Sanctions, Incentives Force Corporations to Change Behavior

San Francisco — Behind those daffy, twisting television ads for Levis, the jeans of San Francisco-based Levi Strauss & Co., there are some smart, public spirited people. I had a conversation recently with one of them — the company’s general counsel, Peter T. Jones — and came away even more persuaded that there are not many general counsels like him.

Jones’ major preoccupation is how to make corporations behave better — for society and for themselves. He is worried that the corporations’ obsession with their stock market values and their short range quarterly performance reports make them myopic on such crucial matters as investment for efficiency, productivity and innovation not to mention social responsibility. Nothing unique about that concern. What is different about Jones is that he talks about sanctions as well as incentives — in that order — for corporations to change their ways.
When the Civil Rights Act of 1964, with its equal pay provision, was passed, he observed, many retailers paid little attention to obeying it. Puzzled, Jones asked a top corporate officer for one of the nation’s larger retailers why not? The man said: “Look, it’s pure mathematics. The only remedy in this new law is compensatory damages (just pay the difference to the worker). If a retailer is in violation he can say to himself, first, I may not get sued. If I am sued I may beat the suit. If I am held liable, the only equal pay remedy is single back pay for what I should have paid them originally. So why should I give up the present value and use and earning power of all that money just to get in compliance with a law with that kind of low cost sanction.”

By 1970 the Equal Pay act was amended to provide for a double damages remedy against violators. Jones went back to the same retailing officer and found him rushing toward compliance.

When Jones was with Montgomery Ward, an equal pay compliance program was placed in effect. But it was not respected by about 10% of Wards’ store managers in the country. So Jones and his Chairman notified them that their bonus had been docked from $5000 to $10,000 for their non-compliance. The howls flooded back to the Chicago home office. Tempering their pinch, Jones and his boss decided to place the docking amount in escrow for a year to induce compliance. The forty store managers then came around. As Jones put it: “They responded to effective counter-pressures of sanctions of a lost bonus and incentives to get it back — negative and positive.”

In another instance, the National Organization for Women, after picketing Sears for not seeking to hire more women, notified Ward that it was next. The chairman, said Jones, “spent more time in the next three days learning about and giving priority and direction to EEO affirmative action and equal pay than he had in most of the entire preceeding year. The clear and present danger of the squeaky wheel of publicity sanctions about a potentially vulnerable area of corporate behavior did get the action grease.”

The way to move corporate behavior, in Jones’ experienced judgment, “is to employ the four S’s: stiff, sure, swift sanctions. Businessmen often believe, and with some justification, that most sanctions are not very likely to be applied.”

By cutting back on regulation of business, the Reagan government, Jones believes, is taking the pressure off companies that are supposed to comply with health, safety, securities, environmental and other important standards. He predicts some backward movement away from these longer term social goals. As one who thinks that corporations can only prosper if society in general prospers, Jones, who worked in the poverty areas of Harlem and South America in the Sixties, sees this withdrawal of corporate sanctions as a serious setback. And not just to society, but to the corporation’s performance as well.

Jones wants to hear from people and organizations who believe there are ways to join the social responsibility of companies to their longer term productivity gains with a bite of sanction and a tender of incentive.