GOOD FOR THE BOTTOM LINE

By Bill Saporito

The President is calling. He wants you, the big cheese at Megawhiz Amalgamated, to come to Washington to discuss "corporate responsibility." You are thinking, "I need this? Wall Street is screaming for me to slash jobs and increase the stock price; competitors are breathing down my neck; and tort lawyers are cruising the open oceans of commerce like so many U-boats, hoping to catch my logo in their periscopes. And the President wants to discuss responsibility?"

Indeed, he does.

This week the chief Chief Executive has invited the heads of some 60 companies to the White House to raise the c.r. issue. The timing seems a bit odd. The economy is moving along nicely, it seems, and the unemployment rate is a low 5.4%, courtesy of the more than 8 million jobs created, ahem, in the past 31/2 years. Yet the anxiety rate among workers, still being spit out in huge numbers by a transforming economy, is high enough to give the Democrats a platform. And Clinton will use it to spotlight corporations--Procter & Gamble, Harley-Davidson, Xerox and Starbucks--that the Democrats believe are "doing well by doing good."

While Clinton will have warm words for the saints, earlier this year business leaders were hearing something else from Secretary of Labor Robert Reich. Until the other Bob, Treasury Secretary Rubin, maneuvered him aside, Reich was an advocate of using the tax code to reward corporations that avoid layoffs by retraining workers, among other things. He also talked about creating a "corporate hall of shame" to pillory the bad guys.

Clinton is more willing to let corporations figure it out themselves. His argument is that in an era of fast technological change and slimmer government, business will profit by embracing a broader mission. In a speech at Xavier University in Cincinnati, Ohio, last March, the President said, "What is the role of business in this new era? It should, first and foremost, do well, make money so you can hire people and contribute. But it should, whenever possible, do well in a way that strengthens families and grows the middle class."

In some parts of the business community, the Administration's interest in the achievements of America's corporations doesn't pass the snicker test. "Chalk it up to election-year politics," says Martin Regalia, vice president for economic policy for the Chamber of Commerce. "They have to have a conference to make up for going so far out on a limb to criticize the business community."

But no one was snickering in February when Republican candidate Pat-the-Populist-Buchanan connected with some voters by lashing out at big corporations. AT&T and its highly paid chairman, Robert Allen, became Buchanan's favorite whipping boys after the company announced a three-way breakup that would eliminate 40,000 jobs.

It's ironic that AT&T should wear the black hat. In its history, AT&T and the telephone Bells were as family friendly and progressive as the New Deal. Telephone families often ran three generations deep. You couldn't blame them for howling; they knew a good thing was ending. Even today AT&T offers a menu of programs that would make any worker's wish list, such as child- and elder-care resource referral services, leaves of absence for parents of newborns and the newly adopted, as well as time off for family care.

In some respects Clinton's message is a little late. Over the past two decades, a number of activist groups, such as the Interfaith Center on Corporate Responsibility and the Council on Economic Priorities, and consumers themselves have persuaded corporations to behave as if they lived in the community. Says Milton Moskowitz, a longtime tracker of corporate behavior and co-author of 100 Best Places to Work in America: "There are a lot more 'good' companies. Originally, way back, corporate responsibility had to do with an external commitment to the community and philanthropic contributions. Now it's even broader." Says Craig Smith, president of Corporate Citizen, a watchdog group in Seattle: "There has been a dramatic shift. It's less about how much money a company gives and more about whether a company offers its intellectual capacities, its technology, and develops programs that focus on what to do to affect society."

Not everyone agrees. There is still a basic free-market argument that business has no business in anything but making money--which of itself will provide plenty of social benefits. One who has made that point for decades is the Nobel prizewinning economist Milton Friedman. Says he: "It was a very fashionable topic some 20 years ago, and then it sort of died down; all of a sudden it has become very fashionable again. I think it is all rhetoric."

While the concept of corporate responsibility isn't new--H.J. Heinz was practicing social welfare in the 19th century--the issue in the modern corporation reemerged in the 1960s, when activists began targeting outfits such as Dow Chemical and General Electric.

From those confrontations emerged a pecking order of corporate responsibility defined around the concept of stakeholders. These stakeholders include the shareholders--the owners of the company--as well as employees, suppliers, customers and local communities. But in the '80s some of these stakes were crushed in the machinery of mergers or restructuring. Cities lost powerful corporate allies, that were relegated to subsidiary status by headquarters in distant places. In industries such as textiles and steel, plant shutdowns destroyed forever the notion that the company takes care of its own. Steel towns in Pennsylvania, like Duquesne, collapsed when their blast furnaces went cold. Those were thought to be singular events, industrial catastrophes that wouldn't be repeated. But in the harsh global economy, layoffs will not go away.

Even New Age companies formed around feel-good management can't avoid it. In Portland, Oregon, Hanna Andersson, a mail-order retailer and maker of children's clothing revered for its mother-friendly workplace, recently let go 25% of its work force. CEO Gun Denhart had also won kudos for her "Hannadowns" program, in which used Hanna clothing could be returned for a 20% credit toward the next purchase. The used clothing was then donated to homeless children. But rising postal and paper costs took a toll on this company, which last year had chalked up $52 million in sales.

No one gets lifetime employment anymore, not even at companies like Hewlett-Packard, a visionary $31.5 billion high-tech firm that makes just about every good-guy list extant. Instead, HP employs a system of redeployment for "excessed" workers. They can hunt for other positions within the company for 90 days, fully paid and free of job responsibilities. Usually the company will make another job offer. But if an employee decides to leave, he or she still receives a generous severance package.

HP pays at the upper end of the industry scale and provides full health insurance, a discount stock-purchase plan and a cash profit-sharing bonus. The company has offered flex-time for 20 years and has incorporated job sharing, compressed work weeks and telecommuting.

The success of HP and other such companies belies the notion that businesses that are socially responsible can't also be fiscally responsible. In fact, the opposite is true. A business can't do much good if it isn't any good at what it does.

It's no coincidence that these same companies have been able to embrace the leading management trends of the past decade: flat organizations; bottom-up management; empowerment; customer-focused, just-in-time manufacturing, and total quality. These philosophies demand a flexible and dedicated work force not locked in battle with management. As a CEO put it, "This is not do-good stuff. This is the way you make money."

According to Tom Kochan, a professor of management at M.I.T.'s Sloan School, only about 35% of U.S. workplaces have implemented two or more socially responsible measures. These tend to be larger, better capitalized firms rather than small and medium-size companies, where the bulk of U.S. job creation occurs.

That's because many programs have high start-up costs. And, says Kochan, often one or two measures won't be successful. What does succeed is a sustained, company-wide commitment to a model that links many of these practices. He adds, "If firms do these kinds of things, they will get an economic return for their investment and a higher quality work force that is more loyal and productive. It is a virtuous cycle."

It's difficult to think that the business leaders who come to Washington this week will be looking to a Democratic President to tell them how to run their companies. But they will be happy to hang around as the President praises some of their number for progressive management. And in an election year, the President too will be happy to make the point to voters that he is an advocate for the working class.

Businesses have another constituency, of course, one that, given the choice, generally prefers cash to virtue. Happily, in the world of business it is becoming increasingly possible, if not necessary, to get both.

--Reported by John F. Dickerson and Adam Zagorin/Washington, Stacy Perman and Jane Van Tassel/New York

With reporting by JOHN F. DICKERSON AND ADAM ZAGORIN/ WASHINGTON, STACY PERMAN AND JANE VAN TASSEL/NEW YORK