Andrew Carnegie and Wealth

In 1899, Andrew Carnegie (1835 – 1919), founder of the conglomerate US Steel corporation published a book called The Gospel of Wealth, which set forth the classic statement of corporate social responsibility. Carnegie’s view was based on two principles: the charity principle and the stewardship principle. Both were frankly paternalistic; they saw business owners in a parent like role to childlike employees and customers who lacked the capacity to act in their own best interests.

The charity principle required the more fortunate members of society to assist its less fortunate members, including the unemployed, the handicapped, the sick, and the elderly. These unfortunates could be aided either directly or indirectly, through such institutions as churches, settlement houses, and (from the 1920s onward) the Community Chest movement. Of course, well-to-do people themselves decided how much to contribute, and initially charity was considered an obligation of individuals not of business itself. By the 1920s, however, community needs out grew the wealth of even the most generous wealthy individuals and business was expected to contribute its resources to charities aiding the unfortunate. Carnegie himself practiced what he preached by giving away millions of dollars for charitable and civic purposes.

The stewardship principle, derived from the Bible, required businesses and wealthy individuals to view themselves as the stewards, or caretakers, of their property. Carnegie’s idea was that the rich hold their money in trust for the rest of society and can use it for any purpose that society deems legitimate. However, he also saw it as the role of business to multiply society’s wealth by increasing its own through prudent investments of the resources under its stewardship.

US Steel acting on Carnegie’s embarked upon an active program of philanthropy. It was the exception rather than the rule; between the Civil War and the great Depression, most management commitments to social welfare were in response to legal requirements or labor movement pressure.

Not until the Great Depression of the 1930s did large numbers of executives take an independent interest in the social impact of business. In 1936, for example, Robert Wood (the CEO of Sears, Roebuck) pointed proudly to his stewardship of those general broad social responsibilities which cannot be presented mathematically and yet are of prime importance. By the 1950s and 1960s, the charity and stewardship principles were widely accepted in American business as more and more companies came to recognize that power begets responsibility. Even companies that did not subscribe to these principles realized that if business did not accept social responsibilities of its own free will, it would be forced to accept them by the government.

There are many examples of the applications of these principles today. The charity principle could be seen after the Los Angeles riots, when many corporations gave cash to individual church relief efforts. Fame Assistance Corp., the non-profit human services arm of the First African Methodist Episcopal Church of Los Angeles, tripled its annual budget as a result of such charitable contribution. Donors included Atlantic Richfield, at $100,000, and AT&T Foundation, Wells Fargo and First Interstate Bank of California Foundation, at $25,000 each. In addition, companies including American Express, Northern Trust of California and Merrill Lynch instituted employee matching programs.

Giving to individual religious units generally proves to be problematic for companies through for if you give to one denomination, all others want a share as well.

According to Stanley C Wright, director of Eastman Kodak’s corporate contribution, Once you start down the religious path, you better hit them all because they all buy cameras and film. Many companies have thus instituted a general prohibition against giving to individual religious efforts, and instead give only to umbrella groups. The donations to individual efforts in the wake of the Los Angeles riots thus represented a deviation from the norm.