Tag Archives: business ethics

The importance of virtues in business

WILLIAM H. BOWMAN writes that firms run by virtuous leaders thrive in the marketplace and the results show in their bottom lines. Further, the character of employees is more important than ever, and data show that companies led by men and women of character outperform competitors. Key virtues include integrity, responsibility, forgiveness, and compassion . . .

William H. Bowman

William H. Bowman

by William H. Bowman

April’s Harvard Business Review has a fascinating article which notes that we regularly hear about unethical CEOs, but not much about firms led by “highly principled leaders.”

Do such organizations outpace competitors? KRW International conducted a survey and found that firms run by virtuous executives had a two-year return on assets of 9.4%. Those led by ethically challenged leaders returned 1.9%. And what were the key virtues they tracked? Integrity, responsibility, forgiveness, and compassion.

This isn’t the first time the relationship between virtue and corporate performance has been observed. In 2001, Jim Collins published Good to Great, demonstrating that top CEOs consistently practiced two key virtues: personal humility and professional will. He called that “Level 5 Leadership” and said it was primarily responsible for the 5:1 stock performance advantage great companies had over their direct competitors.

With such dramatic results, wouldn’t you do everything in your power to hire employees who took seriously the practice of virtues? We all say we want employees with integrity, but do we seriously address the issue of virtue in our recruiting procedures? If not, we should! Fivefold performance advantages are just too significant to ignore. But how do we do this? Which virtues are the most critical?

I was the president of two companies, each with about 250 employees. One was in the child care business and the other conducted building inspections. Each company decided it would work to acquire the human virtues most important to its customers.

Our first step was assembling a list of human virtues. We were able to identify 135 of them. Recognizing the impossibility of becoming proficient in each, we decided we would choose five. But which five? We needed employees to buy in because this was going to be serious work. So we decided we would ask each of our customers: “What is most valuable in the work that we do for you?” We received over 200 responses from each company’s customers.

We then mapped each customer response to one of the 135 human virtues. At the end of that mapping, we picked the five that received the most comments. For the child care company, the virtues were patience, optimism, tolerance, perseverance and commitment. For the building inspection company, they were diligence, dependability, knowledge, charity and honesty.

With virtues identified, we created an 18-month program where the first three months were reserved for planning, and each successive three-month period was dedicated to learning and practicing each of the five virtues.

Of course, we learn from Aristotle and others that virtues can’t simply be willed, they must be practiced. We become a generous person by practicing acts of generosity, not simply by reading about the value of giving. So for each virtue we created a plan by department so employees would have plenty of opportunity to practice that virtue. One of the real benefits of this process was that the entire company worked on each virtue at the same time, so there was a lot of shared experience.

A few months after the program ended, we went back and measured our key company metrics to see what had changed. We were not expecting to see the dramatic cost savings that accrued at the end of the program. Here are some examples:

• A reduction in turnover at the building inspection company from 20% to 14% six months later, to 8% a year after the program ended. It cost us about $25,000 to replace an employee, so this saved us $750,000. At the child care company, turnover was reduced by 35%.

• When our building inspectors missed a defect, the company had to pay to remediate it. That bleed was running $1 million a year before the program, but fell to $150,000 a year after the program ended, saving $850,000 per year. This savings continued year after year.

• A Fortune 100 company decided to purchase a child-care facility for its own use because it wanted a partner dedicated to helping its employees improve their personal as well as professional lives.

The break-even for each company’s program was less than six months. So we had a company that was more virtuous and that cost much less to run. Truly a virtuous cycle.

The character of employees is more important than ever, and data show that companies led by men and women of character outperform competitors. A conscious plan to help employees develop the virtues important to their business can vastly improve a company’s culture, as well as reduce its costs.

WILLIAM H. BOWMAN is president and CEO of Core Values Group.

It’s the least I could do

Dave Durand writes that a growing number of employees do as little as possible at work. For leaders, the primary tool to help minimalists change behavior is a solid culture. There is a saying that culture eats strategy for lunch. This holds true because a great strategy without a strong culture leads to ruin, but a great culture leads to effective strategy . . .

Dave Durand

Dave Durand

To most of us, “it’s the least I could do” means, “I wish I could have done more.” However, to a sad and growing number of people, it is a goal.

I have a personal policy of attempting to provide solutions whenever I write on a topic that may strike some readers as a rant against an issue which undeniably irritates me. I will provide solutions in this article. But beforehand, I must admit, there may be a bit of a rant. My apologies to those who take offence. But to those who share my irritation, let’s get started!

Minimalist behavior is certainly destructive in relationships and organizations, but it’s the minimalist who suffers the most. Regrettably, I must include myself in this category at times. I think that’s partially why the topic ignites me. It seems that all of us have that tendency on occasion. In fact, during my college years and several years following, minimalism was my way of life when it came to my faith. I basically went to Mass on Sundays, but it wasn’t because I strived to be holy. It was primarily to hedge my bet against going to hell. That admission is embarrassing but true. I learned a lot from that experience.

When it comes to organizations, we have all worked with minimalists — the people who strive to do as little as possible. At work, they show up late, meander around their work day and scoot out as early as possible. Minimalists have a mental block and a retardation of maturity. Above all, they are selfish. The core problem for a minimalist is the lack of ability to suffer for a greater good. When people get trapped in minimalist behavior, they have a difficult time escaping the trap because they form habits which translate into nearly every part of life. At home they do as little as possible to contribute to family life, and asking a minimalist to volunteer is a waste of breath.

In order to free oneself from minimalist behavior, it is necessary to step outside of your own world and see the big picture. This is done by taking stock of the damage that is done and eventually seeing the upside to striving for the greater good. The good news is that we are all capable of this transition.

For leaders, the primary tool to help minimalists change their behavior is a solid culture. There is a saying that culture eats strategy for lunch. This axiom holds true because a great strategy without a strong culture leads to ruin, but a great culture always leads to effective strategy. Culture is formed by keeping the relevant outcomes of any organization front and center. This is done by teaching your team that what each person does at work is secondary to who they become as they do their work. Biblically speaking, we must remember the scriptural truth that it merits man nothing to win the world without saving his own soul. Of course, that was accomplished by Christ’s saving work on the cross, but or participation in that process is significant. In the life of a Catholic, we can feed the poor and spread the gospel, but if we don’t allow God’s grace to transform us, we will fall short.

Similarly, in leadership, if we expect our teams to work hard and sacrifice for the mission but we fail to hold the same standards for our own behaviors, we will be recognized as hypocrites. When hypocrisy is recognized by our teams, they will soon adopt the behavior and minimalism will become the culture. In order to overcome this danger, we must promote the mission and repeat it often in both word and action.

A powerful way to remember this is to know that an A today is a B tomorrow. A first grader’s reading skills, which merit an A in first grade will soon become a B in second grade and a C or D in third grade if progress does not follow. Likewise, our efforts at one stage in life will become less effective as years progress unless we strive to match our character and outcomes as we age. At the core, we are powered by the gifts of the Holy Spirit to avoid minimalist behavior. Stay in the state of grace and pray for the fortitude to strive for the best you can be at work and at home.

DAVE DURAND s the best-selling author of “Perpetual Motivation” and “Say This, Not That.” He is a business executive and trainer of over 100,000 individuals in sales, marketing and business management.

The futility of business ethics

Andreas Widmer writes that business ethics without a clear understanding of the meaning and significance of work is a bit like playing ball without any rules. He suggests a shift from a focus on rules and regulations, from a focus on business ethics as a separate topic, to an integrated focus on teaching young entrepreneurs about business as a vocation . . .

Andreas Widmer

Andreas Widmer

Imagine you were leading a large sports team without being told exactly what game you’re playing. Someone places a nondescript ball in front of you and says: “Play!” So you start. Every so often when you touch the ball, the ref’s whistle admonishes you.

You stop, are told that this is not allowed, you shrug your shoulders and play on. The referee’s calls are mystifying, even arbitrary, and for you the game’s objective becomes simply to circumvent or avoid the ref all together.

Business ethics without a clear understanding of the meaning and significance of work is a bit like playing ball without any rules. When we think of business ethics, we think of regulations, laws and codes of behaviors: basically a litany of don’ts.

The list multiplies rapidly. After every scandal, there is a call for more regulation. After any new regulations, businesses devise new strategies to deal with these regulations — in essence, to figure out how to have them affect their business as little as possible. It seems a reasonable enough response if seen from the perspective of “avoiding the ref.” Except that this, of course, is the recipe for the next scandal, and the cycle begins anew.

It’s no wonder that popular opinion condemns business as selfish, corrupt and damaging to society. Yet it doesn’t have to be that way. In reality, most businesses are run in a very different way than what I just described. Not because of any industry regulation or government law, but because they act out of their leaders’ fundamental understanding of what business is all about. This view is often informed by their faith.

God is a worker. The first thing we learn about God in the Bible is that he is creative: He conceived of and formed the world out of nothing. Then he made humans. He says that he wanted to make them in his image: a subject, immortal, a worker. This is where we find the primary purpose of business: God invited us to participate in his creative power. Every time we go to work, every time we engage in business, we accept that invitation and in fact, imitate God.

This is why Blessed John Paul II says that when we work, we don’t just “make more,” but we “become more.” Work is a path to holiness.

The ethics of any specific action finds its foundation and purpose in the intrinsic meaning and significance of that very action. This is why any kind of ethics in a relativistic society is at best transient and at worst completely incompatible with the common good. If I cannot ascertain the Truth, how will I know how to produce goods that are truly good and services that truly serve?

When approached from the deep meaning and significance of human work, however, business ethics becomes an instinctive exercise in excellence. It’s not how well I know the rules that makes me a better athlete, it’s that I’ve effectively internalized the game. That’s how an athlete gets what’s called “in the zone,” and it’s what happens when an athlete achieves perfection in his game.

And so it goes with business: If I internalize the very essence of business, it’s no longer about rules or regulations, but about perfection and excellence. It’s not about short-term or long-term, but about transcendence; not about profit and loss, but about sustainability; and not about me, but about others.

John Mackey of Whole Foods didn’t create his store to meet rules or regulations, but he offered products aimed at perfection and excellence. It’s the reputation of that excellence which made Whole Foods into the icon of healthy groceries.

Tom Monaghan didn’t focus as much on short-term performance as he did on making Domino’s a permanent and rewarding presence for his customers and employees.  His approach allowed Domino’s to become one of the most positively recognized companies in the world. François Michelin didn’t set out to create a profit, but harmony between his company and the consumer, work force, investors and society. He credits this harmony with the immense success during his tenure.

Any business that can compete and has a positive impact in the long run is inherently other-directed. It is in giving that we receive. That holds true in business as well as in one’s personal life. Think of your last interaction with any company: Customers reward good products and positive service with loyalty — the critical ingredient in any company’s successful future.

What I propose then is to shift from a focus on rules and regulations, from a focus on business ethics as a separate topic, to an integrated focus on teaching young entrepreneurs about business as a vocation. Let’s teach the next generation that business is about more than making a living. Let’s teach them to make a meaningful and fulfilling life. The results will speak for themselves.

ANDREAS WIDMER is director of entrepreneurship programs at The Catholic University of America. He is the author of “The Pope & The CEO: Pope John Paul II’s Lessons to a Young Swiss Guard.”

Reinventing business education

Catholic University of America launches new School of Business and Economics . . .

Whenever financial scandals make the news, business schools typically respond by adding more ethics courses to the curriculum.

But a new School of Business and Economics at the Catholic University of America is taking a different approach to instilling ethics into future business leaders by seeking to integrate morality, virtue and service into every aspect of its teaching and research.

Rethinking ethics

Dr. Andrew Abela

Dr. Andrew Abela

“It’s more than adding courses or chapters in textbooks,” said Andrew Abela, who was named dean of the school on Jan. 18, “but making sure that when you learn finance, you learn how to do finance well. That means being both effective and ethical.”

A member of Legatus’ Northern Virginia Chapter, Abela said the challenge in creating such a program is that business disciplines traditionally have been designed to be ethically neutral. Added Catholic University President John Garvey: “It’s a popular and common way of thinking about business problems that we can separate our deliberations about business issues from our moral deliberations, that business education will give you the tools to be successful at finance, marketing, accounting, whatever, and you employ that in service to whatever your ideals happen to be.”

Nonetheless, he continued, business is inextricably intertwined with moral questions. For example, he said, the current debt crisis is tied to our duties to the aged and future generations, and the last financial crisis dealt with disclosure, honesty and self-restraint.

“To think back to old-fashioned terms,” Garvey explained, “if you list the capital sins we were taught to recite as children in our catechism  class, the majority deal with these kinds of problems: covetousness, envy, gluttony, lust for goods as well as people. The virtues we want to teach people in the marketplace are a welcome antidote for that.”

Since the university announced on Jan. 8 that it was turning its existing business and economics department into a school, Garvey  said he has been struck by how new and surprising people find the idea of incorporating ethics and morality into a business program.

John Garvey

John Garvey

“I wish that there were more examples of this kind of full integration of ethical and moral thought in business and professional schools, but it’s relatively unusual,” Garvey said.

Neil Watson, a student in the school’s Master of Science in Business Analysis program, said he was drawn to Catholic University precisely because of the way the business school integrates faith, virtues, morals and ethics into every course.

“It wasn’t going to be a one-time course where I signed a paper saying, ‘I promise to be an ethical business person.’” Instead, he said, in every class, he is learning not just finance and accounting, for example, but how to do them for the purpose of doing good.

“It’s one thing to be a good business person and another to be a good business person doing good,” he explained.

Business and economics

Watson said the new business school’s approach is especially important for his generation, which has seen business portrayed as separate from a person’s spiritual life.

“We’ve seen the results and harm that are done to society if you try to practice business that way,” he explained. “We grew up with Enron and the financial crisis with AIG because it became all about money. My generation in particular is hungering for that integration.”

Although Abela believes there is a demand for business programs like Catholic University’s, he said most students searching for a business school might not be looking specifically for a virtues-based approach. However, when they learn about it, they say that is what they want.

Catholic University’s school also differs from other business programs around the country in that it combines business and economics, two disciplines Abela said are closely related. “We realize that the project of reinventing the theory of business so that it can have morality integrated into it also needs a reinvention of economics.”

As plans to expand the former department into a school became known over the last few years, CUA’s School of Business and Economics has attracted new students and faculty members.

Undergraduate enrollment has gone from 300 three years ago to 421 — in addition to 36 graduate students. Although no enrollment target has been set, Abela said applications for the next academic year are already up significantly.

Over the last five years, the full-time faculty has doubled in size to 14, with another 50 teaching part-time. The school plans to hire three more faculty members for the next academic year.

Andreas Widmer

Andreas Widmer

Among recent additions to the faculty are Andreas Widmer, a CEO and former member of the Vatican Swiss Guard who is serving as director of entrepreneurship programs; Dr. Frederic Sautet, a noted French economist who will be a visiting professor of entrepreneurship; and Dr. Ava Cas, a development economist who is assistant professor of economics.

Besides undergraduate degrees in accounting, economics, finance, international business, international economics and finance, management, and marketing, the new school offers graduate degrees in accounting, business analysis, and integral economic development management.

The one-year business analysis program is designed mainly for liberal arts students without a business background and employs an advisory board whose members provide one-on-one mentorships  to students. The integral economic development program is for students who want to work in a nongovernmental organization and is based on the understanding that economic development cannot occur unless the core institutions of society are strong.

Legatus connections

Abela said an MBA program is a possibility for the future, but with the current glut of MBAs in the U.S., there is a declining demand. “We will eventually do one,” he said, “but when we do, it will be something distinctive.”

In its quest to instill Catholic values in the business leaders of the future, the school has also employed Legates as speakers and mentors. The advisory board of the master’s program in business analysis is made up of many Legates from the Northern Virginia and Seattle chapters. Other members have visited the school as guest speakers.

“We always welcome more,” Abela said. “Our students love meeting successful Catholic business people. We want to show them examples of good, upstanding moral leaders who are also successful.”

Asked whether ethical business people are more likely to succeed, Abela was unequivocal.

“In the long term — and most Legates know this — if you treat people with respect, you will have a more sustainable and successful business over the long term. There’s no guarantee that by being moral, you will be successful. There are all sorts of temptations, but if you are trustworthy, chances are you will be more successful.”

JUDY ROBERTS is Legatus magazine’s staff writer.

Integrity on the playing field of life

Paul J. Voss writes that baseball players linked to performance-enhancing drugs have been denied entrance into the Baseball Hall of Fame. While politicians and celebrities who lack integrity often get a free pass with regard to ethics, sports are different Christians, too, are called to a higher standard. We cannot simply be Sunday-morning Catholics . . .

Paul J. Voss

Paul J. Voss

Each January, the Baseball Writers’ of America Association (BBWAA) announces the results of the annual Hall of Fame voting. The 2013 ballot included some rather impressive names, including Roger Clemens (a seven-time Cy Young award winner), Barry Bonds (the all-time home run king), and Sammy Sosa (the only person in MLB history to hit more than 60 home runs in three different seasons).

Despite their gaudy numbers and impressive career achievements, not a single member of this esteemed trio earned even 38% of the vote (a player needs to be named on 75% of the ballot for admission into the pantheon of all-time greats). The writers had tossed a shutout of historic proportions.

These players, of course, do not have spotless reputations. Strong evidence links each athlete to the use of performance-enhancing drugs (PEDs) and a growing consensus among sports writers seems to be emerging: Players who admitted to using PEDs, and even those strongly suspected of using PEDs, will not be admitted into the Hall of Fame anytime soon. In previous years, the writers tipped their hand, so to speak, by refusing to enshrine other Hall-worthy candidates (like Mark McGuire and Rafeal Palmeiro) who had been linked to PEDs. By opting not to admit the users (either admitted or suspected), the writers had ample justification at their disposal.

The BBWAA Election Rules state that “voting shall be based upon the player’s record, playing ability, integrity, sportsmanship, character, and contributions to the team(s) on which the player played” (#5). This rule obviously leaves some room for interpretation and, as a result, differences certainly emerge. However, the most dominant issue of this election was the use of PEDs and the bearing that drug use had on the words sportsmanship and integrity.

Sportsmanship suggests fairness, respect for an opponent, and graciousness in winning. It also mandates the proper adherence to the rules of the game and prudent disposition of energy. This aspect of sport often caught the attention of Blessed John Paul II, himself an athlete. In marking the 25th World Day of Tourism in 2004, he said: “The correct practice of sport must be accompanied by practicing the virtues of temperance and sacrifice; frequently it also requires a good team spirit, respectful attitudes, the appreciation of the qualities of others, honesty in the game and humility to recognize one’s own limitations.”

Professional athletes obviously strive for every competitive advantage and this desire, often fueled by excessive pride, can weaken any sense of sportsmanship or fair play. Lance Armstrong admitted as much in his recent interview with Oprah Winfrey. The BBWAA obviously felt that using PEDs violated the spirit of sportsmanship and fair play — even if “everyone was doing it.”

The word “integrity” comes from the Latin integritat, meaning “whole” or “complete.” In action and behavior, integrity implies (and even requires) a conspicuous attention to ethics and the quest for human excellence and flourishing. But if we even casually scan the landscape of American politics, business, entertainment and civic life, lack of integrity does not necessarily disqualify a person from high status, adoration or success. We can see myriad examples of complete disregard for integrity — behavior that often leads to worldly success and acclaim. How might we account for this disjunction between the Hall of Fame and everyday life?

The credibility of sport requires integrity from athletes, coaches, equipment manufacturers, referees and the rule book. Without a soundness from all stakeholders, the entire constellation of sporting activities collapses into farce. We value a level playing field, competent officiating, sensible rules and legal equipment in order to preserve the integrity of the game. We may have a cynical attitude toward politics, but our feelings toward sports remains genuine and honest. Thus, cheaters cannot and will not be tolerated.

What does this mean on a practical level for Catholics who desire to live a life of integrity? A life of integrity would reject the balkanization of faith. We cannot simply be Sunday-morning Catholics. In order to achieve integrity, we must integrate our faith into all aspects of our life. We cannot be faithful spouses only 50% of the time. Our role as mother or father is not simply a fashion that changes from one season to the next. In business, we need to treat stakeholders with honesty in every transaction. In the final analysis, the quality of our life — the assessment of our career — will include the amount of integrity we brought to the playing field of life.

PAUL J. VOSS, Ph.D., is president of Ethikos, a professional organization ’offering ethics training, and an associate professor of literature at Georgia State University.

The ‘feel’ of ethics in leadership

Dave Durand writes that leaders can inspire a range of emotions in others — both good and bad, some on purpose and others inadvertently. Even though leading is more important that inspiring positive feelings, leaders should be aware of how they make others feel in order to be fully effective. Ultimately, he says, leaders should lead with humility . . .

Dave Durand

Recently my friend and mentor passed away. He spent 62 of his 88 years in life as an entrepreneur. He taught me many things over two decades. Some lessons were complex, yet others simple.

One primary lesson he shared with me summarizes what he stood for, and I’ll carry it with me for the rest of my life. He often said, “People will not always remember what you said. They will not necessarily remember what you did, but they will always remember how you made them feel.”

The “feel” we convey to others may be the most powerful tool for creating results or destroying possibilities for leaders. In many cases, the way people feel about you actually classifies the way in which they perceive your ethics. People often claim sales people who pressure customers are unethical. However, everyone has a different threshold for feeling pressured. In many cases the sales person is not trying to apply pressure, rather he is just being enthusiastic. So how can such a subjective thing as sales pressure be perceived and labeled in such an objective way as to be called unethical?

The answer is that it doesn’t really matter why because, even though feelings are an unfair evaluation of ethics, they are the primary driver of perception. Most people perceive “your ethics” based on how you make them feel. So paying attention to the way you make others feel is essential. This reality doesn’t mean that leaders should attempt to sugar coat all situations, appease followers, or lead only after taking a poll. It does, however, mean they should be intentional about what feelings their words and actions will convey. It’s tragic when a leader makes an ethical decision but communicates it in a way that weakens his organization’s morale.

Leaders inspire a range of emotions in others — some intentional, others inadvertent. The four primary emotions that produce action or apathy are: importance, empowerment, being belittled or feeling hamstrung. Take note that these feelings are personal feelings, not opinions about the leader. It’s often said that it’s better for leaders to be respected and unpopular than it is to be liked and not respected. This is true but it’s also a distinction that misses the point of leadership and distracts a leader from a better objective. A mature leader pays much less attention to whether or not he is liked or respected and way more attention to how the people he leads feel about themselves, rather than about him. By default, a leader who makes people feel empowered and important will be respected and, in most cases, liked. But those are secondary benefits to the primary goal.

On the other hand, a leader who makes people feel hamstrung can actually, and ironically, be well liked. Consider politicians who tell the message of doom and gloom while promising to “give” help to the helpless. The purpose of such a message is to make followers feel helpless and dependent on the leader. Such leaders intentionally weaken their followers in order to increase their own personal perceived power. On the opposite side of the spectrum, leaders who don’t desire popularity but fail to equip their followers with the tools they need to help themselves, also conjure up the feeling of being hamstrung. Either way, being hamstrung is a feeling that never produces results.

As Catholics, we are taught from a young age that we should know our value because we are children of God who loves us. Obviously, if God loves us we must be important. In addition, the gospel tells us that we can do all things though Christ who strengthens us. God our Father is the perfect example of leadership so we are wise to inspire these feelings in the people we lead.

On the other hand, the evil one can make us feel falsely important — or he belittles us and causes fear and doubt. He attempts to make us feel hamstrung by stripping from us the gifts of the Holy Spirit. His greatest weapon is despair, the ultimate dagger in the back of our thighs. Leaders who emulate him can be popular with those who don’t know better. But given enough time, that leader’s true colors come out and even the deceived become aware.

Key to leaders’ inspiring positive feelings in others are truth and humility. Humble leaders who adhere to the truth empower their followers with feelings of independence and strength. When leaders lead in truth and humility, they have greater odds of being ethical and of imparting feelings that build trust.

Dave Durand is the best-selling author of “Perpetual Motivation” and “Say This, Not That.” He is a business executive and trainer of over 100,000 individuals in sales, marketing and business management. An abridged version of this article appeared in the October 2012 issue of Legatus magazine.

Corporate social responsibility

Michael Miller contends that a free, entrepreneurial and competitive market economy is the best means to create prosperity and bring about widespread distribution of wealth. But a free economy requires private property, rule of law and free exchange. Equally important are moral virtues such as honesty, thrift, hard work, and a desire to serve others . . .

Dr. Michael Miller

Voltaire once remarked that the Holy Roman Empire was neither holy nor Roman. A similar thing could be said about the popular business ethics model of Corporate Social Responsibility (CSR): It’s neither about business nor ethics.

Popular CSR models neither appreciate the moral and social value of business nor do their emotivist and trendy schemes like environmentalism and diversity actually address the real ethical challenges and social responsibility of business in a commercial society. Yet unfortunately CSR is the dominant framework through which many business leaders think about their role in society. If we’re going to take ethics and social responsibility seriously, we need a more robust vision of business ethics.

CSR is attractive because it touches on a partial truth — businesses are not just renegade profit-making machines. But the current CSR model ends up undermining ethics because of its flawed premises. First, CSR is rooted in a relativist ethic, which is why it focuses on external projects instead of right and wrong. Second, the notion of “giving back” to society presupposes that business took something in the first place. Third, the current CSR approach boils down to little more than a transaction cost of doing business. Companies have to pay off the greens and unions, the secularists and the Catholics, the pro-aborts and the anti-aborts, etc. It ends up being more a protection racket than an ethical framework.

CSR is flawed, but what is the true social and moral responsibility of business? The rich tradition of moral theology and natural law can guide us in this regard. In a commercial society, business plays an important role in the common good and in shaping society’s norms, ethics and values. What then does an ethical and socially responsible business look like? An ethical company must be honest in its dealings, follow the laws and regulations of the state and, beyond that, the moral law. Employers must also treat their workers with respect, pay fairly, provide a safe working environment, allow employees ample time to spend with their families and to rest and worship God.

Other duties include helping to maintain a just, free and competitive market economy that enables new entrepreneurs to compete — even at the expense of losing market share. This is a challenge especially when businesses grow and begin to have more access to state and federal regulators. Business people tend to like competition when they are small and have no political connections, but once they become bigger it’s important to resist the temptation to shift the market unfairly in their favor.

Businesses also have the responsibility to help maintain and develop a moral ecology that encourages virtue. Marketing and advertising do more than just sell products, they create and influence culture, attitudes, habits, beliefs and standards. Business leaders need to be responsible with this power and not engage in campaigns that resort to vulgar or sexual imagery; that undermine family life or parental authority; that mock the good, the true, and the beautiful; or that take advantage of children.

In Born to Buy, Juliet Schor documents the billions spent on marketing to children with the goal of turning them into consumers at the expense of family life and their social and mental health. A consumer society is not the same thing as a free economy, and those of us who appreciate the benefits of a market economy must resist consumerist culture. Consumerism not only hinders human flourishing, it will eventually undermine the free economy.

The following are some examples of real “social responsibility” that are more difficult than giving money to the latest green fad. It might mean a loss of profit, especially in the short term. But it can be done. For example, Omni Hotels decided in 1999 that it would no longer make porn available at its hotels. A spokesman called it a “moral decision,” recognizing that porn is a moral evil that exploits women and has disastrous effects on men. In the end, Omni ended up attracting religious gatherings from the likes of Billy Graham Ministries, TD Jakes and others.

A free, entrepreneurial and competitive market economy is the best means to create prosperity and bring about widespread distribution of wealth. But a free economy does not just pop out of nowhere. It requires a certain institutional and cultural framework — private property, rule of law and free exchange. Equally important, however, are moral virtues such as honesty, thrift, hard work, delayed gratification, long-term thinking, and a desire to serve others beyond mere economic exchange. Free economies also require certain kinds of people. A society of rational maximizers concerned only with making a profit — or stupefying others through porn and vulgarity — lacks the character and virtue to sustain a market.

Business leaders cannot save the world. Only Jesus can do that. But in its own sphere of the market, business plays a key role in shaping culture. Business leaders need to decide whether they want to take the easy road and promote the latest social trend or whether they will accept their real social and moral responsibility. A lot more than they realize rests on their decision.

Michael Miller is the Director of Programs at the Acton Institute for the Study of Religion and Liberty in Grand Rapids, Mich.

The price and illusion of loyalty

Dave Durand says that loyal employees and customers are key to successful business. He contends that we can learn a lot of business lessons from the apostles. John was loyal to Christ throughout His ministry. Peter was disloyal, but repented. Judas was disloyal, but did not repent. A humble person is always loyal, but one who pushes blame is not . . .

Dave Durand

Loyalty is a word that is used often in the business community. Establishing loyal customers is always a challenge and a worthy pursuit. Creating a culture of loyal employees also has its serious and obvious benefits.

Are there really loyal people out there? A skeptic would argue that true, free loyalty is not achievable. He might even add that “everyone has a price,” insinuating that, given enough money, power, or pain, everyone’s loyalty can be purchased or stolen.

To my mind, the most challenging ideas are those which contain enough truth to be nearly undeniable, yet have enough error to destroy their entire theory; the question of true loyalty is one of those ideas. I’m not alone in that I have experienced plenty of betrayal. When people experience betrayal — or even mild forms of disloyalty — they can become jaded, but that is a mistake.

We can learn a lot about loyalty from the apostles. The entire spectrum is represented by the twelve. On one end there is Judas, who put on a good show but lacked loyalty at the highest level. He positioned himself as the kind of guy who was dedicated to Jesus and concerned about the poor, yet his facade was merely a front to hide the fact that he was a thief. Judas traded in his eternal well-being for a few coins. On the surface, his story confirms the skeptic’s theory, but fortunately for us, God’s grace can lift even the lowest heart. In fact, God empowers loyalty beyond comprehension.

On the opposite side of the spectrum is St. John, a great example of supernatural loyalty. His loyalty was stronger than fear. Despite seeing Jesus arrested, falsely accused, scourged, mocked, beaten and crucified, John stayed at the foot of the cross. He must have feared that he too might suffer the same fate by association. His loyalty is not common.

Next to John on the spectrum, but slightly to his left at the time, is St. Peter. He represents the most common type of dedicated loyalty. Ultimately Peter gave his life for Christ, but he grew into that grace after he denied Him. Jesus knew Peter would be weak at that moment, yet He chose him to be His vicar.

What did Jesus see in Peter that we might have failed to see in him ourselves? How many of us, as leaders, might have passed by the fisherman during the “interview” process? How many of us would have fired him for the first infraction of disloyalty because we failed to see the desire and commitment he possessed, despite his temporary weaknesses?

Estimating loyalty is one of the least talked about, yet most important leadership skills that must be gained by anyone with subordinates. There are three simple ways that I’ve learned to estimate the loyalty of people I bring into my life at work.

The first is not a character assessment as much as it is an observation of maturity. There are times when new employees or partners express their loyalty in such absolute terms that I can only surmise that they lack the experience to understand what they’re saying. For example, a new employee will say that he’s committed to my company for “life,” yet he has no experience to know what that means. He reminds me of teenagers who marry right out of high school without a complete understanding of what their commitment actually entails. A sober look at what it means to be loyal builds trust. I try to estimate loyalty based on understanding what loyalty actually means beyond the honeymoon. Can the person in question realistically describe what it means to be loyal when push comes to shove? Does she see loyalty as an emotion like joy or does she see loyalty as a decision?

The second way I estimate loyalty is through humility. A humble person is a loyal person. The disadvantage I have is that I can’t read souls or hearts, so I’m limited to objective observations and my “gut.” One way I identify humility that leads to loyalty is by observing people when they make mistakes. Do they openly and readily own them or do they deny them and push the blame on others? People who push blame are never loyal. That is certain.

The third way I estimate loyalty is by eagerness. Loyal people are eager to advance the cause of an organization. They don’t sit back and wait to be told what to do. They don’t wait to care. They simply care. This is a lasting characteristic. It’s an active participation in the mission.

These three “ways” allow for a few mistakes here and there. They allow for the St. Peters out there to make mistakes but also to rise to a new occasion. I love a comeback story, which is why a second or third chance for the right person can be the right approach. In the end, we can all make mistakes on these estimates. But with openness to the gifts of the Holy Spirit we will get it right most of the time.

Dave Durand is the best-selling author of “Perpetual Motivation” and “Win the World Without Losing Your Soul.” He is a business executive  and trainer of well over 100,000 individuals in sales, marketing and business management.

Business ethics as if morally mattered

John Dalla Costa writes that if companies need a business case to strengthen their commitment to ethics, then those ethics are subservient to the bottom line. Disturbingly, ethical problems are then robbed of their moral worth. Business scholars say that ethical responsibility issues are usually parsed to eliminate any reference to higher purpose . . .

John Dalla Costa

Governance, business ethics and corporate social responsibility (CSR) have become much more considered practices in companies since the dot-com crash, but a decade’s worth of measures aiming to strengthen managerial integrity have fallen well short of the need.

On a dollar-to-dollar comparison, the collapse of Lehman Brothers was 10 times more costly to shareholders than the ignominious downfall of Enron. The social costs are also exponentially greater, with millions of people immediately losing jobs and pensions, facing what many economists believe will now be a prolonged period of high unemployment and structural adjustment. It’s true that companies placed bets that they could not cover, and that regulators failed to imagine consequences or prescribe norms for protecting the public trust. However, part of the blame must also go to the systems for self-regulation, including business ethics and CSR, which were meant to temper irresponsibility and to provide a method for exercising managerial conscience and organizational conscientiousness.

When the banks first began to falter in late 2008, I visited the websites for Lehman Brothers and Bear Stearns and downloaded their publicly available codes of ethical conduct. What jumped out as I did a side-by-side comparison was the uncanny similarity, as if the companies’ standards were adapted from a common legal boilerplate. Both codes began by invoking the authority of the respective boards of directors, both specified restrictions relating to conflict of interest, and both included a closing section enjoining employees never to put corporate assets at risk. Research confirms that most companies now have some type of code of their own, but the question business leaders need to ask is whether their systems for responsibility are any less flimsy.

For most companies, ethics have been reduced to a compliance function, involving a legalistic checklist devoid of any influence on strategy or culture. Compliance is a type of adolescent discipline for preventing infractions, whereas the pressures in most business environments actually require the ethical maturity to excercise creatively moral imagination and practice moral courage.

Admittedly, a few companies have gone beyond minimal ethics to take a more strategic approach to risk management. During the last decade, more and more data has been proffered supporting the business case for ethics. A recent article in Fortune explains that “virtue is supposed to be its own reward, but according to an emerging line of thought, it’s profitable too.”

Two recent studies have raised empirical reasons for being suspicious of this approach. First, a McKinsey survey of international business leaders confirms that while an increasing number of CEOs acknowledge a duty for corporations towards social justice, poverty reduction and sustainability, most also admit to a large gap between their rhetoric and actual performance. Second, a 2010 report from the U.N. Research Institute For Social Development shows that social responsibility programs undertaken by the world’s largest 100 corporations have achieved only a fraction of their promise. Executives appreciate the benefits of a reputation for responsibility, but the authors conclude that “far more attention has been paid to assessing what CSR does for the business and the ‘bottom line’ than for people and the environment.”

It will be obvious to many that part of this quandary relates to instrumentality. If companies need a business case to strengthen their commitment to ethics, then in essence those ethics are contingent or subservient to the bottom line. Perhaps the most disturbing feature of this pattern is that our deepest ethical problems are robbed of their true moral worth. Business scholars who study the internal practices of companies have found that ethical and social responsibility issues are usually parsed to eliminate any reference to higher principle or purpose.

Andrew Crane, professor of business ethics at York University in Toronto, details four such strategies to “accomplish ethical neutrality.” Managers de-personalize the stakes, using code words such as “headcount” or “outsourcing” to evade the human impacts of decisions. They set rigid boundaries for morality by insisting that any such concern is private or relative and therefore inappropriate to strategic discourse. Crane discovered that companies “appropriate” ethical concerns without answering to the higher standard this entails, such as claiming to be “green,” “organic” or “healthy” without investing in sustainability or addressing obesity. Paradoxically, the end result is a regimen of business ethics that renders morality taboo.

This is problematic for authenticity and integrity, especially for Christians. As disciples of Jesus, ethical and moral problems represent profound moments of conversion — not opportunities for advantage, but for bearing the cross that no one else can shoulder. Some economists argue that business is “value neutral,” but we know that ethical lapses by business leaders have moral consequences, impacting innocent people and passing difficult burdens on to the poor.

For business ethics to matter, we must work to again root their claim in moral soil. As theologian and ecologist James Nash reminds us: “The task of ethics is not to adapt reasonable norms to fit current practices, but rather to challenge and enable societies to adapt their practices to fit those norms.”

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.

Does it make sense to teach business ethics?

Dr. Andrew Abela argues that there’s no such thing as an amoral, ethically neutral finance theory or management theory. Good business leaders know that a true theory of business is in fact ethical at the core. A successful, long-lasting business is one that cares about its people — its customers, employees and the communities it operates in . . .

Dr. Andrew Abela

I’ve had a nagging suspicion for some time now that teaching business ethics in a university is not delivering on what’s expected of it. The big question is this: Does teaching business ethics make business more ethical?

At the Catholic University of America (CUA), just like at every other university with a business program, we teach the obligatory business ethics course; the accrediting agencies insist on it, after all. But I think there’s a problem with this approach. Some time ago, two of my students were in their business strategy class with one of my colleagues, a professor of management. During this class, they delivered a presentation about Wal-Mart’s strategic challenges.

At the end of the presentation, my colleague challenged them with the following: “I happen to know that you’ve been discussing ethical issues about Wal-Mart in Dr. Abela’s class. Why didn’t you bring up those issues in your presentation today?”

Without missing a beat, the students’ response was: “Well, that was an ethics class; this is a strategy class.”

There you have it. A separate business ethics course teaches students that ethics is separable from the rest of business — that you can “do” ethics separately from doing finance, marketing or HR. It teaches them what my former professor — Ed Freeman of the University of Virginia’s Darden Business School — calls the “separation thesis,” the (false) idea that business issues and ethics issues can be clearly separated.

This thesis is false because there’s no such thing as an amoral, ethically neutral finance theory or management theory. They can masquerade as such, but every theory of business contains within it some fundamental assumptions about what the theory is for, what counts as a good outcome, and what role human beings play in that theory. And depending on the content of those assumptions, the theory will be moral or immoral, but never amoral — never free of morality. So it’s false to think that we can teach business as a purely technical subject and then add ethics to make it moral. The “ethicality” of business is already determined from the core assumptions of the business theory we teach.

Thus we often face the problem that in our business ethics course, we teach students to respect human dignity, but then in marketing they’re taught to sell as much stuff as possible regardless of the good of the consumer; in finance, to maximize profits above all else; in economics, that human beings are nothing more than utility maximizers who find their happiness by consuming more and more stuff. Not explicitly, perhaps. But implicitly, that’s the message they get from these courses.

If, after you graduate, real life presents any tension between the lessons you learned in your business ethics course and the lessons from your finance (or marketing or management) course, guess which is more likely to win? “I’ve got to do my job,” graduates think, “and my job is finance, therefore I do what my finance class taught me.”

The difficulty here is that when business runs this way, according to supposedly amoral theory, we invariably end up with the greed-induced global malaise we’re facing now. Why? Because “amoral” business leads to immoral business: Without a strong notion of the good built into our concept of business, without a strong ethical foundation within the theory, business theory cannot provide sufficient protection from temptation.

The irony is that good business leaders know what many professors don’t: that a true theory of business is in fact ethical at the core. Most Legates I’ve spoken with know that a successful, long-lasting business is one that cares about its people — its customers, employees and the communities it operates in.

So how do we educate future business leaders? Instead of teaching business ethics as a separate course, let’s build it into each and every business course, and show that it belongs right inside business theory itself. (That, by the way, is the purpose of the upcoming Catechism for Business — not to serve as a business ethics textbook).

This is what we are trying to do at CUA with our new Master of Science in Business Analysis (MSBA) program, launching this fall. It’s a one-year business program designed for liberal arts students who want to pursue a business career. It takes the critical thinking and communication skills they’ve developed and adds the language and tools of business.

The program is guided by an advisory board of Catholic business leaders (including several Legates) who will also serve as mentors to students. Each course — be it in marketing, finance or management — is solidly founded on the Catholic social teaching principles of solidarity, subsidiarity and human dignity. And there is no course in business ethics. It does have a unique course called The Spirit of Enterprise, which gives a historical view of the contributions of business to society through the ages, but the topic of ethics itself is infused into each course.

We’ve started to accept applications to this program, so if you know any liberal arts college seniors with an interest in business, send them our way because it’s time to start educating the next generation of Legatus members!

A member of Legatus’ Northern Virginia Chapter, Dr. Andrew V. Abela is chair of the Business and Economics department at the Catholic University of America and an associate professor of marketing. He blogs at CatholicBusinessEthics.org