Near the conclusion of his big speech
in Kansas this week, President Obama praised business leaders who
understand "their obligations don't just end with their shareholders." The president singled out Marvin Windows and Doors
, based in Warroad,
Minnesota, for not laying off a
single employee during the recession, and choosing instead to cut the
pay and perks of both workers and management.
This section of the speech is apparently based on a recent New York Times article
about the company, one which complicates some of Obama's arguments, however, and highlights other things he declined to address:
1. Marvin Windows and Doors has the latitude to consider
obligations beyond those to its shareholders because it doesn't have
shareholders. The 107-year-old company is privately held: the president
is the founder's granddaughter and her brother is the chief executive.
The firm's work force of 4,300 included 16 members of the Marvin family.
2. Marvin also doesn't have, apparently, any obligations to unions;
its workers don't seem to belong to any. When housing starts - and
orders for new windows and doors - plummeted, management cut salaries by
5 percent, put hourly workers on 32-hour weeks, stopped paying tuition
reimbursement, stopped allowing employees to cash in unused vacation
days, and encouraged them to take unpaid leaves. Through attrition, the
workforce is 14 percent smaller than at its housing-boom peak. The only
things the company hasn't cut are jobs and health insurance benefits.
There's not a hint in the Times article of any of these changes being
voted on or negotiated with anyone - all appear to have been the
owners' unilateral decisions.
3. Indeed, there were only two brief mentions of labor unions in Obama's Kansas speech, both treating their decline as an accomplished
fact rather than a reversible one. (If "you're somebody whose job can be done cheaper by a computer or by someone in another country, you don't have a lot of leverage when it comes to asking your employer for better wages or better benefits, especially since fewer Americans today are part of a union." And, "The truth is we'll never be able to compete with other countries when it comes to who's best at letting their businesses pay the lowest wages, who's best at busting unions, who's best at letting companies pollute as much as they want." The president doesn't exclude the possibility that we could still be well-above-average at busting unions.)
4. If President Obama thinks cutting pay and benefits is morally superior to
laying people off during a downturn, he could have shown his enthusiasm
for this idea by using the enormous leverage his administration wielded
over General Motors and Chrysler in 2009 and 2010 to insist on significant pay cuts and
benefit reductions for their UAW hourly employees as a condition of taxpayer bailouts of those companies. Instead, he didn't even demand small, symbolic reductions.
5. The communitarianism of the Marvin company comes with baggage, according to the Times.
The firm dominates the tiny town of Warroad: Another sibling of the two
who run the company is the mayor, and the family or the company built
the public library, senior center and high school's swimming pool. (The
headquarters includes a visitors' center and museum displaying a lock of
the founder's hair.) The noblesse oblige that comes with the no-layoffs
policy is paternalistic and also, for modern Americans who like the
advantages of contingency in many areas of their lives, more than a
little claustrophobic. Whether the Marvin company model is a template
for the future or a quaint relic is at the very least, an open question.
6. The Marvin company seems to
have captured the spirit of the share economy
, but not solved its
dilemmas. The company president says she is taking the "long view" by
not cutting Marvin's "life blood," the "skills and experience" of its
employees. But it's not clear, in the long view, whether that will turn
out to be a good business decision. If we're talking about skilled or
semi-skilled positions, some employees will have more skills and
experience than others. A more cold-hearted company might have decided
to reduce employee costs by laying off the 25 percent of the employees
who were least skilled rather than reducing the compensation of every
employee, from the most to the least skilled, by 25 percent. Figuring
out, in theory, which company - Scrooge, Inc. or Benevolent Enterprises - will be more competitive isn't easy, and
it will be important to analyze the empirical evidence that comes in
over the years from Marvin and its competitors. Some Marvin employees, despite their gratitude for the
no-layoffs policy, are leaving the company and the town for more
lucrative opportunities elsewhere. Are these exiles a representative
sample, or does their ambition and attractiveness to other employers
suggest that they are in the more-skilled part of the company's bell
curve? If the latter, the company is harming itself by refusing to
differentiate among employees whose contributions are most valuable, in favor of treating
all of them well, but identically. Both Mickey Kaus
and Clive Crook
raised doubts about the coherence and feasibility of what Kaus called Obama's "charity capitalism." Even the proffered business rationale for Marvin's no-layoffs policy might make more sense as a philanthropic one.