Why Managers Cultivate Social Responsibility

Whyte William H. Jr. , and the Editors of Fortune, Is Anybody Listening? (New York: Simon and Schuster, 1952), pp. 4–6.

Ibid., p. 1.

In his recent book, The Economy, Liberty and the State (New York: Twentieth Century Fund, 1959), Calvin Hoover has a brilliant chapter devoted to “The Conservative Acquiescence in the Changed American Economic System.”

The National Association of Manufacturers, which Whyte calls the “bellwether of the free enterprise campaign,” could claim three of its former presidents among the members of the first governing council of the John Birch Society in 1959. It is not always possible to separate the old Free Enterprise campaign and the present efforts of the radical right. One of the leading supporters of the Schwartz Christian Anti-Communism Crusade has been Joe Crail of the Coast Federal Savings and Loan Association in Los Angeles, the third largest savings and loan group in the country. Crail set up a Free Enterprise Bureau in 1961, has spent over $250,000 annually to promote his views, and has mailed two million pieces of propaganda to depositors, borrowers, and business concerns. Crail claims that 5,000 companies have inquired about the Bureau and no less than 2,000 firms have established similar bureaus. Harding College in Arkansas Whyte calls a “sort of ideological center for the job of ‘reeducating Americans in the American way of life.’” Its “National Education Program” made the movie “Communism on the Map” (produced by Birch member Glenn Green) and widely used by radical right groups, but so inaccurate and vulnerable to criticism that even Fred Schwartz of the Anti-Communism Crusade repudiated it. The National Education Program lists on its letterhead executives from Monsanto Chemical, Swift, Mississippi Power Company, U.S. Steel, Lone Star Cement, Olin Mathieson Chemicals, American Iron and Steel Institute, and General Electric. One General Electric vice-president wrote, “It is a pleasure to endorse without reservation this organization… .” While many of these firms were old mainstays of the Free Enterprise campaign, some of them also were simultaneously sounding the Gospel of Social Responsibility. For more facts on business support of the radical right, see Westin Alan F. , “Anti-Communism in the Corporations,” Commentary, December 1963, pp. 479–487, and Cook Fred J. , “The Ultras,” Nation, June 30, 1962.

See the instructive and delightful article by Spitz David , “The Timken Edition of Lenin,” Harpers, March 1961, pp. 56–57.

Franklin D. Roosevelt and the New Deal 1932–1940 (New York: Harper and Row, 1961), p. 322.

Thompson Stewart , Management Creeds and Philosophies, Top Management Guides in Our Changing Economy (New York: American Management Association, 1958, Research Study No. 32).

(New York: McGraw Hill, 1963).

Social Responsibilities of the Businessman (New York: Harper, 1953), p. 44.

“The Responsibilities of Management,” Harpers, November 1954, pp. 67–72.

Conduct of the Corporation (New York: Random House, 1962), p. 282.

See Bowen , op. cit., chap. 2; Cleveland Harlan Lasswell Harold D. , Ethics and Bigness (New York: Harper and Brothers, 1962), pp. xxiii–xlvi, and Bernstein Peter L. , “Can Business Grasp the Future?” Nation, January 13, 1964, pp. 49–51.

Manne Henry G. , “Corporate Responsibility, Business Motivation and Reality,” Annals of the American Academy, Vol. CCCXLIII (September 1962), 55–64.

“Responsibility and the Modern Corporation,” Journal of Law and Economy, Vol. III (October 1960), 75–85; I have drawn upon Katz' work in this section.

Ibid., 82.

Great Enterprise (New York: Macmillan, 1955).

Capitalism and Freedom (Chicago: University of Chicago Press, 1962), p. 133. For a more elegant statement of this viewpoint, see Lewis Ben W. , “Economics by Admonition,” American Economic Review Supplement, Vol. XLIX (May 1959), 384–398.

“The Hard Way Is the Only Way,” a speech presented before the Annual Meeting of the Manufacturers Association of Connecticut, Inc., September 12, 1963.

(New York: Macmillan, 1932).

See, for example, Green Philip , “A. A. Berle—New Myths for Old,” New Republic, June 22, 1963; Manne , op. cit.; and Robert L. Heilbroner's review of Berle's The American Economic Republic in the New York Review of Books, Vol. I, No. 2 (n.d.).

“The Troubled Conscience of American Business,” Harper's, September 1963, pp. 37–43.

U. S. Internal Revenue Service, Statistics on Income 1960–61: U. S. Business Tax Returns (Washington, D.C.: Internal Revenue Service Publication No. 453 [November, 1962], preliminary report).

Economic Power and the Free Society (New York: Fund for the Republic, 1957), p. 14.

See, for example, Bazelon David , “The Facts and Fictions of U. S. Capitalism,” Reporter, September 17, 1959, pp. 43–48; Votaw Dow , “The Mythology of Corporations,” California Management Review, Spring 1962, pp. 58–74; and Reagan Michael D. , The Managed Economy (New York: Oxford University Press, 1963).

Berle Means , op. cit., p. 135.

In his two-volume treatise, Corporations, written in 1897, John P. Davis concluded: “… the corporation could act only through its organization; consequently, if an integral part of it should be wanting, the activity of the corporation was suspended until the wanting part should be supplied; thus during the vacancy of the headship, if one were a part of the corporation constitution, the corporation could perform no act until it had first elected a head. Nor might the head, in most matters, act without a body” (New York: Capricorn Giant, 1961, Vol. II), p. 213. He cites Coke's authority: “A sole body politic that hath the absolute right in them, as an abbot, bishop, and the like, may make a discontinuance; but a corporation aggregate of many, as dean and chapter, warden and chaplains, master and fellows, mayor and commonalty, etc., cannot make any discontinuance; for if they join, the grant is good; and if the dean, warden, master, or mayor makes it alone, where the body is aggregate of many, it is void and worketh a disseisin… .”

(New York: Simon and Schuster, 1956).

Anshen Melvin Bach G. L. , eds., Management and Corporations 1985 (New York: McGraw-Hill Book Co., 1960), p. 3.

Cleveland Lasswell , op. cit., pp. xxviii, xxxi.

Mason Edward S. , “The Apologetics of ‘Managerialism’,” The Journal of Business, Vol. XXXI (January 1958), 6. For a somewhat different view, see Habakkuk H. J. , American and British Technology in the 19th Century (Cambridge: Cambridge University Press, 1962).

(New York: McGraw-Hill, 1960), chap. 6.

Another example comes from the recent revelation that the costly decision by General Dynamics to build “… the 990 was signed, sealed, and delivered without board approval.” See Smith Richard Austin , Corporations in Crises (New York: Doubleday, 1963), p. 83.

In the place of the partial proprietors who are passing from the scene, he advocates professional directors, who will be put on boards by the large financial institutions (who now tend not to vote at all). These men would devote full time to directorial duties, assure an atmosphere of free discussion on boards, and serve as an independent review on an otherwise unchecked management.

Nossiter , op. cit., p. 37.

See “Pope Paul Calls for Reform of the Curia,” New York Herald Tribune (Int. Ed.), September 23, 1963; and Workers' Management in Yugoslavia (Geneva: International Labour Office, 1962), p. 277. In the latter case it is called “following the directorial line.”

Villarejo Don , “Stock Ownership and the Control of Corporations,” New University Thought, Vol. II (Autumn 1961 and Winter 1962), 33–77 and 47–65. The list of the 250 largest firms, as ranked by total assets, was taken from Fortune, July 1960. Usable data could be obtained for 232 of the corporations studied.

The data gathered were from SEC reports, which require a complete current listing of securities owned by the officer or director of each corporation. The major shortcoming of this type of data is that there is no guarantee of finding either the largest holding in a given corporation or the control block of stock. Officers and directors need not report holdings of relatives. Where the controlling group is indirectly represented on the board, there is no available information on the over-all holding of the group. Trust holdings of banks in a corporation need not be reported even if a director of the bank is a director of the corporation in question.

The TNEC Monograph No. 29, p. 99, defines control as “the power of determining the broad policies guiding a corporation and not … the actual influence on the day-to-day affairs of an enterprise.” Berle and Means use the definition also adopted by Gordon R. A. , “Possession of the power to select or change management” (see reference 44). Berle argues (in Power without Property, p. 74) that “management control” is the “locus of power over and the norm of control of the bulk of American industry now.” Management control is defined to mean that “no large concentrated stockholding exists which maintains a close working relationship with the management or is capable of challenging it” (p. 73).

Kolko Gabriel , Wealth and Power in America (New York: Frederick A. Praeger, 1962), pp. 61–62.

Ibid., p. 60.

New York Times, September 13, 1963, pp. 35, 42. The study is entitled “Characteristics of Stock Ownership” by Jean Crockett and Irwin Friend. Preliminary draft (mimeographed), table 1.5, p. 1. 24–25. Part of a large-scale study of stock ownership and trading financed by the Ford Foundation and directed by Professor Friend.

See, for example, Lilienthal David , Big Business, A New Era (New York: Harper, 1953), serialized in Collier's in 1952 and later reprinted as a Pocket Book; Galbraith John Kenneth , American Capitalism (Boston: Houghton Mifflin, 1952); and Sayles Leonard , Individualism and Big Business (New York: McGraw-Hill, 1963).

Both published by Exposition Press, New York.

For example, those of Gordon R. A. in Business Leadership in the Large Corporation (Berkeley: University of California Press, 1961), pp. 347–351, or those of Ernest Dale mentioned in reference 33.

American Society of Corporate Secretaries, Inc., Shareowner Communications and Related Subjects (March 1960), pp. 3–4.

See Beveridge Oscar M. , Financial Public Relations (New York: McGraw-Hill Book Company, 1963).

Twenty-Third Annual Report of Stockholder Activities at Corporation Meetings 1962, Lewis D. Gilbert John J. , 1165 Park Avenue, New York.

See Marris Robin , “A Model of the ‘Managerial’ Enterprise,” Quarterly Journal of Economics, Vol. LXXVII (May 1963), 185–209.

“Industrialism and Industrial Man,” International Labour Review, Vol. LXXXII (September 1960), 10. Also their other work cited therein.

April 7, 1962, pp. 80–92.

Pour Une Réforme De L'Enterprise (Paris: Éditions du Sevil, 1963).

Particularly his proposed system of economic courts which, among other functions, would resolve conflicts about corporate leadership and attest to the accuracy of its accounting.

Mason Edward S. , The Corporation in Modern Society, pp. 26–27.

Quoted in Ross Irwin , The Image Merchants (London: Weidenfeld and Nicolson, 1960), p. 166.

See his “Post-Bourgeois Europe,” Commentary, January 1963, p. 2.

Economic Development in Perspective (Cambridge, Mass.: Harvard University Press, 1962), chap. 5.

For a parallel argument on the social responsibility of science, see Barber Bernard , Science and the Social Order (Glencoe: The Free Press, 1952), pp. 225–232, esp. p. 229.

Hacker Andrew , “Business Role in Social Reform,” New York Times, Western Edition, November 22, 1963.

Business Concentration and Price Policy (Princeton, N.J.: Princeton University Press, 1955), p. 351.

(New York: Harper & Brothers, 1953), pp. 132–133.

(Garden City, New York: Doubleday, 1953), p. x.

See Wendorff R. J. , “The ‘Business Risk’ Problems of Products Liability Insurance,” Wisconsin Bar Bulletin, October 1962, pp. 29–50.

“The Ethical Content of Annual Reports,” Journal of Business, Vol. XXXVI, October 1963, p. 387.

New York Times (Int. Ed.), September 5, 1963, p. 1.

Kassalow Everett M. , “U.S. Ideology vs. European Pragmatism,” Challenge, Vol. XI (July 1963), 22–25.