Authoritarian "engineer-managers" ran heavy industry in the early twentieth century.
In the 1920s and 1930s, the engineer-managers were challenged by "leader-managers" who aimed to raise workers’ output not by bossing them but with soft-touch human relations skills. The leader-managers cloaked their undemocratic power as part of the free enterprise system.
The Manager As "Moral Leader"
The new emphasis on leadership had ethical implications. Management theorists interpreted the idea that power flowed from the bottom up as implying a moral superiority in managers, who led not by power but by exemplary courage. This masking of managerial power under cover of moral leadership posed a long-term danger to democracy.
What if corporate leaders’ illusion that their leadership was about morality more than power flowed out into democratic society at large? It might weaken traditional democratic concerns about the corruption of power.
Self-righteous notions of moral leadership were destined to suffer setbacks in the Vietnam and Watergate eras. But the corporate world’s self-appointed moral leaders would eventually have their counterparts in government and in the White House.
For the rest of the 20th century, an Austrian immigrant named Peter Drucker would be the dominant voice in the new cacophony of management studies. Drucker was sympathetic to workers; they had fallen under the undemocratic power of managers through no intentional political process but only through economic development. Nevertheless, Drucker held out hope that American managers could be taught to work for the benefit of society as a whole.
Drucker learned the practicalities of management from Alfred Sloan who generously allowed the young Austrian to shadow him for two years at General Motors. The resulting book, Concept of the Corporation (1947) won acclaim by explaining GM’s organization and success. But Drucker urged GM to see itself as having a social mission such as job creation, a point refuted by Alfred Sloan who saw the corporation’s job as making money.
CSR and The Rise of Free Market Ideology
The lesson in realism that Sloan tried to offer Drucker is still relevant today, when so much emphasis is placed on corporate social responsibility.
Corporations should be socially responsible, and many are. But responsibility for the well-being of society in general does not belong with corporations. We have another institution – democratic government – to do that job.
Postwar writers such as David Riesman, John Kenneth Galbraith, and Daniel Bell critiqued managers for failing to see, in Bell’s words, The End of Ideology (1960), especially the irrelevance of free market ideas in the era of large corporations. The job of limiting capitalist power had shifted from the market to “countervailing” institutions such as government and labor unions. Actually, it was critics like Riesman, Galbraith and Bell who suffered a failure of vision. They failed to see that the free market ideology was on the ascent.
C. Wright Mills was the only left-liberal critic of the period to see that the idea of a managerial revolution had been overdone. The actions of corporate managers as well as financiers, speculators, and raiders indicated the ownership of corporate property still mattered. Mills presciently warned that America was commanded by those whose “high position is not a result of moral virtue.”
Contest of Wills: JFK And U.S. Steel
Duplicity in a corporate leader went on national display in 1962 thanks to the attempt of President John F. Kennedy to break the inflationary cycle of wage and price increases. Kennedy thought he had won the agreement of U.S. Steel CEO Roger Blough to hold prices in return for steelworkers agreeing to a modest wage increase. But Blough broke his implied promise and raised prices, leading to a dramatic contest of wills in which Kennedy forced the steel chief to back down.
Kennedy’s battle with U.S. Steel did not show, as many said at the time, that he had extraordinary power. The president could hardly fire off such a barrage every time a company raised prices. Blough, seeing that Kennedy had exhausted his ammunition, instituted his prices increases quietly, in a piecemeal fashion in the ensuing months.
A Kennedy adviser later wrote that Kennedy was "outside the business ethos."
The president "did not consider successful businessmen as the best brains or the most enjoyable company." Kennedy’s attitude reflected that of an increasingly large share of the public who, even if they could not control the corporate chiefs, did not have to like them.