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 / Fourth Quarter 2002 / Issue 29(originally published by Booz & Company)


Apocalypse 2010?

If all this sounds a bit over the top, that’s not surprising. Mr. Gates is a neo-populist; his rhetorical allies are people like Mr. Nader; the writers William Greider, Kevin Phillips, and Paul Hawken; and Business Ethics editor Marjorie Kelly — the kind of people who argue that corporate charters should be set for limited terms and renewed only if companies display some acceptable level of social responsibility. In 2000, Mr. Gates ran on the Green Party ticket for the U.S. Senate in Georgia, making headlines when he was arrested for protesting his banishment from a televised debate.

A Second Chance?
There’s a temptation to get caught up in Mr. Gates’s politics, and to charge him with political naivete, or with socialism, or simply with irrelevance. If the rich are going to get richer, and the poor are going to get poorer, doesn’t that simply mean we should apply ourselves to getting richer? To Jeff Gates, there’s no way to get there from here; the wage income available, even to the upper middle class, is far too small for most people to accumulate significant assets with.

To me, however, the most intriguing aspect of Mr. Gates’s approach is the audacious idea — almost counterintuitive in today’s economy — that a company can best boost its profits by spreading wealth beyond its boundaries. What if that turned out to be right? Under what circumstances might it work and might it not work? Can we imagine a cultural atmosphere in which CEOs and other senior executives turn their attention away from their own bonus-and-benefit packages and toward the question of the legacy they hope to leave behind?

“It sounds like CEOs and senior executives have everything to lose through the reforms you’re talking about,” I said to Mr. Gates.

“Oh, no, I think it’s just the opposite,” he said.

But when I pressed him, it took him a while to explain why. He started by talking about immediate business benefits. Pilfering and absenteeism go down; employees stay for life, innovating all the way. “Your people will begin to build assets, which will make them more loyal to you.” And, he added, you’re less subject to the kinds of downturns that hit companies like the Sunbeam Corporation or the Xerox Corporation when tricky accounting practices could no longer mask poor fundamentals. Then, “since you’re involving your customers as shareholders, you build brand loyalty and more robust market demand.” In other words, when your customers and suppliers and employees are truly your financial partners, they bring business to you.

But all of this seemed beside the point, and I told him so. “Here’s what gets me up in the morning,” he finally said. “How would it feel, as an executive, to go in each day knowing that the people you have hired genuinely feel that you’re working on their behalf? That 20 percent of your shareholders showed up in your buildings every day? What would it mean to managers personally to create a vibrant center where people learn what it is to be fully human, where they make decisions to restore the natural environment, where they watch everyone becoming better off — psychologically, ecologically, and financially? And they can look back on their careers as corporate executives and tell their children, ‘Hey, you know what? I did that.’”

Finally, he added, “You don’t have to do the CEO analyst road show anymore.”

In my own heart, I don’t really believe that the crisis that Jeff Gates talks about will occur. Something will happen to get us out of it, by the skin of our teeth; hasn’t that always happened before? And yet, I’d feel a lot more confident of the future if I knew that a fair number of companies were following his advice.
I have also read about what happened to Henry Ford in 1930, at the dawn of the Great Depression. Prodded by Herbert Hoover, he tried his familiar tactic again. He cut car prices and raised wages to $7 per day. This time, it didn’t work; within a year, he had to drop his own minimum wage back below his once-sacrosanct $5. There were a lot of differences, of course, between 1930 and 1914, including a much stronger set of competitors (such as Alfred Sloan’s General Motors). But I can’t help thinking that if there had been a few more companies — a dozen? a hundred? — doing the same thing as Henry Ford, Mr. Ford might have had a chance, and the Depression could have lost some of its bite. If Jeff Gates is right, we may get another chance to find out.

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