ED 212.933

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DOCUMENT RES, .

, pc 015 727 ,r. .*

AUTHOR , Moa, Michael K.;Seashore,,Stanley ,.

TITLE' , Norms Govern g Corporateliehavior: An AlternatiVe toMarked and to.Administration.

PUB DATE Aug 8NOTE

12p.; Paper, presented at the Annual Convention of the

American Psychological Associatioli. (89th, LosAngeles, CA, August 24-26, 1981).

).

I

EDRS PRICE M 01/PG0 Plus Postage..'DESCRIPTORS -*Administ ption; Arbitration;iCollective Bargaining;,

*Employer-Employee lielationship; *Government le;tw.-- . *industry; Labor V(eqkislation; *Labor Relations

Marketing; Organizational Climate; *Power stey ture;Problem Solving,; State of the Art Rev4ewsi:Unio s.

L,S

.

ABSTRACT v( Changes-in-production systems have' altered the

interdependen0e between workers and management. New patterns ofeinterdependenceallrought new responses, e.g.,/wbrkers formed union, .

and management turned to-the human relations movement to securevolUntary employee" cooperation. When voluntary complianqe provedinadequate, collective bargaining and arbitration emergdd. In the1970's, low productivity spurred the quality of work movement? aneffort to move from coercion ofemployees to employee cooperation.

llel changes'in patteses of interdependence evolved betweenbusiness and society. Similar to labor-management relations,,,newpatterns- of business-society interdependence demaistrated the /knitsofvoluntary cooperation and the necessity d doercisn. Although,government maintained a third- party, role in labor-management,disputes, it sought an advocacy rolb on behalf pf societyimbusiness-sddlety disputes. Federal regulations proliferated, andprivatesector political 4nvolvement designed tot protect business ,

,'interests grew accordingly. Now §overnment must maintain a'.

third-party status in business-society relations if it is to'provide. ,the framework for accommodation. private,institutions,, applying theprinciples of pollective bargaining, c6uldbe created to managebusiness-society relations. Both business and society) must learntoexercise self-discipline and "privatize" coercion when formingacceptable norms of association without government interference%

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**************6*****************************************************.* ,keprodUctions supplied by EDRS are the best that can be .made *

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NORMS GOVERNING CORPORATE BEHAVIOR:

an alternative to niackk-and to administration*

Michael K. Moch*

University of Texas at Dallas

and

(LS. DEPARTMENT OF EDUCATIONNATIONAL INSTITUTE OF EDUCATION.

EDUCATIONAL RESOURCES INFORMATION

CENTER (ERIC)

Thos document has been r&Producad sareceived hom the person 'or ossanuation

oncinetog n.341 Mena changes have been made to improve

reproduction quaky.

Ponta of view or °portions stated in thosittocu

them do not necessary represent official NIE

position or poScy. ,

O

Stanley Seashore

University of Michigan

.

August, 1981 .

"PERMISSION TO REPRODUCE THISMATERIAL HAS BEEN G NTED BY

TO THE EDUCATIONAL RESOURCESINFORMATION CENTER (ERIC)."

:.*This_Pap..er was'prepared for presentat tion at a symposium titled "Impact of

Ideologies, Values and Beliefs bpoil OrganIzafions," held -at the annual, meetings

..of 'the American Psychological Association Los Angeles, 1981. It updates analyses

resented in M. Moch and S. Seashore, "HowNorms Affect Behavior in and of Corporations,"

in F. Nystrom And V, StarbuCk (eds.), Handbook of Organitational Design, Oxford, A1980, and'in M. Moch and S. Seashore, "Managing Relationsh±l's between the Corporation

and Society: What, Can We Learn .1rom the History of.Managing Human Relations In the

WorkplacOPtin S. Sethi add C.'Swanson (eds.), Private Enterprise amend Public'

Purpose, Johp Wiley, 1981-

ht

Al ti

Al

-2-

. ..

The key.to industrialization was not the independence but inter-dependence; no indiv9lual was-Sel -sufrfidient...Dominating this .

was the modern-corporation...Ad= ity is created and proukhif the individual finds a higher expression of himself.!L_ _ _

.Changing expectations defining appropriate relationships between 'business and

society have much in common witl. changes which defined-.7and are still.defininr-hoW

emplOyee-employer relationshi s should be managed. Several themes are visible in

6

both movements.* Changing methods and the increasing size qf isoduction sirtems sub-.

stantially altered 4he agree of int*erdap/ndence between. workers and managers on th6

cge hand and between businesses and the communities i 'which they operate on the

t'.other. Initial attempts to.mana.ge the new.interdepen encies stressed voluntary dor

pliance\:lid cooperation. 'Ais stratediproved to be. inadequate in the case of .labor.

relatios, as unions mounted credible strike threads end managemene'accuiesCed

grievince arbitration. Voluntarism also is likely to be.inadequate for managing

emerging interdependencies,between business and society. -Until 'Very recently;

- .

at least, regulation has been forcibly encroaching on what had Van areas,pfx

exclusive managerial prerogative./ .

There are also important differences between these two mov,ements. While both

'nitially stressed voluntarism,..found it wantinC and, generated means for the admin-%

/ i.....'

istratlon of coerdion, the management of labor relations developed ways' to "privatize" .

coercion through -t4/ective bargaining and the arbit, ration process. GoVernment leg -

islation

.

islation provides the fraMework through whichaccommodation is realized. Government,

howev!r, ha not maintained-To n souga to achieve7-a thirdTparty status in

.

the

.-

O

.

management of business-bociety,rtlations It hSs soughtan advocacy 'role . .

)osuppOrtiiig--and even formulating-sooiet 's claims against business interests., This*

also happened in the history of laborrelations; although, thisicase,siate and

federal action. was more fregdenrdirected in support of xatAr than in opposiVir,

4

to Wta were then managerial prerogatives. 'Such action proved to be inadequate.,-- It

. °

succeeded neither in protecting dmanagerial interests nor in making workerslor mangers

8ff .0

4,

t

.

-2-

The key to industrialization was not orie independence but inter- C

dependence; no indivlotual was ' -s61 -suffiCient...Dominating this

was the modern-corporatiot...A c pity is created and Orough

if the individual finds a higher 'expression of himself.!!7_. _

1 _

_Changing expectations defining appropriate relationships between 'business and

society have much in common wit hanges which defined ,and are defining- -how

.

41,

employee- employer relationshi s Should be managed. Several themes are visible fin

both movements.' Changing methods and the increasing size of production systems sub-

stantially altered 4he dsgree of inierdSpindence betwemworkers and managers on the

'o 4e hand and between businesses and the communities i 'which they operate on the

other. Initial attempts to.mana.ge the new.interdepen gncies stressed voluntary cola-

\pliance and cooperation. 'Tits strategy 1proved to be. inadequate in the case of.labor

relatiots, as unions 'mounted credible strike threads end managemene'acquieseed 'et

grievance arbitration. Voluntarism also is likely to be-inadequate for managing

/emerging interdependencies,between business 'and society. until v ery recently,

at least, regulation has been forcibly enCroaChitg on what had blpen areas,ofx

exclusive managerial prerogative.a

There are also importatt differences between these two movements. While both

`initially stressed voluntarism, found it wanting,' and, generated means for the admin-.,

..-

istration of coercion, the management of labor rela ions developed ways' to "privatize"

coercion through 411ective bargaining and the arbitration process. GoVernmtht leg-

(

islation provides the fraievork through which accommodation is realized. Governmtit,

howeV4, has not maintained-To souga to achieve7-Zthird7party status in the

management of business-eociety,felations It hds sought ,an advOcacy 'role

05uppOrtifg--and even formlleting7-soviet is claims against business interests. This

also happened in the history of lahor,relations; althoUgh, n this case, state and

federal action. was more frequently directed in support o .rathtr than in oppositptr-..

4

to Aa were then managerial prerogatives. 'Sup action proved to be inadequate,: It

. k. e'") c* ,1'

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succeeded neither in protecting ianagerial interests nor in making workers)or maters

s .

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vp

more considerate of each others problems and concerns.p

tensions and prolonged the inevitable accommodation.

If anything, it aCeAtted

Our thesis in this paper,Asimply put, is that the most effective rile for gov-.

'erament-involves providing the institutional framework ehiough which accommodations

can be made, Governmental advocacy did not and does not help, resolve labor-management

disputes. If the parallel we are draiging is appropriate, therefore, the trend in the

)management'of business-society relations may be -- or, perhaps, has been -- a

(oc stly and avoidabls error.

%

In tics paper we attempt to detail the reasons why an advocacy role for govern-/ ,

D;ent involvement has been and will cottinue to be ineffective. Welsegin ty describing the

limits of voluntary- cooperation and the necessity of coercion, informed both by the

a

tlistory of .labor relations and by recent developments in business-society relations.

We describe how both worker's and managers generate counter-noAfts, norms of non-

-

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...

compliance, which effectively blunt efforts to undermine their positions.1

These

nOrM5\!_r_e common in the workplace, and, as recent events indicate, they are emerging to

i

oordinate managerial resistance-to government 1.)citiatives across a broad range of issues.We

end our discussion by suggesting an alternative to the policy specifying greater gov-

ernment involvemdet in the private sector. r proposal'is preliminary. The prob-

-7----

leras it addresses are complex. The solutions we propose can create other--pdrhaps'

mde costly--problems. ever, we feel we must expand therange of alternatives

currently be4g discuss Our aim is to assist in the search for ways to reduce the

costs associated with crowing to the inevitable accommodation between-private and public

inFierests, and we believe that institutions developed for managing labOr-managdment4

relationships provide at least a starting point for such a search.

EMERGING PATTERNS OF ACCOMMODATION BETWEEN LABOR AND MANAGEMENT

As the modern factory system replaced home production, markets throw which pro-,.

ductrs exthanged _goods or services'forroney in the!pre-factory putting-out system

gave way to rules, regulations, and'managerial directives designed.to-coordinate and,

control the activities. of newlY,interdependent workers. 'As a consequence, work&s,

steep ?d in en individualistic competitive set of values, foUnd themselves ctlturally4 44.

ill-equipped to deal wiih'the realities of lave scale production sYstems.6

New patterns of interdependence brought new responses. Rather than producing and 1

being reZardillShe basis.of their own efforts, workers found themselves bound by' 4 .

coutplexwebs..of interdependence. Everyone'had to' do their part in order 'for anyone

to be productive. The rules and directives designed to manage.thls interdependence

frequently were updated to increase produivity. Speedups often were not accompanied

by increased compensation., Workersilhbeever, soon learned that their source of pov er

in collective production systems lay in4cooperative.efforts desigied to reduce their

41vulnerability. As Ginzberg.an& Berg note,A .

The concentration Of ever-larger numbers of workers under one in-

dustrial roof; the application of scientific management to theprocess of productionCthe Oneral ruthlessness of policies af-

fecting.amployeee, all operated as a.spur and a goad to the organ-

,ization efforts of workerg who learned that through pooling theif

strength they might be able to cushion and moderate some.of the

harshness...

1

Uniapfs. of course, were the most visible outcomes of this response. Less formally,

hoievet, unofficial group norms restricting productivity became commcnplace.8

/. .

Initial Responses to the Emergence of Collective Production

Systems: The puman,Relations Movement-

Originating in the 1930s, the human relations movement may be seen as .a mane-

gerially-oriented response ,to thE pioblem'qf securing voluntary employee cooperation

4in collective production systems.' Chester Barnard argued that'contractual relations u.

f.

, . . .

between employee-and emplOYer were insufficient forobtaini

tion such systems required.# What was:required, vas, first,,

between.needs of both employees and organizations and,. ,

beyond surveillance and contractual.spnction; bUt which encourage behavior consistent

0 =

idt11 organization'p need's.

ng the degree of ccope

a closer identification'

rsecond, norms which lie

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Markets alone had proven .to be inadequate 'Lt. managing'collective production.

The rules and directives which replaced them were being effectively resisted. Mena-- ,

gers were expected to maximize productivity, yet to do this they.raquired the cooper-. .::

-_. . . .

.

ation of subordinates who frequentlyimposed their on versions of what constituted S..

"a fair dAy's work. "1 Moreover,' "rate buster?' who prOduced more thenthe informal'

norm prespribed could be sanctioned by their peers. They were simply one dpg in the. :.'

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web of interdependencies which characterized the new work ,systems. Miterialsor in-. t

.

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fOrmation they:needed to do their work could be withheld by others. The fact that.

, -

they how worked in close proximity with their mates reinforced the effectiveness of/

social rewards and punishments. To the _extent that employees for cloSely=kjit

, ,

cohesive social relationships, productivity norms were particularly effective.10

Ita

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bdcaie cAlr, therefore, that another strategy was required. As Barnard, pointed out,

1

the.difference between an effective acid ineffecttve 'organization often liy in the ex--.

tent to whicthe organization could secure willing voluntar compliance to the needs1(

of the organization. Forced compliance to Unposed rules and directives, it was ar.;.

-pad, would not work. What was needed was a 'new .way to integrate the informal,socialw

-organization and the needs of organizations for productivity and'efficiency.

Human relationists took it 'upon themselves todesign stems in which employees-/,

...

I. . 0._. . -a. e

would, when nengssary, subordinate their indtiridual'interests to those of.the inter-

. ..

depenAnt work group :they called upon managers to experiment with schemes intindea

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to include emplgyeeeand work groups in the goal-setting And rule-making process.

IK/ 1

Such participation, it was felt,.would result in greater commitment to the rules and

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in a be er alignment between. informal work norms and organizationally acceptable prot

cedures. Fo this,humanrelationists.

were criticized for elevating the grdup above

the individual. They were not, however, the pioneers of a more collectivist .

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ideology. The rea pioneers were those who had earlier designed the cqllective pro-

duc ion systeus..

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or

Oft

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Human relationists often dld not recognize or, perhaps, appreciate the difficul-.

r6-

..ties: associated-with aligning the interests of employees, work groups, and orgard,za-

tional goals.12 However,, differences in employee, work group, and'corporate interests '

proved tb be difficult to overcome. Tension was inevitable-between individual inter-,

ests and t se of e group formed to achieve benefits for its members.'3

Each,par-

1 , .

ticipant, ecogniz g that he or.

she will'secure the result regardless of how much)

`"-eflort he or she puts in so long as the others contribete, wi3.1 seek to minimize their

contribution in the expectation of realizing a more favorable effort to reward ratio.fi

Since every member Of the group may be expected to do th6 same, some form of coercion

ti

is requir ed if collective goods are to tie realized.1- 4

Means for managing conflict as

A-

well as-kcommodation, therefore, were required for effectively managing. the complex('

( interdependencies gelierited by systems of pollective production.

Collective Bargaining and'Emeiging Norms of Association

Norms of'association provide legitimacy'for the use of coersion in the interest.

of securing collective goods. A fundamental norm of association, the nom of re-.

ciprocity, states that those who receive benefits should reciprocate by providing

contributions.15 Simply put, those who provide receive, and no one should get some-

.

thing for othing. Those who seek to benefit without.contributing may legitimately

be punished or coerced into contributing. Contributions, then; often-cannot be left

solely to the volunta ry choice of the participants. Human association often requires

,the application of coercion, and it'requires effective norms of association to pro-.

vide legitimacy for such applications.,,s.

Norms of association have'emerged to help manage the increasingly complex inter-

dependencies of moderturoductIon systems. The coercive-leveragewagss4Pplied when

unions achieved the capacity to issue credible strike threats. kanagetent accepted.. ;

grievance arbitration in exchange for pledges not 'to Strike, And effective noris of

assoc iation were worked out--and are still being worked out -- through the arbitration*

IP

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pr cess. F8r example, arbitrators have held that CI) the''contract does not re*erve

for manageme411 rights save those explicitly conceded: (2) Employees cannot engage--4110

4in those activities which Crearly inhibit attainment pf ikr,Knizatiahal activities.

. )

(3) Off-work activities are beyond management control, Unless alty are clearly detri-.

el.

, mental to4the enterprise. .And (4) Sentority is a legitimate basis for exemp-

c tion from disciplinary actions. -'These are evolving implicit rules, backed up-by often.

binding arbitration.16

1\. 6

These norms of asSociation are not limited to unionized plants.- Managers who are,*

noAconstrained by a union contract often are very sensitive to emerging norms speci-

...

fying fair and equitable "treatment precisely to avoid unionization. Norms of associa-A

tionc then, have emerged to go ern the more problemmanic aspects of labor-management

relations,. To the extent that the interests of the'bAanization and those of employees .

diverge and employees can mount credible threats to'dtrike, management often has had

.

little recourse but to accejt such norms a's the only means for securing the needed

cooperation.

From Coercion to Cooperation: The'Quality of Work Movement. ,

.1 a

In Ole early seventies a number of people were becoming disillusioned with tht

abil of traditio labor- management relation's and the collective bargaining pro-

cess to sect the degree of cooperation required by effective and efficient produc-

.

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tion systems. Productivity per -labor hour had leveled off aft (r neatly twenty -five

,years ofconsistent increases. The President established a Co

#*

ssisn on Productivity

and charged its chairman, C. Jackson Greyson, with deterrilining methods for Increasing

laboneproductivity as a means for fighting inflation. The committee determined that

one of the reasons for low -productivity lay in the inability to secure employee com-

mitment and cooperation. To secure suqh cooperation, it was argueS, ways would have

to be found to increaseemploypa involvement'in decision-making and_in the,

quality

4 of life they yperienced at work.170

A

4$

Accordingly, a

hi In 1974) this

ganization, founded

%.

I

quality of work life program was established within the Commis-

,-

program. separated from the Commission and esta shed its own or

by Ted Mills, formerly a special assistant to Greyson. Mills'

organization, initially called The National Center for the Quality of. Work Life but

lat.er changed tA. The Natfbnal ality of ll'ork Center, set up" several experiments in

labor-management co8peratiop.18 The design used'byrheNational 'Quality. of Work

Center to facilitate greater lior-management cooperation is complex. it involvesr ) ad

. .. , t

the establishmeit of a joint labor-management committee at the plant level. This.

committee is composed of equal numbers of local labor and plant management represen7

tatives;,however, every effort is made Jto encourage equal participation and to avoid. ,

the introduction of 41/tional adversary proceedings. *These committees ire provided

--.

0

with outside consultants, usually in the area of group'processes and de4sion-noking,

. I. ,

.d

And an independent evaluator./ The evaluator is responsible for assessing the experi- ,

.... ,

1

ment and for disseminating the results through business and labor publications. The

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._,

committee is usually divided into standing committees and ad hoc projeCt committees,:

ft .k

ibUt the management of the entire experiment is these nsibility of the.whole local

labor-management committee./ The entire design is presen ed in Figure 1.19

.

insert Figure 1 about here-

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^ The quality of work movement is still in.its infancy, and it is difficult at this

pOint to chart which direction it rill take: Milli feels strongly that the mo'Vement .

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is "unlike _the superficial and fleeting, fascination with the 'human.relationsl- Malm-

o . .

% -meat." He argues that "this Omovement,'has eve* appeararke of coming from a.signif-,. . ,

.

icant change in management philosophy. that is expressing itself in pelnanent-altera-.

tions in corporite structuxe.. "20 It has received subitantial financial support from

. .....

suth organizations as the Ford Foundation and the.

Departmentof Commerce. Sincel he

,

early seventies at least thirty regiSnal and state organizations' have emerged to pro-.

A-,.

ti

$

c

yide promotion, edUcatiopal and consulting services designed to pr101e labor-manage-

\\, ment cooperation and the quality of work life. The Labor-Management Cooperation A ct

..

of 1978*specifiyally authorizes the

',gager in activities which facilitate

ment committees on plant, in1lustry

Federal Mgdiation,and.00nciliation Service to en

creation, operation, and support of labor-manage-. I

and community levels.

EMERGING PATTERNS OF BUSINESS -SOCIETY 'RELATIONSat,

While the dtViLsion of labor and thg resulting interdependencies were laying the

+. groundwork for new norms within the workplace, growing interdependence among corpot-,

.ations and between corporations and the communities-in which they ope rated was setting

1 ..

the stage for analogous changes in exptctations concerning the proper role of business

.4...

and society. During the following decade$,vpiescriptions which assumed independette

0and/ d competition began tosgive.way to prescriptions which recognized growing

interdependence..

Increasing Visibility of the Interdependence between.Business and Society N4

The social costs of,business represent perhaps the most important aspect of in-.

creasing interdependence between business and society. These are real costs of pr

,duction which are not borne directly by the producer-or by the consumer; such as.air

Viand water pollution. Karl Kapp traces the emergence of social costs to ,the belief in1

,market mechanisms ap means fob channelling corporate behavior in the yuitc interest. ,

He argues that profit donstra is oblige firms to reduce without sacrificing

quality'. One way to do this his to export some of the production casts onto, third,

4 . o o.

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A ,r.

parties. Costs such as those for employee,health and well-being, environmental pro-e ,

tection, and the conservation of novklenewable resources will fiot willingly be borne

by tykiroacer if to do so will result in increased Ice or lower profit and busi.

21ness volume. , It is not necessary to presume corporate greed, only thetieed to sur-

ive. The firm t:shich absorbs these costs Will quickly be priced out of the market.

'1

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t

11.

The onlylasting solution t the ymoblem of social costs, th ereforev.,may be to reducedo,

our reliance qn purely ket.mechanisms oftontrol.

Problems associated with complete reliance on market mechanisms increasing

.

social costs wererecognizfd long ago by far-sighted economists, such a John Ctgtk,

who accused, thany.buSinestmen of "blind indivipalism" and proposed a syStem of public

accounting, since ,"industry is essentially a matte r of public concetn...(ant the

stare which the p lic fits in its processes is not adequately protectadby t)b'safe--

guards Which ividualism affords."P Such concern,,however, was not limited to

these outside he business oommuritty. Iri fact, businessmenI

were among the first to,_

a recognize the altering state of affairs. Owen Young, formgr General Electric_Chairman, i

-N,

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Ccriticized his'fellow businessmen for Urampantindividualism.m Alfred Sloan, former ,

.

.4e

a

General' 'Chairman,. asserted that ",...the enormous scale upon which business is

done (had)` not only changed the methods of'industrik management, but it (had) brought

about an entirely new 6ohcepti.on o'f the relation of businessmen to the fliblic."23

. . ,.

.

Like early union organizers, however, these pioneers lacked sufficient.ieverage among

if

,

4

0expressed frustration A the inatiilityor unwillingness,their colleagues and often

! ,

of their colleagues to actA

in their own long-term collective 'interest'.r.

. The new conception invariably emphasized voluntary cooperation and accommodation,n

A- ) . # .,.

-

and-recognized that the responsibility of business is to serve customers; employees,,

.and the society at large as well as shareholders. Francis X. Suttga labeled this

,,24emerging perspective she "managerial ideology."24 Its fundamental tenets are:

: 1) profit seeking is compatible with.buresubordinate to the goalof soc4a1 welfare,

1)

2) the well-beinni.the organization rather than of the owner should be the central

focus of concern, 3) managers are professionals who must mediate among various in-

terest groups,

demand, and 5)

, 111

41 big business is made necessary by national markets and national

some government regulation is needed to Moderate extreme fluctuations

in the bupiness cycle.25 Monsen a nd Cannon summarized the hew view as follows:

N.

,. ;.it deeMphasizesthe traditional forces of supply and demand' as

determining pricein the'competitive market and stresses more the

12

..e

-4c -11- .

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-41 composit group decision m4lsing of government, business, labor,

and the public consumer. It argues that management is a trustee

,who erVes the interest of all. groups,. taking account of mage

than, just the'Concern of his own stockholders for profits. .r- ,, i -N. , . ,. .

,.. Aqrequent theie of those holding the managerial perspective, reminiscent of 'the.

,

.

volUntarism which charac.orized theituman relations approach to securing cooperation..

,

* -,

>

....,..e,....,,,,, . . . .

.-'-,. I

in co;leci productio; systems, is xhat,tht interests of business and the interests

../ ...

of sicietY are compatible, At least'in the long run. paul Hoffman, while president'''.

of Studebaker, state,4 that.it was "ii5od business 6 be human and...decency pays

dividends. Frank Abrams, once chairmen of Standard Oil of'New Jersey, asserted that -1

the long-term interests of shareholders cannot rIn counter,to the long-t

of the American people." DonalOson Brown, when an executive for DuPont

It -4

Motors noted "...the absolute interdependence between

the common welfare of society." Finally, in an often

Nilson testified in 1953 that "...what is good for-our

fm interests

nd General

the'welfare of b-ues2 and

misquoted statement, Charles

.country is good for General

10.1P1144,tors and vice versa."27

'Jg2°kMore recently, Henry Ford II has argued that "improving the quality. of society--

investing in bettd employees and customers for tomorrow --is nothing more than another

step in the evolutionary procesS of taking a more far-sighted view of return on invest-, .- ,

...

n28ment. Ford,has been counseling his, fellow businessmen to "...stop thinking about

/.., J 4 .1.

O CV ,

the pursuit of profit and the pUrsuit of social values as separate and competing busi-

ness goals...start thinking about changes in public glues as opportuptities to profit

: by serving new demanda."29 '114y,of Ford's colleagues appear to have been listening.

Fred Allen, Chairman of Pitndy-Aowes0-for example, has 'algoriarl that ".:.this era of

. .

,

. ,

growing interdependence*ould counsel us to re-examine all fundamental, levels of the,

1. .,

free-enterprise system. As businessmen, we must learn to weigh short-term opPortuni-, v. .

. .. ,

.

ties against long -term possibilities...."3°- The chopin corild go on and on. Once it

C: 0. ., .

is accepted,, ear that there is an identity bet'een business and societal goals

suggests that the primarY problem associlted .wiEll reconciling them involves mea surir.- .-. >

..

13 ,

,41

4 .

1

'men -Once means become. available for determinist-long-term:business and socieEal

,

cqsts an benefits, more responsible and proiitab busineis\behavior will resul31

Nr

The Limits of voluntary Cooperation and the Necessity of Coercion

.

-The interests of the business community and those of society as a whole may in-.

-

. '-deed be compatible in the longtun. It must be recognized; however,ithat the businesd

4 community is not a coherent social organizagion, but a loostly-coupled.aggregationofqbusiness 'People whose interests have traditionally been viewed as being incompatible,

at least within industries car markets. Consequently, there has been little leyerage

114

available to constrain' free,riders," businessper ns who would prefer that their col-4

,leagues absorb social costsAile they paiticipate fi.n the benefits of an improved'

business climate. The traditpral view, backed up by legislation and legal Precedent,

Which constrains cooperation, is, still held by many bnsineSspeople. There is little

reason toexpect indlvi comp -t g firms to absorb costs for social welfare when

,they can expect to. realize the ial benefits (e.g., a clean environment, public

g ood-will, etc.) withoUt assun g tie costs. addition, they will gain a oompeti-'

tive advantage, because they will be',able to chargeless for .94e sane quelity'prod-

4\ uct. Voluntary cooperation, therefore, is not likely'to be forthcoming to sufficient,. ,.-

. .. I

amounts fb reconcile short-term tensions between the interests of business and the

interests of society. What may be needed, thertfbre, are effective normsof asso-

, % ,

.1

r ciao which function to enforce the norm of reciprocity through the legitimate ap- ,. .,

.%) s

14.

plication of coercion within the business:community. Such norms will be particularly

critical to the extent that dere ation continues to undermine the only source of

legitimate coercion currently op atin&-those administered' under governmentalauspices'

There is mounting evidence ocumenting, the inadequacy of-elying solely ondorporate

voluntarism. Inaddition to the frustrations' ekpressed by socially-minded executives s

0 v

such as those noted abbve, social programs sponsored by the business,community have

expeiienced considerable difficulty. In New York, MinneApolis, and Los Angeles, for'

example, coalitions of bn-sineAsmen whose concerns were mobilized by the urban unrest of the

---- `. 4e

ti. at sixties have fallen into disarray often because of internal squabbling. The

,.

V

National Alliance of,

Busifiessmen has had little success in attratting small and Medium-

sized employers:© Many local groups such-as Boston's OpPorpunities Industrialization

32Ceiter and The New Detroit Committee have been plagued by financial problems

More telling, perhaps, is the record of corporate philanthropy. Since 1935 firms

---r

. -,,

have been al lowed tax relief deductions of up to .fpe percent of their net income for----

..,,.,

charitable purposes. Recently, the ComMission Oh' Private Philanthropy and PublicCd

, Needs has estimated corporate contributions at one percent of net income. Moreover, _

.the report states that moo companies do little or no giving, and only six percent

made cont,ributiots over $500 during, the period under study. Nearlihalf of all oon-

tributions came from fewer than 1,000 companies. The amounts which could be made,

availgble ace not small. Philip Blumberg has estimated that each one Percent of ire,-

tax corporate net income reptsents philanthropic support equivalent to the creation-:

. .. .

t 31of 'five new Ford foundations. Despite this potential, end despiteincreasing reali:-

. .e

zation that the,publiC image of'business is'in decline, ,corporate giving remains con-

ti

siderably below the legal limit. The Commission toricluded'it was ironic that. ,

....the business community, which has so often expressed its '''s ?

wariness of Washington andthe growing size,of government, !

should fall so short of .legal limits in helping select andAsupport public beneficial programs outsia of government...

'!.--4

It is ironic, but understandable. One does not have to conjure up images of

greedy rapacious businessmen to explain it. Through significant giving, all but the

1.argese and most financially Secure corporations could jeopardize their market,posi-...

tion.' They a'l'so Could' become vulnerable to take--over bids.35 Moreover, they.do not

have--ind currently are constrained from developing- -the kinds of informal social anft...../.

. .

--

economic sanctions which Might allow them to discipline themselves. As was the case

with "humat relations' the need to .cultivate cooperation between employees and^tf

WO o

,, ..

.

.

..

'management inside the corporatiOnOtans for administering coercion may be required__....

...-

ifligtificatt'tooperation is to be forthcoming.

I

ye

40'

0 47

4

eat le illation: the Emer ence rms of Resistance

f

4 . Currently, the l e/locus of coercive forcincreasingly' Irre-g with fadeAel,.state,

and local.gaiternMentS. It has heli' a tent force and has provided considerable leverage

for the managerial'perspective; As noted %by the Committee for EconomicDevelopmk"

....there is. the positive; appeal, to the corporation's greaterpportunities to grow and profit in ahealthy, pyosperous,and well-functioning society. And, there-is the negative threat

of 'increasingly onerous compulsion and harrassmen56if it does.

not do its part' in helpingocreate such a society.

Increasing government regdation has been pervisive. ..Murray 'Weidenbaum likened it 'to--

a second.

managerial revolution.. Thelirst revolution was characterized by managersP ,

, .wresting control -of the corporation from their owners. The second revolution was

characterized by a shift in then -locus of control from ,professional managers to gov-54

. ornment bireauCrats.37

The imposition of

secured the degree of

J

externally applied rules and regulations,k however, has not4

ri

cooperatAnggded to defectively manage the interdependencies

between business and society.. Ace the coerciv'e directiives issued by managers to con-

ftrol, and coordinate activities in doollettive production systems earlier in the centuty,

.

directives issued by government provided an incentive for the creation of informal

Al

norms directing executives if resisi And render the external controls ineffective.'

Such norms have long been, a fact ot'llife in the Soviet Union.38 They have begun

-

emerge here, where the rules of business ethics are 'developed and maintained

dependently 'o f the legal aad pold. tic Sifstems .39

more in-

Thg proliferation-.ofgdv ernment constraints has been ma by an expansion of the' role- of

. -

trade associations, business and an increasing business presence in Washington.

Organizations such as the. Council eaae Space Industry Associations

formed to coordiaati lobbying efforts. ' The NationAl

were

9-15 -.st

. .

.

Association'of Manufacturers moved its offices` from New -York to Washington and has

_ 3.'' 4 . .

joined forces with the. Chamber of Commerce of the United States. These orgarlizations

have worked' with the Business Roundtable; the Public Relations Society pf America, the

Young prdsideurd,UrganizatioR, and othefs to form the Committee on Business Overview,

A group designed to defend the business community from political assaults.40

The in- -

cieasing'politi61 clot= of such groups is very difficult to adny, given the nature of

both the budget and the tax legislaticin passed dtring the list few months.,

1,

,t.: may be characwized'as a search for on- going ,cooperation ana accomodation required

.. =. . .

HOW TO MANAGE BUSINESS-SOCIETY RELATIONS:LEARZNQ FROM OUR EXPERIENCE MANAGING LABOR-MANAGEMENT RELATIONS

1

The histpryhistpry of labor-panageMent relations, since before the turn of the centu

411

Iby collective. production systems. By the 1930's it had become evident that' managerial

discretion was limited.as the primary device tor securing coordination and Control.

The human' relationists sought to generate a cooperative spirit by establishing the '

v.4

.410

means by which more equitable exchange relationships could emerge. PureiyvolUntary

exchange, however, proved to be of limited utility. The

,

of management sitoply weren't sufficiently compatible over the relatively short time , ..

erests of labor and those

e 4..-

periods.

during which cooperation was required. Consequently, norms of 'association -.-

I 1

however,

,01 '

emerged against the backdrop of ever ptesent threats tifttrike. These norms; 1.:,,..-

presUhe a degree of incompatibility ktween laboT7fud management-and haVe failed tct

securethe-degree of caoliepAtion required- bor productivity continues to fall--or-/

fails to increase--and for new4atterms Abound. The quality of work movement

reflects one,such call. By chinnelling labor and management initiatives through

quality of work committees, this movement may prove-to be the next step toward secur-.

_`

ing the,needsd degree of mutual effort required by collective, production sysiehs.- tr

4

-16-AV'

Relationshipa between business and society may be seen as. a societal response to

/*the same changes 'that prOvided the/driving force behind evolving patterns of labor-

management relations: increasing interdependence among participants. The size and

interrelatedness of contemporary collective produttion syste often seems to contra -s ,

dict individualistic competitive assumptions. Social is have made the interdepen-

dence_between the operation oaf business and the well:- eing of society increasingly.

isible. The response, however, was directed toward restraining business

havipr thrqugh the proliferation of legislated rules and regulations. This has no

more resulted in cooperative mutually beneficial relations bdtween businessr.

and society than it. did between labor and management earlier is the, century,.

w ''..

These who seek to accommodate the needs ofitbusiness and society by subscribing to ..-'-'

1 ,

71. Am

the emerging managerial ideologx are not likely to find lasting comfort in the be-0.

.1..

'. .

lief that thelong-,term interests. of the business community And the welfare of society

.._ ..

are identical. The human relations movement was not successful in forging sufficient

. - ". . /voluntary cooperation within the workplace for reasons which alsoapply o the. -

-,'lems currently faced by businesses, Cooperation in sufficient deeeelkimply has not

_ 4"---N.been forthcoming. Unless,all competing fftmi-cooperate voluntarily, the-short-term

1

costs for those 'Wht do seek to accommodate lare too great. _Government regulations

-__' - .A

have not resolved the problem. Faced with contradictory demands, businesspersons.

.

have responded through.legitiMatepolitical channels to oppose administered coercion.,

. &

4this

will not stimulate the degree of cooperation;required; it will only remove the only

', . ,

serious attempt to.address the problei,New approaches are/urgently deeded, tgerefore; ,

t, I

_to securek

commitment of all' parties 'in thq interest of the well-being of business 0

c.' 0 '4 0and society.

,..

Accommodationodation between labor and management, to the extent that it has been real-

ized,'emerged throUgh the.- development of norm, of 'association which proMide legitimacy

to the appliqation'of constraints designed to enforce the underlying norm of reciprocity.

18

r44

e

,

,

-17-

.leither labor nor management should get something for-nothing, and the specific rules

which operationalize this norm have been hammered out on the anvil of collective bar-

gaining and arbitration. Gov'ernment has explicitly and as a matterrof pOlicy main-

tamed a third-party role. The courts have refused to hear appeals of:arbitratiOn

decisions. This has teinfprced the ability of the collective bargainin rocess to

resolve differences and to u rk out accomodations Lthbut goyernment icial in-

terferentv. The resulti orms of association aref"private," that is, they are gen-

_

erated---and thereby subscribed to --by efie parties ttiey affect.

In contrast, relationships between business-and society became an increasing

concern of govermnent. Federal relulations proliferated,land pfivate sector

political involvement designed to protect business interests grew accordingly.

Corporation-society relationships

than by coope'rative mutual'effori...for"the

in t e ole of the plaintiff.

were characterized more by advocacy proceedings

c on good. Government often was4.

ased upon our experience in. the 'area of labor-management relations would

prescribe "privitization' of the coercive forte needed to forge .effective norms of

association. Only-if government maintains a third - rty status 'W11111 it be able to

provide` the fraFework needed for accomodati And duly if the 'arms are generated by -

those.who'hame'to live,with them-will the needed degree,of commitment be forthdoming.

4.4

Currently, federal regulations are hluing an effect opposite to that.intended. In the

44'

Federal reetlatials had an effect opposite to that intended.. They treated a riftIbetween the-business comm unity andsa commitment to socially responsible behavior, such

1

the businesspeople of tdmorraw who' seek to be socially responsible pay be viewed

d sanctioned in a yak similar to the "rate buster".within the corporation.41

).

4 4Effectiveresolution of this problem requires that policy-makers intelligently

N4

cultivate eff rms of association within. he business commun Cv and pre-empt

L./J.

the current and ver. feCtive trend collard resistance. This requires priv itation of

-18-

through;which such norms emerge in order to stimulate their formation by.\the people

who will be affected. *There are several ways this could be accomplished, each with

'its bwn set of, promises and potential pitfalls, and only a few of these can be touched

upon here. However, they all require policy decisions in two areas: ,first,` policies414

which would provide the institutional framework within which accommoda ions could

occur and, second; policies which'wouldencourage both' parties in these egotiations

business Ad societyto discipline themselves.

f

3

Creating Private Institutions for Managing Business-Society

Itelations: *Applying the Principles of Collect Bargaining

Hazel Henderson has provl.ded a preliminary outline of one, way to approach the

institutionalizat4n of new, forms of privatized accommodation between business and

society.' Some of her proposals involve an almost direct application of the collective/

bargaining-model. She argues for. the'cultivation of new groups of social' advocates

composed of consumers,, citizens, and stockholders. These groups would provide articu-,

. .

late and informed representatiOn for those who are becoming increasingly alienated and./. ,

increasingly unable to-constructively confrdnt corporate behaviors they find objec-

tionable. Henderson holds up co lectivembargainimg, with its emphasis on seeking areas

of common concern and o imaway from confrontation o ngw levels_of communication

/6

and understanding, as aQ,k

model for bringing the new adVocates and the corporation to--

*4''7)

.gether. She also pr&poses a versionof grievanci arbitration for the settlementoll

'.

s

:disputes. Communities would establish mediation boards composed of highly, trained'

."'xitizens serving on- call''to settle disputes'tftch would "...Otherwise fester:clutter,

court c4enders, oz be resolved by power plays.u42

Henderson's proposals do not go so far as to recommend national legislation; how-.

.t.

ever, such legislation could establish the framework witr

which c'94gity collective

bargaining would be nuAured. For example, legislation could astabliSh the-criteria

. by which community groups and members of the business community would be agemed offi-

.010#

9-

4

cial representatives who would conduct oblA igatory negotiations. The serection of.

representatives and ensttng tegotiations could beinitiated,by'either party. Simi-,

.,..ty. larly, legislation could establish the rules which would ,guide co orations and com-

e.

- munity coups in the process of contract 1egotiations and g i nce arbitration and -

$settlement. Thl,final stage in such a process could be b

.

,ding -arbitration conducted,

by an indepenaent,professiAal selected and.chpensated by both parties in the dis-..

. " ..a.

pute. e longterm intereitt.

of these )rbitrators would lie in writing judgments

.0A

4, .

.

'acceptable to all contending partfhs. ,Since the decisions would bt final --not subject

."----N,...

: .,

to judicial review--these arbitrators would essentially be codifying nOrms of asso-

ciation governing Niness-society relations.

The application of the collectne-bargaining model coul( go a 1dIrg way toward. .

privatizing the mpens by which business and the communities in which ,they operate

reach accommodation. The procedures involved, however, are essentially adversary pro-,

cedures, predigated upon the presumption of a-divergence of interest. This has proven

3 .

to be inadequate for realizing the degree of cooperation of collective production

systems, and, 1phile this'approach may be helpful there is no reason to expect it to

operate ;any more egectiverV at the level of business - society relations than it has

for labor7management relations. AB has been-the case for collective production

*sys6ras, increasing in rdependence between businesses and society may requirl' that

more-cooperative Ls adversary-oriented approac es be found.. .

The Quality of Work Movement provides,one approach for institutionalizing this

0sort of coopqation. There is no reason why business firms.Andocommunity groups cat-

not form Quality of Community Life Committers analogous to the.Quality of WorArak Life

committees curillitly being formed td manage intra-firm interdependencies. Sugh-com--

mittees woulciproVide an important supplement to the arbitration. rocess suggted by

the application.of the collective bargaining model. A diagrammatic representation df

such an approach is presented in Figure 2.

21

e.

1

20.

Insert Figure 2 about here

Like the quality of Work Ube-experiments currently being conducted by the

National Quality of Work Center, 'such committees could be organized and maintained on

an experimental basisdby private organizations. They would bring interdependent,fac

tions together and, give them access to.competent consultation. rn addition, outside

researchers could be employed to learn from the effort aild publish materials which

could guide future attempts to increase and maintain high levels,of businesscommunity

cooperation. Standing comnUtees,could identify problem areas and project committees

could develop and administer programs designed to alleviate these problems?

This sort

of framework would go well beyond the less formal efforts. operating in many communities

today in providing the needed degree of businesscommunity cooperation. Much more,e"

work is needed to develop this sort of approach. For example, the appropriate'leva.

(e.g., national, regional, state, community) at which to form such a committee would /

4 ti

have to be determined. However, establishing such committees would allow for the _

generation of cooperative relationships among otherwise contending adversaries. It

.would provide a meaningful private forum. which does not now foist fort the resolution

of disputes and the development of cooperative effort./I

Privatizing` Coercion and Encouraging SelfDiscipline

4

While institutionalized collective bargaining Lay Provide a useful alternative

.

to the present trend toward increasing goverment regulgtion and business resistance,

several critical problems are likely to, impede the implementation, areven seriousr, 4

consideration, of this proposal. Pdrhaps the most important oethese is the fact that

neither businesses nor their counterparts in the community.are sufficiently organized-

to allow fpr effective negotiations., It is even difficult to delineate boundaries'. .

which clearly,differentiate these-group:4 Also, representatives of community interests

.

are likelyto be spokespersons for subgro*ps which may or may'not reflect the interests

4

. .i

of the.comiunity as a whole'. 4egislation might deal with this by requiring that such.

.

representatives be Aected and that a sizeable proportion of the electOrate vote in

such an election before a negotiating presence can be declared. This would implicitly

dra'-boundaries defining the community along currently operating politically defined .

'el

lines.) 6

More significant and perhaps less tractible problems arise for businesses. It

is not only difficult to define the co nity, of businesses with common interests, but

gislatiop and legal precedent currently constrain cooperation. It enforceom-.

.'petition among business firms operating in the same market. While it may be possible'

,

to encourage cooperation among non-competing firms, significant legal change will ,be4 ,

required to allow organizations operating in the's?me markets to coordinate t eir

aCtivities.sufficiently to allow for ruly collective bar ning with the community

te/X)

or communities in which they opera

The suggestion of bugiiless-community collective bargaining, therefore, implicitly

suggests a.sweeping reappraisal of the costs and benefits associated with sole reliance

upon competitive markets as the means for aligntng business activi es with sOcietal.

interests. Americans generally believe strongly that business comet on provides

portant safeguards and thax allowing cooperation may undermine this mechanism.' There

also will,be those who also feel that significant business cooperation will remove pub-.

Irom 43lic policy public control. ,Nevertheless,*new ways must be found to more effec-

tively harness private organizations *in the public interest, given 'the formation of-

nods of resistance is the business community, and the effectiveness of this community

4.

in opposiniadministered coercion.S.

Despite thg,trequent assumption to the contrary, it is not always eiear that al-.

.."''

lowing for greater cooperation among even competing firms will necessarily reduce

,societal well-being; ,For example, iriduatries'characterized by a high degree of market

concentration phew less. than average...ape increases during periods of greater than

i`

-23

tot

'4 a

average prosperity.44

The life insurance industry; characterized by high .to moderate

concentration, organized member firms to. pledge two billion dollars to. help rebuild

-22-

inner cities after the events of the latesixties.45

It is quite possible that the-

informal contiOls\and the ability-to exercise sanctions' wfiich market concentration'.....--

s ,,,.-

provides are, in part, responsible for these results. The-National Alliance of Bbsi-

nessgmn,seems to be more successful when a few large emplo3'ers'domi4te the community

and therefore provide the means for effectiire control. NAB goals are less frequently'

realized when the business community is diffuse agd loosely structured.464

It is not even clear that overtly illegal price cooperation always compromises.

*v.. '

the public interest. Several of those involved in the ' "incredible electrical con-

spiracy" pointed out that the nation's defense capacity depended upon the health of

their industry. fileir activities, though illegal, wet', 'they argued, acts of

-

sacrifice in thelpublic interest.47 The industry was, in fact, plagued by over-

1;-capacity and, without mechanists for allocating contracts among the firm's involved,

. ,

many may well have failed. +.11e resulting deCline in the capacity of the country to/1 ,

arirapidly increlpe its generating capacity may well'have compromised our defense cap-

ability.

If posdible benefits of allowing busin ess cooperation haye been overlooked in

the current scussionr so have been the costs of insisting upon competition. For

example, in the 1480's a coordinated indistry-wide assault was launched to*determlUe

the optimum methods for emission control in the Los Angeles area. -Because of anti-

trust.objeGtions, however, exchange of neceasary.but confidential technical data was

prohibited among 'firms 'competing in the emission -control market. In another Case,

'

utility companige were prvented from requiring safety inspections for industrial

ause such action constituted restraint trade.48 Yet, precedent

hat "violation's of antitrust law (can) not be defended.

customers, bec

established in 1949 declares

on the grounds that a particular accused.comb ination would not injure but would actu-

24

r

/

-23-

ally help manufacturers, laborers; retailers, consumers,-pr the public in general."49

It is possible that such "policy by precedent" may be a short-sighted response to con-'

4 ,temporary societal and business' needs.

%

7 4A systematic reassessment of the costs and benefits of sole rellance,on crimped-

'..tive forces, given new patterns of Interdependgnce, is, we.believe, justified. There

of course will be substlntial areas in which cooperatidn will not serve societilApter-,

ests., Formal codes for corporate conduct, for example, frequently include prohibitions

against cutthroat competition, competition which could lead to lower prices. Moreover,

corporate behavior, justified as socially responsible, iay obscnre other less socially

desirable behavior. U.S. Steel "voluntarily" contributed five million dollars to

Allegheny county, but justified the gift to itockholderi as t&e-empting a significant4

tax increase:50 Such exatoples serve to underscore the fact that societal and corporate

interests ate not identical and that it ispot always obyious where whose interests

.lie.. The key issue, however°, is to dete ne hw to manage such divergencies's&

Ioverlaps pf interest. eThe proposal fors llective bargaining suggests that-gley

could be dealt with through...a privatized arbitration process on a case-by-case basis,4w

rather than by legislativrmandate.

Introducing the. proposed institutions for managing the interdependencies between

1 1

,businesses and society must go hand-in-hand with rela ing or eliminatimg the constraints

which'currently Iimit'cooperation among firths.. More than, this, however,*ie heeded.

If privatized norms of association are to be effeCtiv ,firmt must be given the in-

,

stitutionalmeans,for disciplining themselves. It is not sufficient simply to allow '

V _

4

firm, to cooperape in the public interest.. They must be' encouraged to dy0 by those.

w , *

/

who will be significantly affected, -and policy=makers should assess the utility of

creating means by which beneficial cons traints can operate. For example, corRorations.

may be allot/es' to sue each other for violation of their amenitNOts. Azi increas-. )-.. 51 ..,

ingly important amenity in the business community is a healthy publid image of the

,

25

I 1-

-24

-1

,

. . .

business enterprise..Films which, in the judgient Of other ei damage this image

could,be made vulnerable to such suits. Other structures, oTten currently viewed with

-

suspicion, maybe called upon to,encour ge compliance of-individual firms. , For example,

leading firms in concentrated industrid could be called uponf to exercise' social dis-

cipline just as they now often exercise price discipline, Interlocking directorates,'. .

,.

executiVe transfers across firms, and the critical position of financial organizations

in corporate.netWorks all represent currently underutilized possibilities for increas-

f.

ing interorganizatioualtoordina4on.4 .

Such policiel would represent a substantial movemenx away from }past practices.

It may be a bit frightening to significantly reduce Our reliance on market mechanisms.

However, if new ways are to be found such as the application of collective bargain-

ing and quality of work fe models, it is essential to carefully consider suchat r

changes., It is not'reasonable to _expect voluntary cooperation, especially when rule%

ofr9omplianc.e(are applied.externally. Such cooperation was not forthcoming from the

shop_ifloorduriug,the earlier decades of this century, and it is not currently forth-

k comps frdm businesses.' It also is, not reasonable to expect businees self - discipline

When firms fu the same markets are legally.rgstricted from cooperating and when pos-

sible inter=market mechanisms of private control dieviewed with distrust and sus-

picion. If collective bargaining betelbueiness and society-is to be considered

seriously, such cdnsideiation must go hand-in-hand with proposals favoring rather than

resmicting ihe.degrie of organization allowed in thOUsiness<co-uknity.-

Whichever 'raw approaches are generated, theyniiist'be evaluated against the cur-

rent trend of effective corporate resistance to.goiyeraMent regulation. /As

,41

Kingman Brtwste-has -noted, "The public red tape of bureaucracy and the private red'

F

tape litigatory.obstruction,are an unhappy price to pay in order to ha<:s,

11.52

vate initiative tortheipubliccinterest.... __It it a price which may not have to

r-;1

e pdid. hrough creative-Polior-makiug, it may be possible to find,a better way.

_Inthis-paper_whave suggested that our *Pe ence managing hulnan relations in col-.

K

e

1so

lectivtproducting systems-mayprovide a. direction for working our way out of the

current situ ion.` The ideas are only. meant to be suggestive. There are many other

possibilities and the ones presented46 tee& much more development before they can

AnK

be considered complete picy,proposals. Sdme new solutions are, however, required

l if we are ta move toward the more cooperative society we must become. By-

workable designs for.stiucturin'g business-society relationships, analysts and policy

.,

. 7 ../

makers'will be strengthening the bonds between societies, corporations, and individual

9'

citizens, bonds which currently "constitute one of the most serious social and economic

problems of contemporary society..

.N

S.

ti

rs

1. -

*

1

e

40

AFigure,

A1., StruCtural Design for Labor-Management,,,

Quality -of -Workilife Project

...

Management.

-.7\V.

/.- _ _

-,--1Ad Hoc Project]

.n Committees

'r

Quality of WorkLabor7Management

CommitteeUnion

f

CConsultant

Standing

Committees

Figure 2. A Structural Design for Business - Community Quality-of-Community Life Projects,

Business

Researcher

1

'1Ad. ROA Project)

..1Comblittees

Quality of ,-Co;munity Life

ittee91.

CommunlgyGroups)

(Consultant)

LStandingIcommittees

.to

6

28

Fontiotes

1. Milton Friedman has been an articulate and indifatigable'advOcate of- the :profit-

-bssedorientation. See hisCapitalismiand Freedom, University of Chicago Press,

1,962-and "The Social Responsibility of Business is to .I cre se Its Profit,b," -

New York Times, Magazine, September-13,,1970, pp. 372--.33, 227126. A useful sum-

mary of the two competing perspectiVes is available-in eithDavis, "The Case

For andAgainst Business Assumption of Social Rgsponsi ilities," Academy of

Management Journal, 16:312-322.

.

2. The fulltext of-Murphy's remarks are available in "Businessman, Heal Thyself,"

Newsweek, Decataber',20,76, page 11.

3. FrderiCk W. Taylor, The Princiliesof scientific Management, Harper, 1911,

page H. -5-

,

4, See

5. -See

Allan Nevins, Study in rower,

Russell W. Davenport,'U.S.-A.,

"Scribner, 1953,,page 4Q2.

The Permanent ReAlution, Prentice-Hall, 1951.

6. See George C. Lodge's highly readable description of this dilemma in "-Business and

th& Changing Society," Harvard Business Reviewl',52 (March - April): 59-72, 1974.

Also see John W. Ward, "The Ideal of Individualism and the,Reality of Organization,"

.in Earl F.-)Cheit (Ed.), The Business Establishment, Wiley,:1964, pages 37-76.

Eli Ginzberg and Ivar E. Berg, Democratic Values and the Rizhts of Menagement,

Columbia,Univeraity Press, 1963, page 193.

8. The first documentation df productivity norms was provitedby Fritz J. _

Roethlisberger and William 3,4 Dickson. in their extensive description of the

telephone bank wiring room in Chicagdls Hawthorne Plant of Western Electric.

See their book, Management and the Worker, Harvard' University Press,-,1939.

Another well-known analysis is-Donald F.- Roy's "Quota Restriction and Gold-

bricking,in a Machine Shop," American Journal of.Sociology,.57:427-442,a,

9. Chesterq. Ba$ard, The Functions of the Executive., Harvard University Press,

-1938.

10. Stanley E. Seashore, Group Cohesiveness in the Industrial Work Group. Institute

for Social Research:, Ann Arbor, Michigan, 1954.

11.' This charge was onesOf.the-p .., . ry pqints made byjuiligm H. Whyte .s popular"

" . book, The Organization:Man, '.n and Schuster, 1956, /

-

12. Elton Meyp, ften considered to be the father of the huian relations movement,

,seems to base believed that--these interests were identical (see TheSocial_Prob-

lams of:an Industrial Civilization, Harvard University Graduate School of Busi:-____

---Iless-Adre4.1.tration, 1945)_L Perhaps the most prominent spokesman for this move=

--, ment,,RensiSLikirtf argued_that-these interests were reconcilable through the ,;(

-application dt_opgn and supportive management styles (New i'itterns'a Management,

-MtGlaiw-,Hilli,1961--and-The Human Organization, McGraw-Hill; 1967). Chris 4rgyris

-argued%that-_divergent interests could be, reconciled to the extent that jobs and

social-relatiOnthips at work were_dsigned to meet employees' personal and Social

-,;needs,(intetrating-the.Individual and- the Organizations, Wiley, 1964).

--c

.1

.1

-28--

113. One prominent critic of the human xelat ons movement, Philip S znic'k, has taken

. its, proponents .to- task for failing to ecognizexhaiconflicts between the goali

of individuals and thoieof-the organization are an unavoidable part of indus-

triallife. _His most recent book, Law, Society, and Industrial Justice, Russell-

Sage, 1969,_ represents one of the few attempts to go beyond voluntarism in the

analysis of emerging libmr-managementhFccommodation and -to begin. to understand

the difficult-problems of reconciling truly incompatible interests. .

..it,.--.

. . - .

s .

A concise exposition of "this thesis can be found in Mancux Olson, The Logic of

Collective Action, HarVard4niversify Presi, 1971. -,

14.

-,--, , ,

15.. See AlVin Gouldner, "The Koaliof Reciprocity," American gociolclical Review,

25;161-170

-...

16. These evolving normssof.association, as well as others, are more fully/detailed

in Philip Selznick,Ibid., pp. 164ff. Additional material describing the emer-

gence of such norms through the process of grievance arbitration' can be found

in Ginzberg and Berg,'Ibid: . `

17 The Cdmmission set tip exfieriments designed to find new ways for increasing

labovothanagement cooperation at work. One experiment took place inv.& mine in

Pennsylvania and is described in Pell S. Goodman, Assessing Organizational

Change: The Rushton Quality of Work Experiment, Wiley-Interscience, 1979.

-RelateCexpertmentsk,havebeen described by Robert H. Guest (Quality of Work

Life - Leatning from Tarrytown,".HarvardBusiness Review, 57(#4):26-87, 1979)

and by Baxry A. Macy, Gerald E. Ledford and EdWard Ek- Lawler III (The Bolivar

Quaiity,of Work, Experiment, Wiley-Interscience, forthcoming) .-

-4 18. These experilments.have involved The inessee Valley Authority, The-City of

.San Diego, and several private organizations.

.00

'19: The form gf this graphic display of the Oality of wo,Fic design was adapted from

David A. Nadler,'"Consulting with Labor afid Management Some Learnings from

Quality -of- Work -'Life Projects,,in W. -Warner Burke (ec), The Cuttitg Edge:

Current Theory, and Praetice in Organization Deve\ument, University Assoniates,

Inc., 1978., -

20. Ted s,."H Resources - Why the MewConcern?" Harvard Business Review,

5 025:.1;0-134 1975....

.21.-.Karl W. Kapp, The Social Costs of Private Enterprise, Schoaken BOoks, 1971. CapP

first publis his thesis in 1950, predicting then that within twenty years'

social cos would beCome a major'sociarland-eConamic issue.- i

.W .

. .-

22. See Morrell EL1d,,The Social Responsibilities of Business, Company and Commdnitv,

:The Press of Case Western Restrvd Univeraty, 1970,, page 107. % '

23. Morrell HealdllIbid.';-page 85-, _-___-:'

. b

.0

- '.24. FrancisX. Sutton, Seymour E. Harris, Carl Kaysen, and"James Tob , The American

. .- Business,- Creed, Harvard University Press, 1956.-.-------

_ .

Joieph R. Morgan, Jr., .._,mModerAmliElpiancilisalpm, Houghton4liff n, 1963.

4

I \-29-

\26. Joseph R. Monsen and Mark W. Cannon, The Makers of Public Policy, McGraw-Hill,

I 1965,2page 47.

. '4 27. Morrell Heg d, Ibid. %I

28. See Philip B. Osborne, The War That Business Must Win,-McGraw-Hill, 1970.

AIM

29. Henry Ford, II, The Human Environment and Business, Weybright and Talley, 1970,

pages'55 b 56. ,

.30. Fred Allen, "Gorpordte Conduct," Business Today, 14 (Winter), page'25..

31. A great deal of effort has been expended in the search for such measpres. Social

program budgeting, social accounting, and social cost-benefit analysis are but a

few of the development techniques. Reviews and proposals are plentiful, such as

those of S. Prakash Sethi ("Getting a Handle on the Social Audit," Business and

Society Review Innovation, 4:31-38, 1972), Archie B. Carroll and George W.

Beiler ("Landmarks in the EiSiution of the Social Audit," Academy of Management

Journal, 18:589-599, 1975)",. and Mpilsolf Dierkes and Raymond A. Bauer (Corporate,

Social Accounting, Praeger, 197-37-N, Almost all of.the current methods and prol-

posals, however, presume that socially responsible activities will, enhance long -1

run profits (see, Raymond A. Baudr and Dan H. Fenn, Jr., The CorpOrate Social '

Audit, Russell Sage Foundatien, 1972, page 62).--

32. See Philip B. Osborne, Ibid., pages 6 & 7:

33. Phillip I. Blumberg, "Corpprate Responsibility 4nd'the Employee's Duty,

apd Obedience: A Preliminary Enquiry," A Dow Votaw and S. Prakash S

The Corporate Dilemma, Prentice-Hall, 1973, page 61.

34. onM.i-ssionon Private Philanthropy andqublic Need's, Giving in Amer Commis -

sion.on Private Philanthropy and Public Needs, 1975,.page 156.,

35. See Henry G. Mann. and Henry-C. Wallich; The Modern Corporation and Social Re-

sponsibility, American Enterprise Institute for Public Policy' Research, 1972.,

36. Committee for EcOnoMc Development, Social. Responsibilities of Business Corpor-

ations, Lommitte forEconoitic Development, 1971, page 29. Jamei%W. McKie

("Changing Views," iJ. W. Male(Ed.), Social 'Responsibility and the Business

Predicament, Brookings Institution, 1974), has properly called this document

"almost an official manifesto of a new business ethic."

37. Murray L. Weidenbium, Business, Government, and the Public, Prentice-Hall, 1977,

page 285.

38. Joseph S. Berliner's classic work, it::.erintheFactor.andManHarvard.

.University Press, 19574is filled witti(letailed_eximPlesofsistemmatic suhver-

-sion of externally applied rules, especially falsification of reporting (Ch. 10).

kG

k

39. Of those convicted-in the electric company priee-fIling conspiracy, only those

who had worked fOr General.Electrit wfre not welcomed back by their previous

_employers (see RichardA. Spth, "The Incredible Electrical'Conspiracy,"

'.Fortune 63,:_(#4): pages 132ff,'and 63 (#5): pages 181ff). Further evidence of

n

-30-,

the independence of business ethics from legally de endible behavior is pro-

vided by Edwin H. Sutherland, -who concluded that "...a violation of the legal

code is not necessarily a violation a dire business code." (White Collar

CriMe, Dryden Press,00,-page 219)..

40. See Murray L. Weidenbaumj Ibid., pages 262ff..

41, 'Theo Nichols (Ownership, Control and Ideology, Allen and UnWin, 1969) reports a

case where sue social pressure actually occurred. Board members of a firm

which was part cularly committed to the doctrine of social responsibility were,- ,

for. this rea on, viewed uss outcasts by managers of other firms.(

42. Hazel-Henderson, "Titfard Managing Social Conflict," Harvard Business Review,

49 (M:82-90.-

43.cSee, for example, Theodore Levitt,,"The Dangers of

Harvard Business Review, 36"(#5):41-50.

7

Social Responsihility,"-

44. FLderic M. S er, Industrial Market Itructure and Economic Performance,'Rand

`McNally, 1970, page 303.

45. George C hurch, "The Executives as Social Activists," Time, 96 (#3):1970, pages

6248.

46. Business Week, 'Hard-Core .jobless Get a Friend at the Top," #2062.(March 8),

1965, pages 62-71.

47. Richard A. Smith, Ibid.

. (

48. MurkL. Weidenb4um,'Ibid., page 157.

49. 4bony v. Empire Storage;and Ice Company, 375 U.S. 49b, 496, 1949.

50. Marvin A. Chirelstein, "Corpovate Law,Relprm," in James W. McKie (Ed.), Social

ResRonsibility and the Business Predicament, Brookings Institution, 1974,

pages 41-77.

51'. The poslailM.lity of permitting such suits is discitssed in Edward J. Mishan,

Technology and'Growth, Praeger, 1969.

52. See Kingman Brewster.Jr.'s Introduction to Henry Ford IT, The Human Environment

: and Business, Weybright and Talley, 1970.

*dr

4 4