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Corporate reform should benefit workers as well as shareholders: panel

August 1, 2002

For more information, contact: Benjamin Haimowitz,

The accountability of corporate America has been defined too exclusively in terms of shareholders and investors and must be broadened to include workers other stakeholders.

But, to date, workers have been virtually ignored in Congress' response to the crisis.

These were the central messages on Sunday, August 11, as the Academy of Management, the world's largest management-research organization, kicked off its annual meeting in Denver. The opening forum on Sunday was devoted to the recent scandals in corporate governance.

As the forum's organizer, Prof. Thomas Kochan of M.I.T., put it, American workers "have been eerily silent in these [corporate-reform] debates to date." Workers and their families are "paying a huge price for trusting business executives to protect their interests. But current proposals fail to protect employees against the corporate actions that have led to dramatic losses in jobs, retirement income, professional and personal identity, and voice in the workplace."

Providing such protections, he continued, "will require a major overhaul and update of the labor laws that were designed for the world of work of the 1930s, not the knowledge-driven organizations, fluid labor markets, and diverse workforce and families of today."

In the 1930s, he noted, Congress followed up its establishment of the Securities and Exchange Commission with the passage of the National Labor Relations Act. Similarly, today's Congress, having acted to protect investors, should "address the legitimate stake workers and their families have in the modern corporation."

But "reforming labor laws is not enough… Another necessary reform is to grant loyal employees who invest and put at risk their human capital a right to sit on the boards of their corporations and pension funds just as these rights are granted to investors of financial capital…The steel, trucking, and airline industries invited employee representatives onto their boards in recent years in exchange for major worker concessions to save their companies. But why should employees only get a voice in governance in failing companies? Their voice should be heard in all firms, not just the basket cases of corporate America."

"Also like investors," he concluded, "employees have learned that they cannot put all their eggs in one basket - in today's labor market, workers must be ready and able to move to new jobs. This requires weaning employment benefits away from their individual corporate focus; as a long-term objective, pensions, health insurance, training and development, and all other benefits must become fully portable."

Kochan, the George M. Bunker Professor of Management at MIT's Sloan School of Management, is the author of many books on industrial relations and human-resource management. From 1993 to 1995 he served on the Clinton administration's Commission on the Future of Worker/Management Relations.

The two other speakers at the session, Profs. Dennis Gioia of Penn State University and John Child of the University of Birmingham in England, joined Kochan in urging a broadening of corporate accountability.

Prof. Gioia laid special emphasis on the responsibility of business schools to incorporate that view in their curricula. Calling for increased attention to the subject of business ethics, he noted that a recent survey by the Aspen Institute found that the experience of attending business schools actually weakened students' ethics. "We're turning out some very skilled criminals," Gioia said.

Prof. Child applied the theme of broadened accountability to multinational corporations in their dealings abroad. As he put it, "Overseas stakeholders are in many instances not well served by MNCs," which, he observed, "oppose local participation in their ownership and control…MNCs must become truly multinational in their ownership and culture."

The Academy of Management, founded in 1936, is an international organization that works to foster the advancement of research, learning, teaching, and practice in management disciplines. It has over 12,000 members in 90 countries, including some 8,000 in the United States. The Academy's 2002 annual meeting, August 11-14, drew 6,000 scholars and practitioners to Denver for more than 1,000 presentations on a host of issues relating to corporate organization, the workplace, and technology development, and other management-related subjects.

Media Coverage:
Reuters. USA: US corporations need ethic lessons, panelists say. (Sunday, August 11, 2002).

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