Is the Businessman Coming Into His Own?

MR. GRIFFIN: Members and Guests of The Empire Club of Canada: our speaker today is Mr. Clarence B. Randall, President, Inland Steel Co., Chicago. Mr. Randall was born in New York State and educated at Harvard University. Upon graduation from the Harvard Law School in 1915 he opened a law practice in the heart of the iron ore country in Michigan's Upper Peninsula and remained there for ten years with the exception of two that were spent as an infantry officer.

In 1925, while quietly but successfully working at his profession, Mr. Randall was offered a position on the executive staff of Inland Steel Company. He had never had any previous dealings with this firm and, as he confesses now, he did not even know the names of its executive officers when he went to Chicago at their request. Inland was well satisfied with its new acquisition and he became vice president in 1930 and president in 1949.

Despite his great success in the industrial world, Mr. Randall has found time to do much more than most senior officers. When I say "more" I am not referring to the fact that he is, or has been, a member of the Board of Overseers of Harvard University, a trustee of the University of Chicago, a trustee of Wellesley College, President of the Harvard Alumni Association, General Chairman of the Chicago Community Fund, trustee of a Chicago museum and Steel Consultant to the Marshall Plan in Paris.

When I say "more" I mean that he has found the time to evolve and set down a philosophy, a creed, a statement of personal beliefs on the vast subject of the place of business and free enterprise in the world in which we live today. This is perhaps the greatest of his many contributions to the life of our time.

Gentlemen, it is my privilege almost every week to introduce "top brass". Today I present to you "top steel".

MR. CLARENCE B. RANDALL: Mr. Chairman, Distinguished Guests and Gentlemen:

It is certainly a great pleasure to be here as your guest, with such old friends as Hugh Hilton and Jim Duncan, one of the most articulate speakers and one of the most sought after; and men like General Ritchie and others about whom I have heard so much.

I am bound to say that this is a great distinction for me. Make no mistake about it; I know, and everyone in the States knows, that the Empire Club in Toronto is the top forum in Canada. To be asked to come here is in itself an honour.

I am embarrassed, because twice I had to regret invitations to come, and it is a most happy coincidence that this engagement which, as your President knows is one of long standing, happens to coincide with events which shortly may bring our Company into Canada in a very big way. I want to say when we do come we shall come with great enthusiasm and in the hope that we may become good Canadians.

Actually, as your President has indicated, I was "trapped" into this thing, trapped by my own big mouth. I don't remember who it was who said, "O, that mine enemy might write a book!" Over a year ago I was persuaded to put my philosophy of business into a book, the argument being: "You are always yapping about Free Enterprise; you claim the great educational institutions are not teaching the young men and young women that way of life; we have plenty of books by people who have never practised it; why don't you put your philosophy on the printed page?" So I devoted last winter to trying to put it on paper.

It happens to be my firm belief that if the businessman is to come back to leadership in the community at large, he has to get up and say what he believes. He has to become articulate. Thus, I have been trying to preach the gospel that business men must know what they believe, and tell it. And now I have been asked to practice what I preach.

I hope it does not offend you of this great institution when I confess at this moment I have made no preparation whatever about what I am going to say today. You are going to get what my wife gets at supper, and what the boys at the office get. I have been having great difficulty all morning on the telephone explaining this to the boys of the press. For once, the press will have to hear a speech. I have always wondered what they would do with the editions on the street containing the prepared speech, if the guy took a powder and did not make it.

When business men fumble around in front of the microphone, I often wonder if it is because they have nothing to say, and I wonder why it should be so hard to have something to say. Take any of these master salesmen, and Canada has many of these specialists, their timing is good and their anecdotes are precise; the hearty laugh comes just at the right time, and the hand-shake is vigorous. They never seem to fumble around for words when they are trying to sell their busy customer. If we understand freedom and our economic way of life, if we really know what it is about, can't we say those things too?

So I have cultivated the technique of speaking without notes and manuscript, and without preparation. I have discovered the most soothing gesture in the world that a public speaker can make is to turn out the reading light. A kind of relaxation comes over the audience, because when you do that, they know it is YOU, not the polished phrases of the public relations expert. (Mine sits here and he does not know what I am going to say.)

Anyway, the words I am going to speak today, I can pronounce. Any books I may quote, I have read. That is why I won't quote from Aristotle.

My title today is, "IS THE BUSINESSMAN COMING INTO HIS OWN?" and I want to make an offer to refund the luncheon cost to any member who finds he does not get what he expected, because when I say "Is the businessman coming into his own?" I don't mean, is he going to get his? I mean, is he going to come into the full evaluation of his social responsibility in this critical world?

Something happened in my country last November 4. What a field day the historians fifty years hence are going to have trying to figure out what that was! We certainly don't know today what it was. We do know it was something very deep, very vital and very substantial.

I know what it was NOT. It was not a mandate to give the United States back to the businessman.

It was a turn toward freedom, it was a turn toward the substitution of the wisdom of the many for the wisdom of the few. This much is true: the result of our election was a vote to give the businessman a second chance. No more! It is no day for rejoicing. Business men have been coming up out of the bomb-shelters since November 4; some who have not seen the light in twenty years. As a matter of fact, some think they have all taken the next train for Washington. If this thing goes on we might have the country's business run by office boys-and that might be something of an improvement in some ways. They say President Eisenhower's cabinet is made up of seven millionaires and one plumber.

But a frightful responsibility has come to the American business community, and all thoughtful businessmen wonder whether we are worthy of the responsibilities that have come to us and how we shall measure up.

As Hugh Hilton knows, we now have come to see that we in the steel industry have had something to do with what occurred last November because of the way we stood up against a union-political alliance in the 1952 steel strike. From early in December of 1951 until July, 1952, hour after hour, day after day, we were trying to measure up to what we thought was our responsibility, and at times it was almost hopeless. I was privileged to sit with those stout-hearted men who, having taken a beating for twenty years, decided to stand and fight. We did stand and fight, and I think my industry was returned to a position of leadership in our country, such as I had always hoped it might have.

The three great modem issues were involved in the 1952 steel strike.

We had, first, the question of inflation; a wage demand that was fantastic, based not at all upon added wealth to the nation's economy, and, therefore, sheer inflation. We did not win that battle in full because the political alliance was too tough, but we made major inroads upon it, and for the first time since organized labor in the United States achieved its present monopolistic power, we induced a national union to take less than the Wage Board and the President had said was fair.

In addition to inflation, we had the issue of personal freedom. We won that hands down when nobody thought we could, and today no man need join or remain in the Steel Workers' Union in order to have a job in our plant or the other steel plants of the United States.

Then we had the issue of Constitutional Government. I think when the history of our times is written the turn-back from Socialism will date from the decision of Judge Pine. His words will rank with those of Jefferson and Marshall and Madison. He did his duty as he saw it, and returned the United States to constitutional government. I refer, of course, to the decision of Judge David A. Pine in the Federal District Court of the District of Columbia on April 29, 1952, in which he ruled that there was "utter and complete lack of authoratative support" for President Truman's seizure of the steel mills.

I say that that battle in which our industry participated, seems to have had some part at least in bringing into sharp focus for the American people the issue of personal freedom and government by law and not by men.

And so today, the business community in the States finds itself with a second chance. It is a time for heart-searching, and it is a time to ask the basic question of what are the values that we seek to preserve and what are the obligations of those of us who are privileged to be in business. We must remember that this Free Enterprise system, which Canada and the United States are joined together to preserve, is the gift of Society. It is bestowed upon us as a privilege. One must not accept the privileges and not meet the obligations, and I propose to talk a little bit about the two sides of that equation.

That the system works needs no further documentation whatever. We have evidence of that in Canada and the United States. It is the only system in the world that works, and let's not tinker with it until we are sure we have something better. When I was in college the Fabian socialists were propounding an attractive theory, and it was a wonderful thing to debate upon at Harvard, Yale and other institutions of learning, but it had never been tried. Now Socialism is no longer a theory. It is a dismal failure. It has been tried, and its grim austerity has been proven. You men who know England know that. The whole steel fraternity of England are my friends. I have seen them going through nationalization, and I have seen them trying to fight back.

I know the Continent fairly well now, and I have seen the dismal effects of central planning as a substitute for the ingenuity and drive and vitality that comes from an economy free to use the best of methods or practises or procedures. This system that Canada and the United States are joined in preserving won the First War, the Second War, is winning the cold war, and is the sole basis upon which the free world stands.

Why then have the businessmen in the United States been in the doghouse for twenty years? It seems upon reflection that it was because we put the emphasis on self and not on the public welfare. We were concentrating on the privilege side and ignoring the responsibility side.

There was a social vacuum, and the New Deal and Communism had their roots in the same soil--the exploitation of human misery. The vacuum occurred because we Free Enterprisers had walked out on the problem. And if now that this great new chance comes to us we once more concentrate on self and put the public in second place, we will have had our last chance, and the Free Enterprise system will go down the drain.

The strength of our system lies in the fact that it does preserve the age-old principle of incentive. It does reward effort; a man is compensated in proportion to his effort. As society is organized man must be kept at his task. Russia does that with the whip. Our society keeps the man to his task by internal impulse; a man works because be wants to, and that is because we provide incentives. But when we give the man the privilege of advancing his own interest in society, we say to him that for the preservation of this way of life, he must impose his own restraints on his own conduct.

He may press his advantages as far as he can, if he stops short before he begins to damage others. When businessmen condemn the shackling complexity of laws, they must recognize that that is society exerting itself when there has been failure of self-restraint.

What then is the measure of the social responsibility of business? What are the obligations of the businessman to society?

In the first place, it is for him to observe the full integrity of the market economy. The market is the policeman on selfishness and greed in the Enterprise System and competition is what keeps us lean and strong. It is the guarantee to the public that the whole thing is on a level. And so I say that any businessman who, by a sneak telephone call, or other method, veers from the free market economy, is guilty of subversion, as truly as the subversion of a foreign agent.

His next responsibility is to the people, whom he has been trusted to lead. We hear a great deal about natural resources, about your great Canadian natural resources and your great future. But, my friends, it was not natural resources that made my country great, and natural resources will not make your country great; it takes human resources. The first business of the businessman is to develop the resource of men and women in his company. That means again putting self in second place. A man who is charged with business responsibility must put the institution first. He must not consider exploitation of the institution for his-selfish advantage. If he gives himself a salary and a bonus, he creates the impression that the company is being run for him. If he puts out a stock plan that is only for himself and the insiders he is not playing the game.

Then there is the obligation of the businessman to the public his business serves. It is of the utmost importance that the service and the product be constantly improving, and always equal to the best in the industry. That takes ingenuity and courage. It is lacking somewhat on the other side of the water. I feel that the chief aim over there is to retain what there is rather than to develop new markets.

Of course there is the obligation of the businessman to the community in which the business lives-the city, the province or the Dominion, or the city, the state and the national level with us; and that is a very, very broad obligation. Take, first of all, the services that are represented by the Community Chest. I happen to be a great believer in the Community Chest, or the Community Fund as we call it in Chicago. It is a function of Democracy in this country that has no counter-part in any other part of the world.

What happens in this great growing country of yours, when a company starts a new project? I am sure my good friend, Mr. James Murdock will not object to my speaking about Noranda's project at Gaspe. What did they do first? They build a community, a good place for people to live, with schools and churches and all the other things that go to make decent living. That is a very obvious cost of production when business goes into a new area. The same problem exists in Toronto and Chicago.

There is also the obligation to preserve our great system of education. In the United States we have a dual system of education. We have the State universities maintained at public expense, and we have privately endowed institutions. Each complements the other. The State university preserves democracy; it must take all comers. That gives the state universities sometimes a tendency toward a lower education level. The privately endowed institutions set the tone of instruction for the great state universities because they are free to teach what they believe to be the truth, and if it were not for the privately endowed institutions, the greedy hand of politicians would be laid upon the state institutions.

It is a direct obligation of business to help maintain the great institutions of higher learning from which we draw our scientists. It has been easy enough to sell boards of directors that they should support technical institutions because they can see that we need engineers, but it has not been so easy to sell them on the necessity of research into the social sciences in the liberal arts institutions.

Yet, the great problems that management has been called upon to face, such as the steel strike of 1952 have not been caused by any lack of technical knowledge. No, the problems that play havoc today are those of human behaviour, and it stands to reason that the businessman of the future must be wise and instructed in the problems of human behaviours. As I have said in another connection, we know a great deal in the steel industry about what causes friction, when metal is rubbed on metal, but we know almost nothing about the nature of the friction which results when one man rubs another the wrong way.

Research into the social sciences is at the moment more important to industry than research into the physical sciences. We are pushing that frontier back so far that we have not men wise enough to apply all that we have already achieved in scientific learning.

Another responsibility of the business man is that of participating in the political life of his nation at every level. Obviously the business man who is wise will never attempt to influence the vote of anyone, but he need not stay silent, because if he is able enough to carry his business responsibilities he ought to be able enough to have intelligent opinions, and let them become a part of the great public debate.

I hope that in my country we will have a great deal more of lend-lease between business and government. I wish people could realize that a man can be honest even if he does not throw his securities in the ash can. They say now no one can work for General Motors unless he sells his government bonds. I hope the day will come when men in business may operate on an interchangeable basis with government to a greater extent.

I wish it could come about that young men at about the age of thirty-five who have just begun to prove themselves in business, might be loaned to the government. They would come back humbler. I happen to have been tossed into the government in 1948. I knew a great many more of the answers when I flew the ocean going on a Marshall Plan mission than I did after exposure to the problems overseas. I resolved not to give the short answers, thereafter, to problems I did not understand.

We in the business community must search out the meaning of freedom in its various manifestations. We must search out the enemies of freedom wherever they can be found, so that we may recognize their weapons, the equipment they use to destroy freedom. Once we have ourselves determined the true nature of freedom, we must dedicate all of our power, all of our capacity, every act of our daily lives to the preservation of that freedom.

CHAIRMAN: Mr. Randall will be glad to have some questions. May we please have some queries?

MR. RANDALL: (After a silence) I am surprised. Is this a new custom in your country? At a group luncheon in the United States there are many questions.

I might tell you, while you are overcoming your inhibitions, one of the most dramatic experiences I have had with questions. I was addressing a group of graduate students at the University of Chicago, and a young man rose at the back of the room--and I might say this is the only occasion I ever answered a question when the answer sounded as good at breakfast as it did that night. He said, "May I ask a question?" I said, "Certainly, sir." He said, "How much is your salary?" And the answer I made was "Not enough. Is there another question?"

MR. MORLEY: How long is it going to take for the average businessman to learn to talk on his feet? And it is a good question.

MR. RANDALL: Not very long. I have only been at it 62 years. A gentleman asked me after my television appearance in which I attacked President Truman's seizure of the steel industry, "How did you do it?" I said, "It was easy; I have been at it all my life."

Many of you doubtless have sons at college. I weighed 100 pounds when I was there, and I could not play football. My mother wanted me to do something for dear old Harvard. She said, "Why don't you try debating?"

QUESTION: You mentioned the fact that companies could do a lot in meeting the needs of housing in new communities to an extent they can not 'in developed cities such as Toronto and Chicago. Is it not that the need is more obvious and pressing?

MR. RANDALL: Every phase of the service to the underprivileged is a phase of business obligation. Take in Chicago, there is a coloured hospital. Personally, I don't think there should be "coloured" hospitals, but we have one and it is a fine one, and the coloured populations can't support it. My company employs a great many coloured employees, and it is part of our job to help them obtain this health service. You can do everything you want to within the plant in connection with safety, and you can provide every protective appliance you can work out, and you will have accidents. Why? Because what goes on in that man's life outside of the plant has to do with accidents. It may be that his wife has cancer, or it may be his son is a juvenile thief, or he has a wayward daughter. All those problems that come to people are reflected in the plant. They make costs in terms of absences and otherwise. They draw down the effectiveness of the whole operation.

Every phase of well-being in the community is the businessman's job.

Now housing in a great city: I am opposed to having the employer build houses. I think there is enough trouble in the relationship of employer and employee without adding a landlord and tenant relationship. I think also every good American should own something, and his own home should be first on the list. Nevertheless, lack of good housing can cause the strangulation of any plant. You in Canada are on the brink of tremendous things. When plants are being laid out they seem to have a large area around them, but twenty-five years from now, they will have gone so far beyond the original plan that the present houses of workmen will be engulfed by the plant and the men will have to drive ten to fifteen miles and they won't want to do it. We are on the lake front and the industrial development behind us has reached the point that the young man who wants a little cottage must go out to the periphery.

We don't produce results by building houses for them but by assisting in their financing. If there is no good place near your plant to live, the men are not going to work in your plant. It is a problem which merits our attention, and it seems to me that the plant community must be a good place in which to bring up a family. Take the question of character training. What use is it to give a man the best technical training if he is immoral--or unmoral? The most significant thing today is character, and how can a businessman fail to see that it is a proper charge on the business system to advance in every way moral training and training in character.

QUESTION: We have seen the A. & P. Company and now the DuPont Company attacked in the United States by the Government primarily because they are large. In view of what you have said, would you care to enlarge on that?

MR. RANDALL: David Lilienthal has just written a new book directed to the fact that bigness is a basic misconception in American life. I suggest you read the book because you have to have bigness in a big country. We can't make steel in a corner bakery. You have to have a tremendous big plant. And you will notice during the war how our Government turned to the big companies to do the big job that had to be done. The concept that bigness is bad is a weakness in our mental attitude toward our economy, and Lilienthal made a very good study of it. The DuPont Company, as I remember it, had spent 27 million dollars on the development of nylon before a pound of nylon was put into merchandise. Who can do that but a big institution. If you want to do that by the government, you have taken a step toward nationization.

My friends, it has been nice knowing you; it has been grand to be with you.

THANKS OF THE MEETING were expressed by Sir Neil Ritchie.