The Essence of American Enterprise: Identifying the Most American Company

  In four areas that were previously unconsidered as business responsibilities, American large business and its executives are now confronted with public demands for new actions, altered policies, and altered attitudes. The public's continued approval of American business as the fundamental institution of economic progress and development will be significantly influenced by the business community's response to these demands. The following regions are the focal point of these challenges:

(1) The capability of the United States to compete in the global marketplace is anticipated to be maintained (and, if necessary, restored) by large corporations. The central issue at hand is the necessity of altering the profoundly ingrained—but antiquated—principles of American wage and job policy. Management is perceived as the leader in this endeavor.

(2) In addition to its more conventional function as an innovator in technology and business practices (e.g., in the distribution system or in organization), big business is increasingly expected to be a policy innovator. For instance, it is anticipated that the fundamental concepts and policies for "semifree markets," such as the defense business or the large-utility market, will be developed by business, rather than the government or "the economists."

(3) The manageability of the large business enterprise is increasingly perceived as "affected by the public interest" rather than as a "private matter" of the individual company, its managers, and its stockholders. Top executives who disregard this matter may ultimately be burdened with restrictive regulations.

(4) Lastly, the public is becoming more accustomed to the expectation that the executive of a large corporation establish a code of conduct that balances the requirements of professionalism and business acumen.One Executive compensation plans, for instance, necessitate reconsideration in light of the public's expectations regarding these dual responsibilities.

To businessmen, these four fundamental demands may appear as a new trend of "hostility to business." In reality, they are the result of the opposite stance: the American public's approval of big business as the most appropriate tool for the majority of economic positions in our society, and the acceptance of the big-business executive as a member of the nation's leadership and a "professional manager." The appointment of a single president of an automobile corporation as Secretary of Defense was regarded as a significant declaration of political principles less than ten years ago. One year ago, when an additional president of an automobile company assumed the position, the sole inquiry was, "Is he significant enough?"

The public's expectations of big business and its leaders are increasing significantly due to the inherently positive attitudes of the public toward business and businessmen. Consequently, the public's awareness of any discrepancy between anticipated and actual business conduct is increased. This, rather than any abrupt increase in public morality, elucidates the profound and enduring public concern regarding the General Electric-Westinghouse price-fixing scandal.

The initial tangible manifestations of these expectations are the new demands that I will outline in this article. Consequently, they are likely to serve as test cases, with an influence that extends beyond their intrinsic significance to public policy and public attitudes toward business and executives in the United States.

The requirements of the global economy

The demands of contemporary and future international competition necessitate the abandonment of labor relations concepts that have been influenced by the conditions of yesterday and are largely revered by tradition. In their stead, new practices and ideas must be implemented, which are initiated by business and are subsequently embraced by management, labor, and the public. To be more specific:

In a high-wage economy, wage settlements that are "noninflationary"—i.e., those that increase cost per hour equal to productivity per hour—are no longer considered compatible with competition.

Today's economy no longer relies on the one-time "pattern-setting" industries—such as steel and auto—to determine the national wage structure.

The concept of "wage increase-price increase" at the bargaining table is no longer sufficient to serve as the foundation for labor-management settlements. It is becoming increasingly necessary to evaluate the "fringe benefits" of labor in relation to profits, rather than adding them to costs.

Occupational mobility must be reinstated while simultaneously addressing the increasing public concern regarding job rights.

The most significant new fact in our economic situation is that the United States, like other inferior powers, must strive to preserve its ability to compete in the global markets. In a world that is becoming increasingly competitive, the responsibility of safeguarding this capacity and regaining lost territory will increasingly be attributed to large corporations.

High productivity and low unit labor costs are insufficient in isolation. However, a nation's competitive edge is significantly diminished or nonexistent in the absence of these factors. For the first time in American labor history, wage negotiations have been significantly influenced by concerns regarding the capacity of an industry or company to compete with foreign entities. For instance, it was the dominant force in the automobile industry's bargaining last summer. However, few managers and even fewer labor leaders are aware that labor costs are not solely determined by hourly wages, but also by fundamental concepts. Additionally, they are influenced by policies in addition to dollars and cents.

Increased Efficiency

Currently, wage settlements that are classified as "noninflationary" are regarded as economically innocuous by management, labor, and the public. However, in a competitive environment, the consumer must be afforded a portion of the benefits of increased productivity, whether through reduced prices, improved quality and service, or both.

The old truth that "productivity" is an economic expression, rather than a physical one, is what is required. Productivity is not contingent upon the quantity of units produced by an individual, but rather on the economic value that an organization offers to its customers. This is especially true in the context of international commerce. There is no "labor" or "management" beyond the water's boundary; there are only American goods of American quality, priced at American prices. However, as a result of the production battle of World War II, the wage bargains in the United States are currently founded on the incorrect definition of productivity, which is physical.

Salary Structure

The acceptance of a few major manufacturing industries as "pattern setters" whose wage arrangements determine the cost structure of the entire economy is another pattern that is interwoven into our labor relations fabric. The mass-production industries, while they were suitable for the economy of yesterday, are not the appropriate pattern-setters in the present day. Currently, a national wage pattern would be more appropriately founded on the performance of major service industries, such as construction, government service, clerical labor, or teaching. Service activities currently employ the most individuals in the labor force and account for the greatest portion of the consumer dollar.