The Executive As Social Activist
PHILOSOPHERS of capitalism have always expected it to produce social progress, but usually as a byproduct of economic efficiency. In 1776, Adam Smith asserted that the businessman pursuing his own self-interest would be led "by an invisible hand" to do more good for society than if he consciously set out to do so. For almost two centuries, businessmen accepted the comfortable, generally sound idea that, by seeking wealth for themselves, they would create jobs, goods--and wealth --for others. In modern America, owners and managers figured that their chief duty was to make the biggest profit they could, subject to some qualifying commandments: Thou Shalt Not Cheat Customers, Thou Shalt Not Oppress Workers, Thou Shalt Not Conspire with Competitors. As a citizen, the U.S. executive might worry about housing, education or public health. As a corporate official, he typically considered such things none of his business.
Now business is changing. U.S. corporate leaders have begun articulating a new philosophy: that business is part of the total society and has an obligation to attack a broad range of social problems, if need be in ways that temporarily retard profits. Fletcher L. Byrom, chairman of Pittsburgh's Koppers Co., finds the idea that business exists only to make a profit as unsatisfactory as "saying that the function of living is to breathe." Charles F. Luce, chairman of metropolitan New York's Consolidated Edison, argues that managers must directly concern themselves with "whether Negroes and Puerto Ricans have decent jobs and housing and education." B.R. Dorsey, president of Gulf Oil, goes as far as to say that "The first responsibility of business is to operate for the well-being of society." In sum, the business of business is America.
The new mood reflects much genuine altruism, but it is also in large part a reaction to rising public attacks on business. Company chiefs have been shaken by the protests of the consumer crusaders, the blacks and the youth. Talented college graduates, who are the people businessmen most want to hire, demand to know just what corporations are doing for the community and the nation. Many corporate chiefs have been personally pressed by their own sons and daughters. Whitney Young Jr., head of the National Urban League, was startled recently to see the chairman of one of the largest U.S. corporations moved to tears while describing the insistent questioning of his children as to what he, as a man of power, was doing to improve society.
The American businessman is being challenged to effect change within his own organization: to hire more of the poor, to stop the pollution that his company produces, to manufacture safer and more reliable products. Beyond that, he is being asked to reach more broadly into the community: to use his company's talent, capital and organizational skill to repair the rattles in the nation's social machinery.
Many businessmen concede that the protesters' challenges are justified and have opened their eyes to social and environmental ugliness that they had never noticed before. "I've been looking at jet planes for a long time," says Wallace Booth, a vice president of North American Rockwell. "But until recently, I took it for granted that a lot of black smoke came out the back end. Now it aggravates me personally." Atlanta's Mills Lane, a highly influential Southern banker, was horrified while driving around the slums of Savannah, his home town, to see the desperate poverty that he had never noticed while growing up.
What are businessmen doing about it all? Their achievements so far by no means match their brave rhetoric. To some extent, business' social effort is a public relations campaign; community involvement has become the "in" thing for a company to boast about. Asked what they are actually doing to improve the community, some corporate leaders cite such routine activities as charitable contributions.
Yet an elite group of firms, mainly among the richest and most powerful corporations in the nation, have made an impressive beginning. They are hiring and training the hard-core unemployed. They are spending prodigiously to clean up pollution of the air and water. They are launching promising pilot programs to build low-cost housing and to improve education. Overall, they make few major decisions without considering the broader effects on the local community and the nation.
"The Worst Domestic Crisis"
Not many small or even medium-sized companies have yet joined the effort. They have less money and resources to devote to anything beyond the pursuit of profit. The corporate leaders who are acting, however, wield power to effect change far out of proportion to their numbers. A partial list: Haakon I. Romnes, chairman of American Telephone & Telegraph; Alden Clausen, president of Bank of America; Thomas J. Watson Jr., chairman of I.B.M.; Harold Geneen, chairman of International Telephone & Telegraph; Roy Chapin Jr., chairman of American Motors; Robinson Barker, chairman of PPG Industries.
Those businessmen who have begun action have proved their seriousness by continuing it through the current economic downturn. The slump has indeed prevented expansion of some projects. For example, the National Alliance of Businessmen lately has been falling short of its goals in obtaining new pledges from companies to train the hard-core unemployed, because corporations now have fewer jobs to fill. Outright cutbacks in social projects, however, have been rare. More and more businessmen are becoming aware that social action is not a luxury; they realize that either they have to change, or change will be forced upon them. Their goal is to create social reforms without real revolution.
Nobody has realized the magnitude and urgency of the job more than the man whose name is synonymous with U.S. capitalism: Henry Ford II. The chairman of the Ford Motor Co. is the absolute ruler, by right of primogeniture, of a worldwide auto empire. In an era of hired managers, he is one of the last of the proprietors, a man who can do exactly what he pleases because, as he says, "my name is over the door." What Henry the Second pleases to do varies from impulsively writing a $50,000 check for a Detroit ghetto recreation center after hearing about it on a TV news show to purposefully promoting change within his company, his city, and the nation's business community.
Some time ago, Ford became convinced that the U.S. is facing what he calls "the worst domestic crisis since the Civil War." To overcome it, he told the Buffalo Chamber of Commerce two years ago, "will require nothing less than a peaceful social revolution. We will need to make basic changes in our schools, our housing, our welfare system. We will also need to make basic changes in our employment practices --in whom we hire, how we hire, and what we do with people and for people after they are hired."
In many ways, Ford, 52, seems an unlikely social activist. He is the most powerful man in the industry that has been criticized more than any other for desecrating the environment and being Late to build more safety into its products. He is anything but a philosopher; he affects a streak of anti-intellectualism that would have pleased his grandfather, Henry the First. "You cannot trust intellectuals," Henry the Second often says. He could easily have lived the life of a playboy, and his well-publicized activities as a jet setter and party lover show that he would hardly have disliked the role. But if there is one trait that Ford has consistently demonstrated, it is a sense of noblesse oblige--a term that Ford himself would never use.
Even in the late 1940s, Ford badgered his managers with memos stressing the company's obligations to hire blacks and members of other minority groups.* As Detroit's leading citizen, he later was especially shaken by the riots of 1967, during which automen could look out their windows and see the city in flames. The sight of Army tanks guarding the General Motors headquarters was a grim reminder that not even the world's biggest manufacturer could count on being let alone to make money in a society moving into crisis.
Soon afterward, Ford opened two hiring centers in the Detroit ghetto to recruit the hard-core unemployed--largely blacks who have never held jobs, have never been counted in a census and never voted in an election, are frequently illiterate and often have prison records. Ford gave applicants free bus passes so that they could get to work until they collected their first paychecks and even handed out lunch money. The newcomers were put into "entry level" jobs, as plant sweepers, stock handlers, assemblers and press operators, at $3.25 to $3.80 per hour. About half the work force at Ford Motor's mammoth River Rouge works now are blacks. In startling contrast, the number of Ford's black dealers is only seven out of 6,900 --but that is seven more than in 1967, and Ford is looking hard for additional blacks to become dealers.
Last December, Henry Ford also committed his company "to an intensified effort to minimize pollution from its products and plants in the shortest possible time." The company's operating policy committee has set up specific targets for each manager to meet in reducing pollution and training and promoting blacks. The record of every manager in accomplishing these goals is set down in the notebooks of data that fill Ford's office. The reports weigh heavily in his decisions about whom to promote.
Beyond his own company, Ford spends about 20% of his time on civic activities. He was a prime mover in starting the National Alliance of Businessmen and served as its first chairman in 1968-69. He crisscrossed the country urging fellow executives to take advantage of Government grants and set up programs to hire and train the hardcore unemployed. He is a trustee of New Detroit Inc., a committee organized by the automakers and other industrialists that meets monthly to listen to the complaints of black militants and try to do something about them. The committee raises about $4,000,000 a year to aid neighborhood youth groups and similar causes. Currently, Ford is chairman of President Nixon's National Center for Voluntary Action, a new body that aims to set up centers throughout the country where people who volunteer for social service can be directed to the hospitals, remedial-reading clinics and other social institutions that can most use their help.
As a trustee of the Ford Foundation, Henry the Second has supported most of its widely debated actions, including aid to community-organizing projects among the poor, despite complaints from some of his company's stockholders that such programs are "revolutionary." The foundation, which owns 24.5% of the company's stock but is a completely independent body, has been an embarrassment to some Ford Motor executives, who say only half-jokingly that one organization or the other ought to change its name. Undeterred, Henry Ford has plunged into other controversies. Last December he renewed a call for mandatory auto inspection in all states, maintaining that it is necessary not only for safety but also for pollution control. Ford Motor, like Mobil Oil and other firms, is also about to begin a lobbying campaign for tougher state laws against drunken driving.
A Display of Imagination
Other managers are working on a variety of fronts, but their strongest effort has been concentrated on hiring and training programs. It is the obvious place to begin; businessmen have their most noticeable impact on society as employers, and one of the bitterest complaints of the black community has been against job discrimination. Though employers in many places are obliged by law not to discriminate, there are ways of setting seemingly neutral hiring standards that in fact bar the blacks. In the past, for example, many companies required job applicants to have high school diplomas, which favored generally better-educated whites. Now many companies are not only easing these rules but seeking out workers whom they never before considered suitable.
More than 60% of General Motors' new employees in recent years have come from "minority groups"--the euphemism embracing blacks, Spanish-speaking people, American Indians and Orientals. About 50% of Con Edison's new employees are blacks or Puerto Ricans. Con Ed's headquarters in Manhattan now rings with soul talk and rapid-fire Spanish. California's Bank of America has raised minority-group employment to 22% of its 35,000 U.S. payroll, double the proportion in 1965.
Executives have displayed their greatest imagination, and compassion, in training and caring for their new workers. For both groups, the experience at times is frustrating. Many of the hardcore are without the remotest idea of what is required of a worker. Quite a few have never learned to tell time of even read simple signs; they have no familiarity with such routine disciplines as getting up at the same hour every morning. Some are completely unable to cope and go back to the streets, frequently by dropping their tools in mid-shift and walking out the plant gate, never to return.
Learning to Read the Colors
Automakers have been able to train the hard-core well enough so that 45% to 50% stay on the job; that is close to the retention rate for ordinary workers. Moderate black leaders think that even those who drop out benefit from having once been hired. They at least acquire the beginnings of a job record, some rudimentary training and, if they are laid off, rights to unemployment compensation that they otherwise would not get. The more radical blacks contend, however, that layoffs of newly hired workers only intensify ghetto suspicion that business' social concern is merely a pose.
Companies are making a genuine effort to acclimate their new workers to the job. Chrysler has set up a training center with a simulated assembly line to introduce ghetto youngsters to the noise and bustle of an auto plant before they face the sometimes terrifying experience of entering a real one. Trainees are taught how to tell time and to read the letters that spell out the most common colors, so that when they graduate to the plant floor they can follow instruction cards guiding them to put a blue steering wheel on a blue car. Each newly hired trainee is assigned a "buddy," a veteran worker who lives near the new man and is responsible for bringing him in on time. The buddy often has to enter the new man's home, wake him up and tell him to get cracking.
Metropolitan Life Insurance Co. has counselors who advise newly hired minority-group employees how to deal with such troubles as illegitimate pregnancies or gouging by loan sharks. Boise Cascade, the timber and land-development company headed by Robert Hansberger, a social activist, tries to teach its new blacks and their white foremen to get along with one another by putting both through sensitivity-training courses. In some sessions, the foreman wears a black mask and a black worker a white mask; the idea is to force each to imagine himself in the other's place. The foreman also dons a blindfold or a pair of special glasses that break up the world into a meaningless jumble, as a sawmill may appear to a person with no work experience. He must be led around by a black worker, just as he will have to guide the black during the first days on the job.
In areas other than hiring and training, business' social record consists of a set of beginnings: some stumbles, some successes, and quite a few ideas that could become important if more companies adopt them. A rundown: HOUSING. Life insurance companies have lent $1 billion to improve housing in the nation's central cities, usually at less interest than on other mortgages. Rather than concentrate on a few huge showcase ventures, the insurers have spread their funds. Examples: an apartment complex housing 268 black, Chicano and Indian families in San Diego; a garden-apartment cluster for Cleveland blacks; 270 co-op apartments for families on the fringe of Newark's blighted Central Ward.
In Georgia, Mills Lane's Citizens & Southern Bank has set up a Community Development Corp. that has financed, among other things, prototype houses demonstrating new designs for low-cost homes. Last week, in a black neighborhood of Atlanta, C.D.C. dedicated "the round house"--a silo-shaped, three-bedroom model that will sell for $14,000 to $16,500, including land and furnishings. The silo design is supposed to provide more usable space for the occupants. Henry Ford has grander designs. Last winter he unfurled plans to put up what amounts to a new town --a complex of apartment buildings, shopping centers and offices--on a huge tract that his company owns next to its "glass house" headquarters in Dearborn.
Ford may never get to build it; he insists that it must be integrated. Dearborn's Mayor Orville Hubbard and the other city fathers have so far kept Dearborn all white, using zoning regulations to defeat several attempts by Ford to break the segregation. POLLUTION. Automakers, whose vehicles are the worst polluters of the nation's air, have made an impressive start in cleaning up by modifying engines and installing afterburners. The 1970 models pour 70% fewer hydrocarbons and 65% less carbon monoxide into the air than the 1960 cars did. The industry's goal is to bring those reductions to 95% and 85% respectively on the 1975 models. Performance is improved when cars burn gas without lead, which tends to clog pollution-control gadgets. In February, Henry Ford sent an open letter to the presidents of 19 oil companies, demanding that they speed their marketing of unleaded gas. The oilmen had been working on it earlier, but Ford's public pressure undoubtedly advanced their timetable. All the nation's major oil companies intend to have unleaded gas on the market in the fall, and the 1971 cars will have engines that, when burning unleaded gas, will cut down nitrogen oxides in the exhaust.
Beyond the auto and oil industries, companies have barely begun cleaning up the mess for which they are largely responsible, but many new approaches are being tried. Coca-Cola executives, conscious of the monstrous garbage-disposal troubles caused by marketing of "one-way bottles" that require no deposit, are about to start an ad campaign aimed at persuading consumers to switch to returnable bottles. Its theme:
"Wouldn't You Rather Borrow Our Bottle Than Buy It?" Coke is also test-marketing in New England a plastic bottle that may be burned without giving off noxious fumes. New York City's Chemical Bank is advertising low-interest loans for apartment-house owners to buy smoke-control equipment for incinerators. The bankers say that they will make no profit on these loans. EDUCATION. Beyond training the hardcore unemployed whom they hire, businessmen have started trying to upgrade public schooling. Michigan Bell Telephone, Chrysler, and Parke, Davis & Co., for example, have each "adopted" a Detroit ghetto high school. In its school, Chrysler has set up a model auto-repair shop and data-processing lab. Students take vocational training under teachers supplied by Chrysler and periodically spend half a day working in the company. The company has hired 290 youngsters from the school.
RCA is undertaking a far more ambitious project. Last spring it accepted a $735,000 federal grant to study and recommend solutions for the problems of the schools in Camden, N.J. The difficulties include outdated curriculums and teaching methods, heavy teacher turnover, disruptive students and dwindling attendance. Community officials wanted the job done by RCA, the city's biggest employer, because they thought that a private business could approach the situation with a fresh eye. Says Donald M. Cook, RCA's director of educational development planning: "One result might be that instead of having a single teacher instruct a class of 30 or 35 pupils, we would have classes of up to 100, with perhaps two teachers assisted by teachers' aides. The teachers could devote themselves to specific subjects and problems and to counseling students who need special attention, while the assistants could tend to more routine activities."
BLACK CAPITALISM. By providing capital, training and markets, some white businessmen help aspiring black entrepreneurs. A typical case: Archie Williams, a 28-year-old black Bostonian, started Freedom Foods in 1968 by buying two supermarkets in the Roxbury ghetto from the 40-store Purity Supreme chain. John Hancock Mutual Life Insurance lent Williams $500,000 at 71% interest, a rate no higher than it then charged to the nation's largest corporations. Purity Supreme President Leo Kahn spent countless hours advising the new chain and used his own company's purchasing agents to get groceries for it on reasonable terms. Result: Freedom Foods is now profitable. Walter Geier Co., a sales consulting firm, has recruited managers of Chase Manhattan Bank, Prudential Insurance, General Foods and many other companies to carry their briefcases into New York City's Harlem and Bedford-Stuyvesant ghettos and give 16-week courses to fledgling black businessmen on record keeping, salesmanship and financing.
Still, black capitalism has had its disappointments for both sides (TIME, Aug. 15). Several ambitious, white-supported projects have failed. Black leaders acknowledge that Negroes who want to be their own bosses should be given more aid, but some doubt that black-owned businesses will employ enough people or generate enough wealth to help significantly in lifting the ghetto masses toward economic equality.
GENERAL COMMUNITY IMPROVEMENT. Mills Lane's Community Development Corp. has spent $1,000,000 each year since 1968 to bankroll "cleanup campaigns" in which businessmen and slumdwellers wield shovels and brooms to spruce up ghetto areas and build playgrounds. This year's drive will involve 100,000 people in 34 Southern cities. Owens-Corning has professional football players counsel potential school dropouts to continue their education. Many companies promote voluntary work by their employees. American Telephone & Telegraph encourages workers to tutor deprived students who need special help.
A few businessmen have supported programs directly opposed to their immediate self-interest. Thornton F. Bradshaw, president of Atlantic Richfield, last month suggested that autos may have to be banned from certain city streets in order to lessen congestion --even though that would hardly increase his company's gasoline sales. Gordon Sherman, president of Midas International, the muffler company, is giving $100,000 a year for three years, with no strings attached, to one of Consumer Crusader Ralph Nader's groups. Nader is likely to use much of the money to campaign for elimination of the internal-combustion engine, on which Sherman has built his $70 million-a-year enterprise. "At some point." says Sherman, "you have to reconcile your own selfish interests with the interest of the public."
Business' social record, however, is imposing only if it is measured against the previous lack of action. As concerned businessmen realize, the record is inadequate when compared with the nation's social need. Henry Ford is the first to admit that, for all the business training programs, social conditions for blacks are improving too slowly. "I don't think the progress is anywhere near as great as it should be," he says, "and I think it has got to be accelerated."
Once they try to venture beyond hiring programs, businessmen move on un-farmliar ground, often unsure of how to proceed or what problem should get their attention first. Ford's No. 1 social worry at present is education, but he is uncertain about how business can improve it. In approaching social problems generally, he says, "I think we have got to establish a list of priorities, and I am not sure exactly what those priorities should be."
Carrots and Whips
Corporate chiefs who share his perplexity are calling on Government to give them the lead. They want Washington to establish more incentives and subsidies for high-priority social projects that business could carry out, and to lay down penalties for failure to act on urgent needs, such as pollution control. That marks a striking reversal of their traditional opposition to federal "interference" with business. Eli Goldston, president of Boston's Eastern Gas and Fuel Associates, recently pleaded for "a set of federal programs containing enough carrots to tempt us and enough whips to force us."
The Nixon Administration has so far failed to heed this call for leadership. In the postinaugural period, the President talked enthusiastically of offering tax incentives to encourage business to combat social problems. That idea has been quietly shelved as too costly and possibly unworkable, and no new idea has taken its place. The Government does have a plethora of programs and subsidies to stimulate low-cost housing, black capitalism, job training and pollution control. But many of the programs are tangled in overlapping bureaucracies, and there is no central office to tell the well-intentioned businessman just what aid is available and how to get it. The Administration could make a great contribution by taking one simple step: setting up a clearinghouse to which businessmen might apply for guidance as to what they can do and how the Government will assist them.
The Administration could also tell some of its zealous regulators of business not to use--or misuse--antitrust laws and other regulations to block social action. Last month the Securities and Exchange Commission ordered Michigan Consolidated Gas to abandon its housing projects. A subsidiary had built low-rent town houses in the Detroit ghetto and downtown apartments for the elderly and planned three more projects in other Michigan cities. The SEC acknowledged the "meritorious" nature of the program, but contended that it was the sort of outside activity forbidden by the Public Utility Holding Company Act. The Detroit News acidly pointed out that the act was supposed to prevent utility holding companies from using their clout to compete unfairly in nonutility businesses, and that Michigan Consolidated had little if any competition in building low-cost housing.
Even lacking Government help, business can--and should--make some further moves on its own. Among them:
> Concentrate on promoting blacks as well as hiring and training them. Few corporate leaders have yet taken a black into the top executive suite, let alone the country club. Though more and more blacks are becoming middle managers, they are usually put in charge of "urban affairs" or "special markets," which really means "Negro affairs" or "Negro markets." To find well-prepared blacks, business may have to look outside its own ranks into such professions as teaching and law, which have attracted talented blacks who were convinced, often correctly, that corporate doors were locked to them.
> Expand the assault on social problems to some new fields. Urban mass transit cries out for the sort of research and systems planning in which business excels. Then there is the whole area of drug addiction. Companies that have large clinics and medical staffs could start experimental rehabilitation programs for the increasing number of addicts in factories and offices.
> Re-examine "strictly business" decisions. There is little that business does that does not affect society. Boston's Eli Goldston offers an example: Last year, he discovered that an Eastern Gas subsidiary was "redlining" areas of the Boston slums--drawing red circles around them on maps, requiring any resident there to put down a deposit before he could get the gas turned on, and decreeing quick shutoffs for customers who were late in paying bills. The areas were considered "high-risk." Goldston stopped the practice. In setting deposits and collection policies, the subsidiary now considers only the customer's employment and credit records, not where he lives. As a result, Goldston says, "we are not losing any more money in the ghetto than before, and we are collecting from deadbeats in the affluent suburbs."
> Sell more nutritious food to the poor. Food packagers have developed special, high-protein foods for distribution abroad under foreign-aid programs. But they have not widely marketed these products in the U.S., where their distribution system is geared to serve the middle class, and their advertising stress usually has been on convenience and variety rather than nutrition. Food executives doubt that there would be any profit in trying to sell special foods to the poor, but they will not really know until they make a major effort. -- Bring people and jobs together. Many companies continue to move offices and plants out of cities and into suburbs, for reasons that make economic sense. But the moves put a growing number of jobs beyond the reach of slumdwellers. Companies could at least haul workers from ghetto to plant in their own buses, and fight for integrated housing in their suburban plant towns.
How far can business ultimately go to help society? Adam Smith's doctrine of the invisible hand still has followers, notably Economist Milton Friedman, who argues that social responsibility is for Government alone, and that Washington is merely passing the buck if it urges business to help.
Old-fashioned liberals also say that the job belongs to Government. They contend that the current slump is too mild to constitute any real test of business' social resolve; a sharp recession, they figure, would force executives once again to value profit above all. The New Left feels that capitalism is too corrupt to be reformed and the profit motive too much a part of it to be mitigated. It considers business' social awareness to be a put-up job and espouses the overthrow of the capitalist system.
Concerned executives answer that Government cannot do everything; social problems are so widespread and deep-rooted that to solve them the nation must use all its resources, prominently including those of business. Still, businessmen are troubled about the justice of committing stockholders' money to projects that promise little or no earnings. Chrysler's real estate subsidiary, for example, has been reluctant to build low-rent ghetto housing because Chairman Lynn Townsend, who has been socially active in other areas, cannot yet foresee even a minimum profit in it. There are legitimate questions, too, of how much a company can bend its quality control standards in order to hire and keep poorly educated workers. If they produce shoddy goods or sloppy services, then customers are inevitably penalized. The Bell System's commendable record of recruiting employees from the slums has contributed to the recent decline in telephone service.
Faced with these doubts and problems, the most thoughtful businessmen make the strong case that social programs should be considered not as an expense or inconvenience but as an investment in survival--for the nation, for the capitalist system, and thus for the company. Gaylord Freeman, chairman of the First National Bank of Chicago, warns that, "There is nothing in either the Ten Commandments or the Constitution that guarantees private property. If at any time the majority of our citizens conclude that they would be better off under some other economic system, then our system will be changed." Adds Henry Ford: "Any successful businessman has to have at least enough common sense to recognize that whatever threatens the country threatens him and his family and his business." The leaders of business can protect the system only by showing that it can indeed bring the good life to all Americans. For that, even more businessmen will have to put as much emphasis on immediate social progress as they do on productivity and profit.
* Continuing a tradition begun, oddly enough, by Henry Ford I. Although he was an outspoken anti-Semite, the original Ford did hire more Negroes than any other industrialist of his day, and not only for menial jobs. As early as 1919, Whitney Young's father earned $300 a month as a Ford Motor electrical engineer and was one of the best-paid blacks in the U.S. Henry Ford II worked under a black foreman while doing a stint in the engine department between college terms.
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