Corporate Power and Social Responsibility: A Blueprint for the Future

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9780029159408: Corporate Power and Social Responsibility: A Blueprint for the Future

One of America's most distinguished economists, Neil H. Jacoby has served as a public member of the Phase II pay board, an economic adviser to President Eisenhower, founding dean of UCLA's Graduate School of Management, and a consultant to numerous government agencies and private corporations. In Corporate Power And Social Responsibility he gives a thorough, objective "social assessment" of the American corporation. He identifies trends which point to a changing corporate role at home and abroad and he offers creative reforms of corporate and public policy which will promote a more "just, efficient, creative and democratic society."

Jacoby finds no evidence to support New Left charges that the U.S. has become a "corporate state." In fact, he says, corporate political power is waning, conglomeration is tapering off, the corporate share of the nation's wealth is holding steady at 28%.

Competition, says Jacoby, is on the increase. Where price and quality of materials and manufacturing were once the only factors, mushrooming technology, new business practices and new markets have created new competitive pressures. An increasing variety of product features, services, warranties, credit terms and trade-in allowances have multiplied consumer choices. As a smaller and smaller proportion of personal income is spent on necessities, competition between different kinds of products has become more important (should discretionary income go for a sail boat or a trip to Europe?). In many industries, increasing competition from foreign manufacturers is a factor. Rapid changes in business practices and technology have even made potential competition from entering firms and new products an important consideration.

Still, Jacoby sees much need for improvement. He proposes measures to increase the political power of the consumer, upgrade the performance of boards of directors, expand the involvement of stockholders in company decision-making, encourage environmental responsibility, and make defense companies function efficiently.

For the future, Jacoby predicts the continued decline of corporate power as government regulation expands and new, competing interest blocs spring up. At the same time corporations will become more responsive to changing social values and priorities. The rapid growth of multinational firms, he believes, will increase the stability of the world order and promote the growth of regional and world-wide political organization.

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Chapter 1

The Criticism of Corporate Business

An institution is likely to be more searchingly appraised if attention is focused at the outset upon its faults rather than its virtues. Thus, an assessment of the social role of the business corporation, which has become a central institution of American society, is best begun by an effort to set forth and evaluate the many criticisms that are made of it. In this opening chapter, we present a systematic account of the various schools of such criticism and identify the flaws that each finds in it. In this way, we uncover those issues that are basic to the business corporation's social role, issues which we will examine and appraise in succeeding chapters.

We shall use "corporation" to mean the profit-seeking company of the business system. While there are many corporations not-for-profit and the number of business partnerships and proprietorships outnumbers incorporated enterprises two-to-one, the significant fact is that profit-seeking corporations dominate the corporate population and conduct over four-fifths of the private business of the United States economy. One is not far wrong, therefore, in following the general practice of identifying the corporation with business.

Many social critics, however, go further and identify corporate business with American society. Eminent scholars and able journalists contend that large business corporations dominate the polity and the society, as well as the economy, of the United States to such a degree that it may be called a "corporate state." In their view, corporate business has made all social institutions -- governments, unions, consumers, even the educational system -- subservient to its purposes. It has attained a near-monopoly of social purpose, wielding virtually untrammeled political and economic power. Standing astride the entire social structure, the giant business corporation is seen as its most basic prototype. For these critics, it follows naturally that the errors and shortcomings of society are those of corporate business: their social criticism coincides with their corporate criticism. But should not their strictures, in fairness, be brought against government, unions, and other institutions, as well as corporate business? Are not many really applicable to the weaknesses of human nature?

THE EVOLUTION OF AMERICAN BUSINESS CRITICISM

The enormous diversity of grounds on which American business is condemned and denounced almost defies analysis. Consider the following statements which typify criticisms of American business in recent literature:

* The United States is dominated by two hundred giant corporations.
* Giant corporations control, rather than are controlled by, their markets.
* Big corporations are operated for the benefit of their managers rather than their stockholders.
* Corporations control the government agencies that are supposed to regulate them.
* The "military-industrial complex" inflates arms expenditures for private power and profit.
* The multinational corporation is the modern instrument of imperialism and neocolonialism.
* Business corporations exploit workers, cheat consumers, and degrade the environment.
* Businesses conspire to raise prices and to suppress improved products.
* Corporate lobbying and campaign contributions corrupt public officials.
* Corporations are ruled by self-perpetuating managements, responsible to no one.
* The "corporate state" has made Americans corrupt, disorderly, distrustful, militaristic, and unjust.
* In the "corporate state" material values always take precedence over moral, intellectual, and cultural values.

The list could be extended indefinitely. Anyone seeking a recent, encyclopedic listing of all the indictments of the American business system voiced by the Radical Left can reach for Charles Reich's The Greening of America. This polemic against the "corporate state" offers a virtual bouillabaisse of criticisms on economic, political, sociological, psychological, legal, and moral grounds. At the heart of Reich's argument is the idea mentioned above that giant corporations dominate and corrupt all the institutions of American society. Reich concludes that the human condition has been getting steadily worse in the "corporate state." He forecasts a bloodless revolution of American youth that will sweep away the present iniquitous social order and, in some miraculous -- and unexplained -- manner, replace it with a Garden of Eden in which everyone will freely pursue happiness, unrestrained by the disciplines of work and organization, corporate or otherwise!

Reich's obsession with the evils of the "corporate state" and his total disregard of the strengths and achievements of American society make his assessment a fantastic caricature of reality. The facts show that the "corporate state" model of American society is a gross distortion, and a misleading guide to an understanding of that society and of policies to improve it. The economy of the United States is pluralistic in the nature and sizes of its enterprises, just as the society of the United States is pluralistic in its institutions. Yet Reich's call for revolutionary social change should not be the occasion for launching a counter-revolution against all reforms. Rather, reasonable men will welcome many elements of Consciousness III -- Reich's label for a set of individual values that stress brotherhood, community, tolerance, and equality -- as a motive force for salutary reforms in the economy and in society. Reforms are needed in all of our institutions in order to improve the quality of life in our society.

As economic historian Theodore Saloutos has pointed out, businessmen and business institutions have been a target for critics and reformers in Western societies for a long time. "Peace between piety and profit has rarely been made." In our history, the post-Civil War era was marked by freewheeling private enterprise, unrestrained by governmental regulation. The reaction to its excesses was the Farmers' Cooperative movement, the Populist movement, the Interstate Commerce Act of 1887, and the Sherman Act of 1890. In addition to critics who sought and gained regulation of business, there were also radical theorists who advocated the replacement of capitalism by socialism and radical activists who used violence as a means to accomplish change.

The public image of business improved somewhat during the first thirty years of the twentieth century as a result of the philanthropies of Rockefeller, Carnegie, Mellon, and others, as well as of the rising prosperity of the people, and the greater social sensitivity and increasing public regulation of business. The onset of the Great Depression of the 1930's, however, brought American business into a new "valley of despair." Business was seen as having failed in its responsibility to provide employment and a rising standard of living for the people. The Great Depression spawned a new wave of social critics and reformers, of which the more spectacular were the Technocrats, the Townsendites, and the Coughlinites. The main stream of reform was, of course, Franklin D. Roosevelt's New Deal. It installed the Federal government in unquestioned leadership of the economy of the United States and established a host of agencies to monitor and regulate the private sector: the Securities and Exchange Commission (SEC), the Federal Power Commission (FPC), the Federal Communications Commission (FCC), the National Labor Relations Board (NLRB), Social Security Administration (SSA), and the ill-fated National Industrial Recovery Administration (NIRA) and Agricultural Adjustment Administration (AAA).

The public reputation of business was at least partially restored during the early 1940's because of the extraordinary productivity of business, "the arsenal of democracy" in World War II. And the problem of "jobs after victory" for returning servicemen was resolved with unexpected celerity. Partly as a result of such progressive businessmen's organizations as the Committee for Economic Development, corporate business made peace with government and labor unions. The Eisenhower era of the 1950's was, by and large, an era of good feeling between business and the American public.

But beginning in the 1960's, an adverse tide of public opinion began to rise against business. A more affluent, better-educated, more critical public began to question the value of ever-increasing production, the resulting pollution and environmental decay, and the defective products and services being produced; and they began to protest the public's seeming inability to influence the behavior of the business system. Frustration over the Vietnam War added fuel to the fires of discontent. Suddenly, consumerism, stock-holderism, racial equalitarianism, antimilitarism, environmentalism, and feminism became forces to be reckoned with by corporate managements. For the most part, they replaced the classical "isms" -- socialism, communism, syndicalism, fascism -- as the main driving forces seeking the reform of the American business system. Classical Marxists, nevertheless, continued to voice their familiar allegations against "monopoly capitalism," "imperialism," "neocolonialism," and "the exploitation of the dispossessed."

As the 1970's began, it could be said that at no time in history had American business been subjected to a more widespread criticism. Paradoxically, this faultfinding mounted to a crescendo at the end of a decade of unparalleled social progress. Moreover, it was also true that at no time in history have American businessmen been more sensitive to criticism or more motivated to respond to it. In his best-remembered remark, the taciturn Calvin Coolidge had said in 1928 that "the business of America is business." The critics are now saying that the business of America is to build a good society and business is only a means to that end. Progressive business leaders have understood this message, as the public policy statement of the Committee for Economic Development (CED), Social Responsibilities of Business Corporations, attests.

A TYPOLOGY OF CORPORATE CRITICISM

The foregoing sketch of the evolution of the criticism of American business suggests the formulation of a typology of such criticism which might be useful for identifying corporate issues that need examination. It suggests a grouping of business critics into three categories, according to the depth of their criticism and the radicalism of their proposed reforms of the system.

Level 1. The Reformist Critics

First are the reformist critics, who accept the basic institutional framework of the contemporary American economy and society. They support the institutions of private property, freedom of enterprise, open markets, competition, limited government enterprise, and public regulation of the private sector. However, they call for reforms of market mechanisms, increasing governmental regulation of business, and restrictions on the use of private property to enhance the well-being of society. Reformist groups include those who support consumerism, environmentalism, antiracism, and stockholderism, as well as those seeking to make corporate business active in the solution of such social problems as urban decay, hard-core unemployment, the development of black capitalism, the abatement of crime and pollution. The "new wave" of business critics that arose during the 1960's is composed primarily of those who identify with the contemporary social order, but who are increasingly concerned with changing corporate behavior through political as well as through market action.

Reformist critics comprise the majority of contemporary critics of American business. To a considerable extent, their demand is not for new or stricter governmental controls, but for attitudes and policies on the part of corporate leaders that are more responsive to public needs. Our society needs reformist critics and the author counts himself among them.

Level 2. The Leftist Critics

Leftist critics seek to substitute authoritarian socialism for the capitalistic system of competitive private enterprise. Their criticism goes to a deeper level than that of the reformers; they reject the institutional framework of the present economy and call for the complete ownership and operation of the means of production by the state. Orthodox socialists of the Marxist-Leninist persuasion advocate a high degree of authoritarian discipline of the individual, by the state and the Communist party elite, in the interest of material progress. Classical Marxists also demand the substitution of centrally determined (i.e., planned) prices, production schedules, and resource allocations for those that are produced impersonally by market competition. Libermanian revisionists, however, advocate the introduction of the "market socialism" of Oscar Lange instead. Market competition between government enterprises would then substitute for much central planning.

Although the Marxist antithesis to the capitalist thesis has been vigorously advanced for more than a century, it has never gained significant support in the United States. Marxist voices have, during recent years, been drowned out by the complaints of the Reformers, on the one hand, and of the Utopian critics, on the other.

Level 3. The Utopian Critics

Utopian critics reject both capitalism and authoritarian socialism and seek to establish new social orders based upon different human values. They believe that human nature can be radically changed. Individualistic striving for material gain is to be replaced by cooperative efforts to elevate the moral and cultural character of society. Wealth and income are to be shared according to need rather than according to productivity -- an ideal not yet realized in any of the socialist countries. American-style capitalism and Soviet-style socialism equally err, they contend, in having hierarchical structures and in stressing material rewards; the differences between them are not significant.

Professor Martin Bronfenbrenner has observed that recent Utopians can be divided into three quite different schools: the Hippies, the Yippies, and the Humanist Marxists including the Maoists, Castroists, and Allendists. The Hippies and the Yippies are both anarchistic in philosophy and differ primarily in their attitude toward the use of violence as an instrument of social change.

The Hippies are nonviolent anarchists who withdraw from the mainstream of society into their own communes. They are apolitical, libertarian, anti-industrialist, and essentially parasitic upon society. They have a nostalgic yearning for the smaller, simpler social orders of the past. Communal living, handicraft workshops, and a boycott on machine-made products are their "bag." Feeling and intuition are claimed as the sources of their attitudes rather than reason and intellect. The Hippie counter-culture appeals only to a minor fringe of anti-Establishment youth, who feel equally repelled by what they see as the "repressive and exploitative" character of Soviet socialism and American capitalism. Marxist ideas about class structure they consider outmoded. The Hippie attitude is one of resignation from a system they feel powerless to change. This brand of student radicalism arises mainly from the exposure of youth to grandios...

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