Recently, companies have eased up on downsizing. This trend offers us an insight into how business responds to moral pressure. As government grows less powerful and the market economy more powerful, the moral stance of the business corporation becomes an issue of the utmost importance.
Those outside the business community -- in academia, the media, and government -- are quick to pressure business to exercise its "social responsibilities." More often than not, however, this appeal proves counterproductive. Business executives find it easy to brush aside these urgings, often with irritation.
The resentment comes from their suspicion that, as businesspeople, they are treated as if they had no moral concerns for the larger society (which is spectacularly untrue). Their resentment also comes from the fact that, most of the time, what they are asked to do sacrifices the interests of shareholders for some putative social goal.
Nevertheless, there is one form of pressure that does make sense to business: the reminder that the short term and the long term interests of business often conflict and that the morally right thing to do usually serves the long term better than the short term.
The shift in emphasis from social responsibility to this point of view may seem like mere semantics, but it is not. The social responsibility argument pits business interests against societal ones. The short term vs. long term argument offers different strategies for achieving legitimate business goals.
One of the strengths of the market economy is that, in the long run, it is more likely to be self-corrective than institutions such as the government, the media, or universities. The winds of reality blow harder, and sooner or later competitive pressures -- plus regulation -- help to correct the worst abuses. This is what we now see happening in the moderating of the downsizing strategy.
Realistically we must recognize that there are limits to how well business can serve the moral needs of society, even when executives act with enlightened self-interest. But, as the shift from downsizing to the new emphasis on "people factors" reminds us, the opportunity for our market economy to serve the moral as well as the economic needs of the nation remains significant. But it requires taking a longer time horizon and keeping faith with one of the basic tenets of the traditional Protestant ethic -- doing well by doing good.