General Dynamics Strategy

Anders’ strategy creates value. Some of the value created is obvious: Shareholders benefit from increased share price and dividends. This includes any employees who own stock or stock options. And of course, the twenty-five executives in the gain sharing program receive value from their incentive payments.
Less obvious is the value to society created by downsizing. Any excess capacity GD has, including human resources, is not creating value. (By definition, otherwise it would not be “excess.”) When GD sells assets or releases employees, other companies can put them to use in value-creating activities. If the cash that GD receives from selling assets or reducing payroll is paid to shareholders then that money is available to invest elsewhere. This is the Coase theorem in action: resources are allocated to their highest-valued use, and society benefits overall.
But not everyone benefits. Employees who are released lose value if they are not able to find another job offeri...