Corporate Dreams: Big Business in American Democracy from the Great Depression to the Great Recession

Chapter 9 - The Right to Manage

Chapter 9 The Right to Manage Corporate leaders recovered their moxie in the late 1930s. Since the early days of the Roosevelt administration, many of them had lived in unrealistic fear that the survival of the business system was in doubt. The depth of the Depression had rendered more than a few of them passive, even cowed. But as the economic crisis waned, they found the will to fight for what they considered the essence of the business system, their “right to manage.” In the election of 1938, for the first time in a decade, Republicans gained rather than lost seats in both houses of Congress. Republican congressmen and senators found allies among conservative Democrats whom Roosevelt had tried, unsuccessfully, to purge from his party. This alliance of Republicans and anti-Roosevelt Democrats ended the New Deal. Corporate profits rose in 1938, thanks partly to a surge in government spending to fight an economic dip the year before. The 1939 outbreak of war in Europe further stimulated the American economy. Orders for war materiel poured in from England. The United States adopted a policy of “preparedness” for war, lifting both military spending and the financial prospects of American manufacturers. After the U.S. entrance into World War II in 1941, businessmen could also take heart from relative quiet in the labor movement. With young Americans fighting abroad, the public had no patience for labor conflicts at home. Most national unions, including the United Auto Workers, issued a no-strike pledge and held to it, despite occasional wildcat strikes by local affiliates. Even though business had begun to regain some of its former profit and power, many corporate executives still feared that they were on the verge of losing control of their firms. During the war it was not easy to see that the labor movement was approaching high tide and would eventually begin to ebb. Despite the unions’ no-strike pledge during the war, 61 their membership had risen and their leaders had spoken militantly. The wartime shortage of labor emboldened the rank and file. From management ’s perspective, shop floor discipline was lax. Equally distressing to corporate executives was the new militancy of foremen, caught between workers and managers, the former eager to assert their new power and the latter insistent on ever more production. Foremen began to organize and move toward unionization themselves. The movement to unionize foremen had begun among distressed supervisors at Ford, where brutal top-down oppression was still the order of the day. As the foremen’s drive for union protection spread to other companies, frightened executives feared the onset of a new threat to managerial control. Managers saw a foremen’s union as de facto socialism. C. C. Carlton, president of the Automobile Manufacturers Association, said that if management lost control of foremen, “then you have taken over our company. . . . [W]e will have nobody to represent us and our stockholders and the owners of the business.”1 Unionization of foremen was a threat to the right to manage. Executives believed that the “right” to manage was a corollary of traditional property rights. Managers, as agents of shareholders, exercised the property rights of the company’s owners. Limitation on managerial authority was therefore tantamount to socialism. Thomas Roy Jones, a prominent member of the National Association of Manufacturers, said that loss of the right to manage would amount to “relinquishment of the stockholders’ last right—the ownership of the corporate stock.”2 By tying themselves so closely to stockholders’ property rights, corporate executives were in effect answering—or more accurately ignoring—Adolf Berle’s and Gardiner Means’s ideas described in the previous chapter. In The Modern Corporation and Private Property (1932) Berle and Means had argued that with corporate ownership divided among many shareholders, companies were often controlled by managers , not owners. Therefore, corporations, and especially their managers, could not legitimately cite traditional property rights in defense of the privileges and prerogatives they sought to preserve. But few corporate officers had ever heard of Berle and Means. Even if they had, they would have given short shrift to their idea that managers had control. Whether or not corporate managers had more power than shareholders, the T h e C o r p o r a t i o n S t r i k e s B a c k 62 executives’ time in the political wilderness of the New...