OMP 410
MANAGERIAL POLICY AND CORPORATE RESPONSIBILITY
January 2004
Donna Trent, Ph.D.
Module Description
This
capstone module considers the responsibilities of both manager and organization.
Attention is given to three distinct but related themes: the social responsibility of an organization;
public policy toward business organizations; and individual managerial ethics.
Learners
will explore the multiple, competing claims placed on the manager and the
organization. The expectations society
has of organizations are rooted in the values of society as well as the
economic roles played by modern organizations.
Government policy toward business, in particular, is at least partly a
reflection of social expectations of business.
Learners
are challenged to make ethical analysis a routine part of their decision-making
framework. They also are asked to
identify ways the organization can be socially responsible as an institution.
This
capstone module will offer the learner an opportunity
to reflect on the importance of education for a manager; the value of learning
in the liberal arts context, and personal growth that has come as a result of
the
Finally,
learners will have an opportunity to look outward and embrace the larger
community in which they live. Through a service project, they will practice, in
a small but meaningful way, the ethic of “giving back” a portion of the
richness they have gained through their
Learning Outcomes
Upon completion of this module, learners should be able to:
Texts and Materials
Hoffman, W.
Michael et. al. Business Ethics:
Palmer, Parker J.
Let Your Life Speak: Listening for the
Voice of Vocation.
Smith, Hyrum W. What Matters Most: The Power of LivingYour Values. NY: Simon and Schuster Adult Publishing Group, 2001.
Cases:
Donna Klein and Marriott International (A).
Donna Klein and Marriott International (B).
The
Pharmaceutical Industry Responds .
Chickering,
Arthur W. “Liberal
Education, Work, and Human Development.” American Association for
Higher Education Bulletin, Vol. 33, No. 7, March 1981, pp. 1, 11-13, 16.
Adapted by author in 1994 for inclusion in Steltenphol, Elizabeth, Jane
Shipton, and Sharon Villines, eds. Orientation to College: A Reader On Becoming an Educated Person.
Noyce,
Gaylord. “The Dilemmas
of Christians in Business.” The Christian Century.
12-19 - August 1981-802-804. Reprinted from
Powers, Charles
W. “What is Corporate
Responsibility?” (includes
introductory note by Delmar Good).
Reprinted from
OMP 410 Course in BlackBoard format, with links.
Reading
Assignments
Prior to Week One
Course Journal
You will be keeping a journal, as a Microsoft Word document, as you travel through OMP 410. This journal will have 3 parts:
Please run a spell check before turning in your journal each week. However, you have considerable latitude in how you write this journal. Free-writing, sentence fragments, random thoughts are acceptable. The point is to examine your own sense of vocation, of life work: Questions you may consider include: What kinds of activities made me happy when I was a kid? What makes me happy today? Where are my passions? What kind of work should I be doing? What is most important to me? What do I feel passionate about? Where do I derive energy from? What can I do about what matters most to me?
This entry should be a minimum of one page weekly; there is no maximum.
Service Project
It is unlikely that you have traveled this far on your
While your
As you complete this last required course at
This project should have a tie-in, however loosely or tightly defined, to the principles of ethics that you encounter in the Boatright text or to a concept from Parker Palmer’s book Let Your Life Speak. In other words, when choosing a recipient for your service, think of ways to frame your service in ethical or moral terms.
Your group may range in size from 2-4 people.
The project will include:
Please give this project your best effort. It is worth 300 points, roughly 40% of your grade.
Assessment
Points will be awarded as follows:
Personal journal: Zero points, but final grade is subject to this assignment being completed and turn in each week (Weeks 1-5).
Case Analyses: 70 points per week (Weeks 2-4): 50 for content, 20 for mechanics. Total points possible: 210.
Service project: 250 points. All group members will be awarded the same grade. Presentation grade will be based on evidence of preparation and quality of presentation (100 points). Paper will be graded equally on content and mechanics (150 points).
Final paper: 300 points. This paper will be equally weighted for content and mechanics. This paper is due the last night of class.
Total points possible: 760
Grading scale: 684 and higher (90-100%) A
608-683 (80-89%) B
532-607 (70-79%) C
456-531 (60-69%) D
Below 456 F
All written work submitted, except for the personal journal, must demonstrate college level writing competence. Documentation and citations are to follow MLA format, as described and illustrated in Hacker’s A Writer’s Reference, 4th edition and augmented by handout from 5th edition. Failure to cite properly will result in a substantially reduced grade.
Papers submitted after the due date will be subject to grade reduction, up to two letter grades. The following standard applies: One day to one week late: grade reduced by one letter; more than one week late: grade reduced by two letters. Failure to submit the final paper on Week Five will result in an Incomplete for the course.
It is expected that you will attend all classes, arrive by
What is Corporate
Responsibility?: Introduction
Introductory Note by Delmar Good
In 1971, Charles Powers, a professor of social ethics at
In the 1960s a number of social observers had begun to call
attention to the large investments being accumulated by churches, universities
and various non-profit foundations and institutions. These organizations often had idealistic
religious and social service missions.
Their investments were viewed primarily as a way to generate income to
carry out their programs.
In the social and political climate of the 1960s, critics
began to question whether the investment policies of these institutions were
consistent with their primary goals. For
example, in spring of 1966, two students from Union Theological Seminary
persuaded hundreds of students to petition
Powers identified a number of issues. Different churches have different histories
and theological understandings.
Shouldn't their investment policies at least be consistent with their
own tradition? A church that preached
clearly against tobacco and alcohol would likely not want to own shares of a
publicly traded tobacco company, to use a simple example.
Many denominations called on their investment managers to
develop explicit ethical and social criteria as part of their investment
policies. But that moved the question
back one step. Beyond the simple
temperance type criteria appropriate for some institutions, ethical investment
criteria meant one had to address what is ethically and socially responsible
corporate behavior.
The piece that follows is an appendix to Power's book, Social
Responsibility & Investments.
Various viewpoints are discussed regarding that foundational question,
"What is corporate responsibility?"
The piece offers a concise summary of several alternative positions, as
well as a bit of historical flavor of the debate.
Today there are numerous mutual funds and other investment
options that use explicit social criteria as part of their investment
strategy. Readers who want a bit more
detail about the history of attitudes toward social investment criteria, or who
are interested in the specific question of criteria for investment by churches
and church agencies, are encouraged to read Powers.
What is Corporate
Responsibility?
By Charles W. Powers
Not all perceptive observers of the American scene have
universally hailed the shift in the language of corporate executives from
unquestioned acceptance of the profit motive as the engine which has "made
America great" to "corporate social responsibility" as the
banner under which business will now help solve the nation's social
crisis. Critics challenge talk about
"corporate responsibility" on essentially two grounds: (1) that it is a smoke screen (albeit one
with great public relations value) and reflects no important change in business
practice at all, and (2) that if it ever should be more than rhetoric, it will
be bad social policy.
Elaboration of these two points is imperative:
1 J.A.C.
Hetherington suggests that management's acceptance of
"responsibility" language has three primary motivations, all of which
spring from its desire to retain its autonomous position of great power in the
face of converging social pressures. According
to Hetherington, such statements are intended to serve the following
purposes:
a. they assert to the stockholders the
right and duty of management not to devote its efforts solely to the
stockholders' interest (and hence to pursue its own or the company's long-range
interest at the cost of adequate dividends);
b. they suggest to employees, suppliers,
dealers, and customers a benign concern for their welfare and thus implicitly
reject the inevitable conflict between managerial goals and the interests of
these groups; and
c. they suggest to the public at large that
the businessman may legitimately hold and exercise the power at his disposal
since he is a public servant who can be trusted to act in the public
interest. (See
"Fact and Legal Theory: Shareholders, Managers and Corporate Responsibility,"
Stanford Law Review, Vol. 21,
January, 1969, pp. 247-48.)
2. As early as
1958 and 1959, Theodore Leavitt and Eugene Rostow, now joined by Hetherington,
Milton Friedman, and others, called upon business to eschew language and
ventures which lead them away from primary if not single-minded concern for
profit and economic growth. Four closely
related arguments support their position:
a. it is only on
the basis of their ability to turn a profit that businessmen can evaluate
themselves and be evaluated by their peers, the stockholder, the government,
and others;
b. the
overlapping of the spheres of business and government which corporate
acceptance of social welfare duties involves will hinder government regulation
of business and will further erode the private-public distinction which these
critics believe is still the means by which the twin objectives of economic
strength and "life, liberty and the pursuit of happiness" are
possible under the American Constitution;
c. that the businessman is without authority
and an adequate perspective to adjudicate competently and equitably the
competing claims of various interest groups; and
d. that with the
bewildering complexity of social problems which distract them, the businessman
will fail to carry out the functions in which he is competent, i.e., functions
which provide the economic means enabling government and other groups in the
society already organized to solve social ills to attack them.
One can only agree that "corporate
responsibility" is an elusive and potentially self-serving concept and
that it can obfuscate rather than clarify the way in which social problems can
be solved. It can be argued, however,
that the critics cited do not account adequately for the developments in
American economic and political history outlined in Chapter 1, and consequently
ask business and government to turn the clock back to a period which it would
be difficult, if not impossible, to recover.
They may also not take seriously the "crisis of legitimacy,"
which has virtually forced the business community to adopt a new stance, and
the growing body of businessmen who do not regard "social
responsibility" as a dodge.
Wherever churchmen stand on this question, it will be
imperative, as they invest their own and the church's funds, that they
understand (a) the various views of the corporation's nature and objectives
which business executives espouse and what they entail; (b) why they do or do
not want corporations to undertake objectives other than profit maximization and
growth; © what specific areas or aspects of corporate life concern them as
churchmen, and how they want corporations to pursue objectives in those areas;
and (d) how they think corporations can best organize themselves to carry out
social goals. No social investment
policy concerned with corporate practice will be meaningful or effective until
these questions are directly addressed and answered. Consistent with all other parts of this book,
this appendix does not propose the answers.
It attempts only to break down the "elements" so that the
questions may be seen clearly.
WHAT IS A
CORPORATION'S PURPOSE?
At present, three definitions of corporate purpose appear
to be operative: (1) that the primary objective of business is societal
well-being; (2) that the primary (or only) objective of business is profit and
economic growth; and (3) that business has several objectives, among them
profit and societal good, which must somehow be kept in relation to each other.
1. R. Dorsey,
President of Gulf Oil, has recently taken the first proposition: "Today
maximum financial gain, the historic number-one objective, is forced into
second place whenever it conflicts with the well-being of society." This is an extraordinary statement. Immediately one wants to know how Gulf Oil
has reshaped its mode of operations, a reshaping which this shift in basic
objectives should involve. He also wants
to know who defines the "well-being of society." President Dorsey has
given some answers. He accepts the
principle of foreign operations in general managed by nationals; he gives
business the primary responsibility for eliminating pollution; he also suggests
that "our jury is the public."
Those who are
now protesting Gulf's involvement in the Portuguese colonies (which, they contend,
provides the racist governments throughout the areas with increased tax
revenues and badly needed, indigenously produced petroleum reserves) will want
to know how the jury is to be heard.
2. Roger Blough,
former Chairman of the Board of the U.S. Steel Corporation, retains the
traditional view of corporate purposes that profit and economic growth are the
primary objectives of business.
"It is true that the need for
business to discharge a proper measure of social responsibility as a corollary
need to that of operating profitably, is not always
clear to us [businessmen] . . . . But what others frequently fail to comprehend
is that a main ingredient for social progress is the increased wealth--the rise
in the standard of living--which accrues to the country as a result of
competitive initiative, technological innovation, and the investment and
reinvestment of capital. Producing this
main ingredient was and is the business of business, a function which it is uniquely
capable of performing."
It is true
that Mr. Blough stresses increased hiring of minority peoples, better education
and more adequate housing, but the primary goal, indeed the business of
business, is business.
Closely
related to this view and subsumable under this second category is that of Henry
Ford II, who argues that the profit motive remains the goal of business but is
more and more circumscribed by societal needs; indeed, social expectations
become the only viable means through which to pursue profits! "From the
standpoint of business, profit is the end and public service the means. Business earns profit by serving public
needs--but profit and not service is the goal of business. From the standpoint of society and its
members, on the other hand, service is the end and profit is the means."
3. The third
definition of corporate purpose, which suggests that business includes both
profit and societal good among its objectives, is more subtle and allows for
several ways of relating corporate goals.
a. One is taken
by David Rockefeller, President of Chase Manhattan Bank:
Profit must
remain the yardstick, because it is the measure of our efficiency, but profit
must be based more and more on calculations of social costs and benefits as
well as private costs and benefits. We
must accept the fact that economic growth is not an end in itself, but rather a
means to a greater number of social as well as private ends.
b. The other
basic way of construing the profit-social benefit relationship is to see them
as competing goals or purposes. Robert
J. Weston, General Manager of the Building Products Division of Boise Cascade,
feels that the businessman must pursue two goals. He must:
. . . identify needs in the future marketplace that offer
opportunities for business profit and identify needs in the society that offer
opportunities for service to society, then vigorously pursue both goals. . . .
If we accept the validity of pluralistic goals for the American corporation,
then the structure and performance of business will change right along with the
change in business goals.
All of the
executives quoted above view the business manager as a man who must reconcile
or choose between a plurality of competing interests
(most of which are in some way legitimate).
This schema shows, however, that corporate managers differ over what
their goals should be as they choose among the claims. Any investor who seriously wants to help the
corporation be responsible will have to be aware of the nuances of these various
positions on business goals and to clarify the relative merits of each.
WHY CORPORATE
RESPONSIBILITY?
Closely related to the problem of corporate goals is the
issue of why business now does or does not have social responsibilities. Three basic rationales have been
advanced: (1) that the corporation is
more competent than other institutions to deal with social problems; (2) that
it is in the corporation's interest to solve social ills; and (3) that the
corporation has an obligation to pay the costs of its social effects on
society. These are different, though not
mutually exclusive, understandings.
1 Because the
Corporation Is Competent.
Corporation executives are well known for their scorn of governmental
inefficiency. Not surprisingly, then,
they believe that they have the skills to solve the problems which the
government has not yet solved in the present crisis:
Many
governmental leaders at all levels, federal, state and municipal, have
increasingly recognized the limitations of public agencies in coping
effectively with many of our social problems.... More and more business leaders
are recognizing that the great technological and managerial resources of
American corporations are critically needed in the tasks of eliminating
poverty, rebuilding the cities, modernizing transportation, cleaning up the
atmosphere and water, and bringing black and other disadvantaged groups into
the mainstream of our economy and democracy.
Businessmen
differ, however, on the ways of freeing that competence to operate. Some see a closer and fuller coalition
between business and government in these areas.
Some ask government to clear out and simply to referee the corporate
attack on social ills. Others call for more government incentives in specific
areas to provide the means by which business can attack the problems. Still others feel that because business is
competent and government is indolent, business will have to go it alone."
2. Because It
Is in the Corporation's Interest.
Other businessmen feel it is in the corporation's interest to become
deeply involved. For some, using its
competence for social betterment is a matter of survival; for others it is a
matter of creating stable and dynamic communities in the long run (which will
ultimately mean stronger corporate enterprise).
Insurance companies, which have the greatest stake in the economic
long-term growth, have been the most active proponents of the view that their
own interest is inextricably bound up with the health of the nation. Unfortunately, however, as is evident from the current recession,
"responsibility" built upon these foundations is not terribly
durable. Henry Ford II acknowledges this
point:
Now that public expectations are
exploding in all directions, we can no longer regard profit and service as
separate and competing goals, even in the short-run. The company that sacrifices more and more
short-run profit to keep up with constantly rising public expectations will
soon find itself with no long run to worry about. On the other hand, the company that seeks to
conserve its profit by minimizing its response to changing expectations will
soon find itself in conflict with all the publics on which its profits depend.
3. Because the
Corporation Must Pay the "Costs" of Its Operations. One
of the most interesting rationales for business responsibility, partly because
it is both durable and potentially quantifiable, stresses that business must
pay the social costs of its operations.
There are two basic approaches here:
a. The more
aggressive approach is proposed by William H. Dougherty, Jr., executive
vice-president of the North Carolina National Bank Corporation. His is virtually the language of reparations:
"It is axiomatic that private enterprise must answer the call because
private enterprise started the whole mess in the first place. . . . Private
enterprise, which started the whole tragic circle of events, failed to make
even a token effort to meet these problems of the cities." In a complex economic and political system
the task involved in determining the actual causal connections between socially
injurious business action or inaction and the resultant social decay is
difficult, but some businessmen are now ready to undertake the task. Some initiatives in hiring the hard-core unemployed,
especially those where government incentives don't make them profitable,
are examples.
b. For others,
"social cost" picks up from where things are now and makes sure that
new and continuing corporate activities do not contribute to the development of
any future deterioration of the social fabric.
The recent statement by the board of directors of the National
Association of Manufacturers, made up of 150 corporate heads, espoused this
view and linked it with the competency argument.
The
Below the
surface in most of these "reasons why" a corporation should take
social factors into account is the acknowledgment that business is a
"political institution" and must begin to act like one. One finds such a view expressed most clearly
in a speech by Alfred C. Neale, President of the Council on Economic Development
and former first vice-president of the Federal Reserve Bank of
We recognize further that the
corporation is essentially a political institution, whatever its economic
objectives may be. . . . A political institution must obtain the consent of the
governed. The consents that are needed are
diverse and vary from institution to institution. In the case of the corporations, the groups
from which consents must be sought include managements, stockholders, the work
force (with perhaps several different strata), customers, suppliers, bankers and
financiers. Likewise included are the
local communities, . . . as well as the various levels
of government that are often customers, regulators and lawmakers -and in all
instances, tax gatherers.
Those
churchmen and others who seek to alter business practices will want to know the
reasons for their social involvement which specific corporate managements
offer. They should be aware that the
statements by corporate executives are not always lucid. They are often vague and seem to accept
contradictory goals or premises.
CORPORATE RESPONSIBILITY IN SPECIFIC AREAS
Corporate responsibility has less
to do with what business says than with what it does, however. The author's informal corporate survey
concerning social responsibility revealed a most interesting trend: those
corporations which provided the most impressive data on their actual
involvement tended to be (or at least often were) those which had made less
impressive public statements (and vice-versa).
Stockholders concerned with corporate responsibility will want, then, to
test deed as well as word. To do so,
they must be clear about which aspects of corporate life they will emphasize in
their efforts to get "beyond the rhetoric." As a guide to this effort the following
division of the corporate house may be instructive: (1) the corporation's internal practice; (2)
its support of external groups and purposes; (3) its product; and (4) its
influence on public policy.
INTERNAL CORPORATE PRACTICE
Much of the literature on business
ethics focuses upon such issues as the role of honesty, fairness, integrity,
and openness in the internal workings of a corporation. For example, "What do you put on the
expense account?" Although these are not insignificant matters, they do
focus only on issues of interpersonal morality and rarely relate directly to
the larger internal institutional and structural issues which are this book's
primary concerns. These issues include:
Employment Practices. Through such
agencies as Project Equality, many of the nation's churches
have indicated their concern for equal opportunity policies and have been a
force, parallel to the government, in insisting upon corporate compliance. Equal employment, however, involves many
things. In the present situation, the
concern is not only for the percentage of minority persons employed, but also
for corporate policies on recruitment, job-training, and the access of
minority-group persons to the higher levels of the corporate structure. A corporation's success in one of these areas
does not imply either success or strenuous efforts in one of the others. This fact makes difficult any evaluation of a
corporation's responsibility in the area of employment practices on the basis
of its participation in such programs as Plans for Progress, the National
Association of Businessmen, Project Equality and other similar programs. Much more precise indicators are needed.
Labor Conditions. Unions are generally a more potent force for
alleviating poor working conditions than the stockholder can ever be. Still, vigilance in this area is needed,
especially where unions have failed to insist upon high safety standards (the
mining industry may be an example) or where workers are not unionized. Again the issues are not simple. Involved are not only safety considerations,
but efforts in job-enlargement (to relieve boredom from repetitive tasks),
job-enrichment (including educational programs aimed at upward job-mobility
retraining in the face of technological obsolescence, and increasing the
estimate of one's personal worth), job security, retirement plans, and so
forth. These issues are "old
hat" in one sense, but for the persons involved they never are.
Plant Location. Government incentive programs will remain the
primary factor persuading business to think in social as well as economic terms
about where they locate their plants.
Still, stockholder concern about this aspect of corporate practice could
help increase management consciousness of the indirect effects of its
decisions. A few corporations have even
used the argument that it is necessary for their employees to have easy access
to new plant locations as a way to break down restrictive or discriminatory
zoning patterns.
Pollution. Initiatives on a broad front (including
stockholder pressure) have resulted in more concerted effort in corporate
research and development to reduce ecological and other effects of corporate
production methods. (One rarely reads an annual report of an
oil or other energy-producing company which does not include reference
to these efforts.) Where government is caught between conflicting desires, on
the one hand to increase revenues, and, on the other, to enforce stringent
pollution legislation, stockholder concern about ecological matters could tip
the balance. Since research data on the
precise effects upon the life cycle which different types of pollution cause
has been slow in coming, ad hoc
solutions have been the order of the day.
Research breakthroughs in ecological research are occurring regularly,
however, and an informed stockholder could raise the level of discussion.
Supply and Sales Practices. Although
the number is small, some corporations have begun to seek out and support
suppliers, dealers, and distributors whom the nation's marketplace has traditionally
excluded. F. W. Woolworth, for example,
recently announced a multi-phased program involving the
International Operations. The character of
international business operations has come under more intense scrutiny in
recent years. In foreign countries there
are often no "public" agencies with even the kind of countervailing
power which the American public sector has, and growth in international trade
will undoubtedly increase the potential for American dominance of foreign
markets in the next decade. The
proposition that business growth in developing nations is automatically a boon
is as untenable an assertion as the one which claims that it is always a
deleterious force. Increased stockholder
monitoring of foreign hiring practices, wages, working conditions (indeed, all
that has been discussed in this section) could serve an important purpose. Another serious issue is the extent to which
foreign business operations shore up governments (through taxes and support of
governmental programs) which have no legitimacy and would not have the people's
support were it not for international business. On the one hand, one does not want American
businessmen determining the public policy of foreign states and hence welcomes
evidence that they attempt to remain a "neutral" force in the
development process. On the other hand,
"neutral" forces can often prop up socially reactionary and
dictatorial governments. Informed and
specific criticism or commendation of corporate foreign practices may be an
increasingly important role for churches as stockholders.
Advertising. Government has brought corporate advertising
under increasing scrutiny. The
"truth in" legislation has greatly reduced fraudulent or misleading
claims. But studies show
that a variety of sales techniques and credit gimmicks still often exploit
the poor. In addition, one can raise
questions concerning the effect of advertising upon American life-styles in the
light of evidence suggesting that advertisements can effectively create and
change the wants and values of those who see or hear them.
Corporate Support of External Groups and Purposes. Businesses in a
variety of ways may support projects and institutions which are not tied
directly to the workings of the corporation.
Corporate giving is a primary way, and we will look at it first. Of all the areas in which "social
responsibility" involves a clear and nonrecoverable cost to the
corporation, charitable giving has received the clearest legal
authorization. The Internal Revenue Code
permits tax-exempt deduction of up to five percent of pretax profits, and the
legal precedents for allowing gifts only very indirectly related to specific
business purposes are quite strong. Even
so, corporations have stabilized their contributions in recent years at a small
fraction of the allowable percentage: .68 of one percent (although two large
corporations regularly give the maximum allowable). It is noteworthy that the contribution
percentage of the largest corporations generally is less than the .68
average. Some argue that corporate
giving which is not directly beneficial to the company should not be dispersed
by the management, but should be turned over to the stockholders to spend or
contribute as they choose. (Proxy initiatives to enforce this view have
regularly lost by wide margins.) Others argue that corporations are the one
remaining major source of charitable giving with a growth potential in the
country, and industry should be encouraged to increase the percentage
given. While these issues are not
insignificant, it may also be important for church investors to examine
patterns of corporate giving and attempt to alter them if they feel the
corporation supports inappropriate or ineffective charitable concerns. In general, education and civic organizations
(the United Fund is a primary recipient) receive the greatest support. The National Industrial Conference Board
(NICB) estimates that no more than ten percent is earmarked for minority groups
and urban problems. Still, corporations
differ widely in their giving practices.
Some oil and chemical companies (Shell Oil is an example) direct most of
their support to the science and engineering departments in colleges and
universities. On the other hand, one
major industrial firm contributes primarily to black community organizations.
Skill sharing is another arena of
corporate aid to sectors of the society which have not fully shared in the
nation's economic life. Many large
corporations now free some of their technicians and executives from company
responsibility on a periodic basis (a day, a month, or a year) to help
minority-controlled businesses develop needed skills, write proposals, or draw
up capitalization plans, for example.
Corporate Product. Distinct from both its internal and external management
practice is the question of the social utility of the corporation's
product. As we have seen, churches have
traditionally not purchased stocks in corporations whose primary products were
alcohol and tobacco. But there may well
be a variety of other products or product features which a responsible investor
will be concerned about.
a. Product Safety. In a highly technological society, one should
be precise in making accusations that certain products are unsafe. Has the corporation failed to do adequate
research? Is construction of the products poor or scanty? For example, some
corporations in the drug industry are accused of marketing worthless and
sometimes harmful drugs. As discussed
earlier, anti-personnel weapons and other products for the military may well be
considered "unsafe," to say the least.
b. Product Effects. Many products as well as
production practices affect the environment.
These range from pollutants emitted by automobiles to the present
controversy over returnable vs. nonreturnable containers. In general, the products which
CORPORATE INFLUENCE ON PUBLIC POLICY
In a host of ways, what the government
regulates or subsidizes is of paramount concern to the society's quality of
life. As we have seen, the relationship
between government and business is, today, not usually an antagonistic one. Hence, the church may have a responsibility
to monitor what management tries to persuade government to do. Here are some examples. A church which views the establishment of
free trade as a precondition to a healthy world economy may be at least as
effective in expressing that view on a proxy statement or in a corporate board
room as it is in church synod or assembly resolutions. A church concerned about environmental
protection may find it important to persuade business not to attempt to block
government proposals for pollution regulation.
Extraordinary subsidy programs won through political persuasion can also
affect the nation's priorities. Church
and other stockholders should also be concerned that management does not
exploit such subsidies or plumb for the "wrong" ones. (The oil
depletion allowance or military-industrial relationships may be cases in
point.) This is the most subtle, complex, and sensitive area of those which
have been discussed; it also may be the most important.
One should stress, however, that
stockholder activities which pursue the alteration of corporate-government
relationships in the existing economic and political system are prerogatives of
any part owners of a corporation. The
stockholder abdicates his responsibility when he fails to scrutinize carefully
blatant abuses in this arena. It can
hardly be construed to be an example of church "interference" in
matters about which it has no mandate or concern.
STRUCTURING CORPORATE RESPONSIBILITY
If corporate social responsibility
is ever to be more than a public relations man's catch phrase, the modern
corporation will have to find a place in its organizational charts for the men
who will carry out that task. Changes in
the goals and directions of large institutions rely heavily upon the structures
which bear the weight of those changes.
The organizational charts of, for example, the Ford Motor Company
suggest the extent to which that company has recognized this fact.
And yet, executive Robert Weston's
comment probably still stands,
I have yet to see an organizational chart that
shows how the job gets done . . . In
truth it must be said that present organizational charts just have too many
defects. They do not indicate the
significance of the white space between boxes; they do not delineate lateral
communications; they establish artificial management levels. . .
The recent study of urban affairs
departments by Jules Cohn documents this observation. Of the 247 corporations (from Fortune's lists of the largest financial
and industrial corporations in
1. Many of these programs are anomalous and have no abiding slot in
the corporate framework: "We didn't know where to put it, so we formed a
committee," one
Urban affairs departments will
need clear budgetary allotments and performance standards different from those
operating in other parts of the corporation.
And in order to be accepted as an important and permanent part of a
corporation's life, they will need strong support from top management. Urban affairs departments in only five of the
companies Cohn surveyed believed that they had such assurances.
A whole range of other proposals
have been made for "structuring in" social responsibility concerns in
a meaningful way. Some have proposed
"public directors," including those who represent constituencies
affected by the corporation (the Campaign GM proxy proposal included such a
proposal). Others suggest (and again
Campaign GM was an advocate) the establishment of a shareholder's committee
with access to corporate information which would report to the stockholders on
the successes and failures of management's initiatives toward more responsible
practice. Others have suggested an urban
affairs head, reporting to the corporation president, whose staff would fan out
into the rest of the corporation and develop proposals for more coordinated
social responsibility goals and efforts.
A proposal not necessarily incompatible with those mentioned is that the
"public business" of the corporation be given a "line" and
not a "staff" function headed by an executive vice-president who also
sits on the board and heads a "public business" committee on the
board. By inventorying corporate
resources and inventorying the problems which the corporation could affect,
this "public business" department could develop more systematic
approaches to social ills which the corporation could help alleviate and have
clear access to the ultimate decision-making body to gain sanction for its
proposals.
The notion that the corporation
must alter its structure in assuming its new responsibilities is so new to most
corporations that only massive efforts will be able to determine what is
required. While stockholders may not be
able to perform this task alone, it is appropriate that they spur the effort
and sanction its results.
SUMMARY
Although corporate enterprise has
become more and more concentrated in the hands of a relatively few managers, it
does not follow that all corporations are the same. In one major urban area, one of the largest
banks has developed a complex, wide-ranging urban affairs committee to oversee
and develop more flexible mortgage policies, soft loans, and minority hiring
programs, to aid marketing of minority-produced products, and to encourage bids
from minority-owned suppliers and corporate giving. In the same city another large bank has
adopted the rather strange view that because higher-risk loans might hurt the
lendee in case of default, no such loans should be made.
The socially conscious investor
has the task of discerning these differences and adding his voice to those who
encourage the conscientious and chastise the sluggish. The potential of the American church to
effect meaningful changes in providing for the health and welfare of this
society may rest as much with the ability of churchmen to hone the powers of
discerning the shadow from the substance of corporate initiatives in the area
of social responsibility as in its efforts to deploy its own--and in
comparison--scanty resources in the pursuit of those goals.
The Dilemmas of Christians in Business
There is no community of moral support for Christians
working in a
capitalist economy.
By Gaylord Noyce
A
businessman friend of mine recently joined a discussion that had begun around
the Gospel texts on taking up the cross and following Jesus. "Whoever would save
his life will lose it, and whoever loses his life for my sake will find
it."
The
other participants in the discussion were also business executives, and they
nodded agreement as Jack, troubled, bluntly stated his dilemma: "I think I can serve my neighbor in my
church work and my civic involvements. I
do a lot of that. At work I have to be
self-centered, self-seeking."
Jack
was too honest to hear any of my remonstrances.
"But in your earning, you are serving your family," I said. "You serve your employees and you serve
this community's economic well-being."
"No,"
he said, stressing his sense of being trapped in an immoral situation, "at
work I have to be selfish."
Within
a very few weeks I happened to be talking with another small-scale entrepreneur
who was also a dedicated churchman, at that very season pouring hours into a
regional campaign for spiritual renewal in the churches. In response to my description of Jack's
feelings,
Those
two conversations have stuck with me not because I had previously assumed that
business was sweetness and light but because beneath each of them I detected a
troubled and reflective person who is being inadequately served by the church
and the secular philosophers of our economic order. Neither of these men had a rationale that
could help him morally integrate his work, his faith and his idealism. Both invested the major part of their
energies in pursuits that, according to their own best insights, involved
questionable practices. Neither had an
intellectual handle or a community of moral support and criticism to help him
cope with his schizoid experience in a capitalist economy. Not as economists but as fellow Christians
and pastors, religious leaders owe men and women of business some help in their
struggle.
We
are not wanting for moral critique of our present system of business
enterprise, of course. Substantial and
passionate socialist proposals and exhortations are available. In the religious world, liberation
theologians speak in highly moral terms about economic oppression and the need
for systemic change. Unfortunately, the
evidence is inconclusive when we evaluate attempts actually to practice what
doctrinaire collectivism teaches--at least in terms of advantage to the American
society with its relatively free market system.
This is true whether the arguments focus on economic growth,
distributive justice, economic initiative or personal liberty and well-being. (Interpreting the data is difficult; the
hermeneutic circle in evaluating social reality is at least as troublesome as
that in Scripture studies.)
Moreover,
my two friends do not find liberation theology very helpful for their own daily
work, important as that analysis might be in provoking church study group
discussions on foreign policy,
On
the right, there is available to Jack and Warren another ideological critique
of our present system, one found, for example, in the best seller by Milton and
Rose Friedman, Free to Choose (Harcourt,
Brace, Jovanovich, 1980). Here is a
Nobel Prize-winning economist writing with his wife on economic and social
philosophy; and with a link to Friedman's national newsweekly column, as well
as a 13-week educational TV series, the book commands a vast audience. Ronald Reagan says Free to Choose is must reading.
The Reader's Digest claims it
puts us back in touch with how a free society can work.
The
Friedmans' book uses selected stories and statistics that propose, even for our
20th century economic understanding, little more than the discoveries made by
Adam Smith in the 18th century, a rather different epoch from ours in terms of
economic and political organization.
Using a very readable amount of economic jargon and data, the book
represents the libertarian belief that private interest, allowed its free
course with the least possible government intervention, always serves the
public well. We are to trust the
"invisible hand," here once again given near-ontological status in
the scheme of things. Little is said of
the problems of concentrated power unless it is governmental, little of all the
peoples left out in our past experiences of unfettered free enterprise.
Because
of the book's single-minded materialist interpretation of human motivation in
the marketplace and its one dimensional evaluation of the corporate
profit-seeking obligation, a moralist may be tempted to dismiss it out of
hand. That would be a mistake. For one thing, it offers some proposals that
warrant more experimentation and discussion--such as educational vouchers, the
negative income tax and effluent assessments of environmental pollution. For another, "supply side" economic
concern for investment capital may be one part of the answer to our
productivity problems.
Of course the book helps the
affluent rationalize their resistance to redistributive governmental welfare
policy. Of course it provides emotional
focus for our growing disappointment that governmental action does not
"solve" our massive social dilemmas.
Of course it purports to explain our difficulties with a clear-cut,
simple diagnosis. But that is not
all. Free
to Choose also couches its analysis and purpose in moral language, the
language of freedom. (It avoids
discussion of justice and compassion.)
This is very far from being an economics text that
"objectively" describes one dimension of social reality. It is prescriptive--a moral and political
tract. It offers, therefore, a ready and
tempting handhold for people like Jack and Warren as they search for a way to
understand their own moral dilemmas.
Jack
and Warren cannot appropriate reformist arguments born of economic and
political realities in the Third World as easily as they can understand
expressions of pastoral and ethical concern for their own experience, for the
problems of the men and women they employ and for those of their fellow
citizens among the poor and powerless here in this country. Such a critique will suggest the pain and
hurt of those near-neighbors with whom they can most easily identify, and, it
will take seriously the dilemmas of the man or woman in the pew who is
attempting to hold a business life together.
Jack
and Warren do not want their lives divided between a morally viable half--the
world of family, church and voluntary service--and a business-week half that
has to be placed outside of moral concern, commonplace as that solution may be. The type of critique they need must provide
something more responsible, contemporary and compassionate than does Free to Choose.
John
Bennett gave the title "middle axioms" to the guidelines he developed
for social action; these are neither detailed prescriptions to match immediate
situations one-to-one, nor the "impossible possibilities" (Reinhold
Niebuhr's term) of broad-range theological truths or Sermon-on-the-Mount
ethics. I would propose five such axioms
that may contribute to the business people in our pews a Christian
understanding of their calling.
1. Self-interest is omnipresent in the human situation. A Christian's motivations are never pure; the self-seeking form of sin is an element in everything we do. This axiom provides a realistic approach to the marketplace and a healthy assessment of motivation in most economic activity. Self-seeking is both conscious and not. Physicians, who work in a "service profession," have helped structure the medical system to provide themselves an income well above that of most of the people they serve. Preachers and professors enjoy a status they help maintain with various "professional standards" born not only of conscientious idealism but also of unconscious self-interest. Bus