Author: noah_roberts1

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M. Lipsitz Co.

`Noah Roberts

In 1895, Louis Lipsitz began a small recycling business on Bridge Street. The business had a humble start, beginning off by buying and selling scrap copper, iron, brass, rubber, glass and animal hides and bones. Over time his business started to grow expanding to different and bigger materials, while at home him and his wife started to raise a family. Eventually in 1933 Melvin Lipsitz, Louis’s son, joined his father and they relocated their business to the corner of Franklin and First Street in downtown Waco. Melvin married Thelma Sheff in 1935 ,and for fifteen years they worked together in the business as their family grew. They had a son Melvin Jr. and a daughter Lynn.

The original Louis Lipshitz building (Before name change)

The early Lipsitz and Co. factory would take tons and tons of scrap metal, including junk cars, and use it to make new steel. The industry expanded to be so big to where the new steel produced from the scrap in Waco could end up anywhere from Chicago to Mexico. The industry at this point in 1959 was worth almost $2 billion dollars. Being one of the oldest and largest scrap processors in the southwest, M. Lipsitz Co. had a very big impact on this huge industry.

Lipsitz junkyard cars waiting to be shredded

Because of how large their company was, Melvin and Thelma Lipsitz played large roles in the Industry’s affiliated committees. In 1959, Melvin Sr was the vice president and director of the Gulf Coast Chapter of the National Institute of Scrap Iron and Steel. He had also been named the chairman of traffic transportation for the chapter. He would eventually become the president and chairman of the Gulf Coast Chapter. Thelma Lipsitz was the first woman named Panel Vice Chairman of the convention by the Institute of Scrap Iron and Steel Inc National Trade Associations of the iron and steel scrap industry. This resulted in her being placed on the board of directors for the association. Thelma Lipsitz was also involved in multiple outside organizations. She was elected president of Sisterhood of Temple Rodef Sholom, and was the founder and president of the Progressive club, which held meetings and meals in their home.

Eventually, in 1969, Melvin Lipsitz Sr died. His partner, John Salome, took over management of the company and bought half of it, which he still owns today. Melvin Jr became the vice president of the company while Thelma continued to help out in different ways with the business side of the company.

Melvin Lipsitz Senior (Center) standing with other Scrap Metal Executives

In the 1970s, M. Lipsitz and Co. took more initiative in the clean up of Waco. When there were disasters or fires they would be there helping clean the area and would salvage any materials. They would also provide industries with huge containers which gave the companies a permanent place to keep their metal waste. This was able to reduce pollution as well as provide them with more metal scrap.

In April of 1975, they were approved for a zone change to move to a 3.5-acre industrial building in Elm. They got a car shredder as a part of the city beautification program. Using this they were rapidly eliminating unsightly land pollution in Central Texas.

Car being shredded in the M. Lipsitz Co. shredder

This car shredder was a newer technology and was a big help for Waco. This new machine was able to shred a car in 40 seconds which allowed them to shred around 400 cars a day. Tom Salome, the general manager, said it was one of the most modern and cleanest ways to recycle the metal scrap.

Employees look at the companies new car shredder in the scrap processing facility

However, in 1979 the Lipsitz company was held liable for PCB runoff poisoning the water. PCB-contaminated oils from newly purchased electric transformers had soaked parts of the Lipsitz work cite and the rain water was carrying run off into Lake Brazos. Legal action was taken and they were forced to come up with a plan of how they were going to remove the contaminated soil since the effects of PCB can lead to cancer. The companies who sold the transformers to Lipsitz were also held liable for the contamination, since the M. Lipsitz was not intentionally buying contaminated transformers. It took a couple of years for them to recover, but the clean up was complete and the work cite was safe by 1981.

In 1982, the M. Lipsitz company revamped their recycling initiative and proposed another idea to help clean up Waco. They teamed up with Anheuser Busch to encourage the public to start recycling cans instead of throwing them away or polluting the city with litter. They proposed that both individuals and companies would receive 20 cents per pound of cans returned to the M. Lipsitz Co. Again, this program was able to benefit both parties. M. Lipstiz would receive more metals to be able to reuse, and the city had less garbage lying around. The program went on to be so successful that in 1988 Melvin Lipsitz Jr and Anheuser Busch received the Independent Eagle Award in recognition of their efforts.

The M. Lipsitz company has continued to lead recycling efforts in Waco over the past couple of decades by encouraging events like Earth day and Recycling Day. The M. Lipsitz company continued to expand and now has 10 different locations throughout Texas and Oklahoma. It is still run by Tom Salome and Melvin Lipsitz Jr at their location on Elm street in Waco.

 

 

Brenda Sheppard reminisces of a time when the Lipsitz can recycling initiative was able to impact a homeless member of the community in a positive way. 43:22 – 44:32

 

Bobby Eugene Hopper reflects on the duties of his job at the Lipsitz company before his time serving in the Air Force.

 

 

 

 

Works Cited

Lester, Marla Pierson. “Brenda Sheppard Oral History Memoir.” Baylor University Institute for Oral History 13 May 2003.

Downes, Terry. “Bobby Eugene Hopper Oral History Memoir.” Baylor University Institute for Oral History 1 May 2014.

“Mrs. Lipstiz Named Panel Vice Chairman” The Waco News Tribune [Waco] March 30, 1958 Published: Page 22

“M. Lipsitz & Co, LTD.” M. Lipsitz & Co, LTD, www.mlipsitzco.com/.

General Photo File, Accession #F144, The Texas Collection, Baylor University.
General Photo File, Accession #1265, The Texas Collection, Baylor University.
Lipsitz, Melvin, Accession #N-48, Box 179, Folder 2, The Texas Collection, Baylor University.
M Lipsitz and Company Inc #1263, Business and Industry, The Texas Collection, Baylor University.

“Horse Drawn Engine to Be Returned to Firemen.” The Waco News Tribune [Waco] Date Month Year Published: Page(s).

“Thelma To Wed Waco Man In The Near Future” The Waco News Tribune [Waco] September 24, 1952: Page 22.

“Bert Lipsitz and Daughter Return Home.” The Waco News Tribune [Waco] January 06, 1935: Page 14.

“Squeezed Sent to Mail.” Waco Tribune Herald [Waco] September, 1957: Page 12.

“Recycling Scrap Metal And Trash Resources” Waco Tribune Herald [Waco] April 02, 1974 : Page 34.

Baldwin, Helen ” The Personal Touch” The Waco News Tribune [Waco] February 24, 1957 Published: Page 25

“Scrap Iron and Steel Group Elects Lipsitz” Waco Tribune Herald [Waco] July 02, 1961 : Page 12.

“Recycling Scrap Metal And Trash Resources” Waco Tribune Herald [Waco] April 02, 1974 : Page 34.

 

 

 

 

 

 

 

 

 

 

1 Comment Posted on by noah_roberts1 20th century, business, state, and society, unacknowledged assumptions, Uncategorized

Plans To Lower CEO Pay Actually Increase CEO Pay…?

Noah Roberts

In movies and TV shows depicting corporate America, CEO’s and business executives are usually portrayed in the same way. What comes to mind for me is the show “Suits” where top executives in the law firm wear their expensive suits, drive their expensive cars, and have the nicest and largest office in a huge office building. But, why do we have these stereotypical depictions of business executives? Why were they ever paid so much and are their salaries still growing exponentially today?

In Planet Money’s podcast “When CEO Pay Exploded”, they review the events in the 1990’s that resulted in a boom in CEO pay. Before 1990 CEO pay was consistently increasing by a little each year. No matter the performance of the company, the CEO would continually have an increase in salary. During the 1990 recession, where executives were being paid more and more while employees were being laid off, the economist Kevin Murphy wrote a paper on changing the way CEO’s were paid. This launched campaigns for people like Bill Clinton who proposed a new Tax Code that would change the pay of CEO’s. This ultimately resulted in a use of Stock options as payment, which did not work out the way the government intended. However, in the early 2000’s, companies realized the effect on their companies by issuing stock options to executives and have changed pay scales.

The overarching idea throughout this podcast is Business, State, and Society. After Kevin Murphy’s paper on the principal that CEO’s should be based on company performance and not given a base salary, Bill Clinton proposed a new tax code. This tax code would prevent big companies from writing off more than a million dollars of their CEO’s salary. This was to discourage a high base pay. However, they did add in section 4C of the tax code saying that if companies paid based on company performance, they could write off all of the salary. This encouraged stock options to be offered to executives as a form of pay. Where if an executive performed well, they could possess a stock at a certain price and sell it for a gain if the company improved, or a loss if the company did not perform well. Ultimately, this did motivate CEO’s to try to advance their company.

However, this held both Unacknowledged Assumptions and Unintended Consequences. Economists like Kevin Murphy assumed that companies would lower base pay because they were offering stock options as a way for CEO’s to make more money. The reality, though, was quite different. If you were a CEO, you wouldn’t want to lower your own salary, and if you were on the board of executives and liked the CEO, you wouldn’t want to risk losing him or her to another company that would offer more money. This resulted in a same base pay with the addition of a 40% growth in stock options. Consequently, the average CEO salary for Fortune 500 companies dramatically increased from $4 million to $8 million between 1992 and 1996.

Image result for planet money ceo pay

Although, this increase in stock primarily happened due to another Unacknowledged Assumption made by corporations. Due to a weird accounting rule, stock options could be expensed at zero cost, and in result, businesses genuinely thought they were issuing stock to their workers with a zero cost. All they had to do when an employee cashed in was create a stock and give it to them to sell. This led to greater effects on everyone associated with the company. Employees that had their retirement based in stock, or citizens that had many shares of stock were being greatly affected. Their stocks were now worth significantly less because of how many shares the companies were creating out of thin air to pay salaries with.

Eventually, the companies did realize the affects of issuing a lot of stock and stopped giving it out so freely. This has actually resulted in a decrease in average CEO salary over the past few years, going against what most may think. Although one could make a fair argument that executives are still overpaid, we do know that the salaries aren’t going anywhere but down for now.

 

Picture from Planet Money

1 Comment Posted on by noah_roberts1 business, state, and society, unacknowledged assumptions

The Private Business of the Public Government

Noah Roberts

To an extent, almost every American values, or is at least told to value, the free market society. We often hear references to Adam Smith and his proclamation for a free market and automatically pair it to the idea of no government interference in corporations. Many will often argue, “Let the government deal with the issues of the government, and businesses deal with the issues in business.” But, what if we shift our perspective on the relationship between innovative corporations and the government? We often look at the relationship as a black and white issue; government regulation or no government regulation. However, we should be focusing on the degree to which the government helps innovate, not regulate.

On her Freakenomics podcast “Is the Government More Entrepreneurial Than You Think?”, Mariana Mazzucato, a professor in the economics of innovation and public value at University College London, further explains this relationship. At the very start of the Podcast, Mazzucato completely flips the argument that Adam Smith wanted a free market separate from the state. She mentions how he actually wanted a free market from rent-seeking, which were activities that would extract value. This sets the foundation for the rest of the podcast where Mazzucato shows how the government is actually very involved in the innovation and investment of new companies. The state has been involved in many startup companies and industries. They are often the first to invest in the innovation of risky and uncertain technologies that private firms don’t want to invest in. This fuels her stance that the state shouldn’t be thought of as a last resort, but as a “first resort investor”. They have had plenty of successful investments, as well as plenty of failures. She brings to light, however, that the failures are always talked about and not the successes. This led to Mazzucatos’s point that the government has done a poor job of making returns on their successful investments, and that the private companies are benefiting the most of these tax funded loans given to them from the government.

The big idea most evident throughout this podcast, is the relationship between business, state, and society. Mazzucato mentions how many people think that to be more innovative we need less government. However, she disagrees. One of the most innovative parts of the U.S. economy is Silicon Valley. Most would assume that this is because of the private companies’ own research and advancement. What most fail to realize is that the government was deeply involved in investing in innovative research with programs like DARPA and ARPA-E. The government was also a leader in the exploration of fracking in the late 1920s, spending more than $130 million on extraction techniques. This point alone shows how essential the governments involvement with business innovation is. Other private companies didn’t want to take the risk of investing that much money into a business that may fail, but the government’s leadership into that field led to a very essential part of our economy. The government has also loaned money to, and invested in, multiple outside corporations. A successful company that most of the public fails to realize was given state funding is Tesla, which was given a $465 million loan. On the other hand, when the state funded company Solyndra failed after receiving a $500 million loan, every taxpayer was told about it on the news and as a result, angry with the government. The question is why was the success drowned out and the failure brought to the attention of everyone? The answer lies within the governments poor marketing of themselves. They don’t publicize their affiliation with companies like Tesla enough, which results in heavier criticism when they invest in a failing company.

The government also makes the unacknowledged assumption that having businesses give them stock when they can’t pay off the loan will cover the debt of the money given. Mazzucato mentions that the government will ask for 3 million shares of stock when a company does not completely pay off its loan. This policy doesn’t make much sense to enforce, however, when the stock is most likely not going to be worth very much. The government actually needs to be doing the exact opposite. Every time the company is able to pay off their loan, they need to give the government 3 million shares of stock. If we revisit Tesla, their stock was worth 9 dollars in 2009 and increased to 90 dollars by 2013. Mazzucato noted that this increase multiplied by 3 million would be able to pay off the debts of other loans that were not paid back in full, like Solyndra. Instead, Elon Musk has made a profit of $5 billion, while the government is left with the debts of their unreceived money.

Lastly if we revisit the relationship between business, state, and society and the capitalist nature of corporations, we can see why industries like the pharmaceutical industry are able to charge such high prices. Like the companies mentioned earlier, the state is loaning money to pharmaceutical companies for research. These loans of course come from the tax payer. Then, in the capitalist ideal of maximizing profit, the company will charge outrageous prices for new pharmaceuticals. People then have the choice to either let themselves or a family member stay ill or pay the price set before them. Essentially, this results in the customer paying for the drug twice. Once through the tax funded loan, and again on the overpriced market. The most frustrating part about the high prices may be that even though the government has the right to set a price cap for publicly funded products, they choose not to in fear of pushback saying they are anti-free market.

Overall, these points are not trying to prove that we need more government investments in the business world. What they do prove though is that the government needs be recognized as more than a by-stander waiting for things to go awry. As Mazzucato put it, “it is to be an active co-creator and co-shaper.”

 

(Picture found on politicalcartoons.com)

 

 

 

2 Comments Posted on by noah_roberts1 20th century, business, state, and society

Lobbyists: Their Opinion Means More Than Yours, Or At Least To Congress

Noah Roberts

Junior year, after we had completed the AP government and politics exam, my class watched the movie, “Thank You for Smoking” starring Aaron Eckhart and Cameron Bright. The movie focuses on a slick lobbyist, Nick Naylor, who works for the Big Tobacco Corporation. Throughout the movie, Naylor is often spinning the reported negative effects of smoking and trying to work out deals with the government on how to brand and warn society about the effects of smoking. The twisted agenda of Naylor and the Big Tobacco corporation was to market cigarettes in the most appealing way possible. They didn’t care that they were deceiving the public into buying goods that were damaging to their health; they were focused on maximizing their sales and profits. Although this movie satirized to show the extremes of lobbying, it holds some truth in the relationship between businesses and government.

To learn more about the state of lobbying within our government, I read,”How Corporate Lobbyists Conquered American Democracy” written by Lee Drutman from The Atlantic. Drutman brought to light the continual growth of lobbying in our government. Lobbyists reportedly spend $2.6 billion a year, which is more than the $2 billion that is provided to fund the House of Representatives and Senate combined. Compared to the 1950s and 60s, where special interest groups and labor unions had much more impact in the government, business lobbying has become the strongest force in government influence. The relationship between government and business has completely flipped in the last 50 years, from corporations shifting their focus from avoiding government involvement in their business, to focusing on how they can be business partners with the government. This has resulted in more lobbyists being more politically active and proposing and supporting more laws and legislation.

The most obvious “Big Idea” to me, is the relationship between business, state, and society. The actions of business and government are not so separate, and actually go hand in hand. The businesses and government are proposing new laws that can benefit both of them. For example, the article states how in 2000, the industry lobbyists were able to get Medicare Part D passed, which would benefit them by $205 billion in the span of a decade. The lobbyists were able to use the government as a vehicle to a major profit, while Congress was able to get legislation passed. So, if both sides are getting what they want, it makes sense the lobbying relationships have grown so rapidly. This relationship, however, ultimately effects the everyday people in society. For example, when a deal with Medicare Part D was made between the government and corporations, it resulted in different Medicare options offered to the people. Or when a cigarette company like the one portrayed in the movie actually does lobby for less regulation on their products, more people will be attracted to consuming more of their product.

Lobbying in the government doesn’t always result with a harmful outcome for the people in our society. What it does do, though, is take away the voice of the people. Everyday workers who are a part of labor unions or special interest groups now have less of an impact with what legislation is passed. Congress is listening to the people with the money, and not the people who have to deal with the outcome of whatever is passed. The article mentions that for every dollar spent by a special interest group, lobbyists are spending $34 and that each corporation has about 100 lobbyists. With no way to compare to these resources, the interests of the common man are being drowned out.

In his 1961 Inaugural Address, John F. Kennedy stated one of the most famous quotes, “Ask not what your country can do for you; ask what you can do for your country.” I think that corporate lobbyists should reflect on this quote, as it seems to me they are trying to see what our government can do for them.