good reading and thoughts on corporations

Today the New York Times published this article by author Wes Davis.  In it Davis discusses the Bell Corporation’s mid-century attempt to broaden the intellectual and educational horizons of its young executives.  In 1952, the President of Bell Telephone, W.D. Gillen, created the Institute of Humanistic Studies for Executives at the University of Pennsylvania.  The Institute provided a 10-month crash course in the liberal arts to select Bell Telephone managers and executives.  The objective was to stock the company with educated, mentally flexible executives who could respond to problems intelligently and creatively.

I had never heard of this before, and I find it fascinating.  What’s most fascinating, however, is this part at the end:

The institute was judged a success by Morris S. Viteles, one of the pioneers of industrial psychology, who evaluated its graduates. But Bell gradually withdrew its support after yet another positive assessment found that while executives came out of the program more confident and more intellectually engaged, they were also less interested in putting the company’s bottom line ahead of their commitments to their families and communities. By 1960, the Institute of Humanistic Studies for Executives was finished.

This provides historical data to a belief I’ve held for some time about big corporations: that despite being composed of individuals, corporations themselves have no interest in the welfare of individuals or communities.  Their first and only responsibility is to their own preservation, as measured by profit, growth, market share, and other indicators of a company’s success.

This seems all the more relevant today, as national political debate simmers above the stovetop burners of the bank bailout and the BP oil spill.  BP has no fundamental interest in cleaning up the oil spill, except to the extent that it calculates doing so will help its bottom line.  If the profit gained from an improved corporate image is greater than the costs involved in improving that image, BP will clean up the spill.  If not, it won’t. 

Of course, individuals working for BP might feel strongly that BP should clean up the spill.  But the reason BP can’t and won’t clean up the spill is because it has competitor oil companies that won’t help, either.  Like any major corporation, BP has competitors, and they are locked in a never-ending race for financial success.  Every dollar BP spends unnecessarily is a dollar lost in its race with Exxon, Texaco, and others.  This fact requires BP to focus only on what helps its own short and long-term viability, and it must find individual workers who are best at obtaining those ends.  So BP naturally seeks and promotes individuals who are willing to place the company’s fiscal objectives ahead of any personal feelings, interests or moral responsibilities that might interfere.

Of course, what is best for BP is likely to be best for its workers, and they are individuals with families, communities, and environments.  But layoffs are the internal demonstration of how a corporation cares no more for its own employees than it does for the wider population.  If BP is $1 more profitable without you at your desk, you will be laid off.  To not lay you off is to lose a dollar’s worth of ground to the competition.

I believe this to be the case, which is why calls for massive deregulation drive me batty.  Big corporations are, like distant gods, indifferent at best to our livelihoods.  They are interested only to the extent that what is best for a community or an environment coincidentally overlap with its own interests.  Otherwise, they cannot step outside of their own objectives without risking their fundamental existence.  Some free market arguments would suggest that healthy communities and preserved environments are ultimately profitable for everyone, and so the market will look after them.  This has not yet been proven, and it’s not a hypothesis I wish the world to test.

The one corporation that can afford to deviate from the path of profitability is a monopoly.  With no rivals that threaten its existence, it can pursue other objectives.  The only such organization in this country is the government.  It is the only actor in the pantheon of corporate gods with the power to force them to care about our welfare.

So, hats off to that Bell executive who sought to broaden the horizons of Bell employees.  The company spent money to invest in its workforce as people.  Sadly, when it discovered that the investment resulted in less company-oriented workers, it cancelled the program.


UPDATE: Two articles in the July 8th, 2010 edition of the NYTimes are useful examples of the way large corporations do not behave with an eye towards anything but their own economic health.  The first is an article about Wal-Mart’s exhaustive fight against the $7,000 fine assessed against them after an employee was trampled to death on Black Friday in 2008.  The second is about Transocean, the off-shore drilling company involved in the Gulf of Mexico disaster.  Check out this example of Transocean’s attempts to improve it’s all-important bottom line:

A Norwegian newspaper, Dagens Naeringsliv, reported several years ago that a Transocean rig, while returning from a repair yard in Norway to a drilling site in the Norwegian sector of the North Sea, diverted for several hours into British waters. During that time, Transocean transferred ownership of the rig between subsidiaries and later argued that it did not have to pay Norwegian taxes because profits on the transaction had been earned outside the country. The company subsequently settled the case involving that rig.

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