Ethical Responsibility of Corporations

I am reading Lead with Humility by Jeffrey A. Krames.  It is about the leadership style of Pope Francis.  I barely read through the prologue when I came across a quote by Peter Drucker who wrote in his 1946 book, Concept of the Corporation, the following:  “If a social institution operates in such a manner as to make difficult or impossible the attainment of the basic ethical purposes of society it will bring about a severe political crisis…” 

This quote made me pause.  I have long stated that corporations and businesses are to serve the society and not the society serving the corporations and businesses.  There is a moral and ethical responsibility of corporations to use their entities to uplift the well-being of the society.  Corporations do this by using a portion of their income to provide health insurance, generous vacation time, paid family leave, and wages that allow the workers to have dignified employment and access to good education, homes for their families.  Such a perspective increases worker loyalty to the corporation, increases motivation to create excellent products and services for the corporation, and uplifts the community’s well-being in which the corporation is located.

This has not generally been the philosophy of corporations in the late 20th and early 21st century.  Remember the crash in 2008 that if we didn’t bail out the financial institutions we would have spiraled into a world wide depression.  A crisis that is still rocking countries like Greece seven years later.  Drucker’s quote can be directly applied to this crisis because Wall Street’s greed did indeed create a severe political and financial crisis for everyone.

Drucker’s quote does not seem to be part of the philosophy of the Koch Brothers or the Walton family.  They use their corporations to increase their self-interests of power and influence to bend society towards their likings and image. Koch Brothers plan to spend 889 million dollars on the 2016 elections. This is to bend the government towards their will, not to benefit the welfare of the people.  Imagine the number of scholarships to colleges this could have created for the working poor. Imagine the number of school lunches this could have provided.  Imagine the number medical visits for veterans this could have covered.

The Walton’s Walmart corporation refusing to pay living wages and reduced employee work hours has forced their employees to be below the threshold of Walmart paying for health insurance.  To add insult to injury Walmart has even taken out life insurance policies on its employees so Walmart will benefit in case of death. Even though Walmart eventually paid millions to employees in a class action suit, this practice continues in many corporations and financial institutions.  It would have been wonderful if the family benefited–tax free- as the corporations do when they collect from such a practice. “St. Peter don’t you call me, cause I can’t go, I owe my soul to the company store.”

Now if you’re thinking, this is just how businesses are supposed to run in America.  Profit is their bottom line after all.  Think again. This is not how all businesses run and businesses who run differently still make substantial profits.  Take for example Red Frog Events based in Chicago.   Here is a list of their benefits to their employees:  Full medical, dental, and vision for employee and family; unlimited vacation days (that’s right unlimited); One work from home day per week; matching 401K retirement plan; paid parental leave; one month paid sabbatical after 5 years of full time employment.  Red Frog Events has created a culture where the dignity of the employee is supported.

Joe Reynolds, founder of Red Frog Events states his reasoning for unlimited vacation time this way:

Through building a company on accountability, mutual respect, and teamwork, we’ve seen our unlimited vacation day policy have tremendous results for our employees’ personal development and for productivity. There. I said it. I think Red Frog is more productive by giving unlimited vacation days. Here’s why: 

1. It treats employees like the adults they are. If they’re incapable of handling the responsibility that comes along with having unlimited vacation days, they’re probably incapable of handling other responsibilities too, so don’t hire them.
2. It reduces costs by not having to track vacation time. Tracking and accounting for vacation days can be cumbersome work. This policy eliminates those headaches.
3. It shows appreciation. Your employees will need unexpected time off and some need more vacation than others. By giving them what they need when they need it, you show your employees how much you appreciate them and they reciprocate by producing more great work.
4. It’s a great recruitment tool. We hire a mere one out of every 750 applicants at Red Frog. When you combine fantastic benefits with a positive culture, it’s noticed.

And his rationale for paid sabbaticals this way:

1. 1. Everyone needs to recharge. Frogs can disconnect for a full month every five years. A month away allows enough time to come back hungry to tackle the next big project.
2. Appreciation goes a long way. I give tremendous latitude, sabbaticals included, and it’s appreciated. People who love their job perform better.
3. They gain worldly perspectives. Learning new cultures only helps bring fresh thoughts to the table on your next project.
4. Valuable family or friend time. Red Froggers flat-out work hard. A month away every five years allows time to reconnect with a loved one.
5. Going outside of your comfort zone elicits unconventional ideas. Being away for a month breeds creativity. My best ideas come during extended time away.

Yes, Red Frog is not the norm when it comes to treating employees with respect, but I guarantee that their employees are happy at what they do and are willing to do whatever they can to keep their employer happy; including working hard on insuring successful events across the globe.

But more importantly, not having to worry about the stresses that life will throw at a person enables them to be happy in the society at large. They are less apt to go off the deep end and go on a violent shooting spree or come home to kick the dog to vent frustration.Corporations that take care of their employees well-being will in the long run have products and services that are top notch.

Imagine if this was the norm in our society in regards to how we treat our employees what a positive difference in our society there would be. We would not be pushing up against the edge of another financial crisis–because Wall Street has not learned their lesson.  We would not have corporations using money as speech because they would be using money to support the welfare of their employees, the people who make their products and services.  Crime would be down because basic needs would be met. We would not have the get mine first attitude that is rampant in America.  We would all be able to have a life style that was filled with less stress and worries.

I’m not talking about creating utopia.  Utopia is an illusion.  I am talking about extending accountability, mutual respect, and teamwork beyond the companies like Red Frog Events and into being a cultural norm.  That cultural norm is indeed within the realms of possibility.  If one corporation can do it, all corporations can do it.

Pope Francis said it this way:  “It is vital that government leaders and financial leaders take heed and broaden their horizons, working to ensure that all citizens have dignified work, education, and healthcare.”  But as the pontiff also noted, it is not enough to just create structural changes, there needs to be new convictions and attitudes that will sustain such a structural change or sooner or later those structures will become “corrupt, oppressive, and ineffectual.”