Paternalism

The practice of paternalism has a long history in American business, and it has been both maligned and extolled. Many companies have taken the opportunity to highlight their “fatherly” actions, claiming to be family businesses that take care of their employees through extra benefits and care that their workers would not be able to afford otherwise. Others have complained that paternalistic methods used by businesses form unhealthy environments, creating company towns that are fully dependent on companies to provide too many aspects of their living conditions. Paternalism, according to skeptics, fosters a top-down style of management that hinders creative thought among employees and encourages harmful promises or inconsistent behavior. However, a new style of paternalism has become more common in recent years as companies have begun exploring ways in which to develop employee innovation and social resources by helping their workers live healthier, fuller lives.

In the late 2000s, paternalism often involves offering employees benefit plan advice (instead of only a limited number of available plans) and compensation packages that provide a number of personalized extras. These include fitness gym memberships and other healthy living options. By supporting employees in these socially conscious ways, companies are able to maximize employee retention and maintain favorable, efficient workplaces.

DEVELOPMENT OF PATERNALISM IN AMERICA

Ronald Sims, in his 2003 book Ethics and Corporate Social Responsibility, identifies three different stages of development that occurred in the progression of paternalism, as companies explored the meaning of social responsibility and employee welfare in the twentieth century of United States business.

The first stage was profit maximizing management, during which business executives decided that their primary goal, for both society and success, was to encourage profit and growth. The American economy was seen as dependent on the wealth of companies, and anything done to encourage that wealth was seen by managers as acceptable. This was before the era of legislation concerning child labor and gender inequality, so some of the accepted methods—while profitable for businesses— were harmful to society. Sims writes that this era ended at the time of the Great Depression (1930s) when the success of business and business practices was called into question.

The second stage was trustee management . After the Great Depression, wealth was more spread out, and fewer privately-owned companies existed. Instead, companies were under the control of stockholders and subject to many outside groups such as suppliers, creditors, and of course customers. Government involvement also increased, leading to legislation that established fair labor principles and welfare systems; such legislation also encouraged the protection of employees. Corporate wealth started to be distributed for the purposes of social responsibility, and corporate authority moved away from one or two top executives to corporate boards and trustees. Employee benefits became common in this stage. Unfortunately, several paternistic problems also arose as employees became dependent on their companies, while companies struggled to not misuse their paternistic authority.

The third stage is the quality-of-life movement , where corporate social responsibility became a popular topic. Companies began inspecting ways that they could profit by their relationships with employees and employees' relationships throughout society. Social capital, the collective ideas and connections of the society, became important to businesses. Focus moved from purely economic goals to wider initiatives involving care of the environment, employee physical health, employee mental health, and employee emotional security. This is the current state of business paternalism, which is growing into a more complex style of management as organizations realize the marketing and image benefits that can be earned through social responsibility, along with the rewards of employee energy and innovation.

PROBLEMS WITH PATERNALISM

The negative effects of paternalism developed largely in the second stage, as companies began to assume that employees did not have enough knowledge or available information to make wise decisions. Therefore, management took the burden of these decisions away from employees, locking some organizations into dangerous, dependent relationships that could be exploited. However, as electronic communication became more common, the excuse of employee ignorance no longer applied, and companies were able to offer their workers a number of choices, providing them with the necessary education to make wise decisions concerning health plans and benefit options.

One of the most popular current ideas under the heading of “New Paternalism” is the idea of “nudging,” or giving employees—and others—small psychological nudges to make the right decisions, rather than forcing them to make certain choices in any direct way. These nudges are designed to help people realize the benefits to choosing health-conscious options without limiting their freedoms. Government nudges include “sin” and “fat taxes” to support beneficial lifestyles. A company interested in “nudging” their employees might offer gym memberships as a part of an attractive and flexible health benefit plan, encouraging workers to maintain physical well-being without requiring it.

BIBLIOGRAPHY

Aronoff, Craig E., and John L. Ward. “The High Cost of Paternalism.” Nation's Business. May 1993.

Dowling, John Malcolm, and Yap Chin-Fang. Modern Developments in Behavioral Economics. Hackensack, NJ: World Scientific, 2007.

Goldstein, Evan R. “The New Paternalism.” The Chronicle Review, 2008. Available from: http://chronicle.com/temp/reprint.php?id=pwq4w52rk7wg916xkfflm6r43x0h2d5s.

Sims, Ronald R. Ethics and Corporate Social Resposibility. Westport, CT: Greenwood Publishing Group, 2003.

Winning, Ethan A. “Pitfalls of Paternalism.” Ewin.com, 2008. Available from: http://www.ewin.com/articles/paternal.htm.