Wednesday 12 June 2013

Why have company CEOs become anti-social?

Yesterday, this blog linked to research that proved extremely high pay does not improve CEO performance. But why do CEOs behave worse yet receive more pay?

In the journal Democracy, Chrystia Freeland reviews a new book by Mark Mizruchi, The Fracturing of the American Corporate Elite, which examines the fundamental shift in corporate culture that took place in the 1980s. Unlike today, big business in the 1950s and 1960s wanted strong government, for “steering the economy and underwriting the well-being of the middle class”:
The business heroes in this narrative are the leaders of the “moderate, pragmatic corporate elite [that] had emerged, based primarily in the largest American corporations” by the end of World War II. This elite and its views were “epitomized” by the organization whose history forms the backbone of Mizruchi’s narrative, the Committee for Economic Development (CED). Formally incorporated in 1942, the CED brought together engaged, moderate businessmen from across the country and advanced their views in the major national debates of the subsequent decades. They were an illustrious group: As of July 1945, the CED’s trustees included a senior partner at Goldman Sachs, the chairman of Coca-Cola, the president of General Electric, and the presidents of the Federal Reserve Banks of Boston and St. Louis.
The CED, in Mizruchi’s telling, thought the days of untrammeled free-market capitalism were gone, and that both private and government-led economic management would be necessary for a market economy to survive. In order to maintain the system from which their privileges derived, they believed it would be necessary to attend to the welfare of the broader population. This meant supporting a high level of employment, the alleviation of poverty, the amelioration of racial disadvantage, and the provision of sufficient purchasing power in the population to consume the goods that American business was so proficient at producing.
This was the creed of the nation’s most influential corporate leaders, a group that supplied Cabinet secretaries to both Republican and Democratic Administrations. Today, with so much of the national economic conversation consumed by the budget deficit and which middle-class entitlements need to be cut to reduce it, that platform would place you on the left wing of the Democratic Party, and no leading business organization would advocate it.
Why since the 1980s has business treated government almost as an enemy? Freeland thinks the answer is one that Mizruchi is reluctant to acknowledge, probably because it is an uncomfortable answer for Liberals. It is an unintended consequence of the cultural shift in the 1960s:
[Mizruchi] doesn’t pursue the truly unexpected and uncomfortable paradox his historical study reveals. When America’s postwar corporate elites were sexist, racist company men who prized conformity above originality and were intolerant of outsiders, they were also more willing to sacrifice their immediate gain for the greater good. The postwar America of declining income inequality and a corporate elite that put the community’s interest above its own was also a closed-minded, restrictive world that the left rebelled against—hence, the 1960s. It is unpleasant to consider the possibility that the personal liberation the left fought for also liberated corporate elites to become more selfish, ultimately to the detriment of us all—but that may be part of what happened. The book sidles up to but doesn’t confront head-on the vexing notion that as the business elite became more open and meritocratic, it also became more selfish and short-termist.
The most wounding criticism of liberalism is that, in liberating the individual, it destroys society. That is the basis of the opposition to liberalism pursued by communitarians from both the Red Tories and Blue Labour.

Liberals (but not right-wing libertarians) understand that no one can be truly ‘free’ without the support of society and community. No one has the ability to “pull themselves up by their own bootstraps”. Yet because the Liberal Democrats are in coalition with a party that has little time for society, and because Liberal Democrat members pursue the tactics of  ‘community politics’ divorced from the underlying philosophy, Liberals in Britain are vulnerable to their communitarian critics.

A few days ago, David Boyle called for a new kind of Liberalism that emphasises what we share, not merely our individual interests. He is quite right because, as the present economic crisis demonstrates, if liberalism is interpreted simply as an absence of limits, liberty is diminished for all but the wealthiest few.

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