Business roundtable; Are profits the only responsibilities for a business?
The following program is made possible through a grant from the nation's business. This is a business roundtable a program of current comments from leading members of America's business community. Today Raymond H Mulford president Owens Illinois glass company and Louis F. pope Jr. vice president for finance international operations and development General Mills Incorporated will explore the question are profits. The only obligation of business with series host Alfred Seeley dean of the Graduate School of Business Administration at Michigan State University for many years but particularly during the past 25 American business has become perhaps the most
complex institution in a rapidly changing society. We have experienced rapid population growth improved economic well-being and significant scientific and technological advancements all have tended to make our present society more complex. The modern corporation operating within this complex society has become our most important economic and social institution. Its impact is large and far ranging. Our subject today on Business Roundtable are prophets. The only obligation of business is designed to explore the many faceted modern corporation and its value system in a complex and changing society. Mr. Pope in your opinion if you look at the modern corporation today in our society our prophets The only obligation of this type
of business. Well the dean theory I'd have to answer that in my first response would be an immediate no. On the other hand it's a little bit like asking. A man to say yes or no to the question if you stop beating your wife. There's a much broader more qualified answer you have to give to this I think that business has to meet the expectations of our social system and in the past until more recent times that expectation in our social system was fundamentally meeting an economic need of societies. I think today what has happened is that we now see that society expects more from business than just that. And so business is adapting to a more qualified answer. We have to make profit with a conscience and with a social purpose. Mr. Mulford What's your reaction to this question.
I think I would agree with Mr. Pope. Basically. I think we have to put the subject in some perspective. Actually this may be just a matter of semantics but in my view the modern corporation which derives its legitimacy from the state through the issue of articles of a corporation. Can justify itself only to the extent that it fulfills the aspirations of society. Or at least fulfills that very important part. Of this responsibility in terms of creating the economic wealth which is essential to the functioning of our society. Well do you think that over periods of time some of our social values in terms of society in relation to the image of what the corporation ought to be doing has changed. Oh very very definitely I think that you can point out that initially man's. Initial preoccupation with with his food and the shelter and his clothing and the building of the economic material society. I think once you get up to this
certain standard of level that then society comes to expect more from business and I don't think the business should sit back and feel guilty about the tremendous contribution they've made in building one of the most powerful material well-being societies for all of its members. But the point is today that we have a lot of other areas that not need to be solved as creatively and as effectively as we did solve the economic needs of man but haven't we had the argument raised by many people of that. The function of the corporation basically to make a profit have returns for its stockholders reasonable working conditions and that these other functions ought to be the proper function of government. We hear that. I think it's impossible to operate solely within that context because the modern corporation is such an integral part of society. I think it is true that the primary accountability of any business management. Is to produce a
reasonable profit. This is the only way that we can add to the sum total of our national wealth. But I think it is also necessary that we do that within the traditions within the mores within the aspirations of society as a whole. I think for example in the subject of civil rights which is being discussed so so broadly. The matter of equal opportunity in employment can only be implemented or to a considerable extent can only be implemented by the attitude of the managements of corporations. I think this is an example of how the manner in which a corporation is run contributes to the objectives of society. Do you think that the role of business in government is changed very very definitely. Being silly it seems to me that in business you have one of the most effective problem solving organizations that it was ever constructed in society. And yet. Meets these challenges through innovation sees problems in terms of opportunities and
creatively solving these and I think that the guy the government needs to have creative competition in these areas of social problems which can be provided by the innovative and creative talent that management or other businesses have in the form of management at their disposal. It's a very interesting thing that we ask the government to do all these things and yet they're a bureaucratic organization with never developed at a really efficient effective means of trying to or the most efficient means of trying to solve some of these problems and I could see a little creative competition in this area by business in some of these areas. What do you think for example that minority group unemployment which today is a serious problem particularly in our major industrial cities where we have had a migration of the negroes primarily rural from the south to our large northern cities and we find here a very high rate of unemployment
among these people. Is this an obligation that business ought to undertake or is it the obligation of the local government or the federal government or the state government. Well I think it's an obligation that business or do take in its own intelligence self-interest. These are people who must be supported. We can either help them help themselves through attempting to raise their skills raise their economic level raise their contribution so that they can be participating members in our social economy as we know it or if we don't do that we are going to have to subsidize them through welfare payments through the cost of crime on the streets and all of the other problems that are related to a people who are underprivileged. There is of course a moral factor involved but from a purely pragmatic standpoint I think business has a very major stake in trying to upgrade these people so that they're full participants in our social economy.
Are you saying that if it was profitable to business to business ought to hire him if it was not we ought to take another look at theirs. Well I would say this is the oil within an egg problem which comes first I think from the standpoint of pure morality as best I understand that we probably should do something about it. But I am happy about the fact that operating in our own intelligence self-interest also means that we're operating in accordance with good morality. Seems to me also that that business again getting back to it it's skill that it has I mean one of the biggest problems we know that the negro example faces is the sense of self-worth and one of the greatest sense of self-worth that a man can have is providing his own livelihood. And business prides itself on being a great trainer builder of skills in people. So why if you if it is a major problem of the society
who is the best qualified to help tackle it why is in business the the most qualified to tackle and why can't business look on it as an opportunity in the sounds of as Mr. Mulford said to actually improve the overall climate that business has to operate in a sense of that of the people that work for it their own economic well-being. It gets back to talking to because it feeds back into a better society which works better for business. Well out of another facet of this problem or so has to do with the urban problems and again in the major cities primarily such as urban renewal is there a role as you see it Mr. Mulford for business in terms of urban renewal or a specific illustration. Would your company on Illinois think about placing a plant and a slum area in order to afford employment to large numbers of bottom point people. If you had
under consideration that you were going to build a plant someplace. Let me say this. This is not an easy question to come to grips with in a very short period of time. I think a business management has a primary responsibility to society to keep its business its economic complex healthy and viable and contributing continuously. I think that we must be careful as we get off into the purely philanthropic. Now I think certainly in areas in which we operate the environment in which we operate is important to us and it may be that we should and can extend ourself in a direction which is not normally part of our business just from the standpoint of improving the environment in which we operate. I think there may be many companies however who are involved in the building industry Percy who maybe because there is a need to find an
opportunity under the normal profit oriented mores of business to engage in this kind of urban renewal. Well I always think that the John Gardner of Secretary of Health and Education Welfare talked about. The fact that most of. Our complex world is opportunities brilliantly disguised as insolvable problems. And I like to think that this urban renewal is just flattened again to release some of this innovative and creative talent into the urban renewal area and it has to be done on an economically sound basis but I do believe that it can be if you say set up a venture team of some bright young people and tell them look our corporation would like to know what kind of an impact you can have at a reasonable economic return in helping in the ghetto. Can we in fact build a plant and maybe changing our method of
production so that it's a less skilled and certain aspects of our production effectively employ within the ghetto itself. Some of the people we know one of the problems in the ghetto is that they they tend not to want to move beyond three or four blocks so they can go in there with a plan to simplify production basis. Maybe this is again when the great contributions you can make once again at a reasonable profit rather than saying well someone else is going to have to do it I'm a great believer that business is where the action is and it has the greatest source of talent to tackle some of these very difficult social problems. Well I'll go back to a statement Mr. Pope made a little while ago. I think business should be an active collaborator. Maybe rather than even a competitor with government. And I think in this urban problem I can indicate what I have in mind. One of the reasons that our Negro population has such poor mobility is that they're restricted by social
mores from moving out of areas. At the same time much of our white population is moving out of this inner city into the suburban surrounding urban or suburban areas. As a result we have people who need great social services in an area in which the tax base is progressively going damn. So we find our cities in very poor economic conditions now under those circumstances. If a company was to move a plant into the ghetto area into the center city it may find itself taxed to a point because of the desperate need of the cities for revenues that it would be an economic. It would be impracticable. Now where I say that we must work collaboratively with government. I wonder whether it isn't the responsibility of government. The responsibility of society as a whole to remove the restrictions which prevent the mobility of our Negro population.
Course again this is something where we can participate as individuals within the corporation where the corporation can encourage its employees to go out into their respective communities and try to. Act within the local governments and within the local housing codes to help break these down and be involved in this movement on an individual basis. And that's again how we can help you link them that corporate executives ought to rear involved in politics local politics. I certainly do and I also think the operation should go as far as to encourage. Complete involvement in in politics by all of its employees through educational programs not in terms of Republican versus Democrat but in terms of involvement. And a commitment and a sense of responsibility that their government is their government and therefore they are responsible for giving their views to it and and and I would like to see business somehow and again if it takes an innovation figure out how to set up
sabbatical so that people can be released in a corporate life to become involved in politics or back again in the urban renewal area. Let's look at another issue that has been pretty widely discussed in relation to the role of business in modern society. Does the business have the right to spend profits which really in a sense belong to the stockholders or some of the types of things we're discussing. Well I think one of the criteria of successful management in the modern sense is the fact that they must take a long range view of their responsibilities. I think there is much that a company can do NOT from a purely philanthropic standpoint but in terms of their own intelligence self-interest to build the nature of the stature of this Issiah t in which they participate. I think
for example that in such things as contributions to universities. That you can develop a rationale that this is in the interest of a particular business because it develops contacts with the universities who after all are a source of the management that we so desperately need for the future. I think appearing in constructive local activities where there is contributing to a fine local museum whether it is participating in community just drives anything that will upgrade the environment in which the business operates is to the range interest of the business let's look at that question and you've just raised about the role of business and philanthropy. Here again we have many businesses giving rather large sums to some universities not to others some giving them to local charities and so forth. Is there a general concept or
philosophy about this question. Well I think that it's locked up into the point that Mr. Mulford made about. You know how much can you give away in terms of years and be still in the bathrooms of your stockholders. My own feeling as that business has not been as innovative or risk taking or provided that rush that they might have provided in this corporate giving area. It's too often as an example trying to play it a little faith because it concerned me from the stockholder. I'm greatly disappointed myself that out of the hundred largest corporation the United States they only give away point six for their pretax income when the government permits them to get up to 5 percent and over they can increase this over almost 10 fold and still have the government share the cost of it. I'm also disappointed that they as I say don't innovate morning experiment more in this corporate giving.
Let me give you some examples of what General Mills is doing in this innovative area. The University of Minnesota thought that they could get correspondence courses to the prisoners at Stillwater the convicts there and they could not get the funds for this. So General Mills did contribute and out of that is one specific example is Frank Ellie's book who was a convict into a lot of the riot which is now a very popular bestseller. These are creative uses of philanthropy that I think that corporations should should do and do more of and do it better. Mr. Mulford What is one Illinois company actually done has some social implications perhaps of the kinds we're talking about or perhaps some other types. Well it may be that I don't take take quite as broad a view of our responsibilities as Mr. Pope. I think I rationalize sometimes and the rationalization may be kind of far fetched but I still feel. That we don't give away anything that we must invest
constructively for the benefit of our enterprise. I can give you an example however which is rather an interesting one. Some time ago 10 years ago. We obtained by a grant from the crown. The right to harvest pulpwood on two of the major islands in the Bahamas. The quid pro quo from the ground standpoint was that in order to do this we would have to put in a network of roads which would open up the islands and we did. We built a network of some fifteen hundred miles of excellent roads particularly in greater Abaco Island. In a period of 10 years we completed the harvest. In the meantime we built a very fine organization of somebody's 500 people. We were in effect the largest employers in the Bahama Islands. The growth cycle of the trees however is 35 years and we were faced with the necessity of withdrawing our operation which would have left these people without employment. We obtained a consulting firm and we
studied different methods that would enable us to bring an economically viable operation to the islands. And we finally very surprisingly to me. Determined that we could grow sugar and we could put a sugar refinery in there. And with highly automated methods that we could probably be the lowest cost sugar producer in the world. And I wasn't This thought actually I was Gration of making profit. Absolutely absolutely. We wouldn't have considered it if it was not economically viable. We don't feel that we have the right to give away the funds of our company. At the same time let me say this. We have many opportunities. We have to select between them. There were others that were equally good as the one that we gauged on in the Bahamas. But the fact that we felt that we had a social obligation was a predominant factor in having this determined to go ahead with this particular venture.
In other words your fundamental decision was based on you thought you had an obligation to the 500 people that now would have lost employment. This is correct in substance as a loan. We can employ them. In economic ventures that would not detract from the strength the worker the real and that gets back to this key thing that we don't want to lose sight of. As we talk about the businesses social responsibility and social conscience and that is that the ability to do these things real rest very heavily on the economic strength we can now worry about pollution and worry about train and ego and worry about getting the ghetto straighten out because. We have a great economic base. Now we've got to protect that and keep it growing and being dynamic or in fact we won't be able to carry out these other. So I don't expect meet the expectations of our social system. What are some of the expectations of our social system that General Mills is involved with. Well I can give you one. Quick example let's
take the overall food problem in the world as an example. Here we're doing we recognize where the biggest problem is the protein shortage in the world this is creating them out through malnutrition problem. This is in the poorer countries that are africa india etc. We know it's a pity the horror that's going to come someday with these populations increase. Well one thing that we've been working on is eliminating the cow and the hog. And I want I mean by that well you can chemically process so I be fibrous vegetable In other words as a cow down into our meat fiber without going through the inefficiency of the cow. Now what does this mean when it means that in joint ventures possibly with governments of South America Africa and India that we could work with them and. It really didn't meet a major problem and we recognize that long term we expect to make a profit out of this and have to be economically justifiable Another advantage of this. I might add is that as
you meet some of these major social obligations you attract the kind of people creative people you want to attract who want to have some kind of a commitment to what they're doing. And by I think even it can provide is committed by tackling some of these problems at a profit. Well are both you gentlemen are really saying that the social objectives that you are aiming for are that other people become a part of our society also in mesh quite nicely into the modern corporation in terms of its desire for profits. In other words your example of this synthetic food it clearly has you manic stick views. But also you're hoping in the long run it's going to be beneficial for profit. The silly idea we've been talking about. Profits I'd like to give my simplistic definition of profits a person or I-5 as business managers. We have the responsibility for utilizing capital. And
labor. And other assets for the purpose of producing products. Now as far as I'm concerned to the extent that we utilize these various components and come out with a whole which is greater than the sum of its parts this is profit and profit is the additional capital we produce which enables us to raise the level or the economic status of this is Sadie's in which we operate. Now to get back to your question to me the beautiful and interesting and interesting thing about being involved in business management. Is it where human needs exist. You have an opportunity to provide services and you also have the responsibility to provide those services at a profit. You know along the same lines to me Profit is a wonderful tool that measures the effectiveness of your meeting a particular problem or challenge now. One of the problems of the Commerce Department I'd say is how
efficiently is the Department of Commerce the United States being run today. Well there's no way to really measure it whereas in a corporation you can how efficiently is Russia running it's they they don't have a prophetess and so they have a difficulty and we know now that they're actually going back to a form of profit system in order to have this effective measurement. Well it's interesting in the communist philosophy they talk about producing surpluses and surpluses and truth of the properties of which we speak. The only difference is that our economy which is oriented to serve the needs of individuals has been much broader much more prolific in its production of surpluses or profits. And let me add just another point here is that business was built on and on Earth ship the engine really creative thrust of an individual or group of individuals and an organization was effectively built around that group. And today you can take the same kinds of skills and and have a social entrepreneurship which business because it has either been or should be able to meet again using the profit as the yardstick of how efficient is this being
mad. Well take one other question that is frequently debated today. Industrial spoilage of our environment in terms of the air pollution than the water pollution does business have a responsibility in this area. Very definitely However I think it's something that has to be viewed in some kind of a perspective in the construction of any new facilities for example it would be foolhardy not to take into consideration as part of the economic feasibility of such a plant. The necessity of providing all of the protection that is necessary to assure that you will not pollute streams you will not pollute the air as a new plans. This is our new plants. Now it is true that there are many many plants in our country which are still economically productive and essential to the communities in which they operate which were built maybe 50 maybe 25 years ago which were harmless in terms of the environment in which they were operating at the time. But with with with the
pressure of civilisation around them become to some extent dangerous again there. You think here is where we need the role of government to assist in handling the costs of this kind of problem. I think to a certain extent this may be true that there should be. Tax inducements. I'm sorry to interrupt but our time is up and Mr. Bird in this poll we certainly thank you for being in the Business Roundtable and participating in today's business roundtable where Raymond H Mulford president Owens-Illinois glass company and Louis Eppolito Jr. vice president for finance international operations and development. General Mills incorporated for the program was Alfred L. Seeley dean of the Graduate School of Business Administration Michigan State University.
- Business roundtable
- Producing Organization
- Michigan State University
- WKAR (Radio/television station : East Lansing, Mich.)
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- University of Maryland (College Park, Maryland)
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- Episode Description
- Guests on this program are Louis F. Pope, Jr. and Raymon H. Mulford.
- Series Description
- A program of current comment from leading members of America's business community.
- Media type
Host: Seelye, Alfred L.
Interviewee: Mulford, Raymon H.
Interviewee: Pope, Louis F., Jr.
Producing Organization: Michigan State University
Producing Organization: WKAR (Radio/television station : East Lansing, Mich.)
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University of Maryland
Identifier: 68-4-8 (National Association of Educational Broadcasters)
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- APA: Business roundtable; Are profits the only responsibilities for a business?. Boston, MA: University of Maryland, American Archive of Public Broadcasting (GBH and the Library of Congress), Boston, MA and Washington, DC. Retrieved from http://americanarchive.org/catalog/cpb-aacip-500-125qcs2q