What Education Should Business Support?
MARCH 01, 1961 by MERRYLE STANLEY RUKEYSER
Mr. Rukeyser is a business consultant, lecturer, and writer of the nationally syndicated column, "Everybody’s Money."
The Congressman, who favored free enterprise, was berating business executives for their failure to flood the House of Representatives with mail and propaganda equal in size and weight to that from labor unions and sundry other critics of the modern corporation.
I could not accept the view that personalities in management, who are trustees for share owners, should throw their weight around. Executives, in the nature of things, are a numerically small group—at best a minority, but potentially an elite group.
As the brain or intelligence center of the economic system, management should rely for support on the merit of its basic ideas and philosophy—not on its comparatively slight brute force. The philosophy of management is a sophisticated approach to the adventure of living, and stands in sharp contrast to the techniques of primitive tribes who implement their will with clubs.
Accordingly, it would be a corruption of the management function to regard itself as the opposite number of misguided pressure groups. Its mission is not through brute force to offset a wrong push in one direction with an equally potent and ill-considered pull in the opposite direction. Management’s opportunity is to promote civilization through inculcating in men’s minds and hearts principles of creativity and self-discipline which enlarge their potentials for better living. Thus, expressions from management should at all times be responsible, and should be guided by a respect for the public interest.
Whether or not adversaries distorted Charles E. Wilson’s remarks about the identity of the interests of the nation and those of General Motors, it is essential for industrial generalissimos to understand the impact of their private or company decisions on the public interest.
High in public interest are the problems of education and of corporate giving for that purpose. Corporate and individual responsibility cannot glibly be discharged through indiscriminate giving, to colleges and universities, of funds belonging to the stockholders. This delicate subject should be carefully delineated. A businessman must distinguish between standards for personal philanthropy, on the one hand, and of contribution of corporate funds, on the other. Unless the donation can be justified in terms of the enlightened self-interest of those who own the company, then it is better to leave the giving to the individual recipients of corporate dividends or interest rather than to tap the corporate till.
Obviously, if any corporation officer or director is so emotionally confused that he feels disposed to finance movements and ideologies which will destroy a free economy, he should use his personal funds—not those of his stockholders. If one of the objects of corporate giving is to gain good will or create a more friendly environment for business, it is clearly improper to endow ideologies designed to destroy voluntary institutions.
The modern business or financial corporation, bank or trust company, investment dealer or insurance enterpriser is part and parcel of a voluntary system. By the same token, these instrumentalities are in mortal conflict with the theory that government can do everything better and more efficiently than can the citizen. Voluntary enterprise is the antithesis of compulsion and force. Contemporary advertising and selling are social symbols of the individual’s right to choose, and are based on the gentle art of persuasion—the opposite of state-imposed compulsion.
Accordingly, it is worse than muddleheaded to use stockholders’ funds to finance propaganda designed to destroy the foundations of a free economic society. Certainly, the blueprint of a dictated society, seductively and falsely labeled as a Welfare State, is inharmonious with the competitive market economy of which the modern corporation is an example. If a corporate executive is to play his optimum role as a leader of public opinion, he should understand the external environmental factors which create his opportunity. He is unfit to serve if he wears blinders which exclude from his consciousness the broad social, political, economic, and cultural forces which create the climate in which he operates.
To be blunt, the explanation for meager sales of motor cars in the United States in 1931, 1932, and 1933 was no reflection of any internal loss of management skill in the design or production of motor cars. The trouble was external and lay in subtle causes which unbalanced the national economy.
By participation not only as a provider of funds but as an active fellow student in scientific and mature efforts to formulate the ideas and techniques which make for fulfillment of the desires of free men and women, the executive furthers general well-being and serves his own higher self-interest as well. If a businessman takes everything out of the system and puts back nothing, he is as antisocial as the backward farmer who mines the soil.
The educated businessman learns, in the phrase of Wilhelm Röpke, that prudent money management and a free open market system provide "A Humane Economy." It is high time that mature business leaders learn to reject the spurious attempts by academic racketeers to associate inflation with human betterment and "welfare-state" regimentation with personal freedom.
Practitioners of the enterprise system should take pride in their respect for merit, for craftsmanship, and for creative and original thinking. They should join hands with the trend-bucking scholars who hold high the banner of individual free choice and personal responsibility. Certainly, they should not use stockholders’ funds to subsidize those who adulterate the recipes of progress by glorifying concepts of slavery and compulsion.
Selective corporate giving to educational institutions can be of immense value, but those who handle "other people’s money"—to borrow Mr. Justice Brandeis’ historic phrase—should relate the gift to the enlightened self-interest of the corporate donor. Certainly, a corporation that depends on the services of engineers, chemists, or physicists, for example, can justify liberal endowment of their human supply depots—the engineering schools and the universities training scientists.
Similarly, the principle can properly be extended to liberal arts colleges, where the quid pro quo is less direct. In an expanding society, business needs to recruit executives from able personalities who have been trained as to the humanities and an affirmative philosophy of life. But such giving should be on an annual, or an income, basis rather than in the form of an unrestricted capital endowment. The promise of a recurrent gift gives the donor with high social conscience an opportunity to be selective. This procedure reserves the privilege of cutting off gifts to those educational institutions which fail to achieve scientific objectives and scholarly approaches to the dynamic problems of contemporary civilization.
Room for Honest Differences
This standard should not be corrupted to discourage honest dissent. The essence of a free society and the foundation for the American economic system is individual free choice—free choice as to goods and services, as to vocations, and as to ideas, spiritual beliefs, and attitudes. The very structure of competition is based on respect for individual differences. It would thus be a perverse and antisocial abuse of corporate trust for a chief executive to be guided in company giving solely by his own prejudices and dogmas. But at the same time it would not be justifiable in terms of the enlightened self-interest of the corporate giver to endow propagandists—Marxian or what not—whose intent is to destroy the voluntary system on which business survival depends.
Any financial or other help management can give toward dissemination of scientific and objective understanding of a free society is a good investment. Such expenditures of corporate income are a prudent transfer of funds to capital account for "franchise protection." Promotion of popular understanding is a cost-reducing outlay, just as much so as automatic machinery. Popular understanding of the social and economic forces at work prevents the economic waste growing out of friction, fallacious legislation, or emotional prejudice.
No one questions the right of management to expend corporate funds for burglary insurance or for various protective devices. But the threat to private property from direct stealing is picayune compared to confiscatory processes which result from biased thinking and ideas rooted in ignorance. It is nonsensically shortsighted to expect any bright long-term future in growth stocks if the private property system is to go by the boards.
Such astigmatism to the economic consequences of dissident social and political ideas is a deterrent to advancement in spiritual and material well-being. When a distinguished and suave Harvard graduate was debating with me in Town Hall in New York whether there should be a ceiling of $25,000 on personal income, I admonished the dowagers in the audience, who were living on dividends and interest, not to get any false sense of security from the utter politeness and courtesy of my differing colleague. "Though my opponent will liquidate you in a most courteous and courtly manner," I explained, "you will be liquidated, nevertheless."
"Not as I Do . . . ."
In my own salad days, nearly four decades ago, I asked the brilliant legal counsel and important stockholder of the Burns Brothers’ Coal Company how he reconciled his being a millionaire with his adherence to the Socialist Party. The late Morris Hillquit, outstanding socialist leader and unsuccessful candidate for Mayor in New York City, showed mental resiliency in his reply.
"Individual investments and choice of securities, in my opinion," Mr. Hillquit explained, "present exactly the same question to Socialists and Radicals as they do to individualists and reactionaries. The Socialist is opposed to the economic system which permits of unearned revenues in the shape of rent, interest, and profits. Heseeks to substitute that system by one based on the principle of cooperative labor and equitable distribution of the product. He expects that system to be brought about by a series of economic and legal reforms on a national, even an international scale and not through individual practices. The economic system operates equally on all persons, regardless of the political or social views held by them. A Socialist or Radical cannot by his own individual act withdraw himself from the operation of the system while it lasts. He can find place only in the established economic categories as employer, worker, professional, and so forth. If he earns or otherwise acquires money, he can put it only to such uses as the system affords to him. He would accomplish no good by throwing it away or keeping it in a strong box. If he has any money to invest, he must look for safe and profitable investment in the ordinary way.
"Purely as a matter of sentiment, a Socialist or Radical, would, in my opinion, ordinarily discriminate against securities of particularly odious concerns such, for instance, as are largely based on the exploitation of labor, pursuit of notorious antiunion policy, and so forth."
So be it.
Perhaps the late Mr. Hillquit unwittingly gave a practical yardstick for corporate giving. Certainly Mr. Hillquit’s criterion of discriminating against the particularly "odious" would obviously muddle corporate management from subsidizing socialist or communist academies which would be set up to destroy such philanthropic supporters. So doing would be as misguided as if the American Medical Association should decide to endow a School for Charlatans.
There was sophistry, of course, in Mr.Hillquit’s attempt to defend his theoretical and practical schizophrenia. Obviously, securities must be selected by yardsticks other than those he highlighted. First of all, the long term investor wants to know whether a given corporation has the capacity to survive in competition, whether it can operate profitably, and whether its shares are priced competitively on a price-to-earnings ratio. These bear more on investment values than does the degree of management affection for labor unions.
The effort to deal with social ideas in isolation from economic principles leads to absurdity. This was demonstrated when the global leader of the revolt against the razor, Fidel Castro, repelled tourists from Havana by his lawless procedures. After the event, the revolutionary leader naively called in consultants to counsel with him as to why Cuba‘s hitherto profitable tourist trade had dried up. Castro’s innocence resembled the situation of the man who murdered his mother and his father and then went into court to plead for clemency on the ground that he was an orphan.
Misappropriation of Funds
Thus, it seems to me a misuse of stockholders’ funds to give corporate gifts which can’t be sanctioned directly or indirectly in terms of enlightened self-interest. Contributions to bona fide educational institutions which maintain scholarly and objective standards are a wise investment. They help to preserve the spiritual and intellectual foundations for a free society, the only kind of society in which custodians of voluntary companies in finance and business can hope to survive.
Scholars should, of course, have wide freedom in exploring ideas, information, and points of view. Control of funds should not include narrow-minded restrictions on academic freedom. But academic freedom is not threatened by a refusal to support those with closed minds who oppose the philosophy of free inquiry and free expression. To be specific, card-carrying members of the communist conspiracy should not be eligible for support, for they have an allegiance other than to their own conscience.
Businessmen can with confidence support pursuit of the ideals of liberty, particularly since their own function of supervision is linked with the conditions of a free society. Freedom includes the right of dissent, and even the right to be wrong. But freedom recognizes the human personality as something created in the image of God, each person with his own inalienable rights. Business is potentially progressive and liberal because it is itself an expression of the libertarian point of view.
In the competition against ancient ideas of slavery and regimentation "in modern dress," it is a duty of management to lead and energize those committed to enlarging the horizons of the individual. Such freedom is right up the alley of properly conceived business enterprises. And in the process of helping, the businessman himself will be educated to a better understanding of the social, economic, and political forces which make possible such success as he may enjoy.
The Law and Education
You say: "There are persons who lack education," and you turn to the law. But the law is not, in itself, a torch of learning which shines its light abroad. The law extends over a society where some persons have knowledge and others do not; where some citizens need to learn, and others can teach. In this matter of education, the law has only two alternatives: It can permit this transaction of teaching-and-learning to operate freely and without the use of force, or it can force human wills in this matter by taking from some of them enough to pay the teachers who are appointed by government to instruct others, without charge. But in this second case, the law commits legal plunder by violating liberty and property.
Bastiat, The Law (1850)