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New Economy, New Social Contract


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New Economy, New Social Contract

Listen up, Corporate America. The American people are having a most serious discussion about your role in their lives. It is the sweetest of ironies that in the midst of unprecedented prosperity, for which you are largely responsible, a surprising number of Americans are angry with corporations. Remember the bashing Big Business took at the Democratic Convention? Well, nearly three-quarters of the American people do believe that business in general has gained too much power over their lives, according to the latest BUSINESS WEEK poll (page 148). It's not just the handful of industries that Vice-President Al Gore attacked--"Big Tobacco, Big Oil, the big polluters, the pharmaceutical companies, the HMOs."

It's all too easy to dismiss these attitudes as the whining of the well-off: "We're so rich, we're not going to take it any more!" Or as the ingratitude of the beneficiaries of your success. After all, just a few years ago, Japanese and European companies were riding high. Today, U.S. companies dominate the Information Age, the Standard & Poor's 500 index is up nearly 200% over five years, unemployment is extraordinarily low, wages are rising, and inflation remains tame. Much of the credit for that goes to corporations. Times are good--better than most people can remember--so why are all of these people complaining?

The neopopulism that abounds isn't about lack of prosperity. Just the opposite. Americans do give credit to Corporate America for innovating, creating jobs, and above all, making profits. What appears to bug them is something less well-defined and more inchoate. It has to do with corporations being in their faces all the time while not delivering on service. It has to do with being exhausted night after night in a 24/7 work world and not having time or energy left for loved ones. People are grumbling about what they see as business' disregard for their safety, the norms of equity, and the absence of responsibility. Unlike the sixties, when business bashing was part of a youthful rebellion, neopopulism today cuts across many demographic and age groups.

In effect, there is a growing discussion about where civil society begins and the market economy ends. The triumph of the market over the state and the high-tech New Economy are changing the boundaries and the balance between work and family, office and home, corporate and private. The result is an uneasiness with the powerful institution held responsible, the corporation. Both political parties are tapping into this pool of discontent to shape their campaigns.

Here are the issues behind the backlash: Propriety

A sense of corporate invasiveness in hitherto private portions of peoples' lives is growing. Computer "cookies" track every individual's move on the Web, and dot-coms sell personal data, all too often without asking permission. Companies monitor employees constantly and demand blood tests for drugs and, increasingly, diseases. Advertising invades schools and virtually every public space, including baseball stadiums. Work permeates life, cutting time for family and friends. And huge corporate campaign contributions foster an aura of political corruption, undermining democracy. Equity

People feel overworked and underpaid, especially in contrast with their CEOs, who now make nearly 500 times the average employee's wages. In addition, the rewards of the New Economy are felt to be distributed unevenly. Productivity is up 13.5% since 1992, but real wages and benefits have risen only 7.5%. Only 4% of the public believes the sole purpose of corporations is to make profits for shareholders, according to the BUSINESS WEEK poll. Some 95% feels corporations should do more for employees and communities. Safety

People increasingly feel threatened by the products and services sold by corporations. HMOs are seen as run by insurance companies that parcel out health care on the basis of cost. People buy Ford Explorers, in part, for safety only to see Ford Motor Co. and Bridgestone/Firestone Inc. engage in finger-pointing while customers must wait months for new tires (and Ford CEO Jacques Nasser refuses to testify before Congress). Genetically modified crops are created by Monsanto Co. for farmers, but consumers worry about food safety.Responsibility

Corporations increasingly connect to their customers in a personal, emotional way, and their customers expect more from them. So college students picket Nike Inc. and Gap Inc. to stop sweatshops in Asia. Global warming and the environment become very important. Extending U.S. child labor and environmental laws overseas become trade issues.

Corporate America, ignore these trends at your peril. Take steps to counter the backlash now. First, get out of politics. Corporations should embrace the McCain/Feingold campaign-finance-reform legislation. Then take responsibility for overseas factories. Most abuses occur when companies outsource their production and forget about it. Loyal customers demand--and a positive brand image requires--that they don't.

Spreading the wealth is key, too. Options have helped tremendously, but only a minority of employees have them. Many more should get them. And boards of directors must curb the insane leaps of CEO compensation. In a work world dominated by team effort, a winner-take-all pay plan for CEOs is unacceptable.

The New Economy is begetting a New Society. "Executives haven't had to worry about social issues for a generation, but there's a yellow light flashing now and they better pay attention," warns Daniel Yankelovich, chairman of pollster DYG Inc. A word to the wise ought to be sufficient.


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