The Cost Of Bureaucracy

Among the opinion writers I read more or less regularly, David Brooks stands out as one of the most annoying. Three times out of five (okay, that’s just a statistical guess), I find him patronizing, preachy and un-self-aware. But then, in those other two columns, he addresses real issues and does so perceptively.

The column that prompted today’s post is one of the latter. In it, Brooks considers what he calls the “growing bureaucratization of America.” His first paragraph sets out his thesis/observation:

Sometimes in this job I have a kernel of a column idea that doesn’t pan out. But other times I begin looking into a topic and find a problem so massive that I can’t believe I’ve ever written about anything else. This latter experience happened as I looked into the growing bureaucratization of American life. It’s not only that growing bureaucracies cost a lot of money; they also enervate American society. They redistribute power from workers to rule makers, and in so doing sap initiative, discretion, creativity and drive.

As regular readers of this blog know, a couple of years ago I retired from a position as a college professor, a cog in what has to be one of the most prominent examples of the trend Brooks is exploring–a university. I still recall a conversation with a colleague who had preceded me in the trip from “real life” job to the groves of academe. She warned me that what would drive me insane was the utter lack of urgency I would encounter. She was right–if an identified problem was considered really urgentit might get addressed in a year or two. Universities are very bureaucratic.

Brooks proceeds to provide the requisite overview:

Over a third of all health care costs go to administration. As the health care expert David Himmelstein put it in 2020, “The average American is paying more than $2,000 a year for useless bureaucracy.” All of us who have been entangled in the medical system know why administrators are there: to wrangle over coverage for the treatments doctors think patients need.

The growth of bureaucracy costs America over $3 trillion in lost economic output every year, Gary Hamel and Michele Zanini estimated in 2016 in The Harvard Business Review. That was about 17 percent of G.D.P. According to their analysis, there is now one administrator or manager for every 4.7 employees, doing things like designing anti-harassment trainings, writing corporate mission statements, collecting data and managing “systems.”

He also acknowledges the pre-eminence of higher education in the bureaucratization of American life. The following paragraph didn’t surprise me:

This situation is especially grave in higher education. The Massachusetts Institute of Technology now has almost eight times as many nonfaculty employees as faculty employees. In the University of California system, the number of managers and senior professionals swelled by 60 percent between 2004 and 2014. The number of tenure-track faculty members grew by just 8 percent.

The rest of the column is devoted to multiple examples of bureaucratic growth and a wide variety of mostly unfortunate and worrisome consequences.

Brooks doesn’t address what is impelling the growth of bureaucracy, or what steps we might take to reverse it. He also doesn’t address what I have long thought to be a glaringly selective response to the phenomenon: Americans are absolutely obsessed with the ways bureaucracy impedes and complicates the work of our various government agencies–but seem not to recognize that the same situation impedes the efficient operation of corporations, large nonprofit organizations and educational institutions.

Sociologists and anthropologists can probably shed light on the reasons for the nation’s increasing bureaucratization. My own hunch–and it’s only a hunch–is that it’s prompted in part by what Brooks calls a desire for “safety first,” a desire to avoid possible dangers. (I also have a sneaking suspicion that it represents a reaction to America’s very litigious society–an effort to avoid the threat of lawsuits by demonstrating the lengths a company or organization has gone to avoid various foreseeable harms.)

Brooks thinks that resentment of the increasingly bureaucratic nature of our society is one of the things motivating MAGA folks. Maybe–although most credible studies attribute pro-Trump MAGA sentiment primarily to racial grievance, not a more generalized impatience with bureaucracy. (MAGA attacks on universities and corporations are focused on that hated DEI, after all, not the number of administrators and managers.)

I tend to think that the growth of bureaucracy is a phase–something that will abate when, and if, civil society sorts itself out and Americans grow up. Think of today’s America as a teenager, needing rules and structure to balance out those raging hormones….

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Who Should Vote?

I have an old, ratty t-shirt that says “Corporations are not people.” It dates back to the (in)famous exchange between a heckler and Mitt Romney, in which Romney–then the Republican candidate for President–proclaimed that “Corporations are people, my friend.” Needless to say, that declaration didn’t win him many votes. After all, corporations don’t vote.

At least, not in most places. Yet.

A reader of this blog recently sent me a CBS News article about a Delaware town planning to extend the franchise to “corporate citizens.”

Seaford, a town of about 8,000 on the Nanticoke River, amended its charter in April to allow businesses — including LLCs, corporations, trusts or partnerships — the right to vote in local elections. The law would go into effect once both houses of Delaware’s state legislature approve it.

The proposal has rekindled a debate over how much power corporations should have in local government, with fierce opposition from civic interest groups who say businesses already wield too much influence over politics.

“It was very shocking to see this attempt to have artificial entities have voting rights,” said Claire Snyder-Hall, executive director of Common Cause Delaware, a watchdog group.

Delaware is probably the most “corporate-friendly” state in the U.S., with business laws so favorable to the corporate form that the state boasts more than 1.8 million entities registered there. According to the linked article, companies outnumber human residents by nearly two-to-one.

This effort would seem to be the flip side of the widespread efforts to suppress the votes of human citizens. Whatever the merits  of the proposal (admittedly, I’m at a loss to identify those), allowing artificial persons to cast ballots would dilute the votes of actual people. I assume that’s the goal–giving the ballot to corporations would certainly tilt the playing field further in the direction of the communities’ business interests.

In all fairness, when human voters fail to show up at the polls, they bear considerable responsibility for their subsequent loss of voice. What’s that phrase? Use it or lose it…

Legislators have cast the change as a fix for low turnout in municipal elections and a way to attract business owners to the community.

“These are folks that have fully invested in their community with their money, with their time, with their sweat. We want them to have a voice if they choose to take it,” Seaford mayor David Genshaw told local station WRDE. Genshaw cast the deciding vote in a split City Council decision on the charter amendment in April, according to The Lever.

According to Delaware Online, there are 234 entities, including LLCs, trusts and corporations, headquartered in Seaford — a significant number for a town where an April election only garnered 340 votes.

It appears that other Delaware towns already allow corporations to vote, with results that might have been predicted:

In 2019, it was revealed that a single property manager who controlled multiple LLCs voted 31 times in a Newark, Delaware, town referendum, an incident that led Newark to amend its rules. And residents in Rehoboth Beach in 2017 beat back a proposal to allow LLCs to vote.

Delaware has long been noted for being “corporation friendly,” but until I read this particular news item, I didn’t realize just how friendly. The state allows owners of LLCs to stay anonymous. It relieves businesses of the “burden” of paying corporate income taxes. And as every business lawyer knows, the vast majority of corporations headquartered in Delaware– including two-thirds of Fortune 500 companies– don’t have a physical presence there.

American laws do consider corporations “people” for certain very specific purposes–doing business in the corporate form encourages economic activity that benefits us all. If you start a business and it goes broke, your personal assets can be protected from the business’ creditors. Without that protection, many fewer businesses would be formed. And–giving Romney credit for what he evidently meant in that infamous exchange–corporations are indeed formed, managed and owned by real people.

But in a society where the economic gap between the haves and the have-nots is uncomfortably large and continuing to grow–a country where legal structures already favor those with money and status– giving the already-privileged an extra tool to cement and augment their already significant advantages doesn’t seem like a particularly good idea.

The preamble to the Constitution of the United States begins with “We the People.” I’m pretty sure the Founders didn’t intend that “people” reference to include corporations.

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Ve-e-ery Interesting!

Younger readers of this blog–assuming there are some–probably don’t remember Laugh-In, a comedy skit show by Rowan and Martin that was considered edgy for its time. One of the regulars on that show was a comic named Arte Johnson, who would pop up after a segment (often in a pith helmet) and intone (in what I recall as a faux German accent) “Veeery interesting!”

A recent article from Bloomberg elicited a similar reaction from me. It reported on an unanticipated outcome of the dangerous Texas law establishing bounties on people who help women obtain abortions. It was–in Johnson’s memorable phrase–“veeery interesting.”

The article reported on the response of the corporate community to the Texas’s law –an  approach that has triggered passage of similar and increasingly restrictive abortion laws in other states. Named the “heartbeat bill” (a medically-inaccurate characterization), it bans abortions after six-weeks and deputizes private citizens to bring civil lawsuits against anyone they suspect or know helped a woman obtain one. The measure has prompted passage of a similar bill in Idaho, and Florida’s retrograde legislature has approved a ban on abortions after 15 weeks– with no exceptions for rape or incest. Other Red states are following.

 As the Bloomberg article reminded readers, the U.S. Supreme Court is scheduled to rule on a Mississippi case that its newly conservative majority will likely use to significantly weaken if not overrule Roe v. Wade. When that occurs–and it would be shocking if it didn’t, given the current makeup of the Court–  26 states are certain or likely to largely outlaw abortion, according to the Guttmacher Institute.

In a surprising reaction, corporate America is responding to the threat.

The roar of anti-abortion laws sweeping through U.S. state houses is echoing loudly in human resources offices.

Companies that have offered to help cover travel costs for employees who have to go out of state for abortions are trying to figure out how to go about it. Large corporations like Citigroup Inc., Apple Inc., Bumble Inc., Levi Strauss & Co. and Hewlett Packard Enterprise Co. are now offering such benefits for reproductive-care services not available in an employee’s home state.

The report notes that most health insurance plans cover the costs of abortions, but in the  Red states with abortion bans, companies need to create a mechanism to ensure  that their employees have access to safe and medically appropriate terminations. They are exploring how to protect their workers’ privacy and especially how to fend off legal actions that might be brought by states looking to block such workarounds.

Laura Spiekerman, co-founder of New York-based startup Alloy, told Bloomberg News that reimbursing workers for abortion-related travel is the “low bar” of what companies should do. “I’m surprised and disappointed more companies aren’t doing it,” she said.

The company — which has a handful of employees in states with restrictive abortion laws like Florida, Arizona and Mississippi — in January said that it would pay up to $1,500 toward travel expenses for employees or their partners needing to travel out of state for abortions. Alloy also said it would cover 50% of legal costs up to $5,000 if any employee or their partner had to deal with legal issues due to anti-abortion laws.

The numbers are significant: some 40 million women of reproductive age live in states that are hostile to abortion rights. Those states passed more than 100 anti-abortion laws in 2021, “the highest number in the nearly half a century since Roe v. Wade, according to Guttmacher.”

The article highlights some creative responses.  

Dallas-based Match Group Inc. is partnering with a third party for a similar benefit to Alloy’s. Any Match employee in Texas can call a toll-free number dedicated to the program to reach Planned Parenthood Los Angeles, which will arrange travel and lodging paid for by a fund Match Chief Executive Officer Shar Dubey created last year to cover such costs for staffers and dependents, according to a company spokesperson. Eligibility would be determined through a third-party employment verification vendor.

Meanwhile, the hard-right turn of several states is becoming a negative factor in business location decisions. When Texas  passed its abortion law in September, Salesforce CEO Marc Benioff said the company would help staffers relocate from the state. Solugen Inc., a Texas chemicals company, said the state’s social policies were making it difficult to attract talent so it was planning to open another facility elsewhere.

State-level abortion restrictions cost those economies $105 billion annually by cutting labor force participation and earnings, and increasing turnover and time off from work, according to the Institute for Women’s Policy Research. And women who want an abortion but don’t get one are four times more likely to live below the federal poverty level.

I guess when you are a political party dominated by religious crusaders, economic repercussions are irrelevant…

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About Those Captains of Industry…

I’ve been pretty hard on big corporations in several blog posts, and I stand by my criticisms of the behaviors I’ve identified.

That said, the Washington Post recently published an interview with Tim Cook, the CEO of Apple, and it reminded me of the danger of political rhetoric–including my own– that oversimplifies and labels.

On the right, the villains are Muslims, immigrants–actually, pretty much anyone who isn’t a white Christian. On the left, it’s big corporations and rich people.

It’s not that simple.

There are certainly decisions that Apple and other corporate behemoths have made that I personally question, but in many ways, Apple has been a pretty exemplary corporate citizen. As the introduction to the interview notes, Cook has been credited with making the company more systematic, transparent, and team-oriented.

He has engaged on social issues more than most CEOs, writing op-eds on legislation that limits gay rights and making the extraordinary decision earlier this year to oppose the FBI’s request to unlock the San Bernardino killer’s phone.

Cook–like many other thoughtful businesspeople–understands that a focus on short-term profits can undermine the elements of corporate culture than are essential to long-term prosperity. (There’s that “self-interest properly understood” theme again…)

I also think that the traditional CEO believes his or her job is the profit and loss, is the revenue statement, the income and expense, the balance sheet. Those are important, but I don’t think they’re all that’s important. There’s an incredible responsibility to the employees of the company, to the communities and the countries that the company operates in, to people who assemble its products, to developers, to the whole ecosystem of the company. And so I have a maybe nontraditional view there. I get criticized for it some, I recognize. If you care about long-term shareholder return, all of these other things are really critical.

The lesson here isn’t about Apple, or Cook.

Those of us who deplore “us versus them” politics, who remind our fellow citizens that the American constitution requires evaluating our neighbors as individuals, rather than members of groups, need to practice what we preach.

Every corporation is not Koch Industries or Walmart. Every billionaire is not Donald Trump.

When Freedom Indiana was fighting efforts to marginalize the gay community, the most persuasive voices against bias were those of Eli Lilly, Emmis, Cummins and other large companies. When Costco demonstrates that better pay and employee benefits translate into higher profits, employers who would never listen to social “do gooders” take note. When billionaires like Nick Hanauer insist that the real job creators are consumers, and that only by paying workers more can we grow the economy, people listen who would never listen to me, or to other “pointy head” academics.

We need to work toward a culture that recognizes the differences between the responsible and the irresponsible; a culture that rewards good corporate citizenship, and shames the profiteers.

Prejudice is the tendency to paint with a too-broad brush; it is failure to draw appropriate distinctions.

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The Bottom Line and the Common Good

I’ve done my share of business-bashing on this blog–pointing out corporate overreach and bad behavior. But as Frank Bruni recently reminded us in a timely and excellent column for the New York Times, there’s a sunny side to greed.

Self-interest has contributed to sanity on a wide number of issues. As Bruni notes,

They’ve been great on the issue of the Confederate flag. Almost immediately after the fatal shooting of nine black churchgoers in Charleston, S.C., several prominent corporate leaders, including the heads of Walmart and Sears, took steps to retire the banner as a public symbol of the South; others made impassioned calls for that.

And when Nikki Haley, the South Carolina governor, said that the Confederate flag at the State House should come down, she did so knowing that Boeing and BMW, two of the state’s major employers, had her back. In fact the state’s chamber of commerce had urged her and other politicians to see the light.

Eli Lilly, American Airlines, Intel and other corporations were crucial to the defeat or amendment of proposed “religious freedom” laws in Indiana, Arkansas and Arizona over the last year and a half. Their leaders weighed in against the measures, which licensed anti-gay discrimination, and put a special kind of pressure on politicians, who had to worry about losing investment and jobs if companies with operations in their states didn’t like what the government was doing.

Bruni quotes a business consultant for the observation that successful businesses must be more responsive to the general public than politicians.

If you’re a politician and all you care about is staying in office, you’re worried about a small group of voters in your district who vote in the primary,” he told me, referring to members of the House of Representatives. “If you’re a corporation, you need to be much more in sync with public opinion, because you’re appealing to people across the spectrum.”

Does this sensitivity to the population outweigh the damage that some corporations do to the environment? Does it make up for others’ exploitation of workers? Of course not, but as Bruni notes, “it does force you to admit that corporations aren’t always the bad guys. Sometimes the bottom line matches the common good.”

And it should force those of us who think and write about such matters to make important distinctions. I get angry when people make sweeping generalizations based on race, religion or sexual orientation, because there is no monolithic group. Every human category includes assholes and saints and everything in-between.

That’s equally true of corporations and business enterprises.

The market provides many incentives for good behavior. As I noted yesterday, many existing public policies reward less salutary behaviors, and those need to change.

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