Karl Marx and Milton Friedman twirled in their respective interments recently as the Business Roundtable, representing 200 of the nation’s largest corporations, issued a statement redefining the purpose of corporate businesses to include as interested parties a broader spectrum of stakeholders and interests, in addition to that of shareholders. Since the 1950s, Friedman and his libertarian acolytes, such as the Koch brothers, had narrowed corporate purpose to serve only shareholder interests resulting in a blinding mantra leading the nation to existential problems with the environment and wealth inequality. The Roundtable statement envisions corporate responsibility to include workers, communities, suppliers, and consumers. Wow! Who knew, or might have guessed?
Friedman’s single prism vision exacerbated and rationalized the exportation of jobs, corporate relocation to tax havens, unrestrained automation replacing workers, and diminishing wage earning capacity, all contributing to a growing inequality of wealth and damage to the environment. Fortunately and perhaps none too soon, some business leaders have grasped the future of this deadly spiral, urging a view of a broader corporate purpose, one that appreciates the corporate position in society. Last year, for example, the US Chamber of Commerce established as a principal goal the establishment of better paying jobs. These changes in direction are spurred by self-interest in a longer term insight that appreciates that more and better paying jobs create customers.
In 1970, Friedman wrote in a New York Times article: “Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.” So free, Friedman maintained, that he should be permitted to practice law without obtaining a bothersome academic preparation or license. He believed in an actualized libertarian society with surgical booths in every shopping center managed by DIY neighbors.
Corporate management and its shareholder constituencies steered business enterprises to ensure golden parachutes, stock buybacks, and manipulating financial data to improve stock performance, among several tactics; the overall economy had become subservient to a narrow band of interests producing a “trickle up” profit structure. Famously, this Friedman paradigm was popularized by Mitt Romney in August 2011 when he said “Corporations are people, my friend.”
The Roundtable epiphany is welcome and long overdue as history instructed should be the ethos for business. In the Middle Ages, craft guilds, somewhat analogous to modern labor organizations, emerged in Europe as, increasingly, populations gravitated and accreted in concentrated areas while employment economics replaced barter trade and family farming. Workers created craft guilds to produce highly regarded and desired products and services in small markets. Later, in the 1700s and 1800s, the Industrial Revolution functionally shattered craft guilds, expanding markets to international trade as reactionary economic forces, namely communism and socialism, threatened burgeoning capitalist expansion and enterprises. Not surprisingly, the plight of the worker became linked to the moral issue of dignity of labor as a basis for sustaining life, family, and opportunity to flourish, and found a champion in the Catholic Church.
In response to the social and structural revolution caused by rapid industrialization, Pope Leo XIII issued Rerum Novarum in 1891, a papal encyclical condemning communism and socialism in favor of private property, and affirming the essential dignity of employment as necessary to a thriving society.
In response to the social and structural revolution caused by rapid industrialization, Pope Leo XIII issued Rerum Novarum in 1891, a papal encyclical condemning communism and socialism in favor of private property, and affirming the essential dignity of employment as necessary to a thriving society. Leo supported the right of workers to employment [the original denotation of “right to work” as opposed to that in the United States], to provide for themselves and their families, avoid poverty, and acquire property. At the same time, the teaching document endorsed labor organizations and envisioned a role for government in the relationship between employer and employee as it expressed the obligation of employers to bargain fairly with employees for their labor.
Initially, the development of labor unions in the United States, especially in the 1930s, also took on a strong moral hue from Catholic social thought. In 1906, a priest, Father John Ryan, authored A Living Wage, a term in current usage about wealth inequality. During the 1930s following the Great Depression, 150 Catholic labor schools were established to instruct workers on the process of forming, organizing, and managing unions. A Catholic workers movement was spearheaded by Dorothy Day. The religious aspect was popularized by Karl Malden as the priest in the film On the Waterfront, in which he portrayed John Corridan, a Jesuit who headed the Xavier labor school in New York City’s Chelsea district. Corridan’s battles were against organized crime families strangling the livelihoods of dock workers in the 1940s and 1950s.
The epiphany represented in the latest expression for corporate behavior in society remains to be tested. For one thing, the boards of directors of companies remain largely populated by individuals proselytized by the Friedman doctrine. While in 2016, Allstate Insurance raised its minimum wage to $15 per hour, there has been no stampede of imitators. By 2018, a majority of the Organization for Economic Cooperation and Development and European Union nations had statutes guaranteeing worker representation on boards of directors. Although some Democratic presidential candidates have floated this proposal, it remains a bare idea. A few candidates have even encouraged unionization of their campaign staffs. But there has been no news story of an announcement by a major corporation rejecting a move overseas as not in the interest of a US community.
The current head of the Catholic Church, Pope Francis, has written:
Work is fundamental to the dignity of a person. . . . It gives one the ability to maintain oneself, one’s family, to contribute to the growth of one’s own nation.
Since 1891, this has been the simple formulation of an antidote to tame unbridled capitalism, its results, and the adage for a criterion of corporate social responsibility. A US epiphany appears to be emerging, or at least recognized. Perhaps it remains only a thought as business leaders look left to right for the “Who’s first moment.”