Jobs, Downsizing and Stakeholders

by David Nitkin

The Future of Business

We are used to assessing business in terms of profits, or operating ratios, or dividends. The current public debate, is how worthwhile is the large employer? Are profits paid to shareholders generated at the expense of other stakeholders: namely unemployed and dislocated, discouraged but willing, workers?

The bottom line in this debate is not profits; it is the survival of families, communities, the country and the planet.

The Shareholder versus Stakeholder Capitalism Debate

Companies do not exist primarily to create employment. Supporters of free market or shareholder primacy thinking would argue that jobs follow an effective strategy for making money.

Stakeholder rights activists agree that companies do not have job creation as a goal, but would expect it as a cost of doing business. Jobs are means to fuel local economies, enrich corporate profits, and help meet needs of workers, customers, host communities, regulators, and other stakeholders, including shareholders. Consequently, so long as social welfare is attached to gainful employment, institutions will be measured on how much they contribute to society.

Toward a job Creation Agenda for Business

In the first decade of the new millenium, a new means of wealth creation and distribution may be created. Some portions of society are developing expectations of business and its job-related responsibilities, including the following:

1. Ethical Alternatives to Downsizing: The responsible corporation should do everything in its power to avoid layoffs. As noted in the Monitor article, “The Ethics of Downsizing,” (February 1991) there are many such initiatives including job sharing, a wage freeze, deferred benefits, and the like.

2. Investment in Tomorrow’s Workers: There is a need to explore ways to fund new jobs either through lower wage scales for new employees or by asking senior workers to accept wage reductions, with such forgone wages being transferred to young workers in new jobs who are beginning their careers.

3. Worker-Owned Enterprise: Where no buyer is willing to invest in an existing business, every effort should be made to promote worker ownership.

4. Corporate Financial Incentives: Where there is a will, there’s a way. Tax incentives, loan guarantees, investment funds and other tools exist to reward businesses that invest in sustainable job creation and treat workers well.

5. Public Disclosure: It should be made mandatory for companies to report annually on changes in their numbers of workers .

6. Incubation: Large well-established businesses should support promising, startup related firms.

7. Restrictions on Overtime: Unions in some sectors, notably car-making have been willing partners in scheduling overtime for existing workers at the expense of new jobs. This practice should be abandoned in favour of job creation.

8. Job Sharing: There are a variety of supportive mechanisms, including fringe benefits for part-time workers, that need to be explored in this regard.

9. Salary Caps: There is little justification for a chief executive officer earning, through salary and dividends, 2,000 times what the most junior employee earns. No executive is worth or needs compensation of $40 million per year. Salary caps or progressive taxation should he applied.

10. A Commitment to Employment: Corporations need to assess whether corporate social responsibility in the 1990s is about applying as much creativity as possible to the human need for jobs. If so, employment opportunity should be a more explicit part of the organization’s mission and mandate.

David Nitkin is the C.E.O. of Ethicscan, Canada. This article has been adapted from an article in Corporate Monitor, Jan.-Feb. 1996.