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Wily welfare capitalist: Werner von Siemens and the pension plan
Abstract and Figures
The German firm of Siemens and Halske introduced many enterprising features of what later came to be known as welfare capitalism in the mid-nineteenth century. Profit sharing, annual bonuses, a pension fund, a reduction in work hours, and an annual party were all means to ensure a productive, trouble-free workforce. We investigate the reasons why Siemens and Halske introduced this internal welfare system. We focus on the by-far most expensive part of the welfare system: the pension fund introduced in 1872, more than a decade before the nationwide social security system was implemented in Germany. We find that the adoption of the internal welfare system increased labor productivity, and in addition discouraged workers from striking. We estimate that the company’s gains due to strike prevention and higher productivity were at least as high as the cost of the pension fund. This suggests that (1) the introduction of a pension fund is not inconsistent with simple profit maximizing behavior on the firm’s side and (2) increased labor unionization induced firms to introduce subjective components of workers’ remuneration packages.
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... The efficiency wage theory argues that companies such as, Siemens, that paid pensions at the earliest times, might have been goaded to pay premium wage to workers in order to prevent shirking of responsibility by workers and also to elicit extra effort from them. It is further argued that creating a pension fund is akin to wage raise in that when workers cared about their future they will take into account the benefits of being Kastl and Moore, 2009). Even, as a plausible explanation, it was further posited that the mid-1870s economic decline in Europe occasioned by banks' failure and ...
... This theory speculates that the pension fund may have acted like an implicit contract between the firm and the employee to the effect that the firm would look after employees in their old age so long as employees worked faithfully for the company for many years (Kastl and Moore, 2009). It simply comes down to mean that when employers and employees repeatedly interact over a long time, it may be optimal to design long-term implicit contracts that encourage human capital acquisition and reduce employee turn-over and strikes (Lazear, 1979;Prendergast, 1979, as reported by Kastl and Moore, 2009). ...
... This theory speculates that the pension fund may have acted like an implicit contract between the firm and the employee to the effect that the firm would look after employees in their old age so long as employees worked faithfully for the company for many years (Kastl and Moore, 2009). It simply comes down to mean that when employers and employees repeatedly interact over a long time, it may be optimal to design long-term implicit contracts that encourage human capital acquisition and reduce employee turn-over and strikes (Lazear, 1979;Prendergast, 1979, as reported by Kastl and Moore, 2009). It appears a settled matter, as in the case of Siemens, that that the establishment of the pension fund and the associated rules were equivalent to workers placing a security deposit with the company. ...
... Acquier et al. [34] found that Owen's business was both financially successful and had a beneficial social impact. Siemens and Halske, now known as Siemens AG, implemented a pension plan for its employees in 1872, predating the nationwide introduction of such plans by German Chancellor Bismarck in 1889 [35] . Prior to the 1870s, numerous mining corporations provided non-wage benefits and enhanced employment security for the benefit of their own businesses. ...
... These perks were designated by authors as Welfare Capitalism. Originally originating in Europe, this culture was subsequently introduced to the United States in the early 20th century [35] . ...
This paper seeks to examine the literature on corporate social responsibility (CSR) in order to offer a comprehensive overview of the potential impact of CSR on organizational financial outcomes. The paper also examines CSR research in Bangladesh with a more detailed perspective. Data were collected from several reliable sources, such as Web of Science, Scopus, ScienceDirect and Google Scholar, and data range is 2000 to 2024. Based on a thorough analysis of 45 recent empirical studies, it is evident that the literature strongly supports the positive impact of CSR on firm financial performance. However, the overall findings remain inconclusive. The existing research on CSR and its impact on firm performance addresses several key aspects. These include the theoretical foundation, measurement of CSR, methodological considerations, the importance of considering intervening factors in the relationship between CSR and firm performance, and the potential for further exploration of this topic in developing and emerging economies. The existing literature on the relationship between CSR and firm performance in Bangladesh exhibits similar issues. Research in this field is currently lacking in both quantity and quality, which is evident in several issues. These include a limited number of international publications, a lack of theory-driven research, and less rigorous research design. Based on these findings, it is recommended that future research takes a multi-theoretical approach to gain a more comprehensive understanding of how CSR impacts firm performance. Additionally, more rigorous methodologies should be employed to measure various dimensions of CSR and address the issue of endogeneity in the causal relationship between CSR and firm performance. Furthermore, further investigation is needed to understand why and how CSR can enhance firm financial performance in the presence of situational factors. Lastly, it is important to expand the literature by gathering more evidence from different country contexts, including developing and emerging countries.
... The first devices suitable for signalling fire were the forerunners of today's manual call points, which appeared on the streets of Berlin [1] and Boston [2] in the 1850s. Their primary purpose was, in part, to replace fire towers and rudimentary devices used to signal fire. ...
One of the most important purposes of installing fire alarm systems is to provide an alarm signal in the protected building in the event of a fire. Fire alarms are most often provided by networked audible warning devices. The signal must be easily and quickly detectable and identifiable so that the occupants inside can start to escape after the alarm has been sounded. This is apparently a simple expectation, but if you look at the efficiency of fire alarms as a whole, and the effects that determine whether an evacuation will occur in response to an alarm during an actual fire, the question is not so simple anymore. In this article, we will examine the circumstances that may affect the alarm signal. Among these aspects, we will focus on the soundproofing properties of building structures, including interior doors, and their effect on sound propagation. By carrying out on-site measurements, we verify the design principles used in engineering practice, looking for the factors that may influence efficiency of the fire alarms in today’s construction environment. We hypothesise that the increase in sound insulation of certain building materials and structures has an increasingly negative effect on the audibility of fire alarm signals.
... It did so by involving the firm in the housing, education and health of the worker's family as well as the worker. Thus, the nature of this responsibility parallels and reflects what we know about similar developments in Berlin with the firm of Siemens and Halske (Kastl and Moore, 2010) and in the Ruhr valley with the Krupp steel company and other nearby firms (McCreary, 1968). These responsibilities align with a paternalistic role for the firm and the business leader, in which they cared for their employees in ways that echo the manorial system of feudal Europe (Hielscher and Husted, 2020); yet, they also take into account the migration to the cities, creating new institutions for the care of indigents in light of the weakening institutions of the medieval world. ...
Purpose
The purpose of this study is to examine and interpret the characteristics of social responsibility in general, and business responsibility in particular, that were evident during a period in European history that was plagued by widespread social problems and change. Based on that interpretation, the authors explore the lessons those characteristics may have for social responsibility in a contemporary world that is facing similar conditions.
Design/methodology/approach
The paper presents a qualitative analysis of the proceedings of the Bienfaisance Congress held in Frankfurt in 1857, where societal leaders from different nations met to answer the question, who has responsibility for whom, and for what? The authors use grounded theory, as it is operationalized in what is known as the “Gioia template,” to conduct a structured analysis of this particular text, and to in turn produce a theoretical interpretation of how that question was answered.
Findings
The interpretation from this study is that congress participants articulated certain established dimensions of responsibility (individual, organizational, national), as well as one new dimension (international), and did so by differentiating boundaries of responsibility; in turn, the authors suggest that these dimensions and boundaries work together to form a nested system of responsibilities.
Research limitations/implications
There is limited empirical evidence available that documents the variety of responsibility-based initiatives that were being conducted during the 19th century. An analysis of the congress proceedings allows us to gain a better understanding of how the 19th-century world, particularly the upper echelons of European society, approached the question of under what conditions actors in different domains have responsibility for another. While the implications are limited by the analysis of the proceedings of one congress that was attended by elites, they do provide a snapshot of how Europe sought to articulate a system of bounded responsibilities during a time of widespread social problems and change.
Practical implications
Although the nested system of responsibilities framework that emerged from the grounded theory analysis is not applicable to all situations, it should sensitize policymakers and business leaders to the need to address social problems in a systemic way.
Originality/value
The authors both present a systems-based framework for understanding how responsibility is differentiated among actors (individual, organizational, state and international) and demonstrate how a theoretical interpretation of historical documents can be accomplished through the use of grounded theory, as operationalized through the Gioia template.
... However, it is equally true that there is a continuity and structural similarity of certain responses to societal challenges- Luhmann's (1980) "social structureat times when semantics do vary a great deal. For example, we know that a cornerstone of today's CSR activities-the provision of health-related services such as occupational security, health care, and old-age insurance-was developed and refined by the industrial patriarchs in the Prussian Rhine and Ruhr valleys, one of Germany's industrial hubs during the nineteenth-century industrialization (Kastl and Moore 2010;McCreary 1968). From Germany, such corporate programs then found their way to England (Hay 1977;Morgan, 1996), later to the United States and then many other countries. ...
In this paper, we argue that antecedents of modern corporate social responsibility (CSR) prior to the Industrial Revolution can be referred to as “proto-CSR” to describe a practice that influenced modern CSR, but which is different from its modern counterparts in form and structure. We develop our argument with the history of miners’ guilds in medieval Germany—religious fraternities and secular mutual aid societies. Based on historical data collected by historians and archeologists, we reconstruct a long-term process of pragmatic experimentation with institutions of mutual aid that address social problems in the early mining industry, and thus before the rise of the modern state and the capitalist firm. Co-shaped by economic and political actors, these institutions of mutual aid have influenced the social responsibility programs of early industrialists, modern social welfare legislation, and contemporary CSR. We conjecture that other elements of proto-CSR might have evolved according to similar trajectories.
... The earliest pension originated in Britain, the first evidence being a pension scheme for merchant seamen in 1749(Kastl & Moore 2010). A later example of a company performing CSR related activities is Cadbury, the family business which was taken over by George and Richard Cadbury in 1862 (Soskis 2010). ...
Corporate Social Responsibility is an important part of a modern organisation. The definition of CSR can be seen to play an important role in understanding and engagement by organisational stakeholders. There are a numerous definitions and frameworks in the field of CSR and different organisational stakeholders may hold different views in respect of strategic priorities. The research explores three questions: firstly, what is the respondents’ personal definition of CSR? Secondly, how does the concept of implicit / explicit CSR fit within an organisational context? And finally and to a much lesser extent, are there any variant CSR themes within the island of Jersey compared to, for example, the UK?
A multiple case study methodology was adopted, which supported the exploration of CSR policy and activity from the perspective of organisational members. Semi-structured interviews were used along with critical incident technique to explore the definitions, beliefs and values of a range of organisational stakeholders. Empirically based findings support the general definition of the respondents’ personal definition of CSR and also an augmented implicit / explicit framework of CSR which is based on Matten and Moon’s paper (2008). In respect of a personal definition of CSR, 21 respondents were interviewed across 11 organisations and a general, personal definition was found. Generally, respondents defined CSR at an explicit level as being about philanthropy, role in society and engagement. Implicitly, respondents generally defined CSR in terms of ethical, legal and economic interests. People tend to define CSR at an explicit level as ‘fundraising’ and ‘philanthropy’ and at a more implicit level about ‘social good’ and ‘doing the right thing’. An electronic survey showed that respondents from one of the researched organisations prioritised organisational responsibility in the following order: legal, ethical, economic and philanthropic.
The exploration of the implicit / explicit framework of CSR revealed the advantage of utilising a relational perspective which integrates perspectives rather than frames them as a paradox (although this is a perspective adopted by the researcher which is likely to invoke debate rather than be universally accepted). A series of diagnostic dimensions were defined which was used to place the 1,315 respondent meaning units into the framework, resulting a balance of implicit and explicit influences on the organisational framework. The meaning units derived from the implicit / explicit model tended to mirror the respondents’ personal definition of CSR.
There are several areas of recommended research, including an opening of dialogue regarding paradoxical / complementary perspectives of CSR versus organisational responsibility. Recommended research also is how CSR knowledge is transferred from the individual stakeholder to the institution within which she sits and vice versa.
... The earliest private-sector pension schemes also came from Britain. Kastl and Moore ( 2010 ) trace the fi rst evidence of an old-age pension to a 1749 program for merchant seamen. Plans were developed in the 1840s for clerical and other workers of the London and North West Railway, with other railways following. ...
The history of the practice of corporate social responsibility (CSR) has largely been limited to the twentieth century, with a focus on the United States. This paper provides a brief introduction to CSR practice from the nineteenth century through World War I in the United Kingdom, United States, Japan, India, and Germany. The relevance of nineteenth-century CSR to current debates and research regarding the motivations for CSR, the business cases for CSR, stakeholder management, political CSR, industry self-regulation, and income inequality are also discussed.
We collect information about more than 5000 Prussian politicians, digitize administrative data on the provision of health-promoting public goods, and gather local-level information on workers’ movements to study why elites in industrializing countries implement policies that improve the health of the poor. Using county-level variation in elite structure, we present OLS and IV estimates, suggesting that elites improve access to health services due to pressure exerted by workers’ movements. By contrast, policies that prevent disease outbreaks are implemented without such pressure. Analyses of roll- call votes substantiate the findings of the county-level analysis.
Recent research has argued that the American welfare state is not necessarily smaller than the welfare state in other advanced industrial countries. Rather, it is organized on principles that make it seem smaller: Because it functions through tax expenditures and public-private partnerships, it is less visible than welfare states that operate on the principle of direct spending. This review summarizes the most important messages of this revisionist scholarship, particularly in how this form of welfare provision undermines support for the welfare state, increases the complexity and decreases the efficiency of the system, and hides regressive policies from public scrutiny. I then argue that although this work has taught us much about American politics, several gaps need to be addressed. First, the explanation of the origins of this state of affairs is incomplete and unconvincing. Second, while private welfare is an important part of the American experience, the scholarship on private welfare provision has not yet grappled with the fact that private welfare was also historically found in many other advanced industrial countries, but did not crowd out the public welfare state there as it has in the United States. Finally, although the scholarship has usefully called attention to the invisibility of tax expenditures, we should not consider tax expenditures part of the "welfare state," because they only rarely accomplish the functions of redistribution and risk pooling of public welfare programs. Rather, in most cases, tax expenditures should be seen as tax cuts, that is, diminishment of state capacity. These observations suggest that the scholarship would benefit from broader engagement with the comparative literature on political economy and from a more precise and conceptually grounded definition of the "welfare state."
Growing Public examines the question of whether social policies that redistribute income impose constraints on economic growth. What kept prospering nations from using taxes for social programs until the end of the nineteenth century? Why did taxes and spending then grow so much, and what are the prospects for social spending in this century? Why did North America become a leader in public education in some ways and not others? Lindert finds answers in the economic history and logic of political voice, population ageing, and income growth. Contrary to traditional beliefs, the net national costs of government social programs are virtually zero. This book not only shows that no Darwinian mechanism has punished the welfare states, but uses history to explain why this surprising result makes sense. Contrary to the intuition of many economists and the ideology of many politicians, social spending has contributed to, rather than inhibited, economic growth.
A comprehensive history of German society in this period, providing a broad survey of its development. The volume is thematically organized and designed to give easy access to the major topics and issues of the Bismarkian and Wilhelmine eras. The statistical appendix contains a wide range of social, economic and political data. Written with the English-speaking student in mind, this book is likely to become a widely used text for this period, incorporating as it does twenty years of further research on the German Empire since the appearance of Hans-Ulrich Wehler's classic work.
Peter Lindert inquires as to whether social policies that redistribute income impose constraints on economic growth. Although taxes and transfers have been debated for centuries, only recently have we been able to obtain a clear view of the evolution of social spending. Lindert argues that, contrary to the intuition of many economists and the ideology of many politicians, social spending has contributed to, rather than inhibited, economic growth. Peter Lindert is a prize-winning researcher and teacher at the University of California-Davis where he serves as President of the Economic History Association and as Co-Editor of its journal. His textbooks in international economics have been translated into at least eight other languages, and he has previously taught at the University of Essex, Harvard University, Moscow State University, and University of Wisconsin.
