3 Stages of Reflection to Guide Business Leaders to the Common GoodArticle / External content not produced by TOW Project
When businesses and market economies function properly and focus on serving the common good, they contribute greatly to the material and even the spiritual well-being of society. Recent experience, however, has also demonstrated the harm caused by the failings of businesses and markets. Alongside their benefits, the transformative developments of our era—globalisation, communications technologies, and financialisation—produce problems: inequality, economic dislocation, information overload, financial instability and many other pressures that interfere with serving the common good. Nonetheless, business leaders who are guided by ethical social principles, lived through virtues and illuminated for Christians by the Gospel, can succeed and contribute to the common good.
Obstacles to serving the common good come in many forms—corruption, absence of rule of law, tendencies towards greed, poor stewardship of resources—but the most significant for a business leader on a personal level is leading a divided life. This split between faith and daily business practice can lead to imbalances and misplaced devotion to worldly success. The alternative path of faith-based “servant leadership” provides business leaders with a larger perspective and helps them to balance the demands of the business world with those of ethical social principles, illumined for Christians by the Gospel. This is explored through three stages: seeing, judging, and acting, even though it is clear that these three aspects are deeply interconnected.
The challenges and opportunities in the world of business are complicated by factors both good and evil, including four major “signs of the times” influencing business.
- Globalisation has brought efficiency and extraordinary new opportunities to businesses, but the drawbacks include greater inequality, economic dislocation, cultural homogeneity, and the inability of governments to properly regulate capital flows.
- Communications technology has enabled connectivity, new solutions and products, and lower costs, but its amazing velocity also brings information overload and rushed decision-making.
- Financialisation of business worldwide has intensified tendencies to commoditise the goals of work and to emphasise wealth maximisation and short-term gains at the expense of working for the common good.
- Cultural changes of our era have led to increased individualism, more family breakdowns, and utilitarian preoccupations with self and “what is good for me”. As a result we might have more private goods but are lacking significantly in common goods. Business leaders increasingly focus on maximising wealth, employees develop attitudes of entitlement, and consumers demand instant gratification at the lowest possible price. As values have become relative and rights more important than duties, the goal of serving the common good is often lost.
Good business decisions are those rooted in principles at the foundational level, such as respect for human dignity and service to the common good, and a vision of a business as a community of persons. Principles on the practical level keep the business leader focused on:
- producing goods and services that meet genuine human needs and serve the common good, while taking responsibility for the social and environmental costs of production and the supply chain and distribution and watching for opportunities to serve the poor;
- organising productive and meaningful work by recognising the dignity of employees and their right and duty to flourish in their work (work is for the person rather than the other way around), and structuring workplaces with subsidiarity that designs, equips and trusts employees to do their best work; and
- using resources wisely to create both profit and well-being, to produce sustainable wealth and to distribute it justly (a just wage for employees, just prices for customers and suppliers, just taxes for the community, and just returns for owners).
Business leaders can put aspiration into practice when their vocation is motivated by much more than financial success. When they integrate the gifts of the spiritual life, the virtues and ethical social principles into their life and work, they may overcome the divided life, and receive the grace to foster the integral development of all business stakeholders. The Church calls upon business leaders to receive —humbly acknowledging what God has done for them—and to give —entering into communion with others to make the world a better place. Practical wisdom informs their approach to business and strengthens business leaders to respond to the world’s challenges not with fear or cynicism, but with the virtues of faith, hope, and love. This document aims to encourage and inspire leaders and other stakeholders in businesses to see the challenges and opportunities in their work; to judge them according to ethical social principles, illumined for Christians by the Gospel; and to act as leaders who serve God.
In the Gospel, Jesus tells us: “From everyone who has been given much, much will be demanded; and from the one who has been entrusted with much, much more will be asked” (Lk 12:48). Businesspeople have been given great resources and the Lord asks them to do great things. This is their vocation. In this young century alone, many businesses have already brought forth marvellous innovations that have cured disease, brought people closer together through technology and created prosperity in countless ways. Unfortunately, this century has also brought business scandals and serious economic disturbances, and an erosion of trust in business organisations and in free-market institutions generally. For Christian business leaders, this is a time that calls for the witness of faith, the confidence of hope, and the practice of love.
When businesses and markets as a whole are functioning properly and are regulated in an effective manner by governments, they make an irreplaceable contribution to the material and even spiritual well-being of humankind. When business activity is carried out justly and effectively, customers receive goods and services at fair prices; employees engage in good work and earn a livelihood for themselves and their families; and investors earn a reasonable return on their investment. Communities see their common resources put to good use and the overall common good is increased.
When managed well, businesses actively enhance the dignity of employees and the development of virtues, such as solidarity, practical wisdom, justice, discipline, and many others. While the family is the first school of society, businesses, like many other social institutions, continue to educate people in virtue, especially those young men and women who are emerging from their families and their educational institutions and seeking their own places in society. Those who come from socially disadvantaged backgrounds and who are threatened with social isolation may also find their places within companies. Furthermore, businesses promote healthy interdependence among the peoples of different nations by promoting interaction between them in a way that is mutually beneficial. They may thus become vehicles of cultural engagement and promoters of peace and prosperity.
All of these potential benefits encourage the Church to take a lively interest in business. Where businesses succeed, people’s lives can be significantly improved; but where they fail, great harm can result. A market economy must be based on the pursuit of the common good in freedom, but freedom without truth leads to disorder, injustice and social fragmentation. Without guiding principles and virtuous leadership, businesses can be places in which expediency displaces justice, power corrupts wisdom, technical instruments are detached from human dignity, and self-interest marginalises the common good.
We wish to speak specifically to Christian business leaders, who have at the heart of their work the deep sense of God’s calling to be collaborators in creation. Such leaders play an important role in engendering and advancing ethical social principles, drawing on the Catholic social tradition where appropriate, in their day-to-day routines. We also wish to speak to all business leaders of good will who have an influence on the behaviours, values and attitudes of the people comprising their enterprises. From CEOs to heads of teams to those with informal influence, business leaders of all kinds play a critical role in shaping economic life and creating the conditions for all people to develop integrally through business institutions. Such institutions are highly diverse, including cooperatives, multinational corporations, small entrepreneurial start-ups, employee-owned businesses, family businesses, social businesses, partnerships, soleproprietorships, joint ventures with government and for-profit/non-profit collaborations. Some of these businesses are publicly traded stock companies, while most are privately held. Some have revenues larger than many countries, but most are small. Some are owned by thousand of investors, others are owned by a single person or family. Some are legally defined as for-profit entities; others have a new legal standing and are termed “social businesses” with a special status. Business is a diverse institution and Pope Benedict XVI has indeed welcomed a mixing of institutional forms.1
The vocation of the businessperson is a genuine human and Christian calling. Its importance in the life of the Church and in the world economy can hardly be overstated. Business leaders are called to conceive of and develop goods and services for customers and communities through a form of market economy. For such economies to achieve their goal, that is, the promotion of the common good, they should be structured on ideas based on truth, fidelity to commitments, freedom, and creativity.
Business leaders have a special role to play in the unfolding of creation. They not only provide goods and services and constantly improve them through innovating and harnessing science and technology, but they also help to shape organisations that will extend this work into the future. Blessed John Paul II reminded us in Laborem Exercens: “Man, created in the image of God, shares by his work in the activity of the Creator and that, within the limits of his own human capabilities, man in a sense continues to develop that activity and perfects it as he advances further and further in the discovery of the resources and values contained in the whole of creation”.2
Building a productive organisation is a primary way in which businesspeople can share in the unfolding of the work of creation. When they realise that they are participating in the work of the Creator through their stewardship of productive organisations, they may begin to realise the grandeur and awesome responsibility of their vocation.
Businesses certainly have the potential to be a force for great good in any society, and many do live up to their moral and economic promise. Numerous obstacles, however, may stand in the way of realising this potential. Some of these obstacles are external to the business—and its leaders usually have a limited capacity to influence them—such as the absence of the rule of law or international regulations, corruption, destructive competition, crony capitalism, excessive state intervention, or a culture hostile to entrepreneurship in one or more of its forms. Others are internal, such as treating employees as mere “resources”, treating the business itself as no more than a commodity, rejecting a proper role for government regulation of the market place, making money from products that are not truly good or services that do not truly serve, or exploiting natural resources in a destructive way.
Chief among these obstacles at a personal level is a divided life, , or what Vatican II described as “the split between the faith which many profess and their daily lives”. The Second Vatican Council saw this split as “one of the more serious errors of our age”.3 Dividing the demands of one’s faith from one’s work in business is a fundamental error that contributes to much of the damage done by businesses in our world today, including overwork to the detriment of family or spiritual life, an unhealthy attachment to power to the detriment of one's own good, and the abuse of economic power in order to make even greater economic gains. In this regard, the Church remains mindful of the words of Jesus himself: “No one can be the slave of two masters. He will either hate the first and love the second or be attached to the first and despise the second. You cannot love both God and money” (Mt 6:24). Business leaders who do not see themselves serving others and God in their working lives will fill the void of purpose with a less worthy substitute. The divided life is not unified or integrated: it is fundamentally disordered, and thus fails to live up to God's call.
Fragmentation of this kind can ultimately lead to idolatry—an all-too-common occupational hazard of business life that threatens both individuals and organisations. It means abandoning one’s call to relationship with a loving Creator, as the Israelites did at the foot of Mount Sinai when they crafted and worshipped a golden calf. The golden calf is a symbol of misplaced devotion, born of a false idea of true success.4 There are many surrogates for the golden calf in modern life. They emerge when “the sole criterion for action in business is thought to be the maximization of profit”;5 when technology is pursued for its own sake; when personal wealth or political influence fails to serve the common good; or when utilitarian or consequential reasoning becomes dominant. Each of these “golden calves” amounts to a kind of fixation, usually accompanied by rationalization. Each has the capacity to “entrance” us as Pope Benedict XVI says in his social encyclical Caritas in Veritate6 and business leaders must pay careful attention to avoid the lure of idolatry.
The many pressures business leaders face may lead them to forget the Gospel call in their daily professional activities. It may seduce them into believing, falsely, that their professional lives are incompatible with their spiritual lives. It places excessive confidence in material resources and/or worldly success. When this happens, business leaders risk valuing status and fame over lasting accomplishment, and consequently risk losing their good judgment. Business leaders may be tempted, whether from self-centredness, pride, greed or anxiety, to reduce the purpose of business solely to maximising profit, to growing market share, or to any other solely economic good. In this way, the good that a market economy may do, for individuals and for society, can be diminished or distorted.
Well-integrated business leaders can respond to the rigorous demands placed upon them with a servant attitude, recalling Jesus washing the feet of His disciples. Leadership in this servant spirit is different from the authoritarian exercise of power too often present in business organisations. It distinguishes Christian executives and the work environment that they seek to foster. In living business responsibilities in such a manner, in developing true servant leadership, they give freely of their expertise and abilities. In figuratively washing the feet of their collaborators, business leaders more fully realise their noble calling.
An important part of the business leader’s vocation is practising ethical social principles while conducting the normal rhythms of the business world. This entails seeing clearly the situation, judging with principles that foster the integral development of people, and acting in a way that implements these principles in light of one’s unique circumstances and in a manner consistent with the teaching of the Faith.7 The rest of this document is organised accordingly: See, judge, act.
The business leader faces a world characterised by a complicated mix of factors. To try to understand them, we need to follow the guidance given in the document Gaudium et Spes of Vatican II; that is, we have the task “of scrutinizing the signs of the times and of interpreting them in the light of the Gospel”.1 Some of these signs point to factors that limit what leaders can do to realise the good by constricting their behaviour and closing down avenues of creativity. Other factors create new opportunities for managers and entrepreneurs to serve the common good and the potential for new circles of solidarity to infuse our social, political and economic life. The world around us, therefore, presents a complex interplay of light and dark, of good and evil, of truth and falsehood, of opportunities and threats.
Christian business leaders must be able to see this world in a way that allows them to make judgements about it, to build up its goodness and truth, to promote the common good, and to confront evil and falsehood. The judge section of this paper offers help in this kind of assessment. Here the aim is to present a short summary of some key factors affecting business activity today, indicating where possible their good, bad, and context-dependent aspects from the perspective of the business leader.
Among the many complex factors that influence business locally and globally, there are four which stand out as worthy of special mention, having fundamentally changed the context of business over the last quarter-century. The first three are closely related to each other: globalisation, (2) new communication technologies, and the financialisation of the economy. The fourth factor, cultural changes—and, in particular, the challenge of individualism and accompanying moral systems of relativism and utilitarianism—may arguably present the greatest dangers to Christian business leaders. There are of course many other factors that have a bearing on business today state regulation, the role of international authorities, unions, environmental issues, work/family tensions, and more), all of which deserve analysis, but in an effort to be succinct we will only examine these four.
Globalisation: The rise of a global economic order is one of the distinguishing features of our age. The term “globalisation” points to a worldwide process of intensification of the movement of both outputs and inputs, especially labour and capital, bringing with it a growing web of social interconnectedness. With the end of the Cold War and the opening up of many emerging markets, the marketplace for businesses around the world has expanded enormously. This has created new opportunities and new threats. Whole peoples who were previously excluded from the world economic system can now participate in and benefit from it. Greater efficiencies have made more products and services affordable for more people. At the same time, greater world output has been accompanied by greater inequality in the distribution of income and wealth, both within countries and between them. Regional economic zones, with free movement of goods and even single currencies, encourage trade and stimulate innovation. They are not, however, always accompanied by equally free possibilities for the movement of working people in search of employment. Especially where there is a single currency, the resulting limitations that national or local governments encounter when trying to promote an effective economic policy, especially during a localised crisis, may put whole political systems under strain. At the same time, markets have gone from being relatively homogeneous culturally to highly diverse. This is positive in that it brings different cultures into greater communication with one another; however, considering the effects of aggressive competition and the global marketing of standardised products, the dangers of cultural imperialism and loss of diversity should be carefully examined. Pope Benedict XVI has summarised these divergent forces by observing that, “as society becomes ever more globalised, it makes us neighbours but does not make us brothers”.2
Behind all these changes is the fundamental reality that capital has acquired new freedom: no longer does it have to account to the people in the countries where its profits are made.3 It is as if economic power had acquired an extraterritorial status. Companies are able to react to profit opportunities quite independently of their national authorities—and in so doing they play a key role not only in the organisation of the economy but of society. Thus globalisation is modifying the foundations of the economy and the polity, reducing the degrees of freedom of nation-states: the familiar nation-state’s politicaleconomic instruments are tied to a well-defined territory, whereas multinational companies can produce goods in one country, pay taxes in another, and claim assistance and state contributions in yet a third. Business has become much more influential in this changed context and consequently carries the potential for great good or harm.
Communications technology: 4 The revolution in communications technology brought by the Internet has had significant effects, both positive and negative, upon business management. On the positive side, Internet-based collaboration is developing new products and solutions to age-old problems. Such products and solutions have reduced the costs for people to connect globally. New business models combine collaboration and competition in unique ways to meet needs that previously were inadequately served or left completely unsatisfied. Consumer/stakeholder groups are empowered to apply pressure on global businesses and highlight poor practices in issues ranging from respect for human rights to environmental protection in poorer parts of the world. This activism reduces the cost penalty borne by those companies that have always aimed to behave responsibly in these parts of the world.
On the negative side, we now live in a world of instant gratification and an overabundance of information. In such a world, as is commonly noted, the urgent can drive out the important. Every message becomes a priority when instant communication insists on our attention. We seem to have no time for well-studied and thoughtful decisions on complex matters. Decisions—even important ones—are increasingly made without adequate consideration and with too little shared information. Faced with more difficulty in preparing for and explaining decisions, leaders rely on their experience. Thus, their personal values and beliefs become even more critical in framing their decision-making.
Financialisation of the economy: The combination of globalisation with its expansion of markets and earnings and new communications technologies has brought the financial sector to great prominence in business. The term “financialisation” describes the shift in the capitalist economy from production to finance. The revenue and profits of the financial sector have become an increasingly large segment of the world-wide economy. Its institutions, instruments and motives are having a significant influence on the operations and understanding of business. While the recent financial crisis has brought about a wave of criticisms of the negative effects of financialisation, the financial sector has also: given millions of people easier access to credit for consumption and production; sought to spread risk through derivative instruments; created ways to leverage capital to make it more productive; and more. The financial sector has also produced social or ethical funds allowing investors to apply their values in supporting or avoiding certain industries or certain companies. This sector represents an important and fast-growing development that is set to grow further after some promising results during the financial crisis. Caritas in Veritate points out that this type of investment should be the norm: “Efforts are needed—and it is essential to say this—not only to create ‘ethical’ sectors or segments of the economy or the world of finance, but to ensure that the whole economy—the whole of finance—is ethical, not merely by virtue of an external label, but by its respect for requirements intrinsic to its very nature”.5
But despite these positive developments, financialisation has contributed to a whole assortment of negative trends and consequences. We will address only two—commoditisation and short-termism. Financialisation has tended to completely commoditise businesses, reducing the meaning of this human enterprise to nothing but a price. In particular, the financial sector has contributed to this commoditising trend by equating the purpose of business to shareholder wealth maximization. Shareholder value has become virtually the sole metric by which business leaders determine their performance and their worth. In the current climate, the call to “maximise shareholder wealth” remains dominant and is the leading theory taught in many business schools. Along with this commoditisation have come short-term mentalities under which leaders are tempted to become fixated on the upside potential for short-term success, and to undervalue the downside risk of excessive risk-taking and strategic failure. It is perhaps not surprising that the opportunity to acquire enormous wealth in relatively short timeframes provides a strong incentive for dysfunctional behaviour. Pope Benedict XVI noted these dangers when he wrote: “Without doubt, one of the greatest risks for businesses is that they are almost exclusively answerable to their investors, thereby limiting their social value…. It is becoming increasingly rare for business enterprises to be in the hands of a stable director who feels responsible in the long term, not just the short term, for the life and results of the company”.6
Cultural changes: As already discussed, the impact of new levels of contact between nations through globalisation, and between individuals through technology, has resulted in significant cultural change. For the Christian business leader, two related key cultural changes have been the turn to individualism in the West and higher levels of family breakdown than in the past. With a strongly utilitarian view of economics and even of society on the rise, whole populations are encouraged to focus on achieving “what works for me”, independently of the effects on others, with results that negatively impact family life. “Values” are seen as relative, measured by their contribution to individual preferences and business gains. Work becomes simply a means to afford the pleasures of life that each person chooses. Rights become much more important than duties; sacrifice for a larger good is no longer considered. These attitudes fuel the drive of top management to claim a disproportionate share of the wealth created, for employees to nurture an attitude of entitlement, and for customers to foster a culture of instant gratification.
Fortunately, new movements and programs have been developed in an effort to take moral and spiritual life more seriously in relation to business. Faith-and-work groups, spirituality of work programs, business ethics training and social responsibility projects, are all helping business leaders to manage their companies in the spirit of St. Paul’s exhortation: “But test everything; hold fast what is good" (1 Thes 5:21).7 Many of these groups and movements are enabling business leaders to recognise their work as a vocation and the role their businesses play in contributing to the common good.
There is no doubt that globalisation, enhanced communication and financialisation can have positive consequences for the human community. A healthy respect for short-term financial performance can also be positive if it contributes to decision-making rather than being its sole driver. All these trends, however, need to be guided by ethical social principles, illuminated for Christians by the Gospel, and embedded in sound cultural institutions. Without such a constant influence, they risk being detrimental to “integral human development”.8 This is where the social teachings of the Church and our belief in God’s love can offer an authentic perspective, enabling business leaders to fulful their Christian calling.
Respect for human dignity and the common good are foundational principles that should inform the way we organise the labour and capital employed, and the processes of innovation, in a market system. The deep and abiding purpose of individual businesses and commercial systems is to address real human needs, which is to say the relevant needs of everyone who is served in some way by a business. In particular, there are three interdependent activities that businesses should take up:
- addressing genuine human needs through the creation, development, and production of goods and services;
- organising good and productive work; and
- using resources to create and to share wealth and prosperity in sustainable ways.
The Church's social tradition addresses these three interdependent spheres of activity by providing practical principles to help guide decision-makers in the good they may do. These practical principles build on the foundational principles, and they aim to respect the multi-cultural, multi-faith situations that are characteristic of business today. They also help clarify the vocation of the Christian businessperson and the role of a true business leader.
Successful businesses identify and seek to address genuine human needs at a level of excellence using a great deal of innovation, creativity and initiative. They produce what has been produced before but often—as in the arenas of medicine, communication, credit, food production, energy, and welfare provision —they invent entirely new ways of meeting human needs. And they incrementally improve their products and services, which, where they are genuinely good, improve the quality of people’s lives.
In contribution to the common good:1 As the Compendium of the Social Doctrine of the Church puts it: “Businesses should be characterised by their capacity to serve the common good of society through the production of useful goods and services”.2 Business is inherently other-centred: a business joins together people’s gifts, talents, energies and skills to serve the needs of others. This in turn supports the development of the people who do the work. The tasks they perform in common bring forth the goods and services needed by a healthy community. “The business leader is not a speculator, but essentially an innovator. The speculator makes it his goal to maximise profit; for him, business is merely a means to an end, and that end is profit. For the speculator, building roads and establishing hospitals or schools is not the goal, but merely a means to the goal of maximum profit. It should be immediately clear that the speculator is not the model of business leader which the Church holds up as an agent and builder of the common good”.3 Rather, the Christian business leader serves the common good by creating goods that are truly good and services that truly serve. The goods and services that businesses produce should meet authentic human needs, so they include not only things with clear social value—such as lifesaving medical devices, microfinance, education, social investment, fair trade products, health care, or affordable housing—but also anything that genuinely contributes to human development and fulfilment, ranging from simple products, such as bolts, tables and fabrics, to complex systems such as waste removal, roads and transportation.
In 1931, Pope Pius XI wrote in his encyclical letter, Quadragesimo Anno , of the importance of businesses “producing really useful goods" for others.4 The good entrepreneur is one who “gives first thought to service and second thought to gain, who [. . .] employs workingmen for the creation of goods of true worth; who does not wrong them by demanding that they take part in the creation of futilities, or even harmful and evil things; who offers to the consumer nothing but u seful goods and services rather than, taking advantage of the latter’s inexperience or weakness, betrays him into spending his money for things he does not need, or that are not only useless but even injurious to him".5 Needs ought to be contrasted with mere wants, which might be characterised as those desires that are not essential to human well-being. In extreme cases, satisfying mere wants may even be detrimental to human well-being as, for example, in the sale of non-therapeutic drugs, pornography, gambling, violent video games, and other harmful products. This preoccupation with wants, often called “consumerism,” severs production and consumption from the common good and impedes the development of the person.6 Goods that are truly good serve the needs of consumers in a hierarchical order; the need for nutritious goods, for example, clearly outweights the wants of gambling entertainment. This is an objective order, which is why the production of goods and services must abide by truth instead of mere utility.
In solidarity with the poor: The production of goods and services has "a progressively expanding chain of solidarity", which raises several critical issues and opportunities for the business community.7 One is the importance of identifying, in a spirit of solidarity, the real needs of the poor and the vulnerable, including people with special needs, which are often overlooked in a marketplace driven by short-term profit.8 The Christian business leader is alert for opportunities to serve these neglected populations and sees this not only as a proper social responsibility but also as a great business opportunity. Developments in the field of the “bottom of the pyramid” products and services—such as microenterprises, microcredit, social enterprises, and social investment funds— have played an important role in addressing the needs of the poor. These innovations will not only help to lift people from extreme poverty but could also spark their creativity and entrepreneurship and contribute to launching a dynamic of development.9
Businesses create goods and services and organise the work people do together. Successful businesses design work that is good and effective, efficient and engaging, autonomous and collaborative. The way human work is designed and managed has a significant impact on whether an organisation can compete in the marketplace and whether people will flourish through their work. Blessed John Paul II explained that “whereas at one time the decisive factor of production was the land, and later capital—understood as a total complex of the instruments of production—today the decisive factor is increasingly man himself , that is, his knowledge, especially his scientific knowledge, his capacity for interrelated and compact organisation, as well as his ability to perceive the needs of others and to satisfy them”.1 Within increasing globalisation and a rapidly changing marketplace, the farsighted o rganisation of work assures an organisation’s agility, responsiveness and dynamism. This may be expedited where sensible regulations ensure that economic relations and mentalities can develop in a sustainable way, and that virtuous business can effectively profit and excel through its achievements.
Foster dignified work: “It is a scandal,” Pope Pius XI wrote, “when dead matter comes forth from the factory ennobled, while men there are corrupted and degraded”.2 The grandeur of human work not only leads to improved products and services, but develops the workers themselves. The Catholic social tradition has been particularly outspoken about the nature of work and how it affects the person. Blessed John Paul II spoke of “the subjective dimension of work", distinguishing it from its "objective dimension". He set forth a beautiful vision, indicating that when people work, they do not simply make more, but they become more. The changes brought about by work cannot be fully accounted for by its objective dimension. The worker, the subject of work, is also greatly affected by his or her own work. Whether we think about the executive, the farmer, the nurse, the janitor,the engineer, or tradespeople, work changes both the world (objective dimension) and the worker (subjective dimension). Because work changes the person, it can enhance or supress that person's dignity; it can allow a person to develop or to be dmanged. Thus "the sources of the dignity of work are to be sought primarily in the subjective dimension, not in the objective one".3 When we regard work from that perspective, we should find a joint commitment fromt both the employer and the employee to elevate work to that splendidn vision. It is the unity of sound business practice and ethics.
Recognising the subjective dimension of work acknowledges its dignity and importance. It helps us to see that work is for the person and not the other way around.4 Employees are not mere “human resources” or “human capital”. Consequently, work must be designed for the capacities and qualities of human beings, and so we must not simply require that people adapt to their work as if they were machines. Good work gives scope for the intelligence and freedom of workers; its context promotes social relationships and real collaboration; and it does not damage the health and physical well-being of the worker. This requires that leaders have the freedom, responsibility and ability to develop the right person in the right job. Good work is directed toward satisfying genuine human needs so that workers may provide for themselves and their families while also serving the flourishing of others. Good work must be sufficiently well-organised and managed to be productive so that the worker can indeed earn his or her living. Moreover, reward structures should make sure that those workers who do engage their labour in a sincere way also receive the necessary esteem and compensation from their companies. The encyclical Mater et Magistra is perfectly clear on this point: “if the whole structure and organisation of an economic system is such as to compromise human dignity, to lessen a man’s sense of responsibility or rob him of opportunity for exercising personal initiative, then such a system, We maintain, is altogether unjust—no matter how much wealth it produces, or how justly and equitably such wealth is distributed”.5
Create subsidiary structures: The principle of subsidiarity is rooted in the conviction that, as images of God, the flourishing of human beings entails the best use of their intelligence and freedom. Human dignity is never respected by unnecessarily constraining or suppressing that intelligence and freedom. The principle of subsidiarity recognises that in human societies, smaller communities exist within larger ones. For example, a family, itself a small community, is part of a village or a city, which in turn is part of a county, a state or province, then a nation, and so on. The principle insists that the freedom and input of those closest to the effects to be felt should not be arbitrarily disregarded. As Blessed John Paul II pointed out, “a community of a higher order should not interfere in the internal life of a community of a lower order, depriving the latter of its functions, but rather should support it in case of need and help to coordinate its activity with the activities of the rest of society, always with a view to the common good”.6
The principle of subsidiarity, usually applied to the structures of the State, applies as well to business organisations. We develop best in our work when we use our intelligence and freedom to achieve shared goals and to create and sustain right relationships with one another and with those served by the organisation. In other words, the more participatory the workplace, the more likely each worker will be to develop. Employees should have a voice in their work, especially in the day-to-day work. This fosters initiative, innovation, creativity, and a sense of shared responsibility.
49. The principle of subsidiarity offers business leaders great insights. It encourages them to use their power at the service of everyone in their organization and prompts them to question whether their authority serves the development of all their employees. Specifically, this principle engages business leaders in three related responsibilities:
- To define the scope of autonomy and decision making at every level in the company. The business leader should allow these to be as significant as possible, but set limits so that decision rights do not exceed a person or group’s access to the information required to make the decision, and so that the consequences of their decisions do not go beyond their realm of responsibility.
- To provide employees the needed tools and training and to ensure that they have the experience to carry out their tasks.
- To establish a corporate culture of trust so that those to whom tasks and responsibilities have been given will make their decisions with genuine freedom. The company informed by subsidiarity nurtures mutual respect and shared responsibility among all personnel. It allows employees to clearly appreciate the link between good results and their sincere engagement.
This last point about decision-making is what distinguishes subsidiarity from delegation. Someone who delegates confers responsibility or decisionmaking power, but it can be taken back at any time. So delegation does not call employees to the same level of excellence and genuine engagement as do arrangements governed by the principle of subsidiarity, and thus, the employees are less likely to grow and to accept their full responsibility.
Under the principle of subsidiarity, employees on a lower level who are trusted, trained and experienced, know precisely the extent of their responsibilities, and are free to make decisions, can fully use their freedom and intelligence, and thus are enabled to develop as people; they are indeed “co-entrepreneurs”. For business leaders on every level, from team leader up to chief executive, this is very demanding but rewarding. Working under the principle of subsidiarity calls for restraint and a humble acceptance of the role of a servant leader.
Entrepreneurs exercise their creativity to organise the talents and energies of labour and to assemble capital and other resources from the earth’s abundance to produce goods and services. When this is done effectively, well-paying jobs are created, profit is realised, the resulting wealth is shared with investors, and everyone involved excels. The Church acknowledges the legitimate role of profit as an indicator that a business is functioning well. When a firm makes a profit, it generally means that the factors of production have been properly employed and corresponding human needs have been duly satisfied.1 A profitable business, by creating wealth and promoting prosperity, helps individuals excel and realise the common good of a society. Yet creating wealth is not restricted to financial profit alone. The very etymology of the word “wealth” reveals the broader notion of “well-being”: the physical, mental, psychological, moral and spiritual well-being of others. The economic value of wealth is inextricably linked to this wider notion of well-being.
Stewarding resources: Scripture teaches that good stewards are creative and productive with the resources placed in their care.2 They do not merely take from creation’s abundance; instead they use their talents and skills to produce more from what has been given to them. One manifestation of this within the business context is financial profit—the surplus of retained earnings over expenses that enables an organisation’s sustainability. The best business leaders use resources effectively and maintain reasonable levels of revenue, margin, market share, productivity and efficiency, in order to ensure the viability of the organisation. If financial wealth is not created, it cannot be distributed and organisations cannot be sustained.
While profitability is an indicator of organisational health, it is neither the only one, nor the most important by which business should be judged.3 Profit is necessary to sustain a business; however, “once profit becomes the exclusive focus, if it is produced by improper means and without the common good as its end, it risks destroying prosperity and creating poverty”.4 Profit is like food. An organism must eat, but that is not the overriding purpose of its existence. Profit is a good servant, but it makes a poor master.
Just as financial resources are important, so too is stewardship of the environment, both physical and cultural. As Pope Benedict XVI wrote, “The environment is God’s gift to everyone, and in our use of it we have a responsibility towards the poor, towards future generations and towards humanity as a whole”.5 Creation is endowed with an order that we discover but do not create. Living creatures and the natural world may reasonably be employed to serve genuine human needs. As collaborators with God in the unfolding of creation, however, we have a duty to respect and not to attack the world around us. We are free to cultivate this world but not to devastate it. Or as the early chapters of Genesis suggest, we are called to exercise a careful dominion over the world, to cultivate it and make it fruitful, but we do not have license to exploit it as we please.
Distribute justly: As creators of wealth and prosperity, businesses and their leaders must find ways to make a just distribution of this wealth to employees (following the principle of the right to a just wage), customers (just prices), owners (just returns), suppliers (just prices), and the community (just tax payments).6
If one accepts that God’s creation is intended for everyone—rich and poor, powerful and weak, now and in the future—then it follows that all resources are conferred on humankind with a “social mortgage”.7 The Catholic social tradition understands this obligation as applying to property as well as capital. While property and capital should as a rule be privately held, the right to private property should be “subordinated to the right to common use, to the fact that goods are meant for everyone”.8 This principle urges business leaders to consider the distributive effect of the way they set prices, allocate wages, share ownership, distribute dividends, manage payables, and so on. Their decisions should aim not at an equal but at a just distribution of wealth, which meets people’s needs, rewards their contributions and risks, and preserves and promotes the organisation’s financial health. Denying people legitimate access to the fruits of the earth, especially the means to sustain life, amounts to a negation of God’s command to humanity to discover, cultivate and use its gifts.
These six principles point us to the purpose of business, which Blessed John Paul II stated “is 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”.1 While the phrase “community of persons” is not common in business literature today, it actually best expresses the full realisation of what a company and corporation can be. The etymology of the words “company” and “companions”—cum (with), and panis (bread)—suggests “breaking bread together”. The etymology of the word “corporation”—the Latin corpus (body)— suggests a group of people “united in one body”.
When we consider a business organisation as a community of persons, it becomes clear that the bonds which hold us in common are not merely legal contracts or mutual self-interests, but commitments to real goods, shared with others to serve the world. It is dangerous and misinformed simply to consider business as a “society of shares”, where self-interests, contracts, utility and financial profit maximisation exhaust its meaning.2 An inherent characteristic of work is that “it first and foremost unites people. Therein lies its social power: the power to build a community”.3 This understanding helps avoid the spiritual poverty that often arises in market economies from a lack of human relationships within and around a business.4
Building a company as a community of persons based on the six principles above is no easy task. Large multinational corporations in particular can find it challenging to create practices and policies to foster a community of persons among its members. Yet leaders in large or small firms are greatly helped by the practice of personal virtue, those life-enhancing habits and qualities of character essential to any profession. Two very important virtues for the business professional, which we discuss in further detail in the next section, are practical wisdom and justice. There is no substitute in practice for sound judgment (practical wisdom) and right relationships (justice). The six principles above do not provide all that is needed for good judgment in response to the challenges of daily work. They do not provide blueprints or technical solutions, nor are they meant to do so. Ethical social principles, illuminated for Christians by the Gospel, provide direction for good businesses, but the navigation falls to the seasoned and intelligent judgments of virtuous business leaders who can wisely manage the complexity and tensions arising in particular cases.
“Today more than ever,” Blessed John Paul II wrote, “the Church is aware that her social message will gain credibility more immediately from the witness of actions than as a result of its internal logic and consistency”.1 These witnesses of action, the great majority of whom are among the lay faithful, are not “solely passive beneficiaries but are the protagonists of the Church’s social doctrine at the vital moment of its implementation. They are also valuable collaborators of the pastors in its formulation, thanks to the experience they have acquired in the field and to their own specific skills”.2
Christian business leaders are men and women of action who have demonstrated an authentic entrepreneurial spirit, one that recognises the God-given responsibility to accept generously and faithfully the vocation of business. These leaders are motivated by much more than financial success, enlightened self-interest, or an abstract social contract as often prescribed by economic literature and management textbooks. Faith enables Christian business leaders to see a much larger world, a world in which God is at work, and where their individual interests and desires are not the sole driving force.
Business leaders are supported and guided by the Church as well as by Christian business organisations to live out the Gospel in the world.3 Without these practitioners and the organisations that support them, the Catholic social tradition would become merely inanimate words rather than a lived reality. As St. James tells us, faith without works is dead (Jas 2:17).
Unfortunately, there are people of faith within the world of business whose actions have failed to witness to and be inspired by their faith and moral convictions. We have witnessed many scandals involving leaders who have misused their positions of authority and leadership. They have succumbed to sins of pride, greed, lust, and other deadly vices. It is not only these major cases which are so painful to witness; what is also tragic is that there are Christians who, while not committing illegal or scandalous activities, have accommodated themselves to the world, living as if God does not exist. They not only live in the world, but they have become of the world. When Christian business leaders fail to live the Gospel in their organisations, their lives “conceal rather than reveal the authentic face of God and religion”.4
Faith has social implications; it is not merely a private reality. The Church’s social doctrine is “an essential part of the Christian message, since this doctrine points out the direct consequences of that message in the life of society and situates daily work and struggles for justice in the context of bearing witness to Christ the saviour”.5 The social principles of the Church call upon business leaders to act, and because of the current challenging environment, how they act is more important than ever.
Pope Benedict XVI’s Caritas in Veritate provides a vision for action. He explains that charity—“love received and given”—is at the heart of the social teachings of the Church.6 Charity “is the principal driving force behind the authentic development of every person and of all humanity”.7 So when we speak of business leaders acting, this implies both “receiving” and “giving”.
Receiving: The first act of the Christian business leader, as of all Christians, is to receive; more specifically, to receive what God has done for him or her. This act of receptivity can be especially difficult, particularly for business leaders. As a group, business leaders tend to be more active than receptive, especially now in a globalised economy, and under the effects of sophisticated communications technologies and the financialisation of business. Yet without receptivity in their lives, business leaders can be tempted by a quasi-Nietzschean “superman” complex. The temptation for some is to regard themselves as determining and creating their own principles, not as receiving them.8 Business leaders may only see themselves as creative, innovative, active and constructive, but if they neglect the dimension of receiving, they distort their place within the world and overestimate their own achievements and work.
Pope Benedict XVI, prior to his papacy, wrote that the person “comes in the profoundest sense to himself not through what he does but through what he accepts”,9 not through what he achieves but through what he receives. Indeed, human accomplishment taken alone leads only to partial fulfilment; one must also know the power and grace of receptivity. This refusal to receive is found in our origins, in the story of the fall of Adam and Eve, when God commanded them not to eat “of the tree of the knowledge of good and evil” (Gen 2:17). The moral law is given by God, and we can only receive it.10 The social principles of the Church explained above are the Church’s reflection on this moral law for business. When business leaders receive their vocation, they are also open to receiving principles that foster the integral development of those affected by the business.
When the gifts of the spiritual life are embraced and integrated into the active life, they provide the grace needed to overcome the divided life and to humanise us, especially in our work. The first act to which the Church calls the Christian business leader is to receive the sacraments, to accept the Scriptures, to honour the Sabbath, to pray, to participate in silence and in other disciplines of the spiritual life. These are not optional actions for a Christian, not mere private acts separated and disconnected from business.
The Sabbath, for example, is not simply a break from work. Perhaps paradoxically, it is only in our detachment from work that we see its deepest meaning. Pope Benedict XVI explains this connection by stating that “the biblical teaching on work finds its coronation in the commandment to rest”.11 To rest in God places our work in a new context—the context of the continuous unfolding of God’s abundant gift of creation. Sacramental worship is not an escape from the world of business—it gives us the space to see more deeply into the reality of the world and to contemplate God’s work. God’s revelation, which can only be received and not achieved, discloses that His Spirit pervades materiality, that grace perfects nature, and that worship makes work holy. This is why the Eucharist is the most profound expression of the Sabbath. It is where we see most deeply and most profoundly “the work of human hands” in cooperation with the salvific work of God: in human work, elevated by divine work, the bread and the wine are transformed into the Real Presence, a presence that has the power to redeem the world.12
The divine dimension in our daily lives can be hidden and repressed, especially in a globalised, highly technological and financially driven economy, and in situations in which the Church fails to preach and live its social message. This is why Blessed John Paul II asks business leaders and employees to develop a spirituality of work, enabling them to see their role in God’s creative and redemptive purpose and giving them the strength and virtue to live out His call.13 Without a deep well of prayer and reflection, it is hard to see, for example, how business leaders can resist the negative dimensions of information technology that drive speed and efficiency at the expense of thoughtful reflection, patience, justice and practical wisdom. Information technologies encourage us towards instantaneous decisions; thus they can create their own logic that undermines the application of the social principles of the Church, unless they are used in an ordered way by contemplative practitioners.
Giving: The second act to which the Church calls the business leader is giving in a way that responds to what has been received. This giving is never merely the legal minimum; it must be an authentic entry into communion with others to make the world a better place. The self-gift of the person inquires not “how far it must go, but how far it may go”.14 Giving moves business leaders to profound questions about their vocation: How does receptivity to God’s love animate the relationships of the various stakeholders of a business? What kind of business policies and practices will foster the integral development of people?
We have observed business leaders who give of themselves through the goods and services they create and provide, as they organise good and productive work, and as they create sustainable wealth and distribute it justly. The social principles of the Church help orient the institution of business toward a set of behaviours that foster the integral development of people. This entails addressing the demands of the organisation with practices and policies that promote personal responsibility, innovation, fair pricing, just compensation, humane job design, responsible environmental practices, and socially responsible (or ethical) investment. It also requires a prudent application of social principles to hiring, firing, ownership, board governance, employee training, leadership formation, supplier relations and a host of other issues.
In addition to these internal opportunities, business leaders (alongside governments and non-governmental organisations) influence larger issues such as international regulations, anti-corruption practices, transparency, taxation policies, and environmental and labour standards. They should use this influence, individually and collectively, to promote human dignity and the common good and not merely the particular interest of any one stakeholder.
It is not the place of the Church to prescribe in detail the actions of business leaders. Prescription is the work of practitioners and is largely carried out by lay people. The Church’s magisterium does not have technical solutions to offer or models to present; yet, the Church teaches that “there can be no genuine solution of the ‘social question’ apart from the Gospel”.15 The Pope and the bishops, the official teachers within the Church, preach its social doctrine to business leaders not to impose a burden upon them, but to reveal to them the spiritual importance of their actions and the social significance of business as an institution. As Pope Benedict XVI says in Caritas in Veritate: “Man’s earthly activity, when inspired and sustained by charity, contributes to the building of the universal city of God, which is the goal of the history of the human family”.16 When the Gospel informs the “new things” that the business leader faces in our increasingly global, technological, and financialbased economy, it sees them not simply in their technical or market dimensions, but in their influence on the integral development of the person.
This is why an important part of the vocation of Christian business leaders is the practice of virtues, especially the virtues of wisdom and justice. Wise business leaders act virtuously in their practical affairs, cultivating wisdom in concrete practices and policies, not just in abstract mission statements. This is what makes it practical wisdom: institutionalising effective and just practices that foster right relationships with stakeholders, and putting the social principles of the Church into practice in creative ways that humanise the organisation.
When business leaders face particular problems that need specific solutions, their actions are informed by “a prudential evaluation of each situation”.17 This prudential judgment is not only a market-based or technical assessment. Prudence has often been reduced to the clever actions of leaders that advance their own private interests. This is not the virtue of prudence but a vice separated from the requirements of justice. True prudence informs the mind of the business leader by asking the right questions and discerning the best courses of action for building good and just companies that can contribute to the common good.
Developing a prudential mind entails recognising the available resources of the organisation and understanding its unique circumstances. Practical wisdom requires that the ought of ethical social principles be translated into the realistic and possible of a concrete situation (given available means and resources). Practically wise teaching regarding a living wage, for example, always implies a wage that is sustainable for an enterprise. If, however, a living wage is not immediately sustainable for a business, virtuous businesspeople do not stop there and simply defer to market forces. They rethink how they are doing business and how they can change their situation creatively so as to be in right relationships with their employees. This could mean changes at the level of work organisation or job design; it could mean moving into different product markets, or rethinking pay differentials. If it is really not possible for a company to reach a just wage after having made such efforts, it then becomes the role of indirect employers such as the state, unions and other actors to supplement the company’s efforts.18
As important as indirect employers are within the economy, they must never absorb the responsibility of the direct employer. Companies must not delegate their responsibility completely, for example, to the law or to a contract. As a direct employer, the virtues of practical wisdom and justice help the business leader to see the increasing importance of businesses’ social responsibility in a globalised economy. At this time in our history, as Pope Benedict XVI explains, there is “a growing conviction that business management cannot concern itself only with the interests of the proprietors, but must also assume responsibility for all the other stakeholders who contribute to the life of the business: the workers, the clients, the suppliers of various elements of production, the community of reference”.19 This growing conviction has produced a significant amount of theory and practice in business ethics and corporate social responsibility. In many countries we see that subsidiary processes of “self-regulation” are taking place in the context of business associations and branch federations on a regional, national, or international level. Many regulations for protecting customers, employees or the environment are effectively grounded in the business sector itself, even if they may need to be reinforced by government regulation. The practical wisdom of entrepreneurs already plays an important role here, not least to show that the Catholic social tradition has much to learn from these fields of thought and action—and much to offer them.
When business ethics and corporate social responsibility are invoked to do what is contradictory to the Church’s social doctrine, they have disconnected us from a proper recognition that we are made “in the image of God” (Gen 1:27), and they lead us to fail to appreciate “the inviolable dignity of the human person and the transcendent value of natural moral norms. When business ethics prescinds from these two pillars, it inevitably risks losing its distinctive nature and it falls prey to forms of exploitation”.20 When not grounded in the deep soil of human culture, the otherwise helpful role for business ethics and corporate social responsibility will instead be prone to being instrumentalised, and thus will ultimately fail to promote integral human development within business.
Giving and receiving express the complementarity of the active and contemplative life. These two fundamental dimensions of our lives call not principally for balancing, but for a profound integration born of the realization that we need God and that God has done great things for us. In return God asks us to be His hands and feet, to continue His creation and make it better for others. For the business leader, this entails creating goods that are truly good and services that truly serve; organising work where employees develop their gifts and talents; and creating sustainable wealth so that it can be distributed justly. (See the Appendix for “An Examination of Conscience for the Business Leader”, which reflects on these three objectives in day-to-day life.)