The Tyranny of the Bottom Line: Why Corporations Make Good People Do Bad Things A Review by Mike Connolly

How often have we heard it over the past few years: “If only you folks in education would take a lesson from us and act more like we do in business, you’d get better results and we’d have better schools?” And while I agree that there are a number of good business practices that could make schools more efficient, if not more effective, I’ve often felt that society would be far better served by reversing that premise: “If only you folks in business would behave with the same measure of accountability and sense of social responsibility that we exercise in education, we’d have businesses that act ethically as well as thrive financially. The Tyranny of the Bottom Line: Why Corporations Make Good People Do Bad Things doesn’t set out to prove my point specifically, but it does a good job of it, nonetheless. In this book Ralph Estes details the carcinogenic effect that corporations’ narrow-minded obsession with bottom line economics often has on those who work in corporations and on all of us whose lives are impacted, much more than we know, by the practices of corporations. What Enron hasn’t taught us about the havoc self-righteous, self-centered, self-glorifying corporations can cause in our society this book will.

         Tyranny of the Bottom Line, like Caesar’s Gaul, is divided into three parts. In addition, it has a Preface entitled “The Manager Held Hostage: Why Corporations Make Good People Do Bad Things” and five appendices, one of which features the author’s proposal for a Corporate Accountability Act. The others outline frameworks for providing customers, workers, communities and society as a whole with the kind of information these groups need to make corporations more accountable to each of them. [Appendices 2,3,4, and 5].

Chapter one of section one is titled “The Perversion of Corporate Purpose.” Here I discovered something I’d not previously known; namely that corporations were originally chartered to perform a specific public service that individual citizens or the government were unable to manage themselves. The corporation’s, and its CEO’s, principal responsibility was to provide “a public return, a public benefit” to an entire society rather than a financial return to a few corporate shareholders. A financial return to stockholders was, at best, secondary to the principal purpose of the corporation – an afterthought you might say. This conception of a corporation’s justification for existence lasted from the fifteenth century until the middle of the nineteenth century when profit making was first proposed as a major goal of the corporation. [p.23]. In Chapter 2 of this section, “Power Without Accountability: Who Controls The Corporation”, Estes demolishes the current myths about who controls a corporation’s practice and behavior. You don’t have to be Maxwell Smart to figure this one out. The chapter title not so subtly suggests the answer. It isn’t the stockholders, the federal government, the labor unions, the Board of Directors or the marketplace which control, or, for that matter, even exercise oversight responsibility for a corporation’s policies and behaviors; it’s the corporate managers themselves. As old Max might say: “An example of the fox guarding the hen house.”

Corporate CEOs and politicians are fond of putting forward merit pay and performance incentive schemes for educators as means of rewarding exceptional performers but not slothful ones. But as Estes points out these same CEOs [He doesn’t mention politicians, but you’ll see the connection immediately] are often more to be admired for their preaching than their professional practice. For while they institute merit pay and performance incentive schemes for those who work under them, top managers seldom find such schemes agreeable for themselves. Estes quotes John Kenneth Galbraith’s assessment that “The salary of the chief executive of the large corporation is not a market reward for achievement. It is frequently in the nature of a warm personal gesture by the individual to himself.” Estes then lays out plenty of evidence to support that statement. Just to cite two of the more egregious examples he gives: there is Lee Iacocca getting a $338,000 raise while Chrysler’s profits were plunging by 66%, and Frank Lorenzo getting 1.25 million in cash compensation while Texas Air was losing $719 million [p.70].

In chapter four “The Dominion of Corpocracy” we get a vivid picture of the overwhelming influence that corporations have over our lives. Reading this chapter is like falling through ice in January. As Estes documents corporations’ control of our working hours, their influence on government, their manipulation through advertising of our desires, morals, values and character, or their increasing control over higher and lower education, I found myself shaking with rage and wondering if all corporations shouldn’t come with a Surgeon General’s warning. As Woodrow Wilson observed many years ago, it seems that corporations once chartered to perform services for men have conspired to make men their servants.

         Part Two: The Consequences of Unaccountability documents the devastation that corporate accountability exclusively to bottom line profits can bring to the lives of the corporation’s employees, suppliers, and customers and to the local communities in which they operate. Estes questions the wisdom of communities clamoring to attract corporations with tax breaks and zoning privileges and numerous other incentives when these same corporations are, as likely as not, ready to abandon those communities to increase a quarterly profit a quarter of a percent. And if corporations are willing to dump whole communities for a meager profit return, imagine the timidity they must display when faced with the prospect of dumping, loyal employees or long-term suppliers to get a little extra pocket change. You don’t have to imagine it; Estes supplies plenty of vivid, stomach churning evidence. If you can get through the eighty- six pages in this section without becoming disgusted by the profiteering and hypocrisy of corporate types, you are made of stronger stuff than I am. Much stronger.

         Estes’ prescription for making corporations more accountable is found in the final three chapters. “[The] Practical Prescription.” Here he advocates for a more comprehensive and responsible report card for corporations. He calls it a scorecard, but as educators you’ll recognize it as a report card. And a rather good one, I might add. He suggests a report card that assesses a corporation’s treatment of customers, employees, suppliers, communities and the nation as well as the corporation’s shareholders. It is an idea that leaves you wondering why it hasn’t been adopted already. It may also leave you speculating, as it did me, on how many corporations would make The National Honor Society [if corporate industry has one] if they were graded on these criteria. Estes recommendations for the substance and scope of such a report card are found in these chapters and in his appendices.

Although Ralph Estes is an educator, a professor of business administration at The American University, he is no stranger to business, nor its adversary. He is a believer in the fundamental goodness of people in business. At the time of the publication of this book, 1996, he was a CPA and former senior accountant at Arthur Anderson and Co. [Yes, this is the very same Arthur Anderson and Co that was indicted by the federal government for shredding documents on Enron’s and it’s own financial dirty dealings.] Thus, he speaks with the voice of experience and authority on this subject of corporate irresponsibility.

The Tyranny of the Bottom Line is not written as a muck raking denunciation of corporate business practice, although, as you will discover, there is more than a little muck in that practice. Rather it is a plea for and, at the same time, a proposal for making corporate business more humane and responsible to people both inside the corporation and in society as a whole. For Estes that bottom line is that when corporations agree on their own, or are required by citizens, to evaluate themselves and their managers on more than the simplistic, singular dimension of profit, they and those who work in them, and all of us, will be much better off. The bottom line for me is that, until they do, when corporate types come running to educators like us with suggestions of how we might benefit from being more like them, we should adopt a caveat emptor attitude toward them. And maybe we might even have the temerity to suggest that they could learn a thing or two from us.