Editor’s Note: Cynthia J. Pasky, is the president and CEO of Strategic Staffing Solutions and the chairperson of the Downtown Detroit Partnership. In this column written for The PuLSE Institute, Pasky explains why it is important for companies to demonstrate real corporate social responsibility in the communities they are operating in to help working families. For submission inquiries email info@thepulseinstitute.
By Cynthia J. Pasky
What is good for Wall Street isn’t always good for the working person. The question is whether that short term good news for Wall Street, with its focus on quarterly earnings, is truly good news for the nation. Is a company’s sole responsibility to deliver quarterly profits to its shareholders? Or does it have a responsibility as well to the communities in which it is located and to the workers, and their families, who rely on their employment to keep food on the table and a roof over their head?
New York Times columnist Dave Leonhardt recently discovered a column in the October 1944 issue of Fortune magazine by William B. Benton, who was a co-founder of the world-renowned Benton & Bowles advertising agency. The column, written on behalf of a major corporate lobbying group, laid out a vision for prosperity for the United States after World War II was over. The headline was “The Economics of a Free Society.”
“Today,” Benton wrote, “victory is our purpose. Tomorrow our goal will be jobs, peacetime production, high living standards and opportunity.” That goal, he wrote, depended on companies not earning their profits “at the expense of the welfare of the community.”
When George Romney was President of American Motors, he turned down several big annual bonuses because he believed that no executive should make more than $225,000 a year (which would be about $2 million today). In the early 1960s, the typical chief executive at a large American company made only 20 times as much as the average worker, rather than the 271-1 ratio found in the latest evaluations of pay comparisons.
Middle-class incomes rose faster in the 1950s and 1960s than incomes at the top, producing declining income inequality. And the nation – and Michigan – prospered.
When Walter Reuther was being given a tour of a new auto plant during his tenure as president of the UAW, his guide pointed out to him the newest robots that were taking over some of the work on the line, replacing workers. “That’s all good,” he is reported to have said, “but who’s going to buy the cars they’re making.”
When Henry Ford instituted the $5-a-day salary, one of his professed reasons was to pay his workers enough so that they could afford to buy the product they were making, increasing his customer base. I’m sure some bean counters in his company thought it was a crazy idea to pay what was then about double the going rate for factory work. But he saw a bigger picture. And he was proven right.
As we look to the future, it is critically important that we realize that there are other factors that truly enlightened economic policy takes into account that a quarterly revenue report doesn’t reflect. That is why initiatives such as the Mayor’s Workforce Development Board, innovative programs such as Grow Detroit’s Young Talent, the revitalization of the Randolph Career and Technical Center, and efforts to hire returning citizens are so important to our future and to the future of business in this community.
As we plan for the future, job creation and retention and the impact economic decisions have on workers and surrounding communities should be just as important to us, and to Wall Street, as the latest quarterly statement. William Benton’s admonition that companies should not earn their profits “at the expense of the welfare of the community” is just as valid today as it was in 1944.