When CEOs Solved America’s Problems

How to Revive the Post-War Era of Corporate Responsibility

For those worried about the future of the United States, big business looks more like the problem than part of the solution. Large corporations are too powerful, the critics say, and have too much influence over Congress. Their pursuit of their narrow self-interest, their success in gaining favors for themselves, and their ability to stymie reforms all are seen as contributing to the gridlock in American politics.

But it hasn’t always been like this. There was a time when large American corporations actually addressed the problems of American society: the three decades after World War II.

From 1945 through 1973, the leaders of American business played a central role in developing moderate and pragmatic solutions to the issues of the day. Acting through joint business organizations such as the Committee for Economic Development (CED), they advocated full employment, accepted Keynesian economic policies (including increases in Social Security), supported massive increases in funding for education and science, and made their peace with organized labor. In pursuing such policies, big business leaders rejected the traditional laissez-faire perspective that had characterized most businesspeople since the 19th century, a view that Paul Hoffman, president of the Studebaker Corporation and co-founder of the CED, called an “outworn ideology” that had to be “wiped from the thinkers’ minds.”

The corporate leaders of that era were not liberals in an ideological sense, but they were pragmatic in a strategic one. Faced with a relatively strong labor movement and a highly legitimate and relatively popular government, these leaders determined that it was better to work with these institutions than to try to dismantle them.

One consequence of this big business moderation was that right-wing elements were marginalized. Dwight Eisenhower, in a letter to his brother Edgar during his first term as president, referred to conservative ideologues of the time as “stupid.” When the ideologues managed to nominate one of their own for president, Barry Goldwater, in 1964, many corporations defected to the Democrats, and the conservatives suffered a near-record defeat. This moderation also resulted in stability and growth. Despite many problems during this period, including continuing poverty, racism, and social turmoil, real income nearly doubled for the average family, inequality was at historic lows, and the political system, for all its faults, functioned in a relatively effective manner.

This situation began to change in the 1970s. Faced with increasing foreign competition, an inflationary economy, growing anti-business sentiment, and increased regulation, the business community went on the offensive—in the political sphere, at the bargaining table, and in the courts. Large corporations allied themselves with the conservatives they had previously shunned. This tougher strategy quickly yielded benefits. Business was able to reduce government regulation, severely weaken organized labor, thwart initiatives by consumer and environmental activists, and change tax policy in a pro-business direction.

But these victories came at a cost. Business unity began to fray as individual firms—seemingly no longer in need of collective solutions—went their separate ways. Disunity eventually led to defeats, such as the tax reform of 1986, which eliminated deductions for some businesses. Then came the acquisition wave of the late 1980s, which decimated corporate management. As CEOs became more vulnerable to takeovers, the tenure of corporate leaders declined (by more than 20 percent between 1980 and 2000). The people running corporations no longer had the luxury of considering the long-term implications of their actions for the larger society.

These changes fragmented the business community even more and left firms unable to act collectively to address problems of mutual concern. In the 1990s, large corporations, facing rapidly rising healthcare costs, initially supported the Clinton healthcare plan, but internal divisions and pressure from Congressional Republicans led them to backtrack. A decade later, corporate leaders, despite concerns about budget deficits and debt, could not agree on their own tax strategy and were unable to mount an alternative to President George W. Bush’s tax cuts.

The corporate elite has remained ineffectual in the Obama years. Some business groups are pleading for more balanced solutions to the deficit, including tax increases, but Republicans in Congress have ignored them. Democrats and Republicans could desperately use business leaders who are organized and strong enough to mediate between left and right, but no such group currently exists.

American society faces difficult times. The economy, although improving, has not fully recovered from the financial crisis. The nation’s infrastructure continues to decay. A large proportion of Americans leave school without sufficient skills or education. And continued inaction on global warming threatens to cause irreparable damage to the environment.

In earlier decades, the leading members of the corporate community organized and proposed solutions to problems no less vexing than these. But the corporate elite of those years was moderate and pragmatic because it faced a population that—through its support of government and its organization into unions—demanded it.

Big business faces no such pressures today. One can hope that today’s corporate elite will adopt what the postwar CED called “enlightened self-interest” and begin to address the issues of our age. But it will take organized, effective movements to pressure corporate leaders to take action. Today’s CEOs can be better leaders not just of their companies but of the country—with a push from the rest of us.

Mark S. Mizruchi is the Barger Family Professor of Organizational Studies, professor of sociology, and professor of business administration at the University of Michigan, and author of The Fracturing of the American Corporate Elite.

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Primary Editor: Joe Mathews. Secondary Editor: Sarah Rothbard.
*Photo courtesy of Dan Pope.
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