On the recent debate about the state of hunger in
the country, the President is quoted by PDI (through
Cerge Remonde) as saying: "As long as there's one
person who is hungry, the government should do
something about it." I pray to God that she
actually said that because those are the words of a
leader. Which prompts me to post a short version
of a lecture I recently gave at De La Salle
Professional Schools. Business corporations can do
a lot to address the social inequality that continues
to plague our country.
Building Humanistic CorporationsDr. Benito Teehankee
De La Salle Professional Schools
Corporate growth for whom?
The financial indicators from the corporate sector of
the country have been quite impressive in recent
years. BizNews Asia reported that the ten most
profitable corporations of 2005 together netted P219
billion compared to P86 billion in 2004 -- an increase
of more than 150%! The Philippine Stock Exchange
reports that the stock market return last year as
measured by the PSEi was higher than 40%, an
impressive increase from the -30% the index registered
in 2000. The PSE also reports that total market
capitalization has grown from under P3 trillion in
2000 to more than P7 trillion by the end of 2006.
The recent years’ rosy corporate numbers combine with
media reportage to romanticize corporate wealth in the
public imagination. Time magazine’s cover of February
23, 2004 showed Henry Sy and his children with the
banner “The Families that Own Asia”, implying, almost
subliminally, that the corporate wealthy can indeed
“own” a country or even a region. The recent
announcement by Forbes magazine of the country’s
wealthiest, namely, Henry Sy ($2.6 billion), Jaime
Zobel de Ayala and family ($2.6 billion) and Lucio Tan
($2.3 billion), shows the link between corporate
control and tremendous levels of personal wealth.
The pressing question is: Why is the growing
corporate wealth not benefiting the average Filipino?
Based on the National Statistics Office’s (NSO) Family
Income and Expenditure Survey, the country’s income
gap increased from 31.6% in 1997 to 31.8% in 2000.
This means that in 2000, the income of those below the
poverty threshold would have to increase by 31.8% to
surpass the poverty threshold. The latest government
statistics still places the poverty level at around
30%.
Most writers on corporate governance would not see a
problem in this situation. They would reason that the
stock market is simply rewarding the efficient
allocation of financial resources by equity owners to
their most valuable uses, that is, to the corporations
which are best able to meet the demands of the market
and to produce the best profitability. Besides, the
reasoning continues, ordinary people benefit when
corporations expand their range of quality products at
ever cheaper prices.
This is a narrow and misleading view. In the first
place, the stock market directly benefits only a
small fraction of the country’s citizens, perhaps
around 10,000, by some estimates. Secondly, this view
erroneously reduces a person’s welfare to his ability
to purchase consumption goods. Human welfare cannot
be reduced to consumption in the same way that human
dignity cannot be reduced to the ability to purchase
the latest cell phone. Corporations must play a
deeper and more significant role if these are to
improve the lives of ordinary Filipinos: these must
provide decent work which gives fair and living wages,
security of tenure, adequate social protection and
meaningful participation. Unfortunately, the trend
towards minimum wage violations, contractualization
and union membership reductions among many
corporations is leading to deteriorating quality of
work lives for many corporate employees.
What does Catholic Social Teaching say about
corporations and human dignity?
As entities existing in a predominantly Catholic
country, Philippine corporations can be usefully
guided towards becoming more humanistic social
institutions by the teachings of the Church. Catholic
Social Teaching (simply referred to as CST) refers to
the formal teachings of the Catholic Church on social
and economic issues as expressed in papal and
conciliar documents. The major documents of modern
CST include a number of open letters from the Popes –
papal encylicals. The first CST encyclical is
generally considered to be Pope Leo XIII’s Rerum
Novarum (“Of New Things”) which was issued in 1891.
The Pope argued, among others, for family living wages
as a response to the rampant poverty of the day
despite growing industrialization. The Pope
explained that “…working for gain is creditable, not
shameful, to a man, since it enables him to earn an
honorable livelihood; but to misuse men as though they
were things in the pursuit of gain, or to value them
solely for their physical powers -- that is truly
shameful and inhuman.” A hundred years later,
Pope
John Paul II issued the encyclical Centesimus Annus
(“One Hundred Years”) to argue against the creeping
consumeristic greed in the new knowledge economy. He
acknowledged “the legitimate role of profit as an
indication that a business is functioning well” but
cautioned that “it is possible for the financial
accounts to be in order, and yet for the people — who
make up the firm's most valuable asset — to be
humiliated and their dignity offended.”
As the quotes above show, CST has always emphasized
that the pursuit of business profit can be a good
thing as long as it does not lead to the
dehumanization of people. Unfortunately, the tendency
to deprive employees of adequate compensation and to
promote unbridled consumption exists in many
Philippine corporations even today. According to CST,
these practices are to be avoided. Instead, the needs
of human development should be the focus of
businesses.
Pope John Paul II clarified the purpose
of the business firm as “not simply to make a profit,
but is to be found in its very existence as a
community of persons who in various ways are
endeavouring to satisfy their basic needs, and who
form a particular group at the service of the whole of
society.”
In the early 80s, the Bishops-Businessmen’s Conference
on Human Development argued similarly when it
developed its Code of Ethics for Business which
asserted that “the modern manager must be a strategist
for human development, and … the business is to build
an enterprise oriented to the development of man.”
Helen Alford and Michael Naughton, in their book
“Managing as If Faith Mattered”, explained that
integral human development within businesses should
consider physical, cognitive, emotional, aesthetic,
social, moral and spiritual aspects. Using their
framework, I like to represent a person as a flower,
with the center of the flower representing essential
material goods, and seven petals representing each
aspect of human development. A flower cannot be said
to be fully developed if some of its petals are
stunted or are missing altogether. It would be good
for corporate managers to regular evaluate how their
employees are developing as human beings. After all,
persons are not simply replaceable commodities in the
corporate books.
The role of the corporation in the 1987 Philippine
Constitution
The CST expectation that corporations be mindful of
the needs of human development and the common good are
completely consistent with the expectations of the
Philippine Constitution and that of the Corporation
Code. The fundamental law, in fact, mentions the
common good no less than 14 times! In particular, the
article on National Economy and Patrimony states, with
emphases added, that: “The use of property bears a
social function, and all economic agents shall
contribute to the common good. Individuals and private
groups, including corporations, cooperatives, and
similar collective organizations, shall have the right
to own, establish, and operate economic enterprises,
subject to the duty of the State to promote
distributive justice and to intervene when the common
good so demands.”
Thus, while the right to private property of corporate
shareholders is fully recognized, such a right is not
absolute. It is always subordinate to the mandate for
all economic entities, such as corporations, to
support the development of all and to share with
others their just share of the fruits of production.
Certainly, high on the list of people whose
development the corporation should support and who
should share in the fruits of production are its own
employees.
How can corporations be more humanistic?
There are a number of ways Philippine businesses can
be more attuned to CST while also being more faithful
to the intent of the Constitution for businesses to
preserve human dignity and to diffuse wealth equitably
among as many people as possible.
The first way is to pay decently and share the
profits. Oscar Chan of
San Jose Kitchen Cabinets has
been implementing a 50% profit sharing system with his
employees for almost twenty years. The result is
loyalty and commitment to long-term productivity among
employees.
A second way is to encourage creative participation in
productivity. Yoling Sevilla of The Leather
Collection keeps her employees involved in the value
creation work of the company through continuous
training and weekly meetings which enable even the
rank-and-file workers to be aware of the strategic
directions of the company.
A third way is to develop the business acumen of
employees. Richard Lim of Time Depot aims to develop
the career path of his employees such that they can
become future managers and even franchisees of his
business. This is his way of sharing business success
with his employees.
Corporate managers who take CST and the Constitution’s
principles to heart can similarly come up with
creative humanistic management strategies.
Meaningful corporate growth
The current situation of the country, where so few
have ever-increasing corporate wealth while so many
languish in poverty, will not be addressed by waiting
for the market to distribute benefits while the people
wait. It will only improve when more corporations
fulfill their duty, as prefaced to the Corporation
Code, to be “effective partners of the National
Government in spreading the benefits of capitalism for
the social and economic development of the nation.”
Such is the role of humanistic corporations.
(Note: This article is an edited version of the
author’s Sen. Benigno S. Aquino, Jr. professorial
chair lecture on corporate social responsibility and
governance delivered last March 17, 2007 at De La
Salle Professional Schools.)
