Black History Month: Future leaders benefit from knowing the true history of powerful companies

It is well known that the Ford Motor Company revolutionised manufacturing 100 years ago by standardising tasks and paying a very high - $5 a day - salary.

Students learn how standardisation creates efficiencies, and that paying above-market salaries reduces employee turnover, thus reinforcing these efficiencies.

They may hear a mild reference to the lack of intrinsic motivation when employees had to repeat the same task all day, but overall, the key message is typically that Ford’s manufacturing transformed how companies worked, boosting productivity and creating more value for workers, shareholders and customers alike.

Moreover, Ford is often praised for employing large numbers of black workers, thus being more inclusive than its competitors.

But the dark and troubling history to Ford’s working practices is rather less well known. It is rarely revealed to students that its production system involved systematic physical violence.

Gary J. Miller’s insightful book, Managerial Dilemmas, describes how workers were beaten up by foremen if they didn’t work hard enough or if they spoke to co-workers while working.

While the violence affected workers from all backgrounds, Ford frequently allocated black workers to particularly dangerous jobs in hot environments.

The foremen were chosen for their physical strength and size, with this so-called ‘driving method’ of supervision ensuring that workers did not slow down the assembly line, while the high salaries discouraged workers, especially black workers, from leaving the company despite the beatings.

Although Ford paid black and white workers similar wages, black workers had fewer attractive job options elsewhere: thus, they were more likely to put up with adverse working conditions, and were less likely to be organised in trade unions than white workers.

How the East India Company invented 'looting'

Another famous company that is held up to students as revolutionary is the East India Company. Those studying corporate governance learn that the East India Company was the first joint stock corporation.

It is not just in the UK that students learn about the British firm, which was founded in 1600. Students across the globe learn that the East India Company firm is synonymous with the wonderful innovation that joint stock corporations are.

They enable owners to trade shares in the firm, thus attracting capital from all kinds of investors - individuals, families, institutional investors, other corporations, and sovereign wealth funds. This form of organisation has massively contributed to prosperity and wealth creation.

Yet this innovation also has its roots in a controversial past, something that is not always taught. The East India Company was a key participant in colonialism and the slave trade across Asia and Africa. As its name suggests, the company took control of huge swathes of territory in South and East Asia. The commonly used word of 'looting' was adopted from Indian language and was associated with East India Company’s plundering behaviour.

Indeed, today’s corporate governance theories often use seemingly innocuous expressions that appear in a different light when considering East India Company’s past: authors frequently refer to ‘empire building’ (when a chief executive acquires companies to become more powerful) and ‘corporate raiders’ (when activist investors pressure management to make decisions that enhance shareholder value, at times at the expense of other stakeholders).

The East India Company was established by Royal Charter and maintained its own private army with around 260,000 soldiers at its peak. Using its force, it trafficked slaves with specialised skills from East and West Africa to manage its territories in Asia. However, far fewer slaves were trafficked to Asia than across the Atlantic.

Why was this the case? Apparently the company recognised how inefficient slavery was when a business needs specialised labour: in the 17^th century, some company directors argued that Africans must voluntarily serve the company without being coerced. Thus, even while pursuing malign goals, the company applied an uncompromising commercial logic.

Students need to learn about heralded firms in the round

Both examples – Ford and the East India Company – challenge us to be mindful and authentic ethical leaders in today’s business world.

They also challenge educators not to hide the brutal and discriminating aspects of their history from students – our future leaders.

Ford superficially appeared to be a high-paying, inclusive, wealth-creating and efficient enterprise. But beneath the surface, it exploited the workers’ economic realities to implement a ruthless factory regime. The East India Company, meanwhile, used efficient management structures to pursue unethical objectives.

And yet it’s astonishing how selectively authors cover these bygone times, and while today’s businesses face the scrutiny of social media and a more aware public, it is up to researchers, lecturers, analysts and journalists to present these companies in the round, and bring to light the dark practices that partly, and in some cases majorly, enabled their success.

It is imperative that we academics continue to research areas that have huge public and societal consequences to highlight the practices that genuinely promote inclusivity of people from all backgrounds, and this also means being honest about the past that got us here. A dispassionate look at the bright and dark side of business practices is crucial for an in-depth understanding of 'what works'.

Society can benefit hugely from giving black people more opportunities to bring their talents and skills to fruition. Companies can promote genuine inclusivity to support both their bottom line and societal benefits, but it is vital students, staff and society come to terms with their past as well.

Hossam Zeitoun is Associate Professor of Strategy and Behavioural Science and Chair of Warwick Business School’s Race Equality Project. He teaches Enhancing Business Performance Through Governance on the Executive MBA and Global Online MBA, plus Strategic Thinking: Strategic Evaluation and Analysis on the Full-time MBA.