Leadership in a tough economy

As a CEO, I am guided by the words of Pope John Paul II: “Profit is a regulator of the life of a business, but it is not the only one; other human and moral factors must also be considered which, in the long term, are at least equally important for the life of a business” (Centesimus Annus, #35).

If corporate executives and government officials considered this principle when making decisions, there would be no economic crisis. It is easy to see that many large corporations have been focused purely on profit. The meltdown of the financial industry is a perfect example of greed and profit-seeking trumping prudent leadership. These companies leveraged themselves to many times their worth. In the end, many of those companies have failed and others have received huge sums of taxpayer money in an attempt to survive.

The good news is that some minds have opened to ideas that would never have been considered during boom times. This gives us, as Catholic leaders, an opportunity to evangelize. Remembering that personal holiness must come first, we can, by our example, influence companies to include human and moral factors — as well as profit — in decision making.

Catholic moral teachings guide me in investment decisions as the president of the Epiphany Faith and Family Values 100 Fund. Even with the current economic outlook, I am charged with investing at least 80% of the fund in large companies. My theory is that investing in companies that embody Catholic social and moral teachings will lead to increased shareholder value. Some of the human and moral factors I consider are:

OSHA, EEOC and EPA violations. Good leadership creates a culture of accountability. If a company has significant violations in any of these areas, there has been a moral lapse. These lawsuits and citations are distractions that take away focus for a company. They also directly impact the bottom line because of the legal fees and the resulting fines.

Executive compensation. Being a corporate executive is a stressful job with lots of responsibility. Being well compensated for the job is important. However, there is a difference between a good cash and incentive program and a $70+ million salary like the Lehman Brothers’ CEO received.

Separate CEO/Chairman. A board of directors provides oversight for a public company’s shareholders. In most cases, a company with a separate chairman and CEO has better accountability than if one person performs both roles. After all, the board determines the CEO’s compensation.

Employee ownership. For the same reason executives are given stock grants, giving employees a chance to purchase company shares at a discount increases their commitment to growing shareholder value.

Profit sharing. When a company is successful, all employees should benefit, not just upper management. It’s hard to fathom the amount of bonuses that were paid to executives at failing companies while employees were being laid off. Like stock, profit sharing provides a nice incentive for employees to focus on the bottom line.

These are just some examples of how human and moral factors play a role in a company. During these trying economic times, I’m reminded of the Old Testament Israelites. When their faith in God was strong, life was smooth. Everyone had some money in their pockets. As life became easier, the people would slowly put their faith into material things or false gods. This is called apostasy. Life begins to fall apart. When they repented and turned to God, then they would prosper again.

You can certainly see that as individuals and companies were induced to purchase things that they didn’t need and couldn’t afford — and were encouraged to take on debt to finance their extravagant consumption — our country has moved further and further from God, just like the Israelites. Now that the economy is falling apart, it’s our chance to shine. Through personal holiness and integrity in the workplace, we can lead our families, companies and the country back to God.

It’s important to remember some other words of John Paul II: “Be not afraid.” We must be humble, prayerful, hopeful people. While the task seems large, we are in our positions because we have leadership skills. Now is the time to use them.

Sam Saladino is the president of Epiphany Funds, a Catholic values mutual fund, and CEO of Trinity Fiduciary Partners. Saladino is a member of Legatus’ Fort Worth Chapter, Knights of Columbus, Fort Worth Club and Rotary Club International.