From 1952 to 1971, the CEO of IBM pursued a remarkable change in the purpose of their corporation. At the time, Thomas J. Watson Jr., the son of IBM's founder, Thomas J. Watson Sr., was president at IBM, presiding over the then-largest and most profitable corporation. They grew from $696 million in sales in 1955 to $7.5 billion in sales in 1970. In the late 1950s, just a few years into his job as CEO, Watson wanted to make changes to improve the company.
The change he pursued came from a question: "How much more am I worth to IBM than that guy down at the bottom of the pay scale? Twice as much? Sure. 10 times as much? Maybe. 20 times as much? Probably not." (p. 311 FS&C) Watson followed these questions and his answers with radical approaches to alter the purpose of IBM, the world's most profitable company.
In January, 1958 he placed all employees on salary to reduce the differences between executives and other workers. But his conscience began to question other policies, especially in the area of executive compensation. Because of stock options, in 1958, in addition to his salary of $400,000, he stood to make five times his salary in stock options—$2 million. So he stopped taking options that year. "We don't want to look like pigs." he said, in his book Father, Son & Co.: My Life at IBM and Beyond. (FS&C)
Furthermore, he began a process of questioning the very purpose of a corporation under capitalism. He asked whether "our present form of capitalism is the best way to support American democracy in the long term?" He said he thought that "the model corporation of the future should be largely owned by the people who work for it, not by banks or mutual funds or shareholders who might have inherited the stock from their parents and done nothing to earn it." He imagined that achieving such a goal for a corporation would be "an evolutionary process," which would occur "gradually, over two or three generations, [during which] a business would, by law, shift into the hands of employees."
He pursued this visionary change in the purpose of a corporation, that is, who a corporation was to benefit and be owned by. He tried stock purchasing options for all employees, but found that IBM employees didn't stay in the stock because they had other priorities in their lives like reducing mortgage payments. In the end, he settled for "developing employee benefits such as major medical coverage, scholarships, and college-tuition loans, and matching grants for charities and schools." (p. 313 FS&C)
These were radical changes then. And they worked well during his tenure. It is a big, important change to alter the very purpose of a corporation from one to benefit only executives and shareholders, to benefitting all employees and shareholders.
Tim Cook, Apple's CEO Follows Watson's Example in a Different Way
Tim Cook, Apple CEO recently came out with an equivalent big, important change. Here's how it happened.
Tim Cook took over as Apple's CEO in August 2011, succeeding Apple founder Steve Jobs, who died later that year on October 5th, 2011.
According to an article in Salon.com: the National Center for Public Policy Research (NCPPR) came to their 2014 annual shareholder meeting on Friday, February 28th. This group, a conservative think tank, "arrived at the meeting demanding that the board not pursue any environmental initiatives that hurt the company's bottom line. The group's proposal would have required Apple to disclose the costs of such initiatives and to be more transparent about its relationship with 'certain trade associations and business organizations promoting the amorphous concept of environmental sustainability.'"
Cook responded by saying, "We do a lot of things for reasons besides profit motive. We want to leave the world better than we found it. If you want me to do things only for [return on investment] reasons, you should get out of this stock."
NCPPR responded by saying "After today's meeting, investors can be certain that Apple is wasting untold amounts of shareholder money to combat so-called climate change. The only remaining question is: how much."
The proposal by the climate change denier group did not pass.
What this means for Apple and other Major Corporations
The mainstream of corporate practice the last 20 years has been largely a continuation of standard practice of focusing on returns of investment for shareholders. The minority counter-trend is something more sophisticated—a multi-purposed organization which balances how to serve multiple stakeholders including future generations. In the case of Apple under Tim Cook, he's saying that to "leave the world better than we found it" is a key bottom line for Apple under his leadership.
Perhaps it is no accident that Tim Cook is engaging in purpose-changing decisions as far-reaching as those of Thomas J. Watson, Jr., the man under who's leadership turned IBM into a computer company. Mr. Cook worked for 12 years for IBM in their personal computer division, finally becoming their director of North American Fulfillment.
It is too early in Tim Cook's tenure at Apple to judge the legacy he will leave to Apple, its customers, suppliers, employees and shareholders, and to the world. But . . . this kind of thinking bodes well for at least the chance that other corporations will follow Apple's lead and begin devoting significant resources towards solving or lessening the global crisis towards a sustainable global civilization.
This is how transformational change begins. To gain the peace of mind that comes from envisioning a realistic positive future for the human endeavor; to enjoy the certainty the we will be followed by many generations of people with happy, prosperous futures; to build a sustainable civilization on Earth to serve the generations of today, and the generations of tomorrow—we will require such transformational, even revolutionary, change from all sectors of our society, including corporations and governments; religious organizations and non-profits. Bravo to Tim Cook and Apple. Let us support Tim Cook, and other leaders like him. Let us help to make transformational changes. Our present and future happiness depends on it.