The majority of these messages interspersed factual information — enhanced sanitation procedures, waived delivery fees, refund policies — with “personal” assurances from top executives.” Nothing is more important than your health and safety,” one message reads. We were their “first priority.” Fear not, we were told, corporate America has our back.
But these assurances were quickly put to the test. Amid ordered shutdowns and plummeting consumer demand, some executives embodied commitments to the greater good, pledging significant donations to charities, expanding sick leave offerings, taking pay cuts and otherwise working to protect customers and workers alike.
Yet, other businesses left workers without crucial protective gear, and investment banks even pressured health-care companies to increase prices on N95 masks and potential drug treatments.
Responses to the coronavirus reveal the complex roles corporations play not just as economic institutions, but also as social institutions. With their personal messages of support, their leaders proudly position themselves as front-line responders. Properly understanding such gestures requires tracing the development of corporate behavior back to the early 20th century. It was in this era that corporations, having already been granted their legal status as “people,” first unveiled their more human face.
The American economy was at that time settling into unprecedented levels of concentrated economic power. A wave of mergers in the 1890s saw the swallowing up of smaller businesses by giant, bureaucratically coordinated corporations. The newly emerged leviathans faced significant opposition from populist discontent, trade unions, antitrust efforts and calls for industrial democracy. Industry leaders responded to these pressures in a manner that would shape corporate behavior for the next century.
What emerged was two distinct but closely related modes of “personable capitalism.” The first is generally called welfare capitalism. Essentially, employers began assuming responsibility for providing their workers different modes of security and stability in the form of assistance programs, health insurance and other benefits. Welfare capitalism blended a progressive-era vision of reforming the working class with an older form of employer paternalism.
Earlier entrepreneurs such as Robert Owen and Josiah Wedgwood had long offered employee assistance programs, health services and even provided housing for their workers. But the mammoth corporations that arose at the end of the 19th century, due to size and complexity, were largely coordinated by bureaucratic administration and an indifference to employee welfare. This was industrial capitalism in its most impersonal form.
Many business leaders soon recognized strategic reasons to change course. For one, it served to ward off the siren calls of statism and socialism that many workers at the time found compelling. Employers discovered they could effectively “buy off” organizing workers with perks and benefits. But these leaders also argued that this was simply good business. Henry Ford famously believed his overextended paternalism — offering workers higher wages while closely monitoring their private lives — would instill the discipline necessary for both orderly work and consumption. Other leaders, such as General Electric President Gerard Swope justified worker benefits on economic grounds. Happier workers were better workers.
But this first form of personable capitalism was closely tied to a second form: the rise of human relations in management theory. The leading advocate was a psychologist named Elton Mayo, whose claim that psychological research could both predict and control labor unrest caught the attention of business leaders. After receiving a handsome grant from John D. Rockefeller Jr., Mayo launched studies of several American factories in 1923.
Mayo couched his approach within a larger diagnosis of modern society. Drawing on worker interviews, he posited that an overarching sense of fatigue, repression and loneliness was sabotaging workers’ ability to function properly. This diagnosis located the root causes of labor unrest as running far deeper than what collective bargaining could possibly address. Workers longed for deeper relationships with others, and with modern society not providing this, corporations were suffering.
Mayo’s solution turned conventional wisdom on its head: Modern industrialism should not be blamed for the alienation of the “mass worker,” but heralded as the solution. Work environments could imitate and thereby replace the strong communal bonds that modern societies lacked. Mayo believed the “medieval ideal of the cooperation of all” could effectively be re-created. The harmonious functioning of labor, management and capital would solve modernity’s lost sense of solidarity.
Human relations, when paired with welfare capitalism, proved a powerful force for granting legitimacy to the corporate order. By the later years of the New Deal, American society had made its peace with corporate leviathans and their statesmenlike leaders.
But as 20th century progressed, the crucial tie between welfare capitalism and human relations fractured. The decline of labor unions, increasing automation, global competition and pressures to outsource led to the decline of welfare capitalism. Since the 1970s, jobs offering benefits such as paid vacation, health insurance and retirement plans have steadily dwindled, with structural obstacles impeding access to racial minorities, women and immigrants. The rise of the “1099 economy,” named for the provision of the tax code governing independent contractors or gig employees, has only further weakened employee-employer ties.
But human relations proved more resilient. As a consumer-oriented culture supplanted the production-oriented economy, human relations mutated from its managerial form to techniques undertaken in sales and marketing departments. Later managerial gurus like Peter Drucker reinforced the idea that care for the customer — not the worker — determined corporate success. Corporations began focusing on “brand engagement” and “corporate social responsibility,” designed to interweave corporate identities with the personal values and lifestyles of customers.
The response to the coronavirus makes visible how this personable capitalism functions today. In some cases, such as when Salesforce chief executive Marc Benioff spoke in terms of “family” in pledging to keep his workers employed, personable leadership and care go together.
But in other cases, a warm outward face is paired with a quiet reversion back to more impersonal forms of decision-making. Take the airline industry: Their recent pledges of safety and comfort come after a decade of purchasing outdated planes, cramming in more seats and increasing penalties for flight changes and baggage. Increasing customer satisfaction and safety is hardly the driver here, but these cost-cutting tactics coexist with personal pledges to customer well-being.
In many ways, this brings out the fundamental flaws of Mayo’s vision. Mayo’s work largely repackaged faceless bureaucracies as purported sites of communal ties, personal affect and trust. But impersonality remains lurking in these structures — focused more on the bottom line than the well-being of customers or employees. Amid crisis, this is made clear, as overtaxed customer service lines and surges in layoffs can attest.
But fortunately, Mayo’s grim read on modern society was also flawed. He overlooked the many forms of solidarity that have proven resilient even in the face of social change. These include mutual aid societies, now reemerging as communities coordinate neighbor-led responses to the crisis. A wider all-hands-on-deck mentality has also driven many businesses to make substantial donations to charity, shift their production to urgently needed medical supplies and provide services to health-care workers.
But in the long term, these piecemeal efforts probably will not establish enduring forms of social support, nor will they be able to re-create the lost welfare capitalist system barring systemic reform. Corporate executives mobilized by the present crisis could best improve support systems not only by patching the holes now made visible, but also by translating the all-hands-on-deck mentality into a movement to positively change business and the social safety net. A reformed system would ensure more people have access to the resources and security they need, even amid downturns and crises.