Catholic Social Teaching and Corporate Governance

I'm putting together my thoughts for my upcoming (March?) Sen. Benigno Aquino professorial chair lecture which I've entitled "Building Humane Business Organizations: Catholic Social Teaching and Corporate Governance". After reading Joel Bakan's incisive "The Corporation" and watching the DVD based on the book, I thought that it would be timely to suggest inputs for reforming corporate excesses based on Catholic social teachings, especially since quite a lot of board directors in the top Philppine corporations are Catholics who graduated from the top Catholic schools.

Bakan's main thesis is that the legal corporation as constructed is essentially an externalizing machine which is designed to pursue profit. The corporation externalizes when it acquires profits without taking responsibility for the costs and harms caused on others. As such, it is amoral and, as an artificial person, could be reasonably described as psychopathic. This point is similar Kenneth Goodpaster's description of teleopathy, or a sickness of purpose, because a corporation may be solely interested in profit at all cost.

I agree with Bakan's thesis and even with his recommendation that basic reforms are needed in corporate law to make corporations more accountable to democratic governance. A parallel approach is available, I think, through corporate governance. I believe that one way to make corporations moral is to ensure that its governance is guided by moral principles. I will try to develop these points in my lecture.

After a term of Faith-based Management

And so the end of the term has come.

It was an interesting first run of the Faith-based Management course and I certainly learned a great deal for future runs!

The main points covered in the class were the following:

1. Managers who espouse the Christian faith often do not integrate their faith with how they work. The opportunity to achieve this integration is present through reflection guided by prayer and the regular practice of virtue in making managerial decisions. Christian managers can evolve from being secularizers or spiritualizers to being natural law, faith-based or prophetic managers.
2. The difficulty of integrating faith and work is often due to the overemphasis in business organizations of pursuing foundational goods (e.g., profit and material prosperity) while neglecting excellent goods (e.g., human growth and development, the common good).
3. The faith-based manager needs to move beyond foundational goods to pursue excellent goods. The purpose of the business firm is to pursue human development and the common good through the community of the firm supported by sustainable material resources. There are companies which have done this with some success such as RPM and ServiceMaster.
4. The virtues of prudence, justice, temperance and courage guides the manager in pursuing human development and the common good.
5. The BBC-HD Code of Ethics for Business gives a useful summary of key principles and standards for faith-based management in the Philippine setting.
6. In order to pursue human development and the common good in a business, the faith-based manager needs to ensure that jobs are properly designed to respect human dignity and to promote human development.
7. Providing a just wage is a crucial element in promoting integral human development and dignity. Just wages incorporate the concepts of living wage, equitable wage and sustainable wage. The living wage (based on the principle of need) is the minimum amount due to every independent wage earner by the mere fact that he or she is a human being with a life to maintain and a personality to develop. The equitable wage (based on the principle of contribution) is the contribution of an employee's productivity and effort within the context of the existing amount of profits and resources of the organization. The sustainable wage (based on the principle of economic order) is what the employer can pay given the economic health of the organization as a whole. The right of all employees of the company to be paid a living wage prevails over the right of owners/investors to earn a reasonable rate of return on their investment in the company. ESOPs, skill-based pay and gain-sharing are some approaches towards just wages.
8. A wider ownership of productive property (e.g., company equity) promotes employees' development and ultimately serves the common good. Employee ownership guarantees that management and employees alike can cultivate their individual interests only by building up the organization as a whole. Such a community must rest on a sound economic basis, which makes competencies in finance, marketing, operations, etc., essential preconditions.
9. Marketing is a means of building relationships for the common good by communicating products' real benefits. There is a risk, however, that marketing activities may simply serve to create more wants and desire to consume without promoting integral human development and without communicating anything that is true. Relationship marketing and integrated marketing communications have potential in promoting solidarity between the business and its stakeholders.
10. New product development must serve the common good and incorporate true goods as features and not merely apparent goods. QFD can help in promoting better relationships among those involved in product design and overcome obstacles to quality or design problems.

I found a number of things helpful in conducting the course:

• The Code of Ethics for Business developed by the Bishops-Businessmen's Conference on Human Development gave a neat and easy to use set of guidelines for the students to concretize the intent of the course.
• Two additional students from a dissolved class transferred to my class, further enriching the range of discussions.
• The students were very thoughtful in their comments in class.

There were challenges too:

• The students' workloads often prevented them from doing the necessary reading preparations, whether on the textbook or the encyclicals.
• More structured activities should have been made available for the students, including cases for analysis, to internalize the principles.

The best part of the course for me was to witness how students would apply the principles in their discussions and thought processes at work. For example, a student who was in the thick of overseeing a company retrenchment was struggling with how to conduct this difficult process in a humane manner and in a way that can retain as much of the precious talent as possible. He said: "One big example here is the inclusion of drivers and messengers to the program. It is acceptable in achieving the objective of reduction but I think the consideration of retaining at least one driver at the same time he is the messenger. This idea of multi-tasking is still better than hiring a third party or an agencythat will handle those chores. "

Although I think the company will eventually outsource these services anyway, it makes me happy that at least one manager considered options other than this.

Another student, A, had shared her misgivings about her company's people practices at the start of the term. Through her persistent advisory inputs to the top management, she was happy to report that her superiors have began to consider her suggestions for more development activities for personnel. I have high hopes for this student.

I'll prepare a short two-session version of this course for integration in my business ethics courses. This will enhance how we currently cover ethics for our students.