by Daniel Bell
The second is the failure to make the necessary distinction between, as Veblen put it, the technological and institutional processes, or, in the terminology used by a panel of the National Academy of Sciences, between the “technologies” and “the supporting system.” The automobile, the SST, pesticides, drugs—all these are technologies in the physical engineering sense of the term. The support system is the organization of production and distribution, or more generally the economic and legal matrix in which the technology is embedded. The simple point is that there is no “technological imperative,” no exact one-to-one correspondence between a particular technology and a specific supporting system. As Jack Burnham pointed out in a pungent way: “When we buy an automobile we no longer buy an object in the old sense of the word, but instead we purchase a three-to-five year lease for participation in the state-recognized private transportation system, a highway system, a traffic safety system, an industrial parts-replacement system, a costly insurance system....” 12
One may, therefore, depending on the problem, seek to change either the technology (the gasoline engine) or the support system (unrestricted private use of the roads). But what this allows us to do is to compare alternative modes, at alternative costs, and to design better systems to serve social needs. This, in turn, underlines a need for national “technology assessment.” 13 With few exceptions, the decision about the future use of a technology today is made by the economic or institutional interests who will primarily benefit from it. But as the panel of the National Academy of Sciences argues: “Decisions concerning the development and application of new technologies must not be allowed to rest solely on their immediate utility to their sponsors and users. Timely consideration must be given to the long-term sacrifices entailed by their use and proliferation, and to potentially injurious effects upon sectors of society and the environment often quite remote from the places of production and application.”
In rather inchoate fashion, assessment and decisional systems already exist in the federal government. The Federal Water Pollution Control Administration, the National Air Pollution Control Administration, and the Environmental Control Administration, all are empowered to make studies of consequences; but they have less power to establish controls. Some agencies, such as the Atomic Energy Commission both promote new technology (e.g. nuclear power) and assess the consequences. But what may be needed are independent boards to make assessment and propose remedial actions to the executive or to Congress. Whatever the final structures may be, it is clear that some social decision mechanisms will have to emerge in the next few years to make such assessments of second-order effects of technological and social change. New and large powers will be vested in administrative boards. New and complex tasks will confront the Congress.
And for the private corporation, a new principle in the relation of corporations to public policy will soon be emerging. Just as it has been public policy to provide tax inducements to help corporations expand plant capacity (by investment credits, or more rapid depreciation allowances), so it will be public policy to provide tax penalties either to force corporations to bear the burdens of social costs generated by the firm, or to favor an alternative technology or supporting system if the social costs can be minimized by the alternative system or the social benefits enhanced. Given the collective effects of private decisions, this involvement of public policy in corporate policy is inescapable.
Just as we may be moving into technology assessment, so we shall have to cope with social assessments as well. For example, the social map of the United States was redrawn after World War II by the rapid expansion of the suburbs and the extraordinary rise in suburban home ownership. But all this was made possible only as a matter of public policy: by federal guarantee of mortgages; by low downpayments by veterans (often as little as 10 percent down on a purchase price) so that “owning” became cheaper than renting; and by the policy of permitting the deduction of interest payments on mortgages from income taxes. But no one questioned the existing “support system” of large numbers of small developers creating tracts of unattached houses in mechanical grids.
There can be, let us say, three alternative models of suburban development: one, a pattern of detached homes with private walkways and separate garages; the second, a set of “cluster houses” with the sharing of common auxiliary facilities (e.g. garaging); and third, high-rise apartment houses with large green spaces. Each of these developments has vastly different “social costs” which are borne by the community, not by the developer (the pattern of roads, auxiliary land use, the location of schools, etc.). Yet these social costs are rarely, if ever, taken into consideration. There is no “total cost matrix” to make a buyer aware of what the alternative styles could cost him in terms of the secondary costs he and the community would have to pay as a result of his choice. Nor has public policy ever sought to make such a determination.
Now, I am not arguing that consumers should be required to take one or another of the patterns. But intelligent public policy—because it is public monies that are facilitating this social change—should inquire into the alternative total cost matrices of the different patterns, and of the consequences of maintaining or changing existing institutional patterns of home building and development. It is not a matter of “interference” or “non-interference” in the society; any action (including non-action) is bound to strengthen or weaken one or another vested interest. It is a matter of making the choices and consequences explicit.
The Corporation As a Sociological Institution
In traditional corporate law, property is defined as things (res), but the major lesson which corporations have learned in the last thirty years is that a corporation, while producing things, is made up of people, and that one cannot treat people—at least managerial and white-collar personnel!—as things.
Corporations are institutions for economizing; but they are also ways of life for their members. Until the early years of the twentieth century, the life of most Americans was bounded by the isolated small town, the church, and the family. The small town has virtually disappeared; the church has lost much of its emotional hold on people; and the tight bond between family and occupation, which gave a unity to life—the family farm, the family business, or the family occupation which the son inherited—has been sundered. The breakup of that traditional way of life, and the consequent sense of uprootedness and disorientation, is the source of what sociologists call anomie.
Emile Durkheim, the French sociologist who coined that term, thought that for anomie to be resolved there must be a group which could provide a sense of kindredness and common purpose for its members. Political society, he thought, was too amorphous and too distant. The answer, he said, lay in the occupational group, the profession, which could provide a new ethic for society. One of Durkheim’s chief expositors, Elton Mayo of the Harvard Business School, thought that this purpose could be most effectively realized in the business corporation.
For a significant number of persons, this has necessarily become the case. The “four wishes” which the late sociologist W. I. Thomas thought were basic to human experience—the wish for security, for new experience, for response, and for recognition—can for these men only be obtained within the corporate milieu. Much of this led, twenty years ago, to the creation of the derogatory expression, “the organization man,” as signifying a new kind of conformity. If the image were meant to suggest that previously men had been free and individualist and now were uniform and identical, the history was mythical and the irony was simply a new ideology. For life in the small town had been largely narrow and bigoted—one has only to recall Sinclair Lewis’s Main Street—and the world of organizations offered an authentic, fresh challenge and opportunity. Corporations can be forces for conformity; and they can equally be arenas for personal initiative.
A business corporation, like a university, or a government agency, or a large hospital—each with its hierarchy and status system—is now a lifetime experienc
e for many of its members. Necessarily, therefore, it can no longer be an instrument satisfying a single end —in the case of the business corporation, only turning out its goods and services—but it has to be a satisfactory way of life for its members. It not only has to satisfy its customers; it has to be agreeable to its “self.”
A business corporation, however, is subject to different constraints, and has a somewhat different ethos, from a university or a government agency or a hospital. Corporations, unlike the other three, are competitive and have to be profitable. (And the profits, moreover, are often a major support—through taxes—of the other three.) Even so, if we set up a continuum, with economizing at one end of the scale (in which all aspects of organization are single-mindedly reduced to becoming means to the goals of production and profit) and sociologizing at the other (in which all workers are guaranteed lifetime jobs, and the satisfaction of the work force becomes the primary levy on resources), then in the last thirty years the corporation has been moving steadily, for almost all its employees, towards the sociologizing end of the scale. One has only to note, in the rising percentage of “fringe benefit costs,” the index of that shift—vacations, disability pay, health insurance, supplementary unemployment benefits, pensions, and the like.
All of this, historically, was inescapable. To the extent that the traditional sources of social support (the small town, church and family) have crumbled in society, new kinds of organizations, particularly the corporation, have taken their place; and these inevitably become the arenas in which the demands for security, justice, and esteem are made. To think of the business corporation, then, simply as an economic instrument is to fail totally to understand the meaning of the social changes of the last half century.
The Balance of Obligation
When one uses the phrase the “social responsibility” of the corporation, one is not indulging in rhetoric (though many corporate officials are), or thinking of noblesse oblige (which fewer corporate officials do), or assuming that some subversive doctrine is being smuggled into society (as some laissez-faire economists suggest), but simply accepting a cardinal socio-psychological fact about human attachments. Unless one assumes that loyalty and identification are simply monetary transactions, or that employment is simply a limited relation of service-for-payment, then the corporation is a social world, with social obligations to its members, as well as an economizing instrument competitively providing goods at least cost to an economic world of consumers.
But what is the balance of obligation, and how far can one go in either direction? Perhaps the best way of trying to deal with this question is to confront some questions which have already emerged or which may be emerging in the next decade.
Satisfaction on the job. The trite observation from the “human relations” literature of twenty years ago was that a man more satisfied with his job was likely to have higher morale and be more productive. Thus, the mechanical layout of work, set down by the engineer, was modified to take into account the findings of industrial psychologists and sociologists. The increase in costs could be justified by the more than proportional increase in productivity.
But what if a change in job patterns increases satisfaction but does not increase productivity? What is the corporation to do? The conventional answer is that the primary obligation of the corporation is to profits and that marginal increases in costs can only be justified by marginal increases in productivity. But let us take a variant of this problem. When a corporation hires more women, and these women ask for child-care centers to be paid for and maintained by the company, is it obligated to do so? The question is not just of treating such centers as a necessary cost to attract female labor when one has a tight labor market, but of a change in social values which would permit women who want to work to go back to work during the years when their children are young. A child-care center is a necessary component of job satisfaction for young women, even though it may add costs to a company far beyond the “gains” in productivity from such women. Does the conventional principle still hold?
Minority employment. Does a corporation have a special obligation to take on a larger proportion of persons from minority groups which have suffered historical disadvantage—even if such persons are less able than a competitor for the job? And if the employment of such a person increases training costs and may lead to lower productivity? The problem, in principle, is no different from that of a university which may have to set aside a special quota and, sometimes, given the limited number of places, exclude “majority” group persons who on the formal criteria of merit (e.g. test scores, grades) may be more qualified. The question of merit versus social justice is, as most complex moral problems, a question of “right” versus “right,” rather than right versus wrong. Where there is such a conflict of right, how does one balance one’s obligations?
Relative pay. How does one decide what a man is worth? A pure market principle, of competing supply and demand, only reflects relative scarcities, but relative scarcity is not identical with social justice. In most American industry, a distinction is still maintained between blue-collar work, wherein a man is paid by the piece or the hour, and white-collar work wherein a man is paid by the week or month. A few corporations—IBM, Texas Instruments—have abolished the distinction, but not many have followed that lead. What is the rationale for this invidious status distinction?
Within the corporation itself, the differential between the lowest paid (often the common labor rate) and the average of the top executive group may be about 25:1 or higher. On what basis is this spread justified? The original rationale was the market. But increasingly the market becomes less relevant for the determination of the relative differences between “grades” of labor and persons. Elliot Jaques, the English industrial psychologist, has sought to work out a principle of “equitable” pay on the basis of differential responsibility between jobs—as measured, for example, by the amount of independent time a man has to do a job and the degree of supervision. There may be other such “formal” systems. But because human beings want and need a clear rationale for the differences in reward among them, some principle of social justice for social distinctions will have to be articulated.
Responsibility to a community. An old problem, but one that recurs as increasingly the corporation becomes the way of life for its members. Beyond the payment of taxes, what obligations does a corporation have to the local community where it locates its plants and headquarters? What are its responsibilities in creating amenities and a more satisfactory social and cultural environment?
Responsibility for the environment. In the last few years, the corporation, along with the rest of the society, has learned that the environment cannot be treated as a “free good.” How the costs are to be divided will be, as I have already indicated, one of the most difficult technical-political issues of the decade.
The confrontation with moral issues. The corporation, like the university, has always pleaded that on moral questions it is “value-neutral.” As a corporation, its obligation is to seek the best return on investment. But value neutrality is no longer so easily possible. The difficulty arising from American private investment in South Africa illustrates the problem. In the classic morality tale of fifty years ago, the example was one of the local church which gained an income from properties on which brothels were located. The church could always claim a trade-off by arguing that it saved as many souls as it lost bodies. Such a calculus was never entirely convincing. A corporation’s claim that it saves as many bodies as it loses souls is not likely to be more so.
What all this adds up to is that, on the continuum I have drawn of the economizing and sociologizing modes, the balance of attention shifts more and more to the latter. And, while on the particular questions I have cited which the corporation will face in the next decade, there are no exact answers or ready-made formulae, the standpoint from which the decisions will be considered will, more and more, be made from the sociological viewpoint.
The Turning Point for the Corporation
The question of “social responsibility” is, I believe, the crux of a debate that will become crucial in the next few years. One position has been put forth by Milton Friedman:
What does it mean to say that the corporate executive has a “social responsibility” in his capacity as businessman? If this statement is not pure rhetoric, it must mean that he is to act in some way that is not in the interest of his employers. For example, that he is to refrain from increasing the price of the product in order to contribute to the social objective of preventing inflation, even though a price increase would be in the best interests of his corporation. Or that he is to make expenditures on reducing pollution beyond the amount that is in the best interests of the corporation or that is required by law in order to contribute to the social objective of improving the environment. Or that, at the expense of corporate profits, he is to hire “hard-core” unemployed instead of better qualified available workmen to contribute to the social objective of reducing poverty....
In a free-enterprise, private property system, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.14
There are two different kinds of answers to Friedman. Both were given recently by Alden Clausen, the new president and chief executive officer of the Bank of America, the biggest bank in the world.
