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Learn more with our insights in an interview with Kellie King, automation expert, at ow. About 2 days ago from Enlighten's Twitter via Hootsuite Inc. About Our work Industries Resources Media. Like Lewis, Eagan translated his ideals into a series of business practices and structures. For example, he made binding legal arrangements for the company to pay no more than 6 percent of its profits annually to shareholders; the rest went to employees as profit sharing. He made it clear that this was not an act of charity; the trust would be worthless unless the company was successful.

It is still a leader in occupational health and safety, and is the preferred place of employment in Birmingham for blue-collar workers of all races. Its employees receive extensive on-the-job training, and they and their children are eligible for college tuition remission. Turnover among its 2, employees is less than half a percent per year, and its workers, a third of them African-American, enjoy a state-of-the-art wellness center that is also open to their families. The philosophy at W.

Gore and Associates has more to do with fostering innovation and creativity. When he invented a way to coat metal wires in multiple colors, with a polymer called PTFE, DuPont passed on the opportunity to develop it.

This innovation later proved to be worth hundreds of millions of dollars. Gore and his wife, Vieve, set out to create a new company where innovative, self-starting employees would be treated more encouragingly — a business devoid of the barriers, structures, and bureaucratic nonsense that can hamper the free play of imagination, creativity, and initiative. Because there were no bosses, if Gore associates wanted to put a title on their business card, they were free to invent one. One might reasonably expect such a nonsystem to result in chaos; in fact, it has resulted in decades of product innovation.

Gore believed that when his people understood what he was trying to achieve, he could trust them to act as he himself would act in any given situation. Along the way, Gore developed a theory of emergent leadership: One becomes a leader by attracting followers. For example, when an associate had an idea for a new product or project, the first step was to enlist others to work on it with him or her.

Once a team was assembled and a project proposal written, the effort would be funded. Each team was self-managing, and each set its own work schedule. But maintaining such cultures is not easy.


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Indeed, it takes more than a philosophy — it takes a set of rules. The history of socially responsible companies shows that when virtuous programs and policies exist primarily because an individual leader cares about them, his or her successors have no problem removing them. These practices are far more likely to last when they are institutionalized in rules of governance. Thus, a few enlightened capitalists have attempted, in one form or another, to institutionalize their practices in an organizational structure. It can also rely on an independent trust or foundation that owns most of the company stock.

In the U. As University of Denver political scientist David Ciepley documents in a May Journal of Business Ethics article, ownership by a trust or foundation can offer enormous organizational, economic, and social benefits. Though trust and foundation ownership structures have proved central to sustaining virtuous practices in many companies, they are not easy to fund, design, and implement in a way that guarantees admirable behavior after the founder is gone.

Indeed, Spedan and Eagan spent years constructing ironclad documents that bound future generations of trustees to conform to their aspirations for their companies. The constitution covers most facets of organizational activity.

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Lewis also created a complex system of checks and balances designed to limit the ability of trustees to stray from that commitment, even while it gave them the strategic flexibility needed for innovation and to meet future competitive challenges. The vast majority of profits are, by constitutional requirement, earmarked for reinvestment in future growth. The constitution instead provides for their participation through 1 an extensive communication system that gives them full access to managerial information, and 2 an elaborate structure of committees, each with clearly defined roles, responsibilities, and authority.

The constitution prohibits the board from taking actions on employee pensions, living conditions, working conditions, housing, or wages without first consulting an elected employee advisory board. Eagan explicitly directed the trustees to use dividends from his shares in three ways: as profit sharing; as income to workers if the plant shut down for any reason; and as support to the families of deceased workers. Alas, the vast majority of enlightened leaders do not give the same care and attention to their legal and organizational infrastructure.

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For example, most have done little to educate their board about the need to protect legacies of virtue — with, for example, legal barriers to hostile takeovers, or mandates on management priorities. The upshot is that few such legacies have been maintained in publicly traded corporations. Although a good governance structure is necessary for long-term enlightened management, it is not sufficient. Rather, it should be regarded as a prerequisite for a more potent element: control of company stock.

After studying the stories of enlightened capitalists for the better part of my career, I believe that ownership is the most significant predicator of virtuous business practices and the key to their sustainability. This was not by chance. All four founders had an aversion to public ownership of their company. James Lincoln, founder of Lincoln Electric, felt that the greatest threat to his people-oriented management practices came from Wall Street and the short-term dictates of the stock market.

Why should he be rewarded by large dividends?

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When many commentators think about enlightened business ownership, they focus on the advantages of privately held family businesses. But they often have too few resources for any but the most minimal forms of social engagement. There are exceptions, of course. The company recently introduced a line of healthy snacks and vowed to cut back on the amount of salt, fat, sugar, and butter in its chocolate products.