Among those profiled in Enlightened Capitalists is Robert Owen (1771-1858), referred to as the first business reformer. Owen turned the unprofitable New Lanark, Scotland textile mills into a thriving business where he ended child labor, placed preteens in a school he had built, cleaned up and properly heated and ventilated the mills, reduced work hours, provided a communal kitchen, established retirement homes for aged workers, offered medical care, built parks and beautified the community. Although it eventually foundered due to Owen’s eccentric nature and poor management, still-standing mills and other New Lanark buildings are a UNESCO World Heritage site visited by thousands of tourists yearly.
A continuing success story is Lincoln Electric Company, a $3 billion in revenues multinational electric arc-welding company, with 3,300 workers in the United States that has not laid off a single permanent employee since 1947, and for more than 80 years has paid bonuses to its workers averaging from 40 percent to 100 percent of their annual salaries.
Inventor and engineer James Lincoln (1883-1965) founded the company in 1904 in Cleveland on the theory made famous by Horace Mann that “property and labor in different classes are essentially antagonistic; but property and labor in the same class are essentially fraternal.’’ Four rules devised by Lincoln still apply at the company: communication and participation, piecework compensation, merit-based bonuses, and guaranteed employment.
Beyond the usual benefits, Lincoln offers stock ownership, profit sharing and pensions, plus employment in an egalitarian setting where there are no executive parking spaces or dining facilities and everybody uses the same entrance.
Even companies that have suffered a loss of social engagement have made valuable contributions, such as Herman Miller, a leader in office furniture, which early adopted the Scanlon Plan, “a form of gainsharing in which employees are financially rewarded for their efforts and ideas to improve productivity and product quality.’’
And Levi Strauss led the way in the apparel industry of hiring and promoting women, training the handicapped and retraining workers when automated equipment was introduced.
O’Toole discussed contemporary movements such as Conscious Capitalism, which encourages executives to adopt enlightened employment, as well as alternative workplaces such as cooperatives, which have about 250 million workers worldwide.
Financial advisors can play an important role in informing clients about what companies are socially engaged. O’Toole acknowledges that a growing number of consumers and investors, especially young ones, want to do business with those who do good.
The Enlightened Capitalists: Cautionary Tales of Business Pioneers Who Tried to Do Well by Doing Good. James O’Toole. Harper Collins. $35. 592 pages.
Eleanor O’Sullivan is an award-winning journalist who writes for Financial Advisor.