1914 to 1964 to 2014 – Models for U.S. Companies

by Hank Boerner – G&A Institute

Let’s start in January 1914 — entrepreneur extraordinaire Henry Ford, founder of Ford Motor Company (his third company try at auto manufacturing) announced that workers would receive the outstanding sum of $5.00 per day – in effect, doubling their salary. That way, he reasoned, those assembling Ford cars could own one! And buy they did — there were soon millions of the famed Tin Lizzie (Model T) on the expanding road network of the United States.

The American society would be shaped by the rolling out of tens of millions of cars and trucks that followed the decision.  The very landscape of the country would be re-shaped from rural, dusty dirt roads to sprawling super highways and “sub-urbs” exploding in growth around the city centers – all made possible by the automobile.

Virtually all of American manufacturing would be shaped by the dramatic decision of Henry Ford. The “social contract” between large company and society, large company and worker, would evolve into an important mutual dependence and shared prosperity. Many boats would rise in the U.S. economy of the new Industrial Age.

For a time. We had a serious interruption when the wild speculation on Wall Street brought Main Street America to its knees in October 1929 (sound familiar?). The years of the Great Depression would drive millions of families to despair. The Second World War saved our economy and perhaps even our democracy from internal stress.

The post WW-II industrial prosperity would revive industrial and private prospects. Millions of Americans moved into the middle class (the broad middle, between lower and higher rungs of the economic ladder).

Much of the industrial productivity gains were shared; the economic prosperity was shared. Then 50 years on from the Ford decision important changes began in American business life.

The social contract — company/worker — began to fray with evolving onslaughts from the private sector. September 13, 1970 was a watershed – Dr. Milton Friedman, University of Chicago economist, published an essay in The New York Times magazine. CSR? Rubbish, he said (paraphrasing), Corporate leaders had the responsibility to produce the best return for stockholders. If they wanted, the stockholders could dispense money to charities, etc.

I was at American Airlines managing system corporate responsibility (“citizenship”) programs at the time. I could see the changing attitude on the part of business leaders — Friedman’s jeremiad hit home with many leaders. Soon “Neutron Jack” Welch would take the helm at General Electric and begin to set new tone to the social contract.  (Neutron – 1960s term for people would vanish as when a neutron bomb would go off.)

Pioneering CSR efforts quickly wound down at AA and many other large companies.  The few CSR pioneering managers moved on to other functions.  It would be a long time before CSR was back in the manager’s lexicon.  But happily, it is back!

So now we are 100 years forward in time from when Henry Ford had his brilliant insight and shared the fruits of greater productivity with his workforce. And by extension all of American society.

January 2014 — the good news is that CSR is again front and center with American companies and companies around the world. The pendulum has swung from Henry Ford (progressive thinker) to Milton Friedman (conservative thinker) to….What in 2014?

I’d like to think to more enlightened, progressive thought leadership. Time will tell. Henry’s revolution was far reaching and sent dramatic waves of change through industry and society.

So did Dr. Friedman’s views – his views were reflected in the Reagan Revolution and the political swing to much more conservative trends in the American society; this began in earnest in 1964 (with Senator Barry Goldwater’s bid for the presidency). Fifty years on from Henry Ford and the $5 per day we experienced the swing to the political right, and here we are again 50 years later (and 100 years from 1914 and the $5 wage) with what looks like either a swing back to progressive or a very divided national view on these things. With continuing divide along economic, political, philosophic, and management theory lines.

Quo vadis — where are we heading? — is a very important question for all of us but especially the young men and women who will be moving into leadership positions over the coming years. Good news:  I’m impressed with what I see in their enlightened views on the dynamics of the business-society relationship. The Millennial Generation has some very good ideas about how to make our society more sustainable, and our institutions more responsible in their actions.  The social contract may be coming back in style (but in different ways, of course).

I think old Henry would be pleased with what he would see as we re-think the frayed social contract. What are your views?

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