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Summary: A company has more social obligation than to make a profit.

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January 18, 2010

Caritas in Veritate

"Has the LORD as great delight in burnt offerings and sacrifices, as in obeying the voice of the LORD? Behold, to obey is better than sacrifice, and to hearken than the fat of rams. 23 For rebellion is as the sin of divination, and stubbornness is as iniquity and idolatry. Because you have rejected the word of the LORD, he has also rejected you from being king."

It’s not clear what angered Samuel more, the disobedience of Saul and his looting army, or Saul’s insistence that he had obeyed God when he clearly had not done so. The inspired author of the books of Samuel had enough experience with kings to not be very taken with their actions. Some of these Amalekites were left, and, in fact, a descendant of Agag named Haman was responsible for planning the genocide of the Jews several hundred years later. Do not put your trust in princes, in Presidents, in Congress, even in the results of Massachusetts elections. God has already won the victory; it is our job by the Spirit of God to be Church, to witness to the good, and to do good and avoid evil. Pray, work and trust, and don’t worry about the outcome.

The Pope’s encyclical points, as we have seen, to a new direction, one originally set down by Paul VI and John Paul. He tells us that one of the flaws of the economic system that is passing away is that “one of the greatest risks for businesses is that they are almost exclusively answerable to their investors, thereby limiting their social value. Owing to their growth in scale and the need for more and more capital, 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 the results of his company, and it is becoming increasingly rare for businesses to depend on a single territory.” In the present crisis, much mischief was caused by investment company managers who managed assets so as to maximize their annual bonus, and took on uncovered risks that magnified the fall when the fall happened. “Moreover, the so-called outsourcing of production can weaken the company's sense of responsibility towards the stakeholders — namely the workers, the suppliers, the consumers, the natural environment and broader society — in favour of the shareholders, who are not tied to a specific geographical area and who therefore enjoy extraordinary mobility.” And, I should add, have nothing in common with the other stakeholders.

But there is change on the horizon: “there is also increasing awareness of the need for greater social responsibility on the part of business. Even if the ethical considerations that currently inform debate on the social responsibility of the corporate world are not all acceptable from the perspective of the Church's social doctrine, there is nevertheless 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.

Milton Friedman once famously said that the only social obligation a company has is to make a profit. There are still many opinion leaders out there who seem to have that benighted attitude. But more and more people are understanding that investment is not merely a technical act. It is, first and foremost, a human and ethical act. Always, “the requirements of justice must be safeguarded, with due consideration for the way in which the capital was generated and the harm to individuals that will result if it is not used where it was produced[97]. What should be avoided is a speculative use of financial resources that yields to the temptation of seeking only short-term profit, without regard for the long-term sustainability of the enterprise, its benefit to the real economy and attention to the advancement, in suitable and appropriate ways, of further economic initiatives in countries in need of development.” As we consider what we are to do about the poor man of the Western Hemisphere–Haiti–it would be wise to keep those words in the front of our minds.

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