Daniel Yankelovich

Profit WITH Honor

VTR Date: May 22, 2006

Public opinon analyst Daniel Yankelovich discusses American business attitudes.


GUEST: Daniel Yankelovich
VTR: 05/22/2006

I’m Richard Heffner, your host on The Open Mind. And my guest today is perhaps America’s foremost diviner of political attitudes and opinions.

Indeed, when he first joined me here in June 1975 he and former US Secretary of State, Cyrus Vance, had just founded The Public Agenda, which went on to publish its long series of distinguished reports designed to help out leaders better understand the public’s point of view while helping average citizens better understand the true nature of critical policy issues.

Well back then I asked my guest whether he thought it fair for anyone to take the position that he knows what we, as a people, think. His reply … right from our transcript of 31 years ago, quote “I think it’s not too difficult to learn what people say. But that’s really not always the same as knowing what they really think.”


HEFFNER: Well, Daniel Yankelovich has just written still another totally intriguing book. This time about American business attitudes, published by Yale University Press and titled “Profit … spelled p-r-o-f-i-t” … With Honor, The New Stage of Market Capitalism.” And I want to ask my guest today whether he’s confident enough abut what the business community in America really thinks; to assume that it will, or might, adopt the stewardship ethics he calls for so vigorously in his new volume. Dan?

YANKELOVICH: Well, I think that … I think that business is torn. And then it becomes a judgment about which direction it’s going to take. In the post-scandal … the scandals came about because of the enormous cross pressures on business for short term profitability and at the margin some companies cheated and they got involved in the scandals.

But the pressures cut across the entire business community. And now in this sort of Enron … end of Enron trial days … the question in my mind is which direction the business community is going to go?

Part of the reason I wrote the book was to hope to give a nudge in the direction that I think it should go, which is the direction of stewardship ethics.

HEFFNER: It feels that way, Dan. It feels as though you’re not totally convinced yourself of that direction.

YANKELOVICH: Well, I’m not totally … I’m totally convinced that it’s the right direction.

HEFFNER: It should go in that direction.

YANKELOVICH: Yes. Yes. I’m not totally convinced that the business community as a whole will go in that direction. I’m encouraged by seeing some of the companies that are moving in that direction. They are … companies big and small … and they’re … there’s a definite movement in that direction.

What, what I say in the book is as a corporate director in many companies I encountered three levels of corporate ethics. Staying within the law, “the smell test” and stewardship. And the, the people who sort of look to their lawyers to tell them whether they can do something or not or how to, how to get around the law to do it, in my experience have been the minority.

The bulk of companies that I’ve worked with have been in this middle category … “the smell test” … where one or two Directors will always say, when something comes up, “I don’t care whether it’s legal or not, if it doesn’t pass the ‘smell test’ I’m not going to support it.”

HEFFNER: That’s not good enough for you. Is it?

YANKELOVICH: No, because they … it’s negative. It’s negative. It means something stinks, it means something is wrong. It doesn’t point in a positive direction and you know, my feeling is that today’s large corporations are just about the only resource the world has for dealing with these momentous problems of world poverty and global warming and the other challenges that we have. Government’s not going to do it. They may lead the way. But if you don’t have these corporate resources mobilized, these things won’t get done.

Technology is a wonderful tool, but you have to deploy technology in imaginative ways and in ethical ways to advance the public good.

HEFFNER: What about Adam Smith’s … and we’re talking about capitalism … what about Adam Smith’s magical, mystical “hand of God”.

YANKELOVICH: Invisible hand.


YANKELOVICH: Invisible hand. Well, part of the message in my book is that sometimes the invisible hand works. A lot of the times it needs some help.

HEFFNER: From government.

YANKELOVICH: From … within the corporation itself. That’s where stewardship ethics comes in. Because the pressures within the corporation are between short term and long term. And, yeah, I think the most dramatic example … I’ve always found the automotive industry to be so symbolic of transient American culture. And, indeed, it is when you look now at, say, General Motors decision to go with the Hummer and the SUV and Toyota’s decision to go Preis (CHECK SPELLING).

One was thinking of short term profits, the other was taking a longer term point of view. It wasn’t with government help; it was decisions made within the corporation. Their strategy, the way they looked at the future; the way they interpreted their stewardship ethics.

HEFFNER: And what do you do about that?

YANKELOVICH: Well, what you do about it is first of all you get the leadership of companies to make up their minds on how they’re going to handle their own ambivalence.

The cross pressures of, of hedge funds, of Wall Street, of investors, of shareholder value … ideology … are all on short term profits. So you have management that has to somehow find the balance between the short term interests of the shareholder and other constituencies … employers … employees … the public … consumers.

And how you reconcile all of these forces and move toward the public good … at the moment I think that the majority of corporations are in that “smell test” level. And my hope is that as they see the challenges ahead of them and they see the advantages, the practical advantages of a stewardship ethic approach, they’ll move in that direction. That’s my main basis for optimism … is the pragmatic practical advantages.

There’s a concept that I’ve been working with that I call “trust equity”. And trust equity is the trust that the public, consumers, people have in the company. And once you start taking short cuts, once you start going down the wrong path, you lose that trust equity, you’ve lost something extraordinarily powerful.

Look what’s happened to companies like Merck … over a hundred year old company. A company that was the hallmark of integrity. It not only lost a lot of reputation, it lost tens of billions of dollars in market value.

Shell, with its playing games with reserves. Lost enormously. Boeing, Citicorp, they, they … across the board you have examples of companies that are not caught up in scandal, but they’re caught up … AIG, HealthSouth, caught up in short cuts and ways of sacrificing the long term viability of the company to short term profitability. It doesn’t work.

The other way works beautifully. So, it’s … I think my … what I would say about the book that I like a lot, is that the timing is good. Is that with the post-scandal period, with the Enron trial upfront as the book get published … I think that there’s an open mindedness, if I can use that phrase here.

HEFFNER: You may.

YANKELOVICH: There’s an open mindedness to business it doesn’t always have. And as it thinks through how it’s going to resolve its own ambivalence, go short term, go long term … I hope that the, the thesis of the book carries some weight.

HEFFNER: What do you mean by “stewardship” ethic?

YANKELOVICH: Well, the notion of stewardship is that if you’re a leader and the steward of your organization, you leave it in better shape than when you took it over.

HEFFNER: But what’s the definition of “better shape”?

YANKELOVICH: Well, my … I think the essence of stewardship is caring. Who you care for. What you care about. If you only care for shareholders and for your executives, you embrace something like shareholder value.

If your care extends to employees, to the public, to the public good, to customers than you, you have a different set of concerns … you, you become a “steward” and you practice a form of stewardship ethics, in the form of that kind of caring.

HEFFNER: And how well do you do competitively?

YANKELOVICH: Well, you … I’ll give you a couple of … see, you have these conflicting cross pressures. They … what employees want … what customers want … what investors want … what the community wants. They don’t automatically come together. As I said, the invisible hand doesn’t, doesn’t always work … doesn’t work a lot of the time.

So part of the trick of management and the genius of management and leadership is to find out how to reconcile these demands.

Some of my favorite examples of, of stewardship ethics are companies like Starbucks, and Southwest Airlines, Wegman’s Supermarkets where they motivate their employees to be nice to the customers. So they …you get a “twofer” there because the employees are incentivized to go out of their way to cater to customers; it makes the customer happy; and you get a result where the companies in the Fortune 100 Best Companies to Work For. Their return, their total return over a three year period is almost triple that of the S&P 500.

So it’s clear that from a hard-nose, quantitative point of view that if you approach it in the right way you’ll do … can do better.

HEFFNER: But Dan when you say, “It’s clear that in a hard nose way you can do better”, why then does that fly in the face of so much that we have been reading about, talking about, hearing about in the business community over a period of years now.

YANKELOVICH: Yeah, no, there’s, there’s a couple reasons. Business community expresses the larger culture. It’s inevitable; they’re part of the larger culture. And in the larger culture and ethic has developed that I think of as an ethic of “unenlightened self-interest” as compared to one of enlightened self-interest.

In today’s language if you were talking enlightened self-interest you’d say, “Well, it’s win-win. I win. I make out when you do well.”

The unenlightened self-interest ethic is “zero-sum”, I win only if you lose. In looking at survey data on the reaction to Enron, the public wasn’t all that troubled about a lot of the fraud or executives enriching themselves.

But what agitated people at sort of a 90% level was the idea that the executives at Enron were making out at the expense of employees and small investors and the like. So that’s where the … that’s where the problem lies. And I think it is the difference between short term and long term. They … the notion of shareholder value … where you put shareholders first … the rationale for that is that if you serve the shareholder, you also serve the other constituents. Now the honest defenders of that position will acknowledge that that’s true only in the long run. Not in the short run. And since that’s interpreted from a short run point of view and since the owners, the so-called investors, are 32 year old mutual fund managers, not grandma, not long term investors … you have companies that have to respond …


YANKELOVICH: … to these pressures.

HEFFNER: … you made quite a point of quoting Pete Peterson here … of pointing out to the rest of us that there was such an incredible turnover in the holding of stocks …

YANKELOVICH: Well, sure …

HEFFNER: … in companies. That that notion in … gives lie to …

YANKELOVICH: Yeah. I mean if, if you … if the image of shareholder value is grandma holding on to old AT&T stock … god help her. That’s not the shareholder; the shareholder is a sharp MBA with a degree in finance … in and out … zero loyalty. Now the idea of running companies for … to the benefit of those people makes no sense, whatsoever. But that’s the way the system works and it’s reflected …

HEFFNER: But you see …

YANKELOVICH: … in the larger culture.

HEFFNER: But you see, Dan, when you say, “But that’s the way the system works.” And you add that it’s reflected in the larger culture, I don’t know where Dan Yankelovich comes up with a fairly optimistic statement in this book …


HEFFNER: Small as it may be …it’s brimming with optimism.

YANKELOVICH: Oh, yes, absolutely because I think things will move in that direction. I think that at any one moment, if you take a cross section look … at the country, you can be pretty despairing. But if take a longer perspective … at least up to now Americans have had a practical, pragmatic “can-do” optimistic attitude.

This is the first year where I remember where Americans seemed to be incompetent in some of the things that this country is doing. It’s just a terrible shock to me. But that gets us a little bit away from the theme of the book because these corporations are competent … I was just thinking about our government.

HEFFNER: Well, but thinking about our government you can’t avoid the conclusion the wisdom that you expressed … you expressed them almost … that wisdom almost in the same words that FDR used in his Commonwealth speech in 1932 … in his campaign when he spoke about saving capitalism.

YANKELOVICH: Yes. But, well …

HEFFNER: What’s happened to those notions today? We have gone through …

YANKELOVICH: Yeah, but take, take that … take that historical example …


YANKELOVICH: … because it’s a very good example. And the, the Right attacked FDR venomously on, on … as the enemy of capitalism and in retrospect it was clear that what he was doing was saving capitalism.

And if you look at the despair of the 1930’s and the state of capitalism then and what has happened subsequently, you see that FDR did succeed and capitalism was saved and has gone on to be a much healthier beast and has gone through several stages of evolution.

HEFFNER: Oh, Dan, I, I … in my Documentary History of the United States, I have a chapter called “The Roosevelt Revolution” and I look at it now and I ask myself … well, I say to my self, “There must be a counter-revolution”, because what I thought of in writing about those days …


HEFFNER: … as the permanent revolution … the permanence seems rather shaky. What you write, every time you writing something in this book … I, I think to myself …”If only those words could go directly to god’s ear …


HEFFNER: … or eyes”, but that’s not the case.

YANKELOVICH: Well, I mean it depends on how you characterize the permanent revolution. If you characterize it in terms of a sort of government control, that was one aspect of the FDR Revolution. But if you characterize it in terms that you just did of doing … taking actions to save capitalism, it’s worked out extremely well.

Capitalism …world capitalism today is a lot healthier than it was in the period of, of FDR.

HEFFNER: Why, why are you … I was going to say “so vehemently … strike that … why do you lean so heavily in an, in a direction that is anti-government regulation?” In a direction?


HEFFNER: You don’t?

YANKELOVICH: No. No. I, I … no … I’m not a Conservative anti-regulation person.

HEFFNER: You’re a Liberal anti-regulation person.

YANKELOVICH: No, I … the position I take in the book is that when you have these basically ethical scandals, attempting to deal with them through the law isn’t going to work very well.

And I think that is the case. That, you know, we’re … in this country we’re very well “lawyered”. Our solution to our problems is to go the legal route, to pass a law, to pass a regulation.

And that’s fine for the things that require it. But for the domain of ethics, for the domain of social norms? The idea of trying to deal with them through regulations just doesn’t make any sense to me.

HEFFNER: Yes, but the businesses that got away with … for a while … for a considerable period of time … for many of hundreds of millions of dollars put in … not the wrong pockets … but put into pockets where they didn’t …

YANKELOVICH: No, no. Look, I agree with you. I’m very explicit, I think one of the main reasons for the scandals was deregulation. Because deregulation made the so-called guardians, the watchdogs into enablers. That when you took away some of the … the mean the law firms and the accounting firms and the banks, with the deregulation, they just went over to the other side.

Now, the American Academy of Arts and Sciences did a study where they came to the conclusion that 50% of the scandals could be directly traceable to the influence of law firms and accounting firms and other guardians … the watchdogs who turned around and augmented and encouraged the scandals rather than stopped them.

HEFFNER: What’s you guess … really … just between the two of us and the others who are watching … what’s you guest as to what’s going to happen?

YANKELOVICH: Well, my guess is two things … one in terms of the society at large and two in terms of the business community. You were talking … talking Franklin Roosevelt. I’d like you to hark back to the McCarthy period. There was something extraordinary about the McCarthy period. As people of our age lived through it, it looked as if it was going to go on forever. And then one day it was over. It was just over. One day. It was gone. It belonged to the past and the country moved on.

And I think that that’s going to happen here. I think that we’re living through, struggling with a post 9/11 threat, which we’ve responded to in a somewhat dysfunctional way. And that that will pass and we will move on to something new.

What that something new is maybe difficult to say, but it isn’t going to be what we are living through today. In terms of the business community, I think the world economy is in remarkably good shape. There is more liquidity than I think has ever existed in the world economy. You have countries like India and China who are becoming the engines of economic growth, not just the American consumer, which I think is good for all of us.

So I think we’re entering a, a … you have the explosion of technological resource. I think we’re entering an era … which has enormous potential for overcoming poverty, for dealing with a lot of our technological problems. And a lot depends on what these companies do.

HEFFNER: It’s so strange to me to hear you say “And one day McCarthyism was over”, unless you add there are many people who feel that one day, maybe it was the day that the Supreme Court gave the Presidency to George W. Bush … one day the groundwork was laid for a resurgence of attitudes that are not that far removed from McCarthyism. And you say it’s over. It was over over then.

YANKELOVICH: No, I say McCarthyism … I’m not going to say that just it was an unusually dramatic moment.

My perspective on what’s going on in the country today is that we’re living through something of a backlash. That the concern with religion and the rise of religion is a symptom of our ethical confusion. That under a period of stress, people fall back on absolutes, absolute values, absolute ethics.

And we’re living in a period of great relativism that is the heritage of the 1960s and the 1970s. This is a much more tolerant, pluralistic country than it was when I was growing up. A much more open … for opportunity for all. But it also is a country where, where … whose moral compass is a little bit askew and I think that we’re struggling with that.

There’s a backlash against extreme individualism of the last twenty or thirty years, and as backlash, it’s not a trend, it’s not going to move in that direction, it’s going to work itself out and find some ground that is not as extreme, I don’t think as the ground we stand on.

HEFFNER: Dan, where do you get this “It’s going to work itself out”. Maybe everything works itself out …

YANKELOVICH: No, no, no. No.

HEFFNER: … but why do you assume it will for the better?

YANKELOVICH: No. I don’t’. And, and where I get it from is not sort of a Panglossian optimism. I’m a student of social trends, I’ve been looking at social trends for a half century. And they don’t move in the … in one direction. There’s not incremental, they’re not linear. They … one generates … I call the process “lurch and learn”.

HEFFNER: I love that.

YANKELOVICH: That our society lurches to one extreme and then it gradually learns and sometimes the learning is sound learning and sometimes it’s not so sound …

HEFFNER: And I’ve just learned we have 25 seconds …

YANKELOVICH: Ho, ho, then that might be a good note on which to conclude.

HEFFNER: But it’s an optimistic note, I gather.

YANKELOVICH: I am … yes … no I feel that we’re moving in a good direction. I hope the book helps nudge business leaders to move in a direction that I think is good for, for business and for the society.

HEFFNER: Profit … p-r-o-f-i-t … with honor. Dan Yankelovich thank you so much for joining me today on The Open Mind.

YANKELOVICH: Thank you, Richard.

HEFFNER: And thanks, too, to you in the audience. I hope you join us again next time, and if you would like a transcript of today’s program, please send $4.00 in check or money order to The Open Mind, P. O. Box 7977, FDR Station, New York, New York 10150.

Meanwhile, as an old friend used to say, “Good night and good luck.”

N.B. Every effort has been made to ensure the accuracy of this transcript. It may not, however, be a verbatim copy of the program.