Signs of unsettling times

Our call as Christians is to be a light in the darkness, insisting on hope not fear . . .

The credit crisis has morphed into an even more dangerous bubble involving lost credibility. Markets are bereft of confidence, unleashing equities deflation, job losses and factory closings that only exacerbate what is now a globally shared sense of fear and gloom.

Not surprisingly, much of the mistrust for this crash is directed at business leaders. I would argue however, that this historic unwinding of false fortunes – derived from suspect mitigation of credit risk – indicts the very understanding we have of business ethics. As a business ethicist, I include myself in this criticism. Our mistake, at its most basic, has been reinforcing a binary diagnostic in which good ethics led to good companies, while failed companies proved wanting of sound ethical restraint. This has allowed us to study and apply the business case for ethics without engaging the larger systemic dimensions. This is no longer viable. Business ethics as we have practiced them are no longer credible for three reasons:

First, as Alan Greenspan admitted before Congress, the “self-interest” of companies and managers proved a “flawed” basis for “self-regulation.” Since business ethics were designed as the corporate skills for exercising responsibility, the flaw in self-regulation bespeaks a flaw in the discipline for achieving it. We are getting proof again that the self-interest of millions, multiplied over billions of transactions, does not yield the common good.

Pope John XXIII and Pope John Paul II repeatedly focused Catholic social teaching on interdependence. Self-interest is not a negative in itself, but we have tended to categorize morality as a private or solitary preoccupation of managers rather than as an exercise in solidarity. Of course we must be personally responsible for our decisions and actions, but the Church’s premise is that the moral dynamics of integrity, such as repentance and courage for righteousness, hinge on sacramental community and grace. Self-interest is never without shared risks or vulnerabilities, so self-regulation must be cooperatively defined and collaboratively managed.

Second, except in rare instances, business ethics have become an instrumental tool for companies — either to advance competitive advantage by burnishing reputation or to provide a hollow exercise in compliance to avoid legal liability. Again and again the logic has been to build the business case for ethics. Many scholars and practitioners have indeed provided the empirical data for making this case, which has many worthwhile lessons to teach. Lost in this priority to prove practicality is that utility does not exhaust the moral claims of ethical life, especially for Christians. Rather than a “heart of facts,” we need as Ezekiel taught a “heart of flesh.”

With bailouts and stimulus packages, we want to recover the economy, beliefs and patterns that we had before without addressing the biases and imbalances that led to the current crisis. Restoring authentic confidence will require something else — the ethics not for more transparency but for more truthfulness; not simply to prevent malfeasance but to also inspire the creative commitment for making markets more responsible and companies more human.

Third, our current bias is to make the morality of the organization rest on the ethical shoulders of individuals. We have had numerous examples of whistle-blowing failures — either when managers opted not to blow despite having whistles or (as in the Madoff case) when those persons with the courage to risk blowing whistles were ignored by authorities who had their heads buried in the sands of the status quo. This is not to be anti-market or against business, but rather to acknowledge that we must engage markets and business as imperfect human institutions that require on-going moral scrutiny by the community at large.

Some researchers have described the “taboos” around business ethics. Faith is one voice for penetrating these taboos and creating the space for individuals to draw moral sustenance from tradition, history and their respective living faith communities.

In Spe Salvi, Pope Benedict XVI reminds us “that every generation has the task of engaging anew in the arduous search for the right way to order human affairs; this task is never simply completed” (#25). In the swirl of our economic crisis, business leaders and ethicists have indispensable roles in this “arduous search.” We must be the ones to apply ourselves to new skills of governance: for example, creating audit committees for social and justice impacts, or setting compensation structures for executives that are reasonable, fair and motivating. We must be the ones who end the schism between strategy and morality, insisting that business and its outcomes are too important to human flourishing to be left to one-dimensional metrics of profitability; and we must be the ones who revitalize ethics in business to stir prophetic qualities that will help managers see beyond the exigencies of this quarter or fiscal year, and see the work of business in its proper long-term horizon as part of God’s gift and calling.

As always, our calling as Christians is to be a light in the darkness, insisting on hope rather than fear, and embracing responsibility for contributing our talents to “the right order.”

John Dalla Costa is funding director of the Centre for Ethical Orientation, a Toronto-based consultancy providing ethics, governance and integrity services. He is the author of five management books. He is a Regis College doctoral candidate in theology focusing on moral resources for sustainable development.