw power (see Perelman 2000). Over
and above outright
dispossession, the state allowed the aristocracy to enforce the

Game laws. these
remnants of feudalism granted exclusive property rights in
wildlife to the King,
but the law had long fallen into disuse, at least until the early
17th century when
modern capitalism was taking hold in England.
A commoner’s punishment for killing animals was harsh, to say
the least,
even when the purpose was to prevent the creatures from
destroying a farmer’s
crop. Infractions of the law met with penalties, which ranged
from execution, to
incarceration, which was more common, or transportation to
Australia, which was
even more common.
Besides the significant crop losses that the protected game
caused, hunters were
free to ride roughshod through farmers’ fields, creating even
greater destruction.
One might have expected the political economists at the time to
have taken notice
of the Game laws’ violation of traditional rights, not to mention
the economic

costs associated with neofeudal fox hunts.
WRPE 5-3 287 01/09/2014 10:31
Although economists were silent both about such abuses and the
resulting
economic losses, the corn laws, which levied a tariff on
imported grain, were
a matter of grave concern for some early political economists,
even though these
tariffs had a much smaller effect on economic efficiency than
the Game laws.
the difference was that the corn laws interfered with the
efficient exploitation
of labor by raising the cost of a subsistence wage. Ironically,
the Game laws
probably did much more to raise the cost of food than tariffs on
imported grain.

What could cause the different treatment of the corn laws and
the Game laws?
the Game laws were an important tool of primitive
accumulation, preventing self-
provisioning, thereby forcing people to enter the labor market in
order to subsist.
this pressure increased the supply of labor and lowered wages.
In contrast, the
corn laws put upward pressure on wages by increasing the cost
of food. Seen in
the context of coercive power, however, both the abolition of
the corn laws and
the renewed enforcement of the Game laws served to strengthen
capital’s position.
Political economists of the time were too much concerned with
demonstrating
the justice of markets to address such obvious exercises of
power. However, in
their more private writings, diaries, and letters, they applauded
the use of power
to push workers off the land and into wage labor. contemporary
economists
generally follow this tradition in presenting the evolution of

markets as a purely
voluntary phenomenon, beneficial to all.
In order to emphasize the voluntary nature of markets,
economists have
generally gone out of their way to create a theory that excludes
all considerations
of work, workers, and working conditions (Perelman 2011). the
main benefit of
this exclusion is that it conveniently eliminates all
considerations of power from
the discipline of economics. In this sense, the participants at the
conference I
described were blameless. they did exactly what “good”
economists are supposed
to do. the problem is that “good” economists do not make good
economics, except
to the extent that their work provides useful ideological cover.
that cover, however, is incapable of covering up all of the
intractable problems
of capitalism. Once the damage becomes obvious, power may
briefly enter into
the picture. After the crisis subsides, power quickly returns to
its previous state of

invisibility. What is most remarkable is that a clear
consideration of mainstream
economic theory should be enough to alert economists to the
inherent contradictions
in this view of the capitalist economy. Such a perspective
might, at least, be capable
of moderating some of the more destructive results of
untrammeled capitalism.
Power and microeconomics
Power enters into microeconomic theory. According to the
standard assumptions
of conventional microeconomics, prices tend to move toward
marginal costs (or
even marginal revenue if you allow a teensy bit of market power
to creep into
WRPE 5-3 288 01/09/2014 10:31
POWER 289

the picture). In a small village economy based on handicrafts,
this arrangement
might work satisfactorily, but what happens when marginal cost
pricing operates
in a modern economy in which fixed costs are very high and
marginal costs are
insignificant? With a little thought, one can easily see that
corporations could not
cover their fixed costs. Bankruptcy would become common
because marginal-cost
pricing cannot cover costs.
By the 19th century, the introduction of modern technologies
with low marginal
costs led to widespread bankruptcies, especially in the capital-
intensive railroad
industry. Other industries with low marginal costs also suffered
a similar fate,
leading to the Great depression, which began in 1873 (see
Perelman 2006).
most economists, indoctrinated with a theory of market
efficiency, had little

to say about this problem. However, at that time, many of the
most promising
economists went to study in Germany, which was the only
source of graduate
education at the time. these German-trained economists, who
returned to the USA,
had no problem identifying the nature of these bankruptcies, in
part because they
were steeped in a tradition similar to that which Karl marx
experienced. Given
this training, these economists were discouraged by irrelevance
of much of the
merchant-oriented simplicity of conventional economics. to
promote their more
holistic Germanic orientation, they formed the American
Economic Association.
Given their more realistic understanding of economics, these
economists
recognized the need for some kind of countervailing power to
blunt the destructive
power of competition. they advocated trusts, cartels, and
monopolies as a way
to give corporations enough power to prevent the market from
self-destructing.

Nonetheless, perhaps motivated by careerism, the leaders of this
new organization
then turned around and wrote textbooks praising the wonders of
perfect
competition. John Bates clark was the most egregious example
of this duplicitous
form of economics.
In effect, these economists carried on two separate and
disconnected dialogues.
One was with the rich and the powerful, telling them how it was
in their interest to
blunt the power of market forces. the other was intended to
communicate with the
working classes and their sympathizers. Work, workers, and
working conditions
were no part of their concern. According to their “scientific”
theory of economics,
wages were a mutually beneficial transaction and workers’
meager earnings were
their just rewards. While the power of competition should be
allowed to collapse
the level of wages, the state should take measures to increase
profits by weakening
the power of competition in product markets.

Power and monetary theory
Power was once briefly considered as a factor in monetary
policy in studies
coming out of latin America. the latin American experience
suggested that
WRPE 5-3 289 01/09/2014 10:31
inflation reflected the response of the state to a stalemate in
which it was incapable
of satisfying the demands of both powerful business interests
and militant labor
organizations. to appease both powerful interest blocks, the
state adopted policies
that created significant inflation.

In conventional economics, however, monetary policy is just a
technical matter,
unrelated to power. the goal of monetary policy is simply to
ensure price stability,
which can allow the economy to follow an equilibrium path.
What has been
fairly obvious since the recent market crash is the class-oriented
distortion of the
prevailing concept of price stability.
the outlandish fees that banks and credit card companies charge
do not even
merit a comment. Increasing prices of financial assets appear as
a sign of economic
health; however, capitalization of financial assets may more
properly be taken as
an indicator of economic power. In contrast, wages must, by all
means, be kept
in check. the disconnect between the need to hold down wages
and the lack of
concern about other kinds of prices suggests that concern about
price stability is
nothing more than a cover for class warfare. In the second
chapter of The Invisible
Handcuffs (Perelman 2011), I included a remarkably vivid

discussion of monetary
policy as a form of class warfare. the principles in this
exchange were absolutely
clear about monetary policy as a crass exercise in power. In
fact, they pushed the
rhetoric far enough to make the role of power in monetary
policy self-evident.
In 1979, shortly after taking the reins at the Federal reserve,
Paul Volcker
voiced his determination to hold inflation in check. At first,
many powerful people
doubted whether Volcker would be willing to follow through
with his plans,
which were sure to create enormous casualties. A front-page
story in the Wall
Street Journal, entitled, “monetary medicine: Fed’s ‘cure’ is
likely to Hurt in
Short run by depressing Economy, Analysts Say” expressed this
sentiment. the
paper noted,
Among those who are skeptical that the Fed will really stick to
an aggregate target
is Alan Greenspan, . . . who questions whether, if

unemployment begins to climb
significantly, monetary authorities will have the fortitude to
“stick to the new policy.”
(The Wall Street Journal 1979)
Around this time—possibly in response to the article—Volcker
invited the editor
of the Wall Street Journal editorial page, along with his deputy,
and the features
editor, to a lunch at the New york branch bank of the Federal
reserve. Volcker
asked his guests, “When there’s blood all over the floor, will
you guys still support
me?” the deputy editor responded affirmatively, later proudly
recollecting, “there
was blood indeed, as overextended latin borrowers and
American farmers were
caught out by a return to a sound dollar. But we held fast”
(melloan 2003).
WRPE 5-3 290 01/09/2014 10:31

POWER 291
Volcker’s militaristic analogy (expressed privately to the staff
of the Wall Street
Journal) let the cat out of the bag. the effort to tame inflation
was, in reality, little
more than an exercise in class war. In fact, Volcker himself had
intended to spill
blood. Volcker also visually expressed his intentions:
[Volcker] carried in his pocket a little card on which he kept
track of the latest wage
settlements by major labor unions. From time to time, he called
various people around
the country and took soundings on the status of current contract
negotiations. What
is the UAW asking for? What does organized labor think?
Volcker wanted wages to fall,
the faster the better. In crude terms, the Fed was determined to
break labor. (Greider
1987, 429)
Volcker tightened the money supply so extremely that the USA

experienced what
was then the worst economic downturn since the Great
depression. Volcker only
let up when the collateral damage became too great. mexico,
which owed a great
deal of money to US banks, seemed to be on the brink of
bankruptcy, threatening
the US banking system. citibank was effectively bankrupt.
later, michael mussa, director of the department of research at
the
International monetary Fund, looked back fondly at Volcker’s
accomplishment.
mussa continued the military analogy, praising Volcker’s
victory in vanquishing
“the demon of inflation” (mussa 1994, 81):
The Federal Reserve had to show that when faced with the
painful choice between
maintaining a tight monetary policy to fight inflation and easing
monetary policy to
combat recession, it would choose to fight inflation. In other
words to establish its
credibility, the Federal Reserve had to demonstrate its
willingness to spill blood, lots of

blood, other people’s blood. (Mussa 1994, 112)
What would have been the response if unions had gloated about
using their power
to spill capitalists’ blood in the streets? Even if unions merely
suggested the
imposition of serious hardships on the capitalists, an angry
response would have
been followed by strong anti-labor measures. Instead, monetary
policy continues
to appear as a bloodless technological policy to ensure the
smooth operation of
voluntary markets. Power has no place in such matters.
Interestingly, the intended enemy of this war—the workers—
went unmentioned
in this recollection, as did the collateral damage to farmers and
the latin Americans.
But what had workers done to make the state treat them as
enemies? Were these
people culpable of some evil act for daring to expect more than
a pittance?
By the end of the 20th century, the chairman of the Federal
reserve, Alan

Greenspan, was confident that the war was already won. the Fed
need not take
WRPE 5-3 291 01/09/2014 10:31
any aggressive actions. Greenspan believed that the
psychological state of the
workers, what he referred to as the “traumatized worker,” meant
that the threat
of increasing wages had been annihilated. Instead, the monetary
authorities could
rely on what George Orwell called “the haunting terror of
unemployment” (Orwell
[1943] 1968, 265).
As the journalist robert Woodward reported, Greenspan saw the
traumatized
worker as

someone who felt job insecurity in the changing economy and
so was resigned to
accepting smaller wage increases. He had talked with business
leaders who said their
workers were not agitating and were fearful that their skills
might not be marketable if
they were forced to change jobs. (Woodward 2000, 163)
With wages held in check while the economy boomed,
inequality soared during
the late 1990s. In 1997, responding to a question from
representative Patrick
Kennedy, Greenspan, who made a science of public evasiveness,
blamed the
resulting growth in inequality on technology and education,
excusing his own
contribution:
It is a development which I feel uncomfortable with. There is
nothing monetary policy
can do to address that, and it is outside the scope, so far as I am
concerned, of the issues
with which we deal. (Greenspan 1997b)

I do not believe that Greenspan ever used the expression,
“traumatized worker” in
his public pronouncements. He always chose his words
carefully, and he perfected
a language that was legendary for its obscurity. Still, his less
inflammatory words
conveyed the same message. For example, he testified before
congress,
The rate of pay increase still was markedly less than historical
relationships with labor
market conditions would have predicted. Atypical restraint on
compensation increases
has been evident for a few years now and appears to be mainly
the consequence of
greater worker insecurity. (Greenspan 1997a, 254)
Greenspan was correct in his assessment of the situation facing
workers. He had
numbers to back him up, reporting
As recently as 1981, in the depths of a recession, International
Survey Research found
twelve percent of workers fearful of losing their jobs. In today’s
tightest labor market

in two generations, the same organization has recently found
thirty seven percent
concerned about job loss. (Greenspan 1999)
WRPE 5-3 292 01/09/2014 10:31
POWER 293
Greenspan was not the only official at the Federal reserve who
appreciated the
benefit of low unemployment without wage increases. One of
the governors of the
Federal reserve, Edward W. Kelley Jr, spoke up at a meeting of
the Open market
committee about “the good results that we are getting now.” He
went on to say
I don’t know how much, (sic) has to do with the so-called
traumatized worker. How
long is the American workforce going to remain quiescent

without the compensation
increases that it thinks it should get? When employment is as
strong as it is right now,
I don’t think we can depend on having permanently favorable
results in that area. This
has been a rather big key to the present happy macro situation
where we have a high
capacity utilization rate and a relatively low inflation rate. We
all feel rather good about
that. (Kelley 1995)
Economists also realized what was happening to labor. Not long
after Greenspan’s
comments about identifying speculative bubbles, Nobel laureate
Paul Samuelson
told a conference sponsored by the Federal reserve Bank of
Boston that “America’s
labor force surprised us with a new flexibility and a new
tolerance for accepting
mediocre jobs” (Samuelson 1998, 36).
Briefly: Power and labor economics
contemporary economists have gone further to rule out the role
of an imbalance

of power between workers and employers. Instead, economics
represents the
job market as a voluntary arrangement. two highly respected
economists—one
of whom was the instructor in my freshman class in
economics—compared the
relation between employer and employee to that between
shopper and grocer:
The firm has . . . no power of fiat, no authority, no disciplinary
action any different in the
slightest degree from ordinary market contracting between any
two people. . . . He [an
employer] can fire or sue, just as I can fire my grocer by
stopping purchases from him or
sue him for delivering faulty products . . . To speak of
managing, directing, or assigning
workers to various tasks is a deceptive way of noting that the
employer continually is
involved in renegotiation of contracts on terms that must be
acceptable to both parties.
Telling an employee to type this letter rather than to file that
document is like my telling
a grocer to sell me this brand of tuna rather than that brand of
bread. (Alchian and

Demsetz 1972, 777)
Business Power over Workers and consumers
Although the use of power to take advantage of workers is
important, power
under capitalism has other numerous dimensions. For example,
Schumpeter made
WRPE 5-3 293 01/09/2014 10:31
the case that large firms often act as corespectors; i.e., they
both compete and
cooperate. Such corporate cooperation may be intended to wield
power against
suppliers, distributors, the public, or even competitors, which
are not involved in
the collusion.

Of course, businesses also wield power on their own. For
example, business
does everything possible to take advantage of consumers
without losing too
many customers. to avoid unnecessary controversy, I will ignore
the use of
advertising that saturates capitalist society. Although the
sophisticated use of art,
demographics, and psychology to control consumers’ minds may
be seen as an
exercise in power, I will not make that case here.
One could also dismiss the requirement that consumers sign
agreements before
consummating a purchase as an exercise in power; however,
such voluntary
agreements often involve the purchasers waving any rights to
sue the sellers.
Instead, the consumer is typically compelled to accept the
judgment of a supposedly
impartial mediator of the company’s choosing.
classifying the seemingly arbitrary imposition of fees, which
have no

relationship to business costs, as exercises in power would seem
to be less
controversial, especially because the customer may not even be
aware of the
possibility of such fees.
the power over consumers is not unrelated to the power over
workers. In the
early 19th century, economists, such as Simon Patten, were
explaining to workers
that they should see themselves as consumers rather than as
workers. this tactic
made perfectly good sense for capital because workers, who
labored side by side
with other workers, were more likely to feel some sense of
solidarity with each
other. In contrast, consumption is an individualistic activity.
taken to extremes,
consumers can even compete with each other in their
consumption.
the propagandists of the time were clear that women, who were
not in the
workforce, would be easier targets for pushing this perspective.
the hope was that

they could push their husbands to make them work harder in
order that they could
enjoy more consumer goods.
competitive Business Power
Businesses also use power in competing with other businesses.
Economists tend
to emphasize the benign consequences of competition: lower
prices, improved
quality, and even entirely new products.
competition also has a dark side. the earlier discussion of the
macroeconomic
use of power to affect the level of wages is paralleled by a much
more direct,
microeconomic application of raw power in which business
attempts to lower
wages and intensify work. In business-to-business competition,
power is used to
WRPE 5-3 294 01/09/2014 10:31

POWER 295
hobble competitors. corporate chains will choose to open outlets
strategically in
order to stymie competitors’ expected business strategies.
Businesses also engage in predatory pricing, meaning that they
lower prices to
a level that drives competitors out of business. Once the
competition disappears,
the predator can charge prices that take advantage of consumers
who are deprived
of alternatives.
One of the most effective competitive measures is to take
advantage of the legal
structure of intellectual property. corporations sue one another
in order to prevent
them from carrying on business of one kind or another.
Presently, companies are
spending billions of dollars for the patents owned by defunct
companies. they

intend to use them either to sue other companies or defend
themselves when other
companies take them to court. While textbooks describe the
beneficial results of
competition, this sort of deadweight loss goes unmentioned. In
the end, consumers
will bear the cost of all this exercise in power.
Power is a factor in the relationship between businesses and
their suppliers
or distributors. A classic example is the relationship between
Vlasic Pickles
and Walmart. the boutique pickle company wanted to take
advantage of the
marketing scope of Walmart. the giant retailer, however, made
increasingly
difficult demands of Vlasic, which destroyed its reputation as a
premium brand.
For example, Walmart demanded that the pickles be packaged in
gallon jars.
Similarly, charles Kernaghan has documented the damage done
when, Walmart
demands increasingly low prices from its sweatshop suppliers,
who have no choice
but to squeeze more out of the young girls who are already

working in subhuman
conditions.
In other cases, power lies with the producer rather than the
distributer, imposing
conditions on the distributer. recall how microsoft required that
producers who
installed the Windows operating system had to include
microsoft’s Internet
Explorer.
the state has remained in the background of this discussion of
power because
its role in many cases is self-evident, most obviously in the
efforts to hold
down wages. the use of the Federal reserve in wage
determination would be
somewhat irrelevant in the absence of the ability of the state to
restrain workers’
collective action.
Alternatively the state might act to check corporate power, but
such action
typically awaits a crisis that temporarily discredits business.
Once the crisis passes,

such government regulation tends to erode.
Any discussion of the corrosive effects of intellectual property
must take notice
of the power of the courts to enforce even ridiculous intellectual
property claims.
In terms of competition among competitors, such as in the
railroad example,
WRPE 5-3 295 01/09/2014 10:31
alongside J.P. morgan’s consolidations, state regulation served
to further weaken
the force of competition.
that this discussion would not be possible in most North
American venues
brings us to another dimension of power. As an economist, I am

sensitive to the fact
that radical analysis has been virtually banned from the
discipline. In the process,
the subject of power largely disappears. to the extent that
monopoly exists, it does
so only because of government favoritism. Of course, the
systematic exclusion of
economists, who might have any curiosity about matters of the
exercise of power,
is, in itself, an inexcusable exercise of power.
references
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costs, and Economic Organization.”
American Economic Review 62 (5): 777–96.
Epstein, l., W. m. landes, and r. A. Posner. 2013. “How
Business Fares in the Supreme court.”
Minnesota Law Review 97 (4): 1431–71.
Galbraith, J. K. 1976. “Power and the Useful Economist.”
American Economic Review 63 (1): 1–11.
Greenspan, A. 1997a. “Statement before the committee on
Banking, Housing, and Urban Affairs, U.S.

Senate (26 February).” Federal Reserve Bulletin 83 (4): 254–59.
Greenspan, A. 1997b. “testimony before the Subcommittee on
domestic and International monetary
Policy of the committee on Banking and Financial Services
House of representatives (5 march).”
http://commdocs.house.gov/committees/bank/hba38677.000/hba
38677_0f.htm.
Greenspan, A. 1999. “the Interaction of Education and
Economic change: Address to the 81st Annual
meeting of the American council on Education.” Washington,
dc, February 16. http://www.
federalreserve.gov/boarddocs/speeches/1999/19990216.htm.
Greider, W. 1987. Secrets of the Temple. New york: Simon &
Schuster.
Kelley, E. W., Jr. 1995. “Federal Open market committee
meeting transcripts.” August 22. http://
www.federalreserve.gov/monetarypolicy/files/FOmc19950822m
eeting.pdf.
melloan, G. 2003. “Some reflections on my 32 years with
Bartley.” The Wall Street Journal,

december 16.
mussa, m. 1994. “U.S. monetary Policy in the 1980s.” In
American Economic Policy in the 1980s,
edited by martin Feldstein, 81–145. chicago: the University of
chicago Press.
Orwell, G. (1943) 1968. “looking Back on the Spanish War.” In
The Collected Essays, Journalism
and Letters: My Country Right of Left, 1940–1943, vol. 2,
edited by George Orwell, 249–67. New
york: Harcourt, Brace & World.
Perelman, m. 2000. The Invention of Capitalism: The Secret
History of Primitive Accumulation.
durham, Nc: duke University Press.
Perelman, m. 2006. Railroading Economics: The Creation of the
Free Market Mythology. New york:
monthly review Press.
Perelman, m. 2011. The Invisible Handcuffs of Capitalism: How
Market Tyranny Stifles the Economy
by Stunting Workers. New york: monthly review Press.

Samuelson, P. A. 1998. “Summing up on Business cycles:
Opening Address.” In Beyond Shocks: What
Causes Business Cycles (Federal reserve Bank of Boston
conference Series 42), edited by Jeffrey
c. Fuhrer and Scott Schuh, 33–36. Boston, mA: the Federal
reserve Bank of Boston. http://www.
bos.frb.org/economic/conf/conf42/con42_02.pdf.
The Wall Street Journal. 1979. “monetary medicine: Fed’s
‘cure’ Is likely to Hurt in Short run by
depressing: Economy, Analysts Say.” The Wall Street Journal,
October 9, 1, 6.
Woodward, B. 2000. Maestro: Greenspan’s Fed and the
American Boom. New york: Simon & Schuster.
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The Hierarchical Abuse of
Power in Work Organizations
Donald Vredenburgh
Yael Brender
ABSTRACT Although much theoretical and empir-
ical research has examined organizational power,
virtually none has addressed the hierarchical abuse of
power in organizations. Managers' incentives and
discretion and subordinates' dependencies define the
abuse of power as an important organizational issue.
This paper offers a conceptualization and process
model to help further theoretical and applied under-
standing, and it considers the ethical nature of power
abuse. Two dimensions, disrespect for individual
dignity and interference with job performance or
deserved rewards, conceptualize the interpersonal

abuse of power. Behavioral examples of each dimen-
sion are provided.
The process model delineates powerholders'
motives to abuse power and indicates individual
attributes that increase the probability of their pur-
suing these motives. Organizational conditions that
allow or encourage the abuse of power and managers'
particular sources of power interact with these motives
and attributes to define decisions about abusing
power. Norms and considerations of risk influence
these decisions. The decision to abuse power leads
to the enactment of power strategies, and they
generate intended and unintended outcomes. The
process model presented here recognizes an emotional
component of the hierarchical abuse of power.
Donald Vredenburgh is a professor of organizational
behavior in the Department of Management at Baruch
College, The City University of New York. His research
has focused on organizational design, the exercise of
power in organizations, and organizational politics and
has appeared in numerous academic journals.
Yael Brender recently received her doctorate in organization

and policy studies from the Ph.D. in Business Program
of Baruch College, The City University of New York
Graduate School. She published a paper on organiza-
tional democracy. Her previous education occurred at
Hebrew University offerusalem.
Power is necessary and problematic in organiza-
tions. Defined as the ability to get things done
the way one wants them to be done (Salancik
and Pfeffer, 1977), power in organizations lacks
precise boundaries yet carries pervasive impor-
tance. Organizational power requires responsi-
bility because of opportunities for abuse, e.g.
arbitrary personnel actions or demands for
personal service. Lord Acton's assertion that
power tends to corrupt (1979) suggests that indi-
viduals possess incentives to abuse it.
Much organization research has addressed
power, but that research has not incorporated
the hierarchical, interpersonal abuse of power.
The issue has received some popular attention
(Goleman, 1986; Terkel, 1972), but advances in
organizational knowledge require research into
the hierarchical abuse of power. In organizations

managers can abuse organizational members
or the organization itself through power. The
present focus is on the hierarchical, interpersonal
abuse of organizational members, specifically on
managers' abusive exercises of powder with sub-
ordinates, and not on the personal use of an orga-
nization's other resources for private purposes.
The purposes of this paper are to conceptu-
alize the hierarchical, interpersonal abuse of
power, to model the process of the abusive
exercise of power, and to address directly the
ethics of the abuse of power in work organiza-
tions. No assumptions about the pervasiveness
of power abuse or the desirability of equalizing
power in organizations underlie this considera-
tion. Rather, the intent is to contribute to an
understanding of an important organizational and
social issue through initial conceptualization and
theory. The paper conceptualizes the hierarchical
abuse of power dimensionally and discusses
fournal of Business Ethics 17: 1 3 3 7 - 1 3 4 7 , 1998.
© 1998 Kluwer Academic Publishers. Printed in the
Netherlands.

1338 Donald Vredenburgh and Yael Brender
pertinent level of analysis issues, develops a
process model incorporating individual charac-
teristics, situational conditions, strategic decisions
and outcomes, and applies ethical criteria to the
abuse of power in work organizations.
Opportunities for the abuse of power
The exercise of power in organizations occurs
frequently and diversely. Through formal
authority, cultural norms, technical expertise, and
organizational politics, individuals with power
attempt to influence others (Mintzberg, 1983).
However most instances ofthe exercise of power
involve hierarchical authority directly or con-
textually. While recent organizational restructur-
ings and advances in information technology
may have altered some organizations' hierarchies
(Zuboff, 1988), the continued prevalence of these
structures, with their considerable potential for

abuse, defines a need for attention to the hierar-
chical abuse of power.
Individuals in organizations possess incentives
to abuse power because of its importance in
affecting action and acquiring rewards, its status
as a valued resource, and its provision of
autonomy. Power represents the currency in
organizations that allows individuals and groups
to gratify needs and attain goals. In addition insti-
tutionalized forms of power constitute a primary
source of privilege and prestige in a democratic
society. Kipnis (1972) has delineated the temp-
tations powerholders confront to manipulate the
less powerful. Due to hierarchical authority,
resource control, and network centrality (Astley
and Sachdeva, 1984), managers have considerable
opportunity to abuse power. Because of few per-
ceived financial benefits versus costs of compre-
hensively controlling managerial discretion,
organizations trust managers with considerable
autonomy in the exercise of power. The use of
power within economic organizations remains a
private issue in a capitalistic democratic society
such as the United States (Nord, 1978).

Two aspects of power that make managers
vulnerable to abusing it are its relational nature
and its possible nonrational use. With regard to
the relational nature of power, dependency
characterizes longitudinal, hierarchical relation-
ships in work organizations (Kotter, 1985). The
dependency facet of these exchange relationships
makes the possible abuse of power a potentially
continual problem in organizations where hier-
archical relationships mean subordinates depend
on superiors for important rewards without
recourse to other sources (Emerson, 1962).
The organizationally rational application of
power can harm subordinates, but the nonra-
tional use of power heightens the likelihood of
abuse. Power in organizations is context specific
according to Pfeffer (1981), and organizations are
contexts of manifest and latent conflicts. Often
conduct of these conflicts becomes political or
emotional, such that power can be used for orga-
nizationally nonrational conflict behavior.

Conceptualization of the hierarchical ahuse
of power
Ultimately the organizational rationale for the
interpersonal exercise of power lies in functional
effects for job performance (Allen and Porter,
1983). Power exists in organizations to facilitate
proficient, coordinated task performance, and this
power and performance relationship is often
realized through rewards. However organizations
are not pure meritocratic entities, and managers
can affect subordinate performance adversely as
well as positively.
In addition, a powerholder's interpersonal
exercise of power can result, inadvertently or
purposefully, in changes in the subordinate's felt
respect and dignity. This is analogous to leader-
ship practices generating unplanned attitudinal
outcomes (House and Baetz, 1979). Nord (1978)
has discussed the relationship between dignity
and power in organizations, and Kipnis (1972)
has described the lessening of respect for subor-
dinates that many powerholders experience.
Similarly, Lukes (1986) asserted that power-

holders' desires and beliefs affect others' well-
being.
Thus two premises about the exercise of
power underlie the conceptualization of the
hierarchical abuse of power developed here: (1)
A powerholder's exercise of power can increase
The Hierarchical Abuse of Power in Work Organizations 1339
or decrease others' feelings of dignity and
self-respect, and (2) The exercise of power can
contribute to or diminish subordinates' job per-
formance and acquisition of deserved rewards.
Figure 1 presents a conceptualization of the
hierarchical exercise of power. Because the abuse
of power is an instance of the exercise of power,
the figure suggests two defining dimensions of
the abuse of power: disrespect for individual
dignity and obstacles to job performance and/or
deserved rewards. These two dimensions, which
resemble the procedural and distributive dimen-

sions, which resemble the procedural and dis-
tributive dimensions of organizational justice
discussed by Tyler and Bies (1990), receive equal
weights in this conceptualization. The hierarchical
abuse of power is defined as acts which manifest dis-
respect for a subordinate's dignity or provide obstacles
to a subordinate's performance or deserved rewards.
Figure 2 presents some examples of these
defining dimensions of the abusive exercise of
power. These Figure 2 examples derive primarily
from a survey conducted over four years with a
convenience sample of 505 MBA students at an
urban United States business school; 369 students
employed full-time for at least two years provided
examples that led to the identification of the
abuse of power dimensions. Students were asked
via an open-ended, anonymous questionnaire,
""Sometimes some managers in organizations
abuse their power. If relevant, would you please
provide an example of a situation you have expe-
rienced or know about in which a boss exer-
cised power abusively. What did the boss do that
made it abusive?" Respondents were also asked

subordinate's Job Performance or Rewards
Functional
Supportive
Respect
for
Subordinate's
Dignity
Helpful- -Harmful
Dysfunctional
Figure 1. Hierarchical interpersonal exercise of
power.
Dimensions
Disrespect for Individual
Dignity
obstacles to Job Performance

or Rewards
Managerial Examples
Impose demands for illegal
cooperation
Physically harass
Verbally harass or embarrass
publicly
Insist on attitudinal conformity
Gossip harmfully
Exact personal service
Manipulate dependency
Lie, exaggerate, or make insincere
promises
Hake arbitrary personnel selection
decisions
Assume credit for subordinates'
work deceptively
Deprive subordinates of resources

necessary for task
performance
DiscrimInateregardingperformance
appraisal
Allocate rewards arbitrarily
Attribute own poor performance to
subordinates
Require attendance at company
social events
Figure 2. Dimensions and examples of the hierarchi-
cally abusive exercise of power.
to provide examples of the supportive exercise of
power. This procedure resembles that used in the
research on power by Kipnis, Schmidt and
Wilkinson (1980) and is particularly pertinent to
early conceptualization and model development.
The exercise of power is abusive to subordi-
nates when its outcomes are both harmful to

dignity and dysfunctional for performance or
deserved rewards. However, a manager abuses
power when either defining condition obtains,
for example a manager purposely withholding
information necessary for improved task per-
formance from a subordinate exercises power
dysfunctionally for job performance yet not
disrespectfully of individual dignity. Alternately,
a manager who engages in public, verbal task
harassment that induces incremental productivity
is behaving disrespectfully of dignity yet func-
tionally for job performance. In both instances,
an abuse of power occurs.
The abusive exercise of power may be indirect,
i.e., not involving direct interaction between a
manager and subordinate. When one or more
subordinates receives undeserved preferential
rewarded treatment, for example, those being
comparatively deprived suffer an abuse of power.
When a manager gossips personal, confidential
information, the subject endures an abuse of
power. In the first case deserved rewards do not
ensue, while in the second the manager fails to
respect a subordinate's dignity.

Levels o f analysis
Because of the relational nature of the exercise
of power, a conceptualization ofthe hierarchical
abuse of power should focus on managers and
subordinates' relationships. Much organizational
power derives from an organization's hierarchical
structure that generates interpersonal power rela-
tionships. Tyler and Bies (1990) have discussed
the importance of focusing on interpersonal
context, including respect, for understanding the
exercise of power. Because individuals perpetrate
abuses and individuals suffer abuses, the appro-
priate unit of analysis for initial research into the
abuse of power is the individual. Future research
may want to focus on manager and subordinate
dyads, organizational units, or organizational
cultures as the appropriate level of analysis.
Subordinate perceptions. The present conceptual-

ization recognizes the primary importance ofthe
individual subordinate in the hierarchical abuse
of power. Insofar as the subordinate suffers the
wrong when a manager abuses power, the sub-
ordinate's perception ofthe manager's exercise of
power should indicate the presence of abuse. A
subordinate perceives a given instance of a boss's
exercise of po^ver as either a (1) Legitimate, efFec-
tive use of power, (2) Legitimate, ineffective
exercise of power, or (3) Abusive exercise of
power. The distinction between a legitimate,
ineffective use and a nonlegitimate, abusive use
is a perceptual attribution of intent or motive.
When a subordinate feels diminished in dignity
or obstructed in performance or rewards and
attributes to the manager one of the personal
motives indicated in Figure 3, the subordinate
perceives an abuse of power and not just a
mistaken use.
Proposition 1: The subordinate's perspective
should define the hierarchical abuse of
power because it is his or her dignity or
performance/reward that is harmed.

Brass and Burkhardt (1993) demonstrated the
feasibility of the perceptual measurement of orga-
nizational power. Operationalizing the perceived
abuse of power will require the psychometric
development of a scale for subordinates that
contains items describing a boss's behavior. The
scale will tap subordinate perceptions of rather
salient behaviors and will exclude common orga-
nizational behaviors, such as simple disagreement,
from being characterized as abusive. In addition
the scale must incorporate attributions of intent
and thus distinguish legitimate, ineffective exer-
cises of power from abusive ones.
A possible problem of perceptual bias remains.
t
Powarholders' Motives:
Greater control
Personal service
Goal attainment
Loyalty and obedience
Punishment/favoritism

Activating Condition!:
Secrecy
Performance pressure
Ends/means uncertainty
Riak
Conaideration
Powarholdars'
Attributes:
High need for power
Low self-esteem
High egocentrism
Low caring about people
Low ethical sensitivity
Risk talcing propensity
High emotionalism
Souraaa:
Position
Resources

Personal appeal
Past action
Powar Abuaa
Daciaiona
Nor ma
"" Stratagiaa """•
Direct pressure
Upward appeal
Exchange
Ingratiation
Inspiration
Outcomaa
Intended/
unintended
Dignity
Performance or
rewards

Figure 3. The hierarchically abusive exercise of power.
such that select subordinate attributes may
increase the probability of perceiving abuse. For
example, a subordinate's attitude toward authority
figures may bias the subordinate's perception of
a boss's acts. As with perceptual measures of other
constructs, such as leadership, research addressing
the abuse of power must examine subordinate
attributes possibly associated with differential per-
ceptions of a boss's abuse of power.
Unit norms. In organizations the hierarchical,
interpersonal abuse of power occurs at the unit
level of analysis as well as the individual level.
Because of the importance of power, patterns of
abuse lead over time to the formation of unit
norms. The frequency and visibility of abusive
power acts within a unit give rise to norms about
the exercise of power, resulting in some degree

of expectation and acceptability. In some orga-
nizations the hierarchical abuse of power may
become an accepted part of the organizational
culture.
Proposition 2: Hierarchical acts of power
abuse, undertaken over time in a given
organizational unit, lead to the formation of
unit norms.
The abuse of power may be a good example
of a complex organizational concept virtually
requiring multilevel treatment in the organ-
izational sciences (Dansereau, Alutto and
Yammarino, 1984). The multilevel analysis of
power behavior can be used to examine the abuse
of power at individual and unit levels.
The process of the abusive exercise of
power
While a previously unexamined concept such as
hierarchical abuse of power requires the kind of
explicit conceptualization presented in Figure 1,
further knowledge of such a complex concept is

available from a process model. A process model
is a linear representation of a set of variables that
define a theoretically meaningful sequence of
related conditions and actions. A process model
in organizational research can convey how indi-
vidual attributes and organizational conditions
interact as individuals make decisions and under-
take actions that have outcomes. Conger and
Kanungo (1877) have demonstrated the utility of
process models for power research, and PfefFer
(1992) has discussed organizational power in
terms of relationships among individual attrib-
utes, power sources, situational conditions, and
infiuence strategies, similar to Figure 3. Also,
Porter, Allen and Angle (1981) developed a
power process model incorporating situational
conditions, individual attributes, decisions to
exert power, influence methods, and outcomes.
In process terms, the hierarchical abuse of
power is an instance of the more general hierar-
chical exercise of power. The general exercise of
power in organizations involves acts by which an
individual attempts to infiuence another's

behavior, attitudes or outcomes according to par-
ticular preferences. The subset of abusive acts of
power derives from somewhat distinctive motives
and attributes and additionally manifests disre-
spect for the other's inherent dignity or dimin-
ishes the other's performance or rewards. Figure
3 depicts the process of the abusive exercise of
power in organizations.
The process model attempts to delineate indi-
vidual motives and attributes, organizational con-
ditions, decisions, strategies, and outcomes
comprising the abuse of power. According to this
model, primary causes of the abusive exercise of
power derive from individual powerholders'
motives and attributes.
Individual motives and attributes
In addition to using power directly for task
accomplishment, powerholders often possess
personal motives to exercise power (Miner,
1978). Motives for the interpersonal abuse of
power include greater control (Manz and Gioia,
1983; Mechanic, 1962). As Mechanic (1962)

indicated, organizational members seek greater
control by manipulating the organization's struc-
ture. Other motives for abusing power include
desire for personal services, personal and/or orga-
nizational goal attainment (Kipnis, 1984), expres-
sions of loyalty and obedience, and punishment/
favoritism tovard select individuals. Clearly these
motives are not mutually exclusive. They repre-
sent diverse reasons a manager might use discre-
tionary power abusively to pursue his or her
interests. Figure 3 shove's these motives.
Proposition 3: Managers who abuse power do
so in pursuit of select motives.
Some individual attributes increase the likeli-
hood of a manager pursuing these motives and
abusing power. As shown in Figure 3, a power-
holder's high need for power (McClelland, 1965)
likely increased the probability of exercising

power abusively. More specifically, those with a
personalized power need, characterized by little
self-control, impulsiveness, emotional immatu-
rity, dominance, and manipulativeness, will seek
to abuse power as contrasted with those pos-
sessing a socialized power need (McClelland,
1965). Another individual attribute pertinent to
the interpersonal abuse of power is self-esteem.
Bianchard and Peale (1988) suggest that high self-
esteem is inversely associated with the unethical
use of power, explaining that high self-esteem
allows an individual to withstand pressure to
do what is popular, expedient or lucrative.
Defensive, insecure behavior is less likely when
self-esteem is high.
As indicated in the Figure 3 process model,
other individual attributes that can increase the
probability of a manager abusing power include
egocentrism (Schwartz, 1987), limited concern
for people (Blake and Mouton, 1964), ethical
insensitivity including Machiavellianism (Christie
and Geis, 1970), a propensity for risk taking
(Porter et al., 1981), and emotionalism. House
(1988) indicated the relevance of need for power,

self-esteem, and Machiavellianism to the exercise
of power.
Emotions, e.g., vindictive anger, compulsive
anxiety or represented frustration, can cause
abusive acts. Conger and Kanungo (1988) have
discussed the pertinence of emotional arousal
states to power processes in organizations.
Schweiger, Anderson and Locke (1985) have
empirically demonstrated the pertinence of
emotions in decision making processes, and
Kirkpatrick and Locke (1991) have asserted the
importance of emotional stability to a leader's
relationships with subordinates. Of course cog-
nitive and emotional interactions are likely, par-
ticularly in risky environments (Grossberg and
Gutowski, 1987). Thus Figure 3 includes emo-
tionalism as a powerholder attribute pertinent to
the abusive exercise of power, and the following
proposition summarizes the powerholders' attrib-
utes section of the Figure 3 process model.
Proposition 4: Select individual attributes
increases the likelihood of an individual

manager abusing power.
Organizational conditions
Individual motives and attributes of the power-
holding superior are only part of the determi-
nants of the hierarchically abusive exercise of
power, as depicted in Figure 3. Certain condi-
tions in organizational units give rise to decisions
or actions involving power. The Figure 3 model
presents these organizational conditions in terms
of activating conditions and sources of power.
McCall (1979) indicated that if there is some
ambiguity or discretion about how decisions are
made, particularly if important resources are
involved, affected individuals will use their
power. Organizational conditions common to
managerial roles, such as secrecy, means/ends
uncertainty) (Pfeffer, 1982), and performance
pressure, define activating opportunities for
power. While these situational conditions that
activate power can result in organizationally func-
tional acts, they can also generate dysfunctional
and perhaps abusive acts of exercising power.
Secrecy in particular is a condition allowing or

facilitating the abuse of power because it lessens
risk.
Sources of power refer to specific bases of
capabilities to provide some performance or
resource considered important to the organiza-
tion and not otherwise easily available (PfefFer,
1982). Concentrating on structural sources,
Astley and Sachdeva (1984) identify hierarchical
authority, resource control and network centrality
as important sources. Individuals or units will
possess power to the extent that they are placed
to address important problems facing the orga-
nization, control resources valued by others, are
timely in bringing problems and resources
together, are not easily substitutable, and have
successfully used their power in the past (McCail,
1979). Yukl and Falbe's (1991) work empirically
established the distinction between position
sources and personal sources, i.e., sources of

power derived from organizational position and
those based on an individual's attributes. Power
sources usually involve role autonomy and the
opportunity to instill dependence within others
(Pfeffer, 1981), conditions which are pertinent to
the abuse of power.
The capability to abuse power derives from the
sources of power pertinent to any exercise of
power in organizations and are summarized in
Figure 3 in terms of position, resources, personal
appeal and past action (McCail, 1979). For some
managers the longitudinal exercise of power can
lead to the expectation to control others without
resistance and to the loss of sensitivity to subor-
dinates' conditions and preferences. Kipnis (1972)
found that the exercise of power led to devalu-
ation of the less powerful and increased feelings
of causation by some powerholders.
Proposition 5: Powerholders' motives and
individual attributes interact with organi-
zational activating conditions and sources of
power to frame power abuse decisions.

Decisions, strategies and outcomes
The interaction of managers' power motives and
individual attributes with activating conditions
and power sources results in powerholders con-
fronting decisions, as reflected in the Figure 3
process. These decisions, which are sometimes
rather implicit and limitedly considered, concern
whether or not to abuse power and which strate-
gies to engage (Kipnis, Schmidt and Wilkinson,
1980). Deciding whether or not to abuse power
may include a consideration of the possible risk
to be incurred, whereby a manager attempts to
determine the likelihood of realizing beneficial
outcomes rather than costs in a particular cir-
cumstance.
Managers may assess subordinates' attributes as
possible indicators of likely reactions to abuse
(Loverd, 1989). Such risk considerations would
reflect the relational nature of the exercise of
power, in that they involve a manager's percep-
tions of a particular subordinate's attributes as
determinants of actions. Subordinate character-

istics such as submissiveness and obedience
(Milgram, 1974) might encourage a boss to
perceive little risk and act abusively. According
to Lukes (1986), some subordinates allow supe-
riors to modify the subordinates' desires and
beliefs in opposition to their own interests,
thereby removing risk for the superior. However,
managers abusing power do not always undertake
a risk consideration involving possible subordi-
nates' reactions.
The manner in which organizational members
decide to exercise power is subject to normative
influence. Boeker (1989) found institutional
forces derived from an organization's founding
important for the functioning of power in orga-
nizations. Organizational values about the impor-
tance of human resources and norms about the
exercise of power will affect the extent to which
managers exercise power abusively (Loverd,
1989). Figure 3 includes these risk and norm
variables.
Proposition 6: Organizational norms and con-
siderations of risk can moderate decisions

about abusing power.
The Figure 3 process model suggests that the
next phase in the abuse of power process involves
the selection of particular power strategies.
Having decided to abuse power in pursuit of par-
ticular motives, powerholders must determine
how to proceed, i.e., they must select strategies.
Choice of strategies appears contingent on the
powerholder's motives and individual attributes
as well as his or her power sources, the partic-
ular organizational conditions, the pertinent
norms, and the target's attributes, as Figure 3
indicates. Kipnis, Schmidt and Wilkinson (1980)
and Yukl and Falbe (1990) described interper-
sonal influence strategies used in organizations.
Some of these strategies would be used by power
abusers. They would commonly act through
direct pressure, but upward appeal, exchange,
ingratiation and inspiration strategies also lend
themselves to the abuse of power. Coalition,

rational persuasion and consultation strategies
probably do not because of their public or
detailed nature.
Proposition 7: Powerholders abuse power
through the strategies of direct pressure,
upward appeal, exchange, ingratiation and
inspiration.
While these influence strategies generally
involve direct interaction between powerholder
and target, some instances of power abuse do not
involve direct interaction. For example an abused
individual may remain unaware, at least in the
short run, of not having received just rewards in
comparison to others.
The powerholder abusing power in pursuit of
particular motives presented in Figure 3 views
outcomes in terms of those motives. For example
the abusive soliciting of loyalty or obedience leads
to assessments in terms of those demonstrated
behaviors. However not all outcomes of the
abusive soliciting of loyalty or obedience leads

to assessments in terms of those demonstrated
behaviors. However not all outcomes of the
abusive exercise of power are intended outcomes.
Examples of unintended outcomes include
possible changes in interpersonal respect, trust
and liking (Kipnis, 1984).
Proposition 8: Outcomes of the abusive
exercise of power include unintended ones
affecting the quality of interpersonal rela-
tionships as well as intended ones that
address the powerholder's particular motives.
In addition, the abusive exercise of power
affects individual dignity and/or performance or
rewards, which are the Figure 1 defining dimen-
sions of the interpersonal abuse of power. The
dignity and performance/reward outcomes of the
exercise of power provide the bases for under-
standing the hierarchical abuse of power in
organizations.
The ethics of hierarchical power abuse
The possible abuse of power in a society's insti-

tutions is an important social issue. Lewin (1945)
indicated that a significant contribution social
research can make to society is to provide insight
into the legitimate and nonlegitimate aspects of
power.
The opportunities and incentives for the
abusive exercise of power in organizations
suggests that the ethical nature of organizational
power deserves analytical consideration. The
present conceptualization and model of the abuse
of power facilitate that consideration. The extent
to which particular acts involving the abusive
exercise of power violate ethical criteria deter-
mines the ethics of power abuse.
Numerous ethical criteria apply. Manifesting
respect for a subordinate's essential human dignity
is fundamentally a moral issue, based on the
premise that human beings have inherent value
as ends in themselves (Heisler and Houck, 1977).
If individuals deserve dignity in and of them-
selves, workplaces should not allow the manage-
rial exercise of power to devalue the human

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