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Making Business Virtuous
MAKING BUSINESS VIRTUOUS
Jay Hein & Gary Wilkinson, Ph. D.
10/26/2015
Abstract
This paper speaks to the growing disenchantment of capitalism and introduces virtuous business
as the only antidote capable of restoring trust in the free market system. What is recognized is
that now, more than ever, there is need for a clear distinction between values-neutral capitalism
and virtuous business. Two case studies are exampled. The first showcases how The Andersons,
Inc. maintains a culture of ethical decision making, even amidst growth through acquisitions.
The second case covers Tyco, and how new leadership approached the rebuilding of company
culture following massive fraud.
Finally, the paper posits that the objective of becoming or remaining a virtuous business is the
overarching goal for a business. It is always a work-in-progress, an aim never totally achieved;
ut, an organization that steadfastly strives to be virtuous gains the greatest opportunity for
longevity and provides the greatest benefit to society.
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Making Business Virtuous
Presented by:
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Making Business Virtuous
Making Business Virtuous
“There is no right way to do the wrong thing.” This was a core operating principle for
Dayton Molendorp, whose decade as CEO of OneAmerica increased assets from $15 billion to
more than $36 billion (Swiatek, 2014).Notably, much of that growth occu
ed during the 2007-
09 recession.
Molendorp’s leadership suggests that old-fashioned values can translate into success in
the new economy. And he is not alone. Former Pepsico chairman and Wake Forest School of
Business Dean, Steve Reinemund, said in an interview with Seattle Pacific University’s (SPU)
Center for Integrity in Business:
‘…the purpose of business is to provide goods and services for society in an ethical
manner that provides a sense of well-being for employees, supports a livelihood for
families, enhances the economy of communities, and provides a reasonable return for
owners.’ (Erisman, n.d.).
Reinemund notes that business education in America does not produce such leaders today
(Erisman, n.d.). The modern push for more rigor in business education has fueled a transition
from “soft skills,” such as leadership, to more technical skills-based cu
iculum. As described in
this DeVoe white paper on business education, Indiana Wesleyan University (IWU) is delivering
what Reinemund calls for—a return to a business schools’ emphasis on leadership (Erisman,
n.d.).
This paper will consider the growing disenchantment to capitalism and introduce virtuous
usiness as the only antidote capable of restoring trust in the free market system. IWU’s
conference on Adam Smith (London, October 2011) established the intellectual foundation for
this section of the paper: the economic order described in Smith’s book, Wealth of Nations
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Making Business Virtuous
(1776), only works when practicing the values described in his other book, The Theory of Moral
Sentiments.
Business was Birthed in Virtue
It’s worth noting that the modern practice of business was indeed birthed in virtue. In his
classic book, The Protestant Ethic and the Spirit of Capitalism, Max Weber XXXXXXXXXXwrites that the
ise of capitalism is attributable to faith-based ethics. As the Protestants taught individual
esponsibility, so the market benefitted from honest dealing and a network of trust that serves as
glue for the free market.
“Self-discipline, a sense of justice, honesty, fairness, chivalry, moderation, public spirit,
respect for human dignity, firm ethical norms—all of these things which people must
possess before they go to market and compete with each other. These are the
indispensable supports which preserve both market and competition from degeneration.
Family, church, genuine communities, and tradition are their sources” (Ropke, 1960, p.
125).
Catholic philosopher, Michael Novak (1982), picked up the same themes in his book, The
Spirit of Democratic Capitalism. Whereas, his book advances our understanding of virtuous
usiness, his other writings have illuminated the virtues of business. Just as Adam Smith (1776)
was the first to conceive of a world without poverty, thanks to the rise of wealth creation Novak
(1982) contrasts the Asian and African experience over the past several decades as empirical
evidence of capitalism’s blessings to the poor.
As China and India adopted capitalist economic methods since the early 1980s, they have
combined to raise more than a half billion out of poverty. Novak (as cited in Malloch, 2008)
exclaims that “never before have so many people emerged out of hopeless lives in so short a
time” (p. xx). Africa, on the other hand, remained mired in socialist economic schemes, or
simply dictatorships, and its poor has swelled during the same time period. Consider this, in
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1970, 76% of the world’s poor lived in Asia and only 11% lived in Africa (World Bank, 2010).
Today, 15% of the world’s poor lives in Asia and 66% lives in Africa (World Bank, 2010).
Theodore Malloch XXXXXXXXXXhas taken the baton from Smith (1759), Weber (1921), and
Novak XXXXXXXXXXMalloch’s recent book, Spiritual Enterprise, builds on their work and takes on the
paradoxical realities of capitalism’s role in improving society while society remains skeptical of
it. This paradox reached its apex in the 1990s when capitalism’s triumph over communism
seemed to settle the issue once and for all; yet, within a decade, there were widespread protests
in such free market capitals as New York City and London over capitalist abuses that led to
global recession.
Virtuous Business
Now, more than ever, there is need for a clear distinction between values-neutral
capitalism and virtuous business. The former is susceptible to repeating the 2008 crisis and the
latter is the means to macro benefits such as combatting global poverty, and micro benefits such
as finding meaning and dignity in the workplace.
Spiritual Enterprise makes two big claims in this direction. First, it uses rigorous market
analysis to determine that virtuous leadership contributes to business success. Second, it makes
the case that free enterprise capitalism is wholly consistent with spiritual depth and moral
commitment. Both of these claims rest on the notion of virtue, which Malloch XXXXXXXXXXdefines as
“a habit of excellence,” and his book introduces the following virtues with over 60 real-life
usiness case studies—each evidencing virtuous organizational practice resulting in personal and
marketplace success: faith, hope, charity, courage, perseverance, discipline, compassion,
humility, and others.
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Malloch XXXXXXXXXXbegins with a focus on the theological virtues of faith, hope, and love that
form the basis of a spiritually attuned life. He then distinguishes between the “hard” virtues (e.g.,
courage, discipline) that gets things done, with the “soft” virtues (e.g., justice, compassion) that
inco
ectly get relegated to “stay-at-home” situations (Malloch), although they are vital to
virtuous business.
Other contemporary experts help us understand why firms should strive to be virtuous:
today’s talent demands it. The Aspen Institute surveyed nearly 2,000 MBA students from 15
usiness schools to discover their attitudes about business and society (Trevina & Nelson, 2011).
At the start of the 2008 financial crisis, nearly 80% of students claimed that a well-run company
“….operates according to its values and a strong code of ethics” (Trevina & Nelson, 2011, p.
10). In contrast, less than 50% of the students claimed that well-run companies “…adhere to
progressive environmental policies” (Trevina & Nelson, 2011, p. 10) and little more than half
equired “…competitive compensation” (p. 10).
University of Chicago scholar, Amy Kass XXXXXXXXXXasserts that such impulses need to be
instructed. She challenges business schools to teach virtues with such content as she gathered in
her landmark book, The Perfect Gift. Christian education has a distinct contribution to such
teaching given its orientation toward Christ-centered value over material value.
Consider today’s debate over the workplace. Gallup CEO, Jim Clifton (2011), recently wrote a
ook called The Coming Jobs War. He cites Gallup’s research of the world’s 7 billion people
attitudes toward work. Of the 5 billion aged 15 or older, 3 billion need a full-time job, but only
1.2 billion such jobs exist in today’s global marketplace (Clifton, 2011, p. 2). Clifton believes
that this will lack of good, available jobs will threaten countries’ well-being and creating good
jobs will be the top leadership challenge in the new century. In other words, tomo
ow’s power
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okers will be job creators.
Juxtaposed against this growing demand for good jobs is the danger
of placing too much of one’s self-worth in our jobs. Work should
e everything it was designed to be (glorifying God through the full
use of our talents) while not allowing it to be what it was not designed to be (the source of our
identity) as John Beckett XXXXXXXXXXhas shared in Loving Monday: Succeeding in Business without
Selling Your Soul. Tim Keller’s XXXXXXXXXXfaith and work ministry leaders report that much of the
workplace stress reported by congregants is fear of performance reviews. Redeemer’s
marketplace teaching team addresses this inherent insecurity with Christ’s assurances of inherent
worth (Keller, 2014).
So what are the characteristics of a virtuous business? Companies that meet the
increasing demands of global competition for market share with an ethical culture and human
capital development focus will have a competitive edge in the new economy. Virtuous firms are
characterized by having high integrity, a striving for excellence in their provision of products and
services to consumers, in addition to excellence in business leadership and management
practices, a culture of open communication, cooperation and collaboration, and a system of
measurement and accountability throughout the organization.
Leadership and Organizational Challenges to Become or Remain Virtuous
In the previous sections, the characteristics of a virtuous corporation and the reasons why
firms should strive to become or to remain a virtuous corporation have been discussed. This
section will describe the leadership and organizational challenges in the process. It is not an
elusive process, but it does require fortitude. To create a culture of ethical behavior requires an
organization committed to ethical decision making, a system of training and mentoring to build
“Tomo
ow’s power
okers will be job
creators.” ~ Jim
Clifton (2011).
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ethical character among the employees, and the necessary incentives and checks and balances to
make it happen. Of course, no organizational structure ensures ethical decisions. But an
organization with leaders—servant leaders—who set an example of ethical conduct, and a
structure established to provide proper incentives for ethical decisions with appropriate checks
and balances, training, and communication, are key components of a virtuous business.
By example, Jesus taught the disciples about servant leadership by serving them (John
13:1-17). He role-modeled the desired attitude and behavior, and deeper still, he imparted
wisdom.
“The primary perspectives of the servant leader are twofold: When his people achieve
their full potential so will his enterprise. When they have all bought-in to a common and
shared purpose, a goal that transcends their own functional objectives and which is about
serving God, they will work coherently, cohesively and collaboratively towards the
achievement of that purpose, for themselves, for the enterprise and for God” (Waddell,
2014, p.10).
This section will first describe some fundamental organizational requirements for
promoting ethical decision making, and, secondly, discuss how individual decision makers must
co
ectly frame business problems. Finally, the need for planning, open communication on
ethical issues and necessary checks and balances within the organization will be addressed. The
objective is to implement an organizational structure which fosters ethical decision making. It is
an objective that is within the direct control of the firm’s leadership, and one that recognizes that
the execution of ethical decision making by individuals within the organization can be influenced
y the example of leadership, training and continuous reinforcement, and incentives which
eward ethical behavior.
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One of the troubling features of many corporations is that they have the goal of being an
ethical corporation in their mission statements and a code of conduct to support it, but they never
develop a corporate culture of ethical conduct. In a 2012, Wall Street Journal blog post titled
“Survey Finds Unethical Business Practice on the