20. Big Corporations and People

20. Big Corporations and People Many people are afraid of what big corporations will do to the political and social life of the country. Senator Ralph Flanders once said he was disturbed because "No matter how well the big efficient corporations are eco nomically justified, they cannot keep on growing ,vith out changing the social and economic system.... " The growth of big industry is already visibly changing the social landscape, just as did the original growth of manufacturing. Just as the farm town was converted into the old-fashioned mill town, so the mill town has been converted into the larger factory town or huge mill city, with mills •and factories owned, perhaps, by strangers and run by "brass hats" in a distant metrop olis. The problem of economic size is not new. Down through the centuries, technological advance has brought larger production units and larger production units and organizations have brought social and political change.

The development of power tools in the eighteenth cen tury brought the industrial revolution, rising from the mill. Railroads and new means of communication and recording have brought centralized administration. Nothing anywhere near as big as General Motors, the 157 158 BIG CORPORATIONS AND PEOPLE National City Bank, or the SocialSecurity Administration would be possible without the latter. But for as long as there is written history, the question "How good is bigness?" has been at least a farm problem. The Roman Senate, the British Parliament, and the Soviet government have, in their turns, wrestled with the problem of large, efficient estates versus small family farms. By and large the historic pattern has been somewhat as follows. Progress of the industrial arts, to begin with, has.brought new economies in the form of larger pro duction units. These have begun to upset the existing social pattern. The struggle has, then, been over the question of whether the new economies-should be abandoned so as to save the old social pattern, or whether new patterns could be worked out. And this is es entially the question at stake now about big business: should it be hobbled or broken up into "one hundred steel companies instead of one United States Steel Cor poration" or can adjustments to it be made?

The first of these solutions, the "nostalgic approach," was expressed some years ago by Justice William O. Douglas, when he said, "Enormous spiritual sacrifices are made in the transformation of shopkeepers into employ ees." This is the same feeling that Charlie Chaplin ex pressed in his comical-tragic movie, "Modem Times," in which Charlie got lost in the machinery. The feeling seems to be that the village blacksmith who becomes an open-hearth furnace man, the inde pendent oil dealer who becomes a uniformed salesman, the grocer who becomes a branch-manager for a chain, the small-town banker who becomes a big-town v.p., and the farmer who becomes an assembly-line worker have lost the spiritual advantages and satisfactions of BIG CORPORATIONS AND PEOPLE 159 working for themselves. That many of them do not see it that way, is illustrated by the steady drift of farmers and their sons to the assembly lines, accelerated during the war. (Then there is the story of the C.I.O.

assembly-line worker who turned down the offer of a job requiring more skill and attention, because, his routine job left his mind free to think about the evils of capitalism and big business.) One reason why the big corporation can obtain a continuous supply of workers and hold them is because of the comparative security it can offer. (In fact, this brings up a curious contrast in the way many Washington people look at big business compared with the way they look at "social security," the "welfare state," and the "union shop." All are "paternalistic," to use a nearly forgotten word, both the security offered by big busi ness employment and the last-mentioned programs. The main difference is that the latter are compulsory.) Few economists, particularly in Washington, seem to realize the vast difference between the mainspring that moved the "economic man" of classical economics and the one that drives modern corporate managements. It is still simply "the profit motive." But what a change has come about! The "economic man" was in business with the simple motive of the honest speculator: to buy as cheaply, sell as dear, and get out with as large a profit as possible. Or so he was imagined. With a few sinister lines added to the picture, his imagined modern counter part,. the big corporation, emerges as supposedly moved by arrogance, cunning, and greed. But this isn't neces sarily' so. The libretto used by many Washington politicians is opera-bouffe, or gaslight melodrama.

By and large the predominant purpose of large corpo160 BIG CORPORATIONS AND PEOPLE rate managements, in all their major policies, is to make sure the company will remain indefinitely in business. They don't keep the company in businessto make profits, they see that it makes profits so it can stay in business. The aim is to keep the company's fences mended at all times on all fronts: competitive, financial, political, and ethical. When there is a choice, for the company, of more profits and less security, or more security (on these various fronts) and less profits, big-business execu tives almost invariably choose the safe way. A long series of corporate policies are far more easily explained this way than in the conventional way. Among these are "administered prices," held down in boom times to protect the company's good name with customers and .the public and held steady in bad times to protect the company from bankruptcy. Another is the maintenance of sound, rather than speculative, capital structures. Still others are the diversification of markets and products and the long-range planning and develop ment of new products and heavy investments in re search (sometimes called "the industry that produces industries").l The recently increased investments in "public relations" on the community and national levels may be included here, too.

Such essentially conservative and long-range policies are, in effect, the modern corporation's old-age security program for the organization itself. Insofar as they guarantee the company's own economic life, they en able it to offer comparative security to employees in a shifting world. Young men who want security can start with such corporations with the reasonable prob -ability that so long as they do a fair day's work for a fair day's pay they can count on a pay-check as long as they work and a pension as long as they live.

BIG CORPORATIONS AND PEOPLE 161 The President of one of the very largest corporations, Standard Oil Company (N. ].) said a while ago: The American people . . . are testing various ways of protecting the individual against the more damaging effects of inevitable change. They are asking for constructive improvements which •will defend the individual against forces too great for him to cope with. So far as the management of my own company is con cerned, we have formed the habit of thinking and speaking in terms of "career employment" or "lifetime employment." That is our goal. We have reached a point today where 90 per cent of our employees---wage-rated as well as salaried -have been continually employed since the day they were hired.2 Corporate managements are still feeling their way in employee relations. One. reason for this is that the modern corporation is something new under the sun.

It has no historic precedent. Its managers have been preoccupied for a generation in learning the economic hazards to be avoided; for every lesson in corporate policy some big corporation has gone bankrupt. Only recently have managements achieved enough economic security for their firms to give them time to turn their attention to programs giving the employees economic security. They had to learn to economize before they could begin learning to socialize. But a great deal has been done. In recent years there has been much heart-searching in corporate manage ments about the "gulf" between management and men. Polls have been taken, studies made, and new policies adopted. The upshot has been a not inconsiderable list of achievements by corporate management in their do mestic relations. T oan increasing extent they have be come not only bosses, but fathers. Pension systems, suggestion systems, group bonus plans, improved up162 BIG CORPORATIONS AND PEOPLE grading methods, in-plant training programs, plant hos pitals, and house organs have expressed the new "social consciousness" of corporate" managements.

It may be said cynically that "they had to," or chari tably, that they were big-hearted, or acidly, that "it pays." It comes to the same result. Big corporations are becoming social as well as economic institutions. Many people feel that because big corporations are not owned by the government, they are not responsible to anybody. Actually, the larger they are the more people they are responsible to. This is one of those cases in which "power" is also vulnerability. Wash ington economists say big business has power over many people, but big businessmen say they "serve" many peo ple. To sum it up, it is servant to as many people as it "dominates." The first of these responsibilities is of course the con sumer or customer. As the president of du Pont has put it, "Every day is election day in American indus try. The larger a company may be, the greater its need to satisfy more and more buyers to survive. Usefulness is the test of whether a company shall stay big. Cer tainly a cOlllpany will not grow big unless it is useful, nor stay big unless it continues so. The" only power corporations have, big or small, is the right to stand. in the· market place and cry their wares."

They are also responsible to their stockholders, their employees and their unions, and to local and national Qpinion. They are also accountable, in varying degrees, to the Bureau of Internal Revenue, the Securities and Exchange Commissi0n, the National Labor Relations Board, the Wage and Hour Administration, the Social Security Board, and probably to several other govern ment departments.

BIG CORPORATIONS AND PEOPLE 163 A popular fashion today is the drawing of "organiza tion charts," or "work charts," showing linesof authority. Government departments go in for them particularly, with neat lines and boxes showing what agencies, di visions, bureaus and so on are under whom, over whom, a'nd..responsibleto whom. Since big private businesses aren't in the government's chart, some people assume that they are not responsible to "the people." This is, essentially, the idea of socialism. It is being carried forward fast in Great Britain with the "national ization" of industry. It is based on the assumption that there can be no responsibility without, so to speak, a line on a work chart leading up from each industry to the central government, from which in turn a line of responsibility leads directly to the top box of all, the ballot box. It is difficult enough for the millions of owners of the large corporations to keep up with what is going on, despite the efforts of the management to keep them in formed. It would be many times more difficult for the entire electorate; as "owners," to keep up with what is going on. It is doubtful if public opinion has as much influence, for instance, on the policiesof the Commodity Credit Corporation, the Reconstruction Finance Corpo ration, the Maritime Commission,or the Bureau of Recla mation, as it has on Jersey, Steel, GM, or GE. But the public "owns" the first four of these huge "con centrations of economic power," and the other four are "privately owned."