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«Global TrusT and EThics in FinancE Innovative Ideas from the Robin Cosgrove Prize Carol Cosgrove-Sacks / Paul H. Dembinski Editors Trust and Ethics in ...»

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The second lineof implementation looked at the necessary investment in education: business schools worldwide are centrally positioned in developing the integrity and efficient use of ethics in finance. The major theme is the comprehension of underlying, complex non-financial values in finance theory as well as in business practice. So should we invest as if people and planet mattered? Well, it all depends. It depends on what we consider as really important to us, on our values as professionals, individuals and society. If we make sure to feed these values into our financial system, it will produce the right answer.

References Hallerbach, W. et al., 2002. A framework for managing a portfolio of socially responsible investments, Erasmus Research Institute of Management report, May.

Horrigan, J., 1987. “The Ethics of New Finance”, in: Journal of Business Ethics 6.

Hawken, P., 2004. Socially Responsible Investing. How the SRI industry has failed to respond to people who want to invest with conscience, and what can be done to change it, Natural Capital Institute, www.responsibleinvesting.org.

Renneboog, L. et al., 2007. Socially Responsible Investments: Methodology, Risk Exposure and Performance, ECGI working paper, June.

Wisebrod, J, 2007. “How to make responsible investment appealing”, in: Finance & the Common Good/Bien Commun 27.



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There are certainly many ways of writing a paper about the intersection of business and theology. On the one hand, simply describing the different models of corporate social responsibility (CSR) in the business world and, on the other, summarising those Bible passages that mention business in some way, which certainly would be an interesting if rather unfocused method. Given these various methodological approaches methodology, I have decided to focus on the normative question of Christian ethics. Initially, with a less than theological approach, I shall ask if companies should have a moral obligation to implement CSR; and if so, how this could look in practice without taking an excessively naïve approach.

Christian, corporate and collective responsibility

The term “responsibility” is derived from the Latin “responsabilis”, which means able to respond to the obligations and expectations of others. To recognise these responsibilities, managers tend to use a mixture of intuition and rationality. But is it true that only individual persons can 368 Trust and Ethics in Finance be responsible, as they have a conscience? In this context, it is certainly much easier for medium-sized and small companies to live virtuously according to the principles of CSR then it is for bigger companies.

Do companies really have a character and, therefore, can they be made responsible for things? Peter French (1984) initiated this debate twenty years ago: “Certainly a corporation doing something […] usually can be described as having reasons for [its] behaviour. In fact, by virtue of those descriptions they [companies] may be properly held responsible for their behaviour, ceteris paribus.” In his argumentation, saying that companies, as well as employees and managers, have a character that includes responsibility, French also uses the terms “reasons”, “desires”, “intentions”, and “decision-making”, which support the focus on the character of individuals in CSR. In jurisprudence, companies usually are considered as legal persons.

–  –  –

Are companies responsible?

John Ruggies, who works for the UN and is a member of the faculty of the Harvard Kennedy School, wrote in a special report in the Economist in 2008, that the theological question of the obligations for CSR would be irrelevant today, as most companies would already implement them. According to this special report, “some of the big banks, including Goldman Sachs and UBS, have started to integrate environmental, social and governance issues in some of their equity research” (Special issue on corporate social responsibility, The Economist, 29.01.2008). In this regard, most scholars and practitioners today focus more on the how and less on the whether of doing CSR.

The conclusions of the Economist, bearing in mind an enlightened form of self interest, were that failing to take CSR into account would be risky: “Ignoring something that makes business sense” would constitute a certain recipe for failure in the management of the company.

In this context, Peter Pruzan (2008) raises three challenging questions: can a company be responsible? Why should it be responsible?

And what role does the Christian faith play in this business case?

In times of financial crisis, managers tend to speak on the basis of their own visions, moral virtues, and financial values, but also increasingly on that of their company. But do companies also possess intuition, empathy, and reflection? Pruzan argues two possible affirmations concerning this idea: 1) companies are judicial entities with legal responsibilities; and 2) companies are involved in the social system of relationships with share- and stakeholders. Similar to the phenomenon at a football match, in which fans tend to say that “we” (they) have shot the golden goal, even employees tend to speak and think in the first-person plural, that “we” have lost our jobs at General Motors in Detroit, for example. In such a participative and self-referential corporate culture, people tend to feel that way because these interpersonal actions are important in the development of the individual’s identity.

370 Trust and Ethics in Finance

Values and virtues

Christian faith was founded on unique virtues, that can be considered to have derived from Jesus’ greatest commandment to love thy neighbour as thyself (Matthew 22:37-40). From Adam as the first worker in Biblical times who experienced the sweaty nature of work, via the Scriptures of sin and the fall (Genesis) to the end of a greedy and worried world (Revelation), finance has not been intrinsically connotated at all pessimistically in theological thought. The Old Testament in particular speaks quite deferentially about money issues, although this exegesis is not the focus of this paper. In modern times however, some discrepancies between faith and finance on Wall Street are frequently discussed in a controversial and sometimes even hostile manner.

In the current financial crisis, public theology has gained new relevance as it focuses on the intersection of Christian ethics and capitaloriented finance. How do Christian ethics look in business? What are the challenges a Christian manager faces in the neo-liberal economy?

Many managers have started to reflect on their values (finance), virtues (faith), and on Christian ethics in between. Especially in the current crisis, managers with strong leadership skills and education feel able to integrate both CSR and the Christian faith in the workplace. To some extent, one cannot overlook the fact that pastors, churches, and theology are distinct from managers, companies, and economics. However, many of the theological-minded have still missed an important issue: how to integrate the workplace Monday to Friday in a Sunday-centered church that also endorses CSR I do not want to say that business is all good, since the current crisis shows how immediately Wall Street needs more moral virtues in addition to the financially-driven values. Secular companies need managers and pastors who encourage those who are in despair, but try to live according to Christian virtues rather than merely the values of stocks. As a field of theological research in Christian ethics, it can be assessed that in Virtuous Enterprises 371 practice, CSR has received more attention from Christian managers than in the general teaching of business schools.

Certainly diverse strategies and political views exist on transforming CSR and Christian ethics in companies. Having evaluated both useful and counterproductive strategies, the paramount conditions of CSR are “to demonstrate that spirituality brings new dimensions that are otherwise inaccessible by an approach that is only humanistic” (Pauchant, 2002).

CSR and Christian ethics in companies

In this paper, it is argued that CSR stands at the intersection of Christian ethics (faith) and business management (finance). For clarity and control of arguments in the areas of conflict, the terms “virtues” and “principles” will refer to the faith aspects; and the terms “values” and “preferences” will refer to the financial ones.

Prayers, teachings, and sermons preached in the realm of the church are neither able nor bound to make concrete decisions on CSR in the economic sphere, but they do evoke more important issues than the clergy might imagine: convincing managers again that the church does not remain stuck in a counterproductive, biased, or one-way defence of Christian traditions.

Christian communities can also invite managers to their meetings, or visit them in their workplaces. This can offer unique opportunities for developing Christian faith, and for building constructive relationships through mature identities, as well as obeying virtues that help business to become more thoughtful in the light of CSR. In this ethical framework, even mergers and acquisitions, which usually tend to cause reductions in labour, although they are aimed at ensuring the continued existence of the company in a competitive market of global capitalism, are merely business cases that require strong quantitative skills, and where 372 Trust and Ethics in Finance “the fundamental principle, ‘do good and avoid evil’, cannot become the basis on which to decide whether to go through” (Pauchant, 2002).

A nominative approach Probably, the answer to the research question of whether or not companies have a moral obligation to implement CSR is not a satisfactory one, but it does aim to build greater clarity: it depends on the individual cases in the grey areas. Yet, in a black-and-white scheme, no clear answer can be given, because the effectiveness of CSR depends on the knowledge of the grey areas. Instead of describing the faith at work movement, which would tend too much towards sociology or edifying literature, especially that written by Christian-evangelical scholars in the last two years, I prefer to take the nominative approach. This is not problem-free as to how economists qualify and quantify things, even though these value judgments are necessary in everyday business practice.

Christian ethics has criticised these values in light of the eminent virtues that define the difference between mere business goals and the ultimate good (Fischer, 2002).

3C model: character, company, Christ

With regard to the three major models of CSR presented in Figure 1, I would like to examine the normative ways in which managers make their individual moral decisions: on the one hand based on economy, they make the more “rational” decisions; on the other hand, from a theological point of view, the more “intuitive” decisions.

CSR is based on the relationships of the character of both managers and their employees, the corporate culture, and Christ as the ultimate transcendental purpose. Considering the micro, mezzo, and macro level of the moral obligations for CSR, all these fields are linked to each other. But there is much evidence to be found in the interdisciplinary litVirtuous Enterprises 373 erature of psychology and management that it is more efficient for CSR to use identity as a starting point, be it that of individual managers or their employees. Their personal interests, conflicts, and broader education through role-models are important – especially in the high-pressure business environment of Wall Street.

Vocation: Calling and Berufung

& /  ^Z There should always be congruence on all three levels, harmonising the character of the individual, the culture of the company, and faith in Christ beyond the rationality of economics.

Managers should intrinsically encourage CSR through a less objective, and living attitude to corporate culture. CSR should also be instrumentalised, as this can be a support for virtuous behaviour, rather than considering individuals as a means to an end. In order to uphold CSR in an open and encouraging way to employees, all moral agents (including consumers) should behave in a less biased and more considered way, rather than pointing the finger at managers.

I suppose that CSR is really more than just legal compliance. CSR cannot be just a commitment to meet the legal standards through avoidTrust and Ethics in Finance ing harm, as most people with no particular religious affiliation tend to do this anyway.

Individual character CSR focuses firstly on the development of individual character.

When individuals go too far in their imitation of role models, this may partially explain a lack of morality in the individual manager’s. Managers behave differently in dealing with the interests of employees, clients, shareholders, and stakeholders, as was shown during the events of the current Wall Street financial crisis. Particularly in investment banking, which sometimes tends to reduce people in global companies to human capital, the alienation from higher virtues created by financial-driven values appears to be problematic. Recognising that these virtues are linked to a person’s identity, many managers complain that there is no connection between their actual work and their personal identity.

Perhaps these managers feel this way because they never received any deep moral education during their time in business school. Achieving an MBA degree is still commonly understood as a stepping stone in one’s career.

Moral education through role models is one of the key factors in implementing CSR in the corporate culture. Certainly, there appear to be quite a few discrepancies between what happens on a day-to-day basis and the desired behaviour expressed in the mission statement on the company’s website. Some managers probably try to justify their behaviour because they never had any role models in their youth. In a survey of Harvard University MBA graduates, however, many young managers admitted “that they had received explicit instructions from their middlemanager bosses or felt strong organisational pressures to do things that they believed were sleazy, unethical, or sometimes illegal” (Boatright, 1999). Opposing a widespread opinion of virtue-neutral education, HarVirtuous Enterprises 375 vard psychiatrists have found that both students and executives expect both virtue and even silence in teaching matters, which emphasises the responsibilities of role models (Piper, 1993).

Certainly, exemplary behaviour of the CEO and a more CSRoriented human resource department are keys to a virtuous company.

Despite the fact that most business schools paid little attention to this in the period between the fall of stock markets after 9/11 and the speculative climb before Black Friday on 2 October 2008, “management education can and should be more than the transfer of skills and knowledge; it should be a moral endeavour” (Piper, 1993). Students should focus particularly on a more participative, joined-up attitude towards CSR.

Can business ethics be taught?

In a triangle of virtue, knowledge, and skills, Thomas Piper (1993) has developed questions according to implicit models of CSR and the development of corporate culture: “How should an individual decisionmaker, confronted with an ethical dilemma, reach a decision that is competitively, organisationally, economically, and ethically sound?” According to Piper, CSR should be included in the mission of a business school as “a story of hope and concern, of progress and yet unfinished initiatives”, trying to rebalance the educational dilemmas of ethics in management. In the system of moral obligations for CSR, business relationships should be “based on respect, honesty, fairness, and trust as fundamental to the effective and ethical functioning of organisations”.

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