Contrack International, a private US corporation and the managing partner of the $325 m contract to rebuild Iraq's transportation infrastructure, announced its withdrawal from Iraq today. The company felt it had a responsibility to do so. Here's why:
- Transaction costs skyrocketed. Up to 60% of the dollars spent on contract completion were going to security. Further, suppliers (such as its sole supplier of gravel), withdrew due to fears of reprisals.
- Systemic chaos due to personnel problems. An ongoing campaign of violence directed against corporate personnel resulted in poor morale and defections. The corporate HQ was attacked 2.5 months ago and the body of an Egyptian driver for the company was found shot in the head with the word "collaborator" attached to his chest.
- Decision making was stalled. The FUD (fear, uncertainty, and doubt) of the guerrilla campaign prevented efficient decision making. The company was only able to complete $30 m of work over last 8 months.
Market Disruption via Corporate Targeting
Modern states and militaries are totally reliant on corporate outsourcing (critical allies in this war). As this relationship is currently configured, this dependency is a vast underbelly of risk. Global guerrillas disrupt the psychology of the markets that make this outsourcing possible through leveraged attacks on corporate systempunkts. Corporations are not obligated to deviate from the standards of corporate governance. As a result, they will cut and run from a conflict when they find themselves isolated across the following psychological vectors (read Boyd for more):
- Moral. A company is morally isolated when it cannot meet its obligations to its stakeholders. These include profits to shareholders and safety/morale to employees. Management teams that don't meet their obligations to these stakeholders are either summarily replaced or held legally/financially liable.
- Mental. Uncertainty is Kryptonite to corporate decision making. Too much uncertainty and corporate valuations fall. If an operation introduces new uncertainties that taints daily decision making, it will likely terminate it.
- Physical. In order to do business, corporations enmesh themselves in a deep web of connections. If a corporation's activities put their relationships with suppliers, financiers, and partners at risk, they are obligated to cease them.