The Social Responsibilities of Business

Company and Community, 1900-1960

Morrell Heald

• Publisher: Routledge
• Year: 2018
• eBook ISBN: 9781351317344
• Topic: Business
• Subtopic: Business General
• Index: Business

The concept of the social responsibility of business has roots in the Puritan doctrine of stewardship as well as the nineteenth-century gospel of wealth, but business leaders only began to consider community welfare as a whole in the context of their corporate aspirations of the latter half of the twentieth century. Originally appearing in 1970, The Social Responsibilities of Business surveys the history of corporate actions in pursuit of social responsibility, and attempts to assess likely developments. Reissued in 1988 by Transaction with a new introduction by the author and now available in paperback, the volume provides Morrel Heald the opportunity to evaluate his earlier predictions and identify prospects for further development in the area of corporate social responsibility. Some of Heald's predictions have not yet come to fruition, and he reflects upon the reasons. No effective structure yet exists to permit an open exchange of views and needs between business and representatives of its various constituencies. In addition, two of Heald's earlier suggestions have not taken root in the way he anticipated--the company foundation, and the corporate social audit-and he assesses why they have not, and what opportunities they still provide. The Social Responsibilities of Business provides essential back ground for understanding the developing social role of the corporation and for assessing its future direction.

1 - Responsibility and Philanthropy in Nineteenth-Century Business

Philanthropy and fraternity were ideals doubly commended to nineteenth-century Americans. Both the humanitarianism of the Enlightenment and the precepts of Christianity reminded men of their mutual ties and obligations. The Industrial Revolution brought changes which challenged men to apply these values in new social contexts, but it failed to destroy the sources which fed them. Indeed, the conditions it created opened new perspectives on the relationship between economic growth and social welfare. It stimulated efforts to achieve deeper understanding of the nature of social relations, and it provoked many attempts to reform and strengthen them.

American businessmen fully shared the social concerns and preoccupations of their fellow citizens. Although they have often been depict-ed—indeed, caricatured—as single-minded pursuers of profit, the facts are quite otherwise. The nature of their activities often brought them into close contact with the harsher aspects of the life of a rapidly industrializing society. Like others, they were frequently troubled by the conditions they saw; and, also like others, they numbered in their ranks men who contributed both of their ideas and their resources to redress social imbalance and disorganization.

Businessmen, to be sure, had special reasons for desiring stable and healthy social conditions. To show that they were not guided by selfinterest alone is not to suggest that they were, at the opposite extreme, paragons of sympathy and understanding. When labor was in great demand, as was often true in America, it was practical good sense to show the workers some consideration. Where the masses were empowered with the right to vote, their circumstances and mood might be a matter of serious concern to even the staunchest conservative. From the outset, self-interest combined with idealism to foster sensitivity to social conditions on the part of the business community.

This mixture of practical and benevolent motives behind the thinking of businessmen in regard to social conditions often produced confusing results. If charity stimulated efforts to promote social welfare, on many occasions it encouraged unrealistic perceptions of the needs and wishes of others. Paternalism was a constant, usually unrecognized, source of distortion and disappointment. If self-interest stimulated attempts to improve social conditions, a narrow view of self-interest often limited the effectiveness of such measures.

Gradually, and in a variety of contexts, experience led to broader conceptions of self-interest. Even more slowly came the recognition that, for durable achievement, welfare must be defined by the community at large and not by business alone. Such understanding grew hand in hand with the lengthening time-horizons of business which, in turn, stemmed from the rise of large-scale enterprise. It has been further stimulated, in the course of the twentieth century, by the emergence of government as the ultimate guarantor of social and economic stability. Even so, the idea that business should strive to be socially responsible as well as economically profitable has many implications which remain to be fully explored.

Most of the controversies which have centered around this idea in recent years can, in fact, be found in embryo in the experience of nineteenth-century business. The development has been a continuous one which belies, on both counts, the popular contrast between the socially conscious businessman of today and his supposedly self-centered predecessor of a century ago. The well-documented philanthropic ventures of a number of early business leaders indicate a breadth of interests which should serve as a caution against such over-simplifications; but these philanthropies have ordinarily been seen as far removed, if not totally divorced, from the business pursuits which made them possible. A reexamination of the evidence, however, shows that businessmen confronted social conditions as part of their working —as well as their leisure—lives.

A close study of business involvement in nineteenth-century social problems would surely reveal a broad range of experiences and viewpoints. Even a review, in a number of different contexts, of selected situations and responses to them shows clearly that the foundations of much contemporary business social thought were laid in the practical needs of a swiftly developing economy. The moral climate, the language, and the institutional structure in which the social relations of business are considered have certainly changed. But the basic questions and the difficulties arising from efforts to resolve them seem on close inspection to be surprisingly familiar.

Company and Community

Even had they wished to, businessmen could not avoid the fact that community conditions and economic interests were interwoven in the hundreds of company towns which sprang up in the isolated river valleys and mining areas of nineteenth-century America. Textile manufacturers, iron and steel makers, railroads anxious to promote settlement of their lands, as well as other enterprises, often found themselves the chief proprietors of such communities and, therefore, inescapably accountable for and dependent upon the social conditions which prevailed. The records of such company towns are too widely scattered for detailed analysis here, but the studies which have been made of them supply ample evidence of employer involvement in many aspects of community life.¹

Perhaps the best-known early American enterprise organized on a considerable scale was that of a group of New England businessmen known as the Boston Associates. These mercantile capitalists, including such men as Francis Cabot Lowell, Nathan Appleton, and Patrick Tracy Jackson, turned to textile manufactures when the War of 1812 blocked commerce. In a very real sense, they were pioneers of modern industry in the United States. In addition to the factory system, first fully developed in their mills, they undertook the first substantial application of the corporate form of business organization to manufacturing. And, significantly, they displayed an active interest in the lives and living conditions of their employees.

Lowell, the leader in the early stages of the Associates’ undertaking, may have imported his ideas regarding employee welfare, much as he copied his machinery, from British models. In 1811 he visited England and Scotland, where for over a decade Robert Owen at New Lanark had been demonstrating that good wages and healthy living conditions benefited employer and worker alike. There is no record that the two men ever met, although Lowell visited not far from New Lanark. But they shared a Nonconformist religious background, together with a shrewd appreciation of the value of a stable and efficient labor force. Waltham, Lowell, and other early mill towns developed by the Associates showed much the same concern for the needs of industrial workers as did Owen’s own model community.²

Both a genuine wish to avoid the degenerate conditions of European factory towns and a practical need to attract reliable workers guided the policies of the Boston Associates. Their efforts to entice the deft and upright daughters of New England farm families into factory work included provision of decent working and housing conditions, as well as religious, social, and intellectual resources suited to the backgrounds and expectations of the prospective employees. During the 1820s and 1830s these Massachusetts mill towns became showplaces of the new industrial order. Drawing notable visitors from America and Europe, among them Andrew Jackson and Charles Dickens, they symbolized possibilities and hopes for a richer, more abundant life through the productivity of the new factory system. As a creative combination of benevolent and practical concerns, the city of Lowell stands as a landmark of early American business policy.

To be sure, the idyllic aspects of these model industrial towns proved short-lived. Not only did the independent-minded mill girls chafe under rigid management controls, but wages as well as working and living conditions deteriorated markedly after 1840. Depression and overproduction brought falling prices. The arrival of Irish immigrant labor, willing and able to work for lower pay, meant new competition for work and wages. As was to be the case again and again in the history of business benevolence, good intentions failed to outweigh the pressures of competition, the drive for profits, and, especially, the absence of mutual understanding between business leaders and their employees.³

The influences which led businessmen to concern themselves with the welfare of their employees were not limited to the textile industry or to the vicinity of Boston. As factory production spread along the coasts and valleys of New England, through the Middle States, and gradually to the South and West, the company town was a recurring phenomenon of industrialization. Often located at sites remote from the centers of population, as available resources, cheap land, the accidents of discovery, or access to transportation might dictate, these nuclei of industrialism were frequently the creation of a single man or enterprise. Compelled to win and hold workers from the competing attractions of more varied communities, such isolated plants and towns were forced to offer supplementary facilities and services. Company housing and stores, libraries, schools, and similar institutions were often provided by employers to attract a stable and contented labor force. As the motives which inspired such undertakings were mixed, so, too, unfortunately, were their results. Power and paternalism, however well-intentioned, produced exploitation and bitterness more often than they managed to create harmony.

Modern methods of accounting and analysis attempt to specify relationships and responsibilities, often to the point of oversimplification. Such techniques were largely unknown, and scarcely feasible, in the nineteenth century. Just as distinctions between business and the community were not clear in the company town, so sharp lines were seldom drawn between contributions of the firm to community services and the individual benevolences of owners or managers. Especially in cases in which the enterprise was owned or managed by a single proprietor or family group, the question may not even have arisen. Similarly difficult to determine, in the simplicity of economic organization, is whether aid to the community was considered an aspect of employee relations or a separate and distinct sphere. Such issues awaited a less spontaneous era for their resolution. The assumption of social responsibility by American business preceded by many decades the emergence of theories which sought to justify it in economic terms or to locate it on organizational charts.

As industrial growth continued, the single-company town was superseded in many areas by urban centers of greater complexity. Here it was more difficult to assign to any given employer responsibility for conditions affecting the residents. The absence of standards or criteria for company participation in social welfare programs, coupled with the growing impersonality of the urban environment, discouraged business philanthropic activity in such communities. Consequently, individual rather than company contributions provided the chief support of urban charities.⁴

Still, occasional recorded instances of company expenditure for worthy community causes suggest that the practice was slowly developing. The activities of the R. H. Macy Company of New York City may have reflected an unusual social sensitivity on the part of its officers, or the special circumstances of a metropolitan center; but they can hardly have been unique. Whatever the personal philanthropies of its management, the firm’s records show enough cases of assistance rendered to social agencies to indicate a sense of relationship to the community beyond the walls and hours of the business itself. Thus, in 1875 funds were contributed to an orphan asylum; and in 1885, in an action which anticipated modern fund-raising techniques, the firm sponsored a sale of miniature copies of the Statue of Liberty as part of a drive to pay for the pedestal upon which the original was to stand. In 1887, gifts to charities amounting to $1,084.91 were listed under Miscellaneous Expenses in the company’s accounts. Apparently, the now-familiar device of company advertisements in the programs and publications of charitable organizations was not uncommon; in 1902 Macy’s abandoned the practice, “preferring not to confuse business objectives with donations to community enterprises.” That it was not easy to maintain such clear-cut distinctions can be seen in the fact that, a few years later, the company somewhat inconsistently undertook to provide floor space, fixtures, clerks, and related facilities for a department selling articles made by the blind.⁵

Thus, in larger cities as well as in small, company officials were a natural source from which assistance might be sought for a wide range of charitable and community purposes. Evidently, the temptations or pressures to respond to such requests were not eliminated by the anonymity of urban life.

Pullman, Illinois

Visitors to Chicago’s 1893 Columbian Exposition found another model industrial community at Pullman, on the southern rim of the young metropolis. According to its founder, George M. Pullman of the Pullman Palace Car Company, the new town was to have been “a bright and radiant little island in the midst of the great tumultuous sea of Chicago’s population; a restful oasis in the wearying brick-and-mortar waste of an enormous city.” Built in the 1880s, Pullman was a showplace widely heralded as an example of enlightened business policy; total company investment in the town was estimated at $8,-000,000. The community included tenements, parks, playgrounds, and a church. An arcade, a theatre, a casino, and a hotel named for Pull-man’s daughter, Florence, were provided for the use of inhabitants and guests. The Pullman Military Band entertained the public from the local bandstand and even went on nationwide tours, incidentally publicizing the “experiment” and the company. Standards of housing, lighting, maintenance, and appearance were far in advance of the time, winning for the town an award at the International Hygienic and Pharmaceutical Exposition at Prague in 1896 as “the most perfect in the world.” Presumably, the prize jury was concerned only with the physical aspects of the community, for by then its social arrangements had been revealed as considerably less than perfect.

Jane Addams, who knew George M. Pullman and visited the town on many occasions, testified to the founder’s well-intentioned interest in improving living conditions among his employees. It was said that his benevolence had endangered his reputation in more hard-headed business circles. Yet Pullman’s motives were practical, too. Outstanding among them was the desire to attract skilled labor beyond the im-mediate vicinity of Chicago’s trade unions and union organizers. His philanthropy was further tempered by a determination to realize a profit in good times or bad. Pullman saw no inconsistency or impropriety in permitting the company-bui...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Contents
• Preface
• Acknowledgments
• Business and Social Responsibility Revisited, 1987
• 1. Responsibility and Philanthropy in Nineteenth-Century Business
• 2. Business in the ERA of Reform 1900–1920
• 3. Managerial Leadership
• 4. Business and Society in the Twenties
• 5. The Community Chest Movement, 1918–1929
• 6. The Five Per Cent Amendment: 1929–1935
• 7. Business and Society: The Years of Depression and War, 1935–1945
• 8. New Horizons of Corporate Responsibility, 1945–1960
• 9. Ways and Means: The Practice of Social Responsibility, 1945–1960
• 10. The Theory of Corporate Social Responsibility, 1945–1960
• 11. Conclusion: The Assessment of Responsibility
• Appendix
• Bibliographical Note
• Index