R.I.P.: The Good Corporation

IBM's fall from grace is more than a big business story. It also represents last rites for the "good corporation." This was our ideal of what all American companies might become. They would marry profitmaking and social responsibility, economic efficiency and enlightened labor relations. IBM was the model. It seemed to do everything right, and its present troubles (including its first layoffs) have shattered the vision with unmistakable finality.

The resulting psychic void explains much of today's sense of economic insecurity. The spread of the "good corporation" was supposed to provide stable jobs and generous fringe benefits-health insurance and pensions-for more and more Americans. Instead, the process is sliding into reverse. As companies strive to stay competitive, they are shedding workers, encouraging early retirement and cutting fringe benefits. Consider:

In 1979, 55 percent of full-time male workers had employer-paid pensions. By 1988, that had dropped to 49 percent, according to the Labor Department.

Health-insurance coverage is eroding, and workers must pay more of the premiums. A study by Foster Higgins, a consulting firm, finds that nearly four fifths of companies now require employees to pay an average of $107 a month for family coverage, up from $69 in 1989.

Companies are also trimming-or eliminating health insurance for retirees. In 1992, about half of workers in companies with more than 200 employees were promised retiree benefits, down from two thirds in 1983, reports the consulting firm KPMG Peat Marwick.

The once-imagined vision of universal benefits and secure jobs is fading. It is not that executive suites have suddenly been hijacked by meanspirited monsters who have replaced the previous compassionate saints. Both images are obviously overdrawn. Countless companies still make ample profits while treating their workers well, as a recent book ("The 100 Best Companies to Work for in America") shows.

There's 3M, which allows many employees to devote 15 percent of their time to projects of their own choosing. One recent payoff. Post-It note pads. There's Merck, which has pioneered major drugs and has such a good reputation that it receives 150,000 job applications a year. There's Motorola, which has invested massively in worker training.

Nor is it true that stable jobs have vanished. Among men, the typical worker between the ages of 45 and 54 has been with his present employer 12 years. About a third have been there 20 years or more. As more women pursue careers, their job tenure is actually increasing. Still, something has changed. What's gone is a sense of confidence, a faith that jobs-or careers-are permanent. The anxiety may exaggerate the reality, but it is keenly felt.

The idea of the "good corporation" assumed that superior American management could easily blend two roles: the company as a fierce economic competitor, and the company as a welfare state for its workers. There seemed to be no conflict. Stable jobs and ample fringe benefits would make workers loyal, and loyal workers would make companies prosper. IBM is hardly the first company to disappoint the ideal. The unraveling really started in the 1970s with troubles at firms like Penn Central and Chrysler.

But IBM's downfall has special meaning, because it seemed the best of the best. No company, regardless of how prosperous, now seems permanently safe from upheaval. We overestimated the prowess of U.S. management and underestimated the disruptive power of market changes, from new technologies to foreign competitors. We also found that corporate generosity does not automatically create corporate competence. Companies where life became too cushy often lapsed into overconfident mediocrity.

_B_Welfare state:_b_In some ways, these changes have been healthy. The new insecurity-more realistic than the old complacency-often motivates managers and workers to keep their companies viable. But in another sense, the changes have left us adrift. We now lack a clear concept of what "good management" means. It used to be benevolent shrewdness. Does it now include necessary cruelty: axing one third of the company to save the other two thirds?

What also has been wounded is our idea of the welfare state. Since World War I this has always been an unofficial blend of private and government benefits. As more firms became "good companies," we thought, more workers would receive welfare benefits (health insurance, pensions). Government would protect only the poor, disabled and aged. Companies had become spontaneous instruments of social policy; for a citizenry suspicious of government, this seemed just fine.

There were always some groups that didn't fit easily into this welfare system, as Mary E. O'Connell of Northeastern University writes in The American Prospect magazine. These included workers in low-paying industries with high labor turnover and women who moved between the home and paid work. But these excluded groups are now increasingly joined by full-time career workers, whose companies either aren't offering comprehensive benefits or are cutting back. Gaps in the social safety net widen.

What to do? The impending health-care debate is partially a product of this breakdown. People increasingly fear losing health insurance, so government may mandate or provide directly-the coverage. Parental-leave legislation (requiring time off for new parents) reflected the same impulse. If companies don't do the right thing, then government will make them. But, of course, it isn't that simple.

Governments that saddle companies with more labor costs ultimately discourage companies from hiring. And mandated benefits, whether paid by government with payroll taxes or simply imposed on business by regulation, are higher labor costs. The effect is the same as an increase in the minimum wage: if the wage rises too high, companies won't hire workers who seem worth less. Europe has drifted disastrously down this path. In 1970, its unemployment was 2.6 percent; now it is about 11 percent.

So the death of the "good corporation" poses hard issues. There are many good companies, but many don't reach our ideal and some that now do won't in the future. We are discovering the world as it is, not as we wished it to be.