Abstract
The significance of, and difficulties involved in, managerial abandonment of an anachronistic adversarial ideology can best be understood through a capsule history of corporations and unions over the last century. During that period, the nation made only slow ethical advances in its treatment of workers.1 Primary responsibility for this slowness rests with business managers, though most labor leaders and unionists have comfortably adapted an adversarial stance. Both groups are going to have to change attitudes and behaviors if advances are to be made and the past is very relevant to present needs.
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Though American employees have made significant gains over the last century, including markedly higher real wages, shorter hours, and fringe benefits, including safer, more enjoyable places of work, in general, they have not won several rights that surely are basic to ethical treatment. The most important of these is the right to due process at the workplace. Skilled, technical, and professional employees often can not find alternate jobs through a competitive labor market, if they believe themselves mistreated in a particular job; many other employees find alternatives more scarce and thus are denied even a kind of procedural due process through the market. Outside of unionized firms, few organizations offer due process procedures of appeal that include third-party arbitrators or “neutrals.” Without such a final appellant level in the process, due process will be suspect, both to employees and to the public at large. A second right few employees have gained is that of “blowing the whistle” on illegal, questionable activities by others in the organization, particularly managers. Typically managers penalize whistle blowers, unable to recognize the help they may offer in maintaining quality standards, protecting consumers and thus the firm’s reputation, and assisting managers in making sure those within the organization take seriously the various codes of ethics that many firms promulgate. A third right, closely related to the first two, is the right of free speech, something that American employees might particularly expect. A fourth right to which managerial attention has not been paid in recent decades, particularly among the rapidly growing retail trade and services sectors, is that of a more, rather than less, egalitarian wage structure. Occupational barriers in education and the health industries have promoted wider wage differentials than were usually found in modern manufacturing industries. Recent surveys of employees and top executive perceptions of work satisfactions suggest that managers are out of touch with those they work in their firms and have not carefully considered how rights, such as the four mentioned, might be offered to enhance worker satisfaction. A 1987–1988 survey by Louis Harris and Associates, Inc. indicated that whereas 46 percent of office workers were very satisfied with their jobs, and 41 percent were somewhat satisfied, 75 percent of top executives believed their workers were very satisfied, and 19 percent believed that they were somewhat satisfied. See Louis Harris and Associates, Inc., The Office Environment Index, 1988 Summary Report (Grand Rapids, MI: Steelcase, Stow & Davis, 1988), p. 4.
County of Santa Clara v. Southern Pacific Railroad Company, 118 U.S. 394 (1886).
See Commonwealth v. Pullis (1806), reported in Commons and Gilmore, A Documentary History of American Industrial Society, pp. 59-236; Commonwealth v. Hunt, 4 Metcalf, 111 (Mass. 1842), Plant v. Woods, 176 Mass. 492 (1900), Pickett v. Walsh, 192 Mass. 572 (1906), and American Steel Foundries v. Tri-City Central Trades Council, 257 U.S. 181 (1921).
NLRB v. Jones & Laughlin Corp., 301 U.S. 1 (1937).
Quoted in Allan Nevins, Study in Power: John D. Rockefeller, Industrialist and Philanthropist (New York: Charles Scribner’s Sons) 1953, vol. I, p. 402.
Sigmund Diamond, The Reputation of the American Businessman (Cambridge: Harvard University Press, 1955), p. 53.
Alfred L. Thimm, Business Iedologies in the Reform-Progressive Era, 1880–1914 (Tuscaloosa: The University of Alabama Press, 1976), p. 166–167.
John William Ward, “The Ideal of Individualism and the Reality of Organization,” The Business Establishment, Earl F. Cheit, ed. (New York: John Wiley & Sons, 1964), p. 43. The ideas of this section are based on Ward’s arguments.
See Henry Nash Smith, Virgin Land: The American West as Symbol and Myth (Cambridge: Harvard University Press, 1950).
Herbert Hoover, The Challenge to Liberty (New York: Charles Scribner’s Sons, 1934), pp. 54–55.
John William Ward, “The Ideal of Individualism and the Reality of Organization,” The Business Establishment, Earl F. Cheit, editor (New York: John Wiley & Sons, 1964), pp. 39–40.
Geary v. US Steel Corporation, 319 A.2d 174, Supreme Court of Pennsylvania, 1974. For other such cases, see David W. Ewing, “Do it my way or You’re Fired!”: Employee Rights and the Changing Role of Management Prerogatives (New York: John Wiley & Sons, 1983).
See the case of David Edwards, Citicorp, Roy Rowan, “The Maverick Who Yelled Foul at Citibank,” Fortune, January 10, 1983.
John William Ward, The Business Establishment, p. 73.
The Bureau of Labor Statistics no longer publishes turnover figures, but over the years that it did, for manufacturing production workers, turnover typically involved from 4 to 5 percent of the measured labor force each month. Although the core of any work force may be quite stable and some employees may be hold jobs for years, a sizable portion of them come and go all the time.
Robert F. Hoxie, Trade Unionism in the United States (New York: D. Appleton & Co., 1917).
Quoted in the “Report of the Industrial Commission on the Relations and Conditions of Capital and Labor,” Hearings, April 19, 1899, 7 (Washington, DC: Government Printing Office), p. 645.
Charles M. Schwab, chair, Bethlehem Steel, in a speech to a Chamber of Commerce group, 1918, declared: “I believe that labor should organize in individual plants or amongst themselves for the better negotiation of labor and the protection of their own rights; but the organization and control of labor in individual plants and manufactories, to my mind, ought to be made representative of the people in those plants, who know the conditions; that they ought not to be controlled by somebody from Kamchatka who knows nothing about what their conditions are.” “Capital and Labor,” Annuals of the American Academy of Political and Social Science, January 1919, p. 158.
Samuel Gompers, Labor and The Employer (New York: E. P. Dutton & Company, 1920), p. 102.
Charles C. Heckscher, The New Unionism: Employee Involvement in the Changing Corporation (New York: Basic Books, 1988), p. 28.
The Norris-LaGuardia Act, 1932, passively encouraged union organizing, only by relieving unions of the previously imposed judicial restraints. The Wagner Act, 1936, actively encouraged union organizing and protected collective bargaining. In 1947 Congress passed the Taft-Hartley Act, which imposed some restrictions upon unions and limits on collective bargaining. The Landrum-Griffin Act, 1959, increased both the number of restrictions and limits and sought to regulate some of the internal affairs of unions.
Neil W. Chamberlain, The Union Challenge To Management Control (New York: Harper, 1948).
Thomas A. Kochan, “Adaptability of the U.S. Industrial Relations System,” Science, April 15, 1988, p. 280.
Kathryn Rudie Harrigan and Michael E. Porter, “Endgame strategies for declining industries,” Harvard Business Review (July/August 1983), pp. 111-120.
(Boston: Houghton Mifflin Company, 1967). This volume had been preceded by two other influential studies of the modern corporation and its considerable but not necessarily benign contributions to society. The first was American Capitalism: The Concept of Countervailing Power (Boston: Houghton Mifflin Company, 1952), and the second was The Affluent Society (London: Hamish Hamilton, 1958).
Adolf A. Berle and Gardiner C. Means, The Modern Corporation and Private Property, rev. ed. (New York: Harcourt Brace & World, 1968), first examined the new industrial corporation that had emerged after the turn of the century. They emphasized the separation of ownership and control, with managers effectively exercising power.
See Peter Drucker, “The Coming of the New Organization,” Harvard Business Review January/February 1988), p. 53.
S. Frederick Starr, president of Oberlin College, has noted that even so centralized, powerful, and all controlling an organization as that of the Soviet government has not been able to control its external and internal environments. He writes that “the regime had become petrified and oligarchic, thereby repressing the very forces that might have stimulated economic renewal... while the official economy lagged, an entrepreneurial’ second economy’ burgeoned.... Economic stagnation... occurred because the system failed to adjust to the emerging values of the populace, especially its best educated and technically most competent elements.” “Soviet Union: A Civil Society,” Foreign Policy, No. 70 (Spring 1988), pp. 26-27. It is ironic that the large American business corporation should suffer some of the same troubles that the centralized state planning system of the Soviets has encountered. As the reader will see in the following analysis, the sources of those troubles are remarkably similar; both capitalism and Socialism are subject to them. Or more accurately, one can characterize the large, Galbraithian business corporation as the closest Americans have come to a socialistic system.
See the description of the modern corporation given by the Committee for Economic Development (CED): “One of the most important changes is that the corporation is regarded and operated as a permanent institution in society.... [The] aim is to further the continuous institutional development of the corporation in a very long time frame.... As a permanent institution, the large corporation is developing long-term goals such as survival, growth, and increasing respect and acceptance by the public.” CED, Social Responsibilities of Business Corporations, June 1971, pp. 21-22. In the light of the continual change in a capitalistic economy, with even large firms appearing and disappearing, this statement is more an expression of hubris than fact. In the 70 years between 1917 and 1987,78 percent of the firms on a list of the 100 largest in the earlier year did not survive to appear on the list during the latter year. See Forbes, July 13, 1987, pp. 49ff.
Peter Drucker, “The Coming of the New Organization,” Harvard Business Review (January/February 1988), p. 45. Richard A. Gabriel notes that the military, during World War II, borrowed the same hierarchical, bureaucratic model back from the large corporations. It had become the recognized standard of what “a large organization should be,” if one wanted to gain both efficiency and control. See Richard A. Gabriel, “What the Army Learned From Business,” The New York Times, April 15, 1979. The Roman Catholic church may also have been a indirect model for the newly emerging business corporation. A large proportion of the industrial work force were probably Catholic, and many were immigrant. Both their new arrival in the country and their acceptance of the church’s organization may well have conditioned them to the authoritarian, hierarchical form of their employing corporations. The workers acceptance of a similar form in their unions, as well as in the business firm, may thus have been facilitated.
Alfred D. Chandler, Jr., and Herman Daem, Managerial Hierarchies (Cambridge: Harvard University Press, 1980), p. 1.
William J. Hampton and James R. Norman, “General Motors: What Went Wrong?” Business Week, March 16, 1987.
See Employment and Training Report of the President, 1982 (Washington, DC: Government Printing Office, 1982), Table C-2, p. 241. “Administrative and managerial personnel” made up over 10 percent of all nonagricultural employment in the United States in 1980, compared to 4.4 percent in Japan, 3 percent in West Germany, and 2.4 percent in Sweden. See Mark J. Green and John F. Berry, “Taming the Corpocracy: The Forces Behind White-Collar Layoffs,” The New York Times, F3, October 13, 1985.
Robert Jackall, Moral Mazes: The World of Corporate Managers (New York: Oxford University Press, 1988), and.
Michael Maccoby, The Gamesman: The New Corporate Leaders (New York: Simon and Schuster, 1976).
The Committee for Economic Development, Social Responsibilities of Business Corporations, A Statement on National Policy by the Research and Policy Committee of the Committee for Economic Development, June 1971, p. 20.
Clifton Garvin, “Exxon and the Arts,” The Lamp, 1978, p. 10.
“Statement on Corporate Responsibility,” Business & Society: Economic, Moral an Political Foundations (Englewood Cliffs, NJ: Prentice-Hall Inc., 1985), p. 155.
Paul W. MacAvoy, “The Business Lobby’s Wrong Business,” The New York Times, December 20, 1981.
Andrew C. Sigler, “Roundtable Reply,” The New York Times, December 27, 1981.
Bruce Nussbaum and Judith H. Dobrzynski, “The Battle For Corporate Control,” Business Week, May 18, 1987, p. 103.
Ibid.
Ibid., p. 22.
“Statement on Corporate Responsibility,” Business & Society: Economic, Moral and Political Foundations, ed. Thomas G. Marx (Englewood Cliffs, NJ: Prentice-Hall Inc., 1985), p. 155.
The reader should note that business corporations have hardly been generous in even their charitable giving. In absolute amounts, their gifts appear large, compared to family incomes. In 1979 dollars, they provided between $1.0 billion and $2.3 billion, 1955–1980; however, as a share of their own pretex net income, they have contributed from a low of 0.86 percent in 1955 and 1956, to a high of 1.26 percent in 1969.” “Lend A Helping Hand,” Public Opinion (February/March 1982), p. 24.
See Earl F. Cheit, “The New Place of Business: Why Managers Cultivate Social Responsibility,” The Business Establishment, Earl F. Cheit, ed. (New York: John Wiley & Sons, 1964), p. 157–8.
The Business Roundtable statement, however, mentioned plant closing as a socially difficult problem, requiring a careful balancing of various constituency interests. It did not call for the participation of constituencies in arriving at a decision, however; managers both could and should make it by themselves, in the interests of the various constituencies involved.
Such essential irresponsibility may provide the economy with a flexibility that is far more productive than those adversely affected realize. Compare the ease with which a business firm closes an out-of-date plant with the difficulties encountered by the Department of Defense when it attempts to close unneeded military bases, obsolete supply depots, and inefficient facilities.
CED, Social Responsibilities of Business Corporations, pp. 63-64.
Milton Friedman, Capitalism and Freedom (Chicago: The University of Chicago Press, 1963), pp. 133–134.
Paul W. MacAvoy, “The Business Lobby’s Wrong Business,” The New York Times, December 20, 1981.
Peter Drucker, “Corporate takeovers—What is to do done?”, The Public Interest, No. 12 (Winter 1986), p. 20.
From George A. Stevens, New York Typographical Union No. 6, New York State Department of Labor, Annual Report of the Bureau of Labor Statistics (1911), Part I, pp. 239-241.
Quoted in Lewis Corey, The House of Morgan (New York: G. Howard Watt, 1930), p. 213.
Royal Meeker, “Employees’ Representation in Management of Industry,” Monthly Labor Review, Vol. 10, 1920, p. 7. Italics added.
“Taking Aim at ‘Union Busters’,” Business Week, November 12, 1979, p. 98.
Carey W. English, “Business Is Booming for ‘Union Busters’,” U. S. News & World Report, Vol. 94, May 16, 1983, p. 61.
Quoted by Earl Lathan, “The Body Politic of the Corporation,” The Corporation In Modern Society, Edward S. Mason, ed. (Cambridge: Harvard University Press, 1959), p. 223.
David W. Ewing, Freedom Inside the Organization: Bringing Civil Liberties To The Workplace (New York: E. P. Dutton, 1977), p. 21.
Ian Cameron, “In Defense of Conflict?” Unilever Magazine (September–October 1974), p. 30.
Harry Levinson and Stuart Rosenthal, CEO: Corporate Leadership in Action (New York: Basic Books, 1984), p. 4.
Allen Weiss, The Organization Guerrilla: Playing the Game to Win (New York: Atheneum, 1975), Part III, pp. 91–124.
Hierarchy is so integral a part of modern business enterprises that Alfred D. Chandler, Jr., defines them as economic institutions, owning and operating a multiunit system and relying on a multilevel managerial hierarchy for administration.
An economy of small business units would require a great many more market exchanges than at present. Such exchanges, or transactions, are costly; about one-fifth of the labor force is presently employed in wholesale and retail trade. Although many of the workers involved store, move, and package the goods with which they deal, a sizable portion of them merely administer, carry out the exchanges, and record them.
See Fritz Roethlisberger, Management and Morale (Cambridge: Harvard University Press, 1943).
Mayo had reached this conclusion before he conducted the experiment, and without noting carefully the research findings. Two work groups were involved, men in the bank wiring room and women in the test room. The productivity of the former did not change over the course of the experiment, whereas that of the latter did. Mayo ignored the difference, focusing upon the test room outcomes as proof of his conclusion. William Foote Whyte offered another interpretation: The test room women functioned as an autonomous work group, whereas the men’s group continued to work under the close supervision of the foreman. See his “Review of the Elusive Phenomena,” Human Organization, Vol. 37, No. 4, pp. 412-420.
See Elton Mayo, The Social Problems of an Industrial Civilization (Boston: Graduate School of Business Administration, Harvard University, 1945).
Peter Drucker roundly condemns managers invocation of prerogatives. “This is a singularly unfortunate phrase. A prerogative is a privilege of rank. Management has no claim to any such privilege. It exists to discharge a function. Its job is to make productive the resources in its trust. A prerogative is never based on responsibility or contribution.... Management has authority only as long as it performs. To invoke management prerogatives undermines managerial authority.” Management: Tasks, Responsibilities, Practices (New York: Harper & Row, 1973), p. 301.
See William Foote Whyte, “From Human Relations to Organizational Behavior: Reflections on the Changing Scene,” Industrial and Labor Relations Review, Vol. 40 (July 1987), p. 492.
Philip H. Abelson, “Competitiveness: A Long-Enduring Problem,” Science, May 13, 1988, p. 865.
William Shepherd, “Causes of Increased Competition in the U.S. Economy, 1939–1980,” 64 Review of Economics and Statistics (November 1982), p. 613.
Carrie Gottlieb, “And You Thought You Had It Tough,” Fortune, April 25, 1988, p. 83.
The Council of Economic Advisers have argued that “the share of value added in manufacturing has remained remarkably stable throughout the postwar years, fluctuating in a narrow range between 19 and 23 percent.” Economic Report of the President, 1988 (Washington: Government Printing Office, 1988), p. 63. But Lawrence R. Mishel of the Economic Policy Institute concludes that the official statistics are dated, based upon an input-output model unchanged since 1977. He calculates that the decline has been one of “unprecedented magnitude,” See Robert Kuttner, “U.S. industry if wasting away—But official figures don’t show it,” Business Week, May 16, 1988, p. 26.
See Statistical Abstract of the United States, 1987, (Washington: Government Printing Office, 1987), Table No. 858, p. 507.
The Economist, March 5, 1988.
George Gilder, “The Revitalization of Everything: The Law of the Microcosm,” Harvard Business Review, March-April 1988, pp. 49-61.
Claudia H. Deutsch, “U.S. Industry’s Unfinished Struggle,” The New York Times, February 21, 1988.
Louis Lowenstein, “Pruning Deadwood in Hostile Takeovers: A Proposal for Legislation,” 83 Columbia Law Review 249, pp. 297–298 (1983). He suggests that institutional investors own an even higher share of the corporations in the Standard & Poor’s 500 stock index. Also see Ford S. Worthy, “What’s Next for the Raiders,” Fortune, November 11, 1986, p. 23. Peter Drucker gives a figure of 50 percent of all publicly traded common shares of large firms. “Corporate takeovers—What is to be done?”, The Public Interest, No. 12 (Winter 1986) p. 11.
Bruce Nussbaum and Judith H. Dobrzynski, “The Battle For Corporate Control,” Business Week, May 18, 1987, pp. 103-104.
Nearly half of the 47 million U.S. households owning stock hold it through mutual funds. The number of mutual funds has increased rapidly in recent years. Through 1985 and 1986 the number of mutual-fund shareholders increased by 2.7 million. Because households sold more stock than they bought, over the same period, for a total of $227 billion, it is probable that many are not withdrawing from the market but transferring their assets from individual accounts to mutual funds. George Russell, “Manic Market,” Time, November 10, 1986, p. 67. Also see Kenneth R. Sheets et al., “How The Market Is Rigged Against You,” U.S. News and World Report, December 1, 1986, p. 47. Also see Nancy J. Perry, “Who Runs Your Company Anyway?” Fortune, September 12, 1988, p. 140. “Pension funds now own 25%, by value of all corporate shares traded in the U.S. They own 50% of the shares traded on the New York Stock Exchange and 65% of the Standard & Poor’s 500 stocks.” Perry presents data indicating that public funds total $576 billion, and private funds are nearly twice as large, $1,053 billion; union funds take a poor third place with $131 billion. She estimates that by 2000 pension funds assets will amount to $3.5 trillion dollars and will represent half of all corporate equity.
See Anthony Bianco, “American Business Has a New Kingpin: The Investment Banker,” Business Week, November 24, 1986, p. 77. He quotes John Kenneth Galbraith, who expressed his surprise at what is happening. His earlier studies gave no hint that managers would ever have to worry about any constituency, particularly the unorganized, passive stockholders.
Peter C. Clapman and Richard M. Schiefer, “Recipe for a Management Autocracy,” The New York Times, December 14, 1986.
For example, the California Public Employee Retirement System and the NYS Employees Retirement Fund asked for a formal long-term role in choosing Texaco directors. The New York fund holds 3 million shares and the California fund owns 783,000 shares; there are 244.3 million shares outstanding. A number of large corporations have responded, albeit reluctantly, to the demands of institutional investors. Alcoa, General Mills, Sara Lee Corporation, and Loral Corporation have agreed to conduct board elections through secret ballot. Allanna Sullivan, “Two of Texaco’s Institutional Holders to Seek a Role in Nominating Directors,” The Wall Street Journal, August 17, 1988.
The share of middle managers who report favorable views of their opportunities for advancement dropped from 72 percent in 1975–1977 to 39 percent in 1983–1985. Twenty-eight percent said that merger/reorganization had changed their views. Carol Hymowitz, “Stable Cycles of Executive Careers Shattered by Upheaval in Business,” The Wall Street Journal, May 26, 1988. Presumably most top managers arrange to bail out of a merger with a golden parachute.
Lipset and Schneider, p. 167. The negative opinions were consistent over four surveys, 1966-1978.
William Serrin, “Study Says Work Ethics Is Alive but Neglected,” The New York Times, September 5, 1983, p. 8.
In 1962, over 15 percent of all the employed still worked for themselves, one-third of them in agriculture. By 1985 less than 10 percent were self-employed, and those in agriculture accounted for fewer than one out of six.
Claudia H. Deutsch, “U.S. Industry’s Unfinished Struggle,” The New York Times, February 21, 1988.
Ibid.
“Educational Level of U.S. Work Force Rises, Report Shows,” The Wall Street Journal, August 30, 1988.
The Wall Street Journal, May 13, 1988.
The Confidence Gap, p. 120.
Business Week, September 12, 1988, p. 72.
Business Week, August 8, 1988, p. 46.
Robert H. Hayes and Ramchandran Jaikumar have also pointed out the dangers of American managers concentrating their efforts on “hardware” improvements rather than examining the adequacy of their personnel policies, attitudes, and habits of mind. “The real impediment [to productivity improvement] lies not in the inherent demands of the hardware but in the managerial infrastructure that has become embedded in most U.S. companies over the past 50 years. This includes the attitudes, policies, systems, and habits of mind that are so ingrained and pervasive within companies that they are almost invisible to those within them.... Traditional managerial attitudes, manifested in top-down decision making, piecemeal changes, and a ‘bottom-line’ mentality are incompatible with the requirements and unique capabilities of advanced manufacturing systems.... [We need] profound reform in the modern corporation... new working relationships. At a still higher level, reform means that top officers must cultivate new skills and managerial styles. It may well require a new generation of executives. “Manufacturing’s Crisis: New Technologies; Obsolete Organizations,” Harvard Business Review, September/October 1988, p. 79.
John T. Dunlop, “Have the 1980’s changed US industrial relations?”, The Monthly Labor Review, Vol. 111 (May 1988), pp. 29–34.
Audrey Freedman, “How the 1980’s have changed industrial relations,” The Monthly Labor Review, Vol. 111 (May 1988), pp. 35–38.
Elmer W. Johnson, “Management and Labor: Breaking Away,” a presentation made to faculty and students at DePaul University, Chicago, Illinois, Spring 1988, pp. 5-6.
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Kuhn, J.W. (1990). Unions in the Nineties. In: Walton, C.C. (eds) Enriching Business Ethics. Springer Studies in Work and Industry. Springer, Boston, MA. https://doi.org/10.1007/978-1-4899-2224-3_6
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