Contrasting Approaches to Corporate Responsibility

Kenneth Mason and Lee Iacocca both are presidents of major corporations. But the similarity ends there. In the past month both gentlemen have expressed dramatically dissimilar thoughts about corporations, regulations and responsibility.

Mason, head of Quaker Oats Co., represents a small band of corporate statesmen in this country. You would understand better what I mean if you pick up the August 13, 1979, issue of Business Week and turn to page 14. There, in one full page, is more wisdom from a businessman than you are likely to see in a decade of business writing on corporate ethics.

To Mason, corporate responsibility is not giving to charity (those are “acts of philanthropy”); nor is it refusing to engage in payoffs or kickbacks (those examples are simply “corporations obeying the law”). Nor, he adds, is it corporate responsibility to insist on strict safety rules or truthfulness in advertising. Those “also are examples of corporations simply obeying the law, as well as practicing sound management.”

Corporate responsibility is going beyond those duties by using socially important assets (he lists finance, management, labor, materials, land, air and water as those assets) “in a way that makes social sense.” These assets “must produce a satisfactory profit, because without a profit the entity must close down.”

Then Mason zeroes in: “I know of no greater disservice to American business in my lifetime than Milton Friedman’s widely publicized assertion that business’ only reason for being is to generate profits for shareholders. What a dreary and demeaning view of the role of business and business leaders in our society!

“Making a profit is no more the purpose of a corporation than getting enough to eat is the purpose of life. Getting enough to eat is a requirement of life; life’s purpose, one would hope, is somewhat broader and more challenging. Likewise with business and profit.”

The Quaker Oats chief then supplies these principles to his industry and the controversial case of children’s TV programming and food advertising. He concludes that much improvement is needed in both areas.

In contrast, Iacocca, president of Chrysler Corp., comes out slugging against the government–his all-purpose scapegoat. Government regulations, he asserts, are shackling the auto industry. Chrysler capital is going “to meet the damned regulations” instead of being applied elsewhere, he told an auto audience in Detroit. There is little, short of the tides, that the recently fired Ford executive has not over the years blamed on what he calls over-regulation.

Just what is Iacocca talking about when he talks of over-regulation? The auto safety standards? Between 1970 and 1981 the auto industry has not and will not have to meet any new significant standard. The passive restraint standard (put off for almost eight years) starts applying to large cars during the 1982 model year and for smaller cars the following two years.

Perhaps he is talking about air pollution standards. In 1970 a federal law gave the auto industry five years to modestly stop poisoning the air. Three years later the domestic auto companies started lobbying Congress to delay the standard. They succeeded in doing so for several years. Not until 1981 do the auto companies have to comply with slightly stronger standards than envisioned in the 1970 act.

It could be that Iacocca is complaining about the government’s fuel efficiency requirements. A 1975 law led to regulations by the Department of Transportation mandating a gradual, increase of average car fleet mileage per gallon until the average reaches 27.5 miles per gallon by 1985. Not only is such a standard good for consumers and the nation’s energy problems, but it made Chrysler less vulnerable to competition from more gas-efficient imports. Chrysler would be even worse off today if its sluggish, gas guzzling ways were not prodded by Washington.

Maybe the Chrysler president is upset over the bumper standard. To reduce substantial car damage from low-speed bumps and keep insurance premiums from going through an even higher roof, the DOT has mandated a 5 mph bumper. Wow! That’s what the 1932 Ford could withstand. But that nevertheless irritates Iacocca whose idea of consumer protection at Ford Motor Co. included the Pinto fuel tank, the Flex fan (allowing blades to fly off unexpectedly), and jumping transmissions, all the while resisting recalls of these defective vehicles.

Not only are these regulations modest, long-delayed and accepted by many auto companies smaller than Chrysler, but they reflect the point Mason makes about using corporate assets “in a way that makes social sense.”

Will The Masons of our business community ever be able to teach the Iacoccas that the basic test of production is the health, safety and economic well-being of consumers?

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