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Catholic
Social Teaching and the Globalisation of
Business Management Theory
David W. Lutz
1.
Introduction
Business management education in most universities,
including most Catholic universities, in the
English-speaking world is straightforwardly inconsistent
with the Social Doctrine of the Catholic Church. Catholic
Social Teaching is articulated primarily, though not
exclusively, in a series of documents ranging from Pope Leo
XIII’s 1891 encyclical letter Rerum Novarum to Pope
John Paul II’s 1991 encyclical letter Centesimus Annus,
and has recently been summarised in the Compendium of the
Social Doctrine of the Church.[1]
While this might seem like a matter of interest only to
Catholics, it is in fact relevant to Africa and to
Globalisation for the Common Good.
We are experiencing today the globalisation of business
management theory. Anglo-American business management theory
is now taught throughout the English-speaking world,
including former British colonies in sub-Saharan Africa.
There is no significant difference between business
education in the United States and in Kenya. Anglo-American
management theory is also growing in influence rapidly in
the non-English-speaking world. The belief is widespread
that, following the collapse of the Soviet Union, the United
States is the model for the rest of the world.
The most important characteristics of Anglo-American
business management theory are that the firm is regarded as
merely a collection of individuals standing in various
contractual relationships with one another and the purpose
of business management is believed to be the maximisation of
profit or owner wealth.[2]
Anglo-American management theory developed over time within
a particular cultural and philosophical tradition – one of
the most individualistic and materialistic in human history.
It is now taught and applied in countries with radically
different cultural and philosophical traditions, including
those of sub-Saharan Africa. This creates conflict between
traditional cultures and the practise of management.
Much has been written about differences between African and
European culture and philosophy. In most cases, this
literature makes no distinction between Britain and
Continental Europe, nor between modern and traditional
European culture and philosophy. In fact, modern European
culture – especially the culture of English-speaking,
Western countries – differs greatly from all
traditional cultures, including traditional European
cultures. When Anglo-American management theory, which is at
home only within modern, Anglo-American culture, is put into
practise elsewhere, it destroys traditional cultures. Even
on the European Continent, some patriots are fighting a
battle to preserve their nations from Anglo-American
management theory.[3]
Although traditional cultures differ from one another in
many respects, they are similar in essential
characteristics. In all traditional cultures, on all
continents, the good of the individual person is realised
within a community and is consistent with the good of the
community. Ethics, whether developed theoretically or not,
is about character traits – virtues and vices – and social
relationships.
The Confucian tradition of East Asia is one of moral
virtues, which benefit not only other persons, but also the
one who possesses them:
Tsze-chang
asked Confucius about perfect virtue. Confucius said, “To be
able to practice five things everywhere under heaven
constitutes perfect virtue.” He begged to ask what they
were, and was told, “Gravity, generosity of soul, sincerity,
earnestness, and kindness. If you are grave, you will not be
treated with disrespect. If you are generous, you will win
all. If you are sincere, people will repose trust in you. If
you are earnest, you will accomplish much. If you are kind,
this will enable you to employ the services of others.”[4]
Furthermore, for Confucius, ethical actions are rooted in
family relationships: “Filial piety and fraternal
submission!–are they not the root of all benevolent
actions?”[5]
Since China is poised to become the next global superpower,
we need to increase our understanding of traditional Chinese
culture and philosophy.
Similarly, within the European tradition, to be ethical is
to possess the four virtues of wisdom (or prudence,
practical wisdom), justice, fortitude, and temperance.
According to the Greek philosopher Plato, these are
character traits of both virtuous persons and virtuous
communities.[6]
Moreover, according to Plato’s student Aristotle, “man is by
nature a political animal” and “the individual, when
isolated, is not self-sufficing”. The individual good is
attained within a community: “When several villages are
united in a single complete community, large enough to be
nearly or quite self-sufficing, the state comes into
existence, originating in the bare needs of life, and
continuing in existence for the sake of a good life.”[7]
Traditional African cultures are also non-individualistic.
In the words of Kwame Gyekye:
The communal
or communitarian (I use the two words interchangeably)
aspects of African socio-ethical thought are reflected in
the communitarian features of the social structures of
African societies. As remarked by many scholars or
researchers on the cultures of Africa, these features are
not only outstanding, but the defining characteristics of
those cultures. The sense of community that characterizes
social relations among individuals is a direct consequence
of the communitarian social arrangements.[8]
W. Emmanuel Abraham describes the effect that colonisation
by individualistic, modern European cultures had upon
traditional African cultures:
Colonialism
also ushered in unbridled economic exploitation and sapped
sub-Saharan cultures of their vitality. They became deprived
of direction and internal impetus, and increasingly survived
mainly as pageant and ceremonial. New ideas concerning
individual accountability and individual reward, the
spreading sense of individual vision and the ascendancy of
self-interest in contrast with community interest as a basis
of action, the growing sense of private power arising from
self-action rather than clan direction, all of these
atomizing factors, acting in concert, have loosened the
internal bonds and efficacy of lineage-based clans.[9]
It is not a coincidence that traditional cultures in Asia,
Europe, and Africa share important characteristics. Despite
claims to the contrary by modern European philosophers such
as French existentialist Jean-Paul Sartre,[10]
all human persons share a common human nature. No human
society is capable of standing the test of time unless it is
consistent to a high degree with human nature. Modern
Western culture cannot survive, and is already beginning to
disintegrate, because it has become detached from its
historical roots.
The process of globalisation includes the globalisation of
business management theory and practise. What we are
presently experiencing is the ascendancy of Anglo-American
management theory. This is unfortunate for the entire human
race, because this theory is radically individualistic and
materialistic. What we need, instead, is a theory of
business management consistent with the positive, common
characteristics of traditional cultures. One place to begin
the development of such a theory is Catholic Social
Teaching.
Although Catholic Social Teaching is consistent with
Christian Scripture, it is more philosophical than
theological and does not depend upon Sacred Scripture.
Furthermore, insofar as it is philosophical, it relies upon
traditional more than modern European philosophy. The
Catholic Church is often criticised for being insufficiently
modern. But, since the most important difference between
traditional and modern European culture and philosophy is
that the latter is more individualistic and materialistic,
it is appropriate for Catholic Social Teaching to be rooted
in traditional European philosophy.
Because Catholic Social Teaching is consistent with what was
good in traditional European cultures, and because
traditional European cultures are similar to traditional
cultures in other regions, Catholic Social Teaching is
consistent in essentials with traditional cultures around
the globe, including traditional African cultures.[11]
Consequently, a theory of business management consistent
with Catholic Social Teaching may be acceptable to persons
who are not Catholic.
2. Elements of
a Business Management Theory consistent with Catholic Social
Teaching
Catholic Social Teaching has more to say about political
economy than about business management. At the macro-level,
two things are clear. First,
The Church
does not propose economic and political systems or programs,
nor does she show preference for one or the other, provided
that human dignity is properly respected and promoted, and
provided she herself is allowed the room she needs to
exercise her ministry in the world.[12]
Second, both liberal capitalism and Marxist socialism fail
to respect and promote human dignity properly. Pius XI
writes of his predecessor Leo XIII:
He sought no
help from either Liberalism or Socialism, for the one had
proved that it was utterly unable to solve the social
problem aright, and the other, proposing a remedy far worse
than the evil itself, would have plunged human society into
great dangers.[13]
Catholic Social Teaching’s rejection of socialism is
unequivocal:
If Socialism,
like all errors, contains some truth (which, moreover, the
Supreme Pontiffs have never denied), it is based
nevertheless on a theory of human society peculiar to itself
and irreconcilable with true Christianity. Religious
socialism, Christian socialism, are contradictory terms; no
one can be at the same time a good Catholic and a true
socialist.[14]
From this, however, it does not follow that liberal
capitalism is acceptable:
Can it perhaps
be said that, after the failure of Communism, capitalism is
the victorious social system, and that capitalism should be
the goal of the countries now making efforts to rebuild
their economy and society? Is this the model which ought to
be proposed to the countries of the Third World which are
searching for the path to true economic and civil progress?
The answer is
obviously complex. If by “capitalism” is meant an economic
system which recognizes the fundamental and positive role of
business, the market, private property and the resulting
responsibility for the means of production, as well as free
human creativity in the economic sector, then the answer is
certainly in the affirmative, even though it would perhaps
be more appropriate to speak of a “business economy”,
“market economy” or simply “free economy”. But if by
“capitalism” is meant a system in which freedom in the
economic sector is not circumscribed within a strong
juridical framework which places it at the service of human
freedom in its totality, and which sees it as a particular
aspect of that freedom, the core of which is ethical and
religious, then the reply is certainly negative.[15]
Catholic Social Teaching rejects the simplistic assumption
that we have only two options in political economy, Adam
Smith and Karl Marx, as well as the slightly less simplistic
assumption that all of our options lie on a one-dimensional
continuum ranging from extreme capitalism to extreme
communism. In fact, the similarities between capitalism and
communism are more significant than their differences. Both
are materialistic; they merely have a quibble concerning how
best to distribute material wealth. Consequently, any
compromise between them – such as the “Third Way” of the
British Labour Party or the “New Centre” of Germany’s Social
Democratic Party – will also be materialistic.
Although my concern in this paper is with theories of
business management, not theories of political economy, the
two are related. Anglo-American management theory is closely
allied with Anglo-American macroeconomic theory; profit
maximisation and free trade go hand-in-hand. A complete
treatment of the relevance of Catholic Social Teaching to
the theme of this conference – “Africa and Globalisation for
the Common Good” – would necessarily discuss both the
macro-level and the micro-level. My present focus, however,
is on the latter.
2.1. The
Nature of the Firm
Anglo-American business management theory and Catholic
Social Teaching disagree concerning the metaphysics of the
business enterprise. According to the former, individual
persons exist, but communities do not. It is an heir of the
social contract tradition of political philosophy. Whereas,
for Aristotle and more than two millennia of European
cultural and philosophical tradition, man is by nature a
political animal, for Thomas Hobbes, the “natural condition
of mankind” is one of solitary individuals.[16]
Human society is artificial, not natural. And if human
society is artificial, so are organisations within it.
One of the differences between a community and a mere
collection of individuals is that, in the former, the good
of each member is consistent with the good of the other
members and the good of the whole, the common good. With a
collection of individuals, on the other hand, the common
interest is nothing more than the aggregate of the various
individual interests, and each individual’s self-interest
may conflict with the common interest and the self-interest
of other individuals.
This difference between a community and a mere collection of
individuals can be illustrated by the analogy of an
athletic team. It is possible to have a collection of eleven
footballers on the same field at the same time, all wearing
the same uniform, without having a team. If each individual
is interested only in making himself look good, not in the
success of the team, then we have nothing more than a
collection of eleven individual players. If, on the other
hand, each player understands his personal success as a
contribution to the success of the organisation, then it is
a true team, a true community.
The contrast between the ways in which Catholic Social
Teaching and Anglo-American culture understand human
communities can be illustrated by considering how each views
the family. According to John XIII, “The family, founded
upon marriage freely contracted, one and indissoluble, must
be regarded as the natural, primary cell of human society.”[17]
In a passage that resonates with traditional African
cultures, the Second Vatican Council speaks of “traditional
local communities such as families, clans, tribes,
villages”.[18]
The Council also notes that Jesus Christ understood the
importance of the family to society: “Willingly obeying the
laws of his country, He sanctified those human ties,
especially family ones, which are the source of social
structures.”[19]
The same document goes on to call the family society’s
foundation: “The family, in which the various generations
come together and help one another grow wiser and harmonize
personal rights with the other requirements of social life,
is the foundation of society.”[20]
And Paul VI wrote similarly, “In the task of development,
man finds the family to be the first and most basic social
structure.”[21]
In fundamental contrast to this understanding of the family,
American economist and Nobel laureate Milton Friedman, a
radical individualist, writes: “The ultimate operative unit
in our society is the family, not the individual. Yet the
acceptance of the family as the unit rests in considerable
part on expediency rather than principle.”[22]
As a consequence of the rejection of traditional European
social principles and the practise of Anglo-American
capitalism, the traditional family is an endangered species
in the United States today. For a visitor from the US, one
of the most striking features of African societies is that
the family is important. This is rapidly changing, however,
as Africans migrate from their rural homes to urban centres
in search of high-paying jobs. Anglo-American capitalism
will destroy any traditional culture, including traditional
African cultures, just as it is destroying many traditional
Asian cultures and what little remains of traditional
European cultures. It begins by destroying the traditional
family.[23]
When commercial organisations are understood in terms of
modern Anglo-American culture and philosophy, they are mere
collections of individuals. For Friedman, Anglo-American
capitalism’s most eloquent apologist, “A corporation is an
artificial person.”[24]
This is an echo of Hobbes, who called the state an
“artificial man”.[25]
According to Michael Jensen and William Meckling:
It is
important to recognize that most organizations are simply
legal fictions that serve as a nexus for a set of
contracting relationships among individuals…. The private
corporation or firm is simply one form of legal fiction that
serves as a nexus for contracting relationships and is also
characterized by the existence of divisible residual claims
on the organization’s assets and cash flows, which can
generally be sold without permission of the other
contracting individuals.
[26]
Catholic Social Teaching recognises that some human
organisations are less natural – more artificial – than
others: “Among those social ties which man needs for his
development some, like the family and political community,
relate with greater immediacy to his innermost nature;
others originate rather from his free decision.”[27]
Athletic teams are less natural than families and political
communities. Nevertheless, since recreation with others,
physical exercise, and competition are natural to human
persons, athletic teams are not unnatural. Similarly, since
“work is a fundamental dimension of man’s existence on
earth”,[28]
organisations of working persons are also more natural than
artificial.
In opposition
to the Anglo-American understanding of the nature of the
firm, Catholic Social Teaching understands commercial
organisations as communities. John XXIII wrote in 1961,
“Every effort must be made to ensure that the enterprise is
indeed a true human community, concerned about the needs,
the activities and the standing of each of its members.”[29]
John Paul II
developed this idea of the firm as a community further in
1981:
It is
characteristic of work that it first and foremost unites
people. In this consists its social power: the power to
build a community. In the final analysis, both those who
work and those who manage the means of production or who own
them must in some way be united in this community.[30]
John Paul II repeated the concept of the firm as a community
in 1991, the centenary of Rerum Novarum:
People work
with each other,
sharing in a
“community of work” which embraces ever widening circles....
It is his disciplined work in close collaboration with
others that makes possible the creation of ever more
extensive working communities which can be relied
upon to transform man’s natural and human environments.[31]
And, in another passage, he related the nature of the firm
to the next question to be considered, the firm’s purpose:
The purpose of
a business firm 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.[32]
2.2. The
Purpose of the Firm
According to Anglo-American business management theory, the
purpose of a business firm is to maximise profit or owner
wealth. In the words of Friedman, “The social responsibility
of business is to increase its profits.”[33]
The primary argument for this claim is that the owners of
the firm are principals, the managers are their agents,
agents must do whatever their principals wish, and
principals desire the maximisation of their wealth. As
Friedman puts it:
In a
free-enterprise, private-property system, a corporate
executive is an employee of the owners of the business. He
has direct responsibility to his employers. That
responsibility is to conduct the business in accordance with
their desires, which generally will be to make as much money
as possible while conforming to the basic rules of the
society, both those embodied in law and those embodied in
ethical custom. Of course, in some cases his employers may
have a different objective. A group of persons might
establish a corporation for an eleemosynary purpose – for
example, a hospital or a school. The manager of such a
corporation will not have money profit as his objective but
the rendering of certain services.
In either
case, the key point is that, in his capacity as a corporate
executive, the manager is the agent of the individuals who
own the corporation or establish the eleemosynary
institution, and his primary responsibility is to them.[34]
Among the problems with this argument and with “agency
theory” is that, according to British commercial law, from
which financial management theorists have taken the concept
of agency, managers are agents, not of the owners of the
corporation, but of the corporation itself. Given the
contemporary ontology of the corporation, however, according
to which it is nothing more than a collection of
individuals, it makes no sense to say that managers are
agents of the corporation. Anglo-American financial
management theorists have decided that managers are the
agents of the owners of the corporation – an error of
profound significance.
If we understand managers to be agents of the corporation,
we are in a position to understand their purpose as
promoting the common good of the corporation and the larger
communities to which it belongs. If, on the other hand, we
understand managers to be agents of the owners of the
corporation, within an individualistic, materialistic
philosophical tradition, then the purpose of business
management must be to maximise the material wealth of the
owners.
Although agency theory is dominant in English-language
business management scholarship and teaching today, there is
some dissent. According to agency theory, managers cannot be
trusted and must be controlled, so that they maximise owner
wealth, rather than their own. This is unrealistic, since
the primary function of the business executive is
decision-making. “Stewardship theory” argues, to the
contrary, that managers should be regarded as good stewards
of the corporation’s resources and should be granted
discretion to make responsible decisions. Although this is
an important step forward, it is too small, because
stewardship theory still assumes that the purpose of
managerial decision-making is the maximisation of owner
wealth. According to leading stewardship theorists Lex
Donaldson and James Davis, agency theory
emphasises
control of managerial “opportunism” by having a board chair
independent of the CEO and using incentives to bind CEO
interests to those of shareholders. Stewardship theory
stresses the beneficial consequences on shareholder
returns of facilitative authority structures which unify
command by
having rôles of CEO and chair held by the same person.[35]
Although agency theory and stewardship theory disagree at
some minor points, they are in agreement that the purpose of
business management is to maximise owner wealth. Stewardship
theory’s criticism of agency theory does not change the fact
that Anglo-American management theory contradicts Catholic
Social Teaching.
One of the mistakes of the European philosophical tradition
is recognition of a distinction between the professions and
commerce. The purpose of a profession is to promote the
common good in some specific way: the legal profession
promotes the justice of the community, the medical
profession promotes the health of the community, the
military profession defends the community from external
aggressors, etc. Although members of a profession are
compensated for their services, sometimes quite handsomely,
financial gain is not the purpose of a profession. This is
the reason lawyers provide pro bono services to
persons who cannot pay for them and a doctor who comes
across a road accident is required by the ethics of his
profession to render aid, without first asking about the
victims’ financial resources and insurance policies. The
presence within each profession of greedy individuals who
are in fact motivated by the love of money does not alter
the fact that the purpose of a profession is to serve the
community, not to make money.
Throughout most of the European tradition, commerce has been
distinguished from the professions. It was regarded as
inferior to the professions, because its purpose was
understood to be financial gain. In order to develop a
satisfactory theory of global business management, we must
correct this error and recognise business management as a
profession.
Pius XI, writing in 1931, assumed the traditional
distinction between “industries” and “professions”:
The teaching
of Leo XIII on the form of political government, namely,
that men are free to choose whatever form they please,
provided that proper regard is had for the requirements of
justice and of the common good, is equally applicable in due
proportion, it is hardly necessary to say, to the guilds of
the various industries and professions.[36]
Pius XII – who did not write a social encyclical, but
delivered hundreds of addresses to various associations of
professionals – corrected this error in a 1950 address to
the World Congress of Chambers of Commerce:
The merchant,
one will say, should be skilled without doubt; he must be a
man of affairs, prudent more than sentimental, again,
without doubt. But he must add to these strictly
professional qualities a high concept of the ideal of his
profession. As a businessman, he must also consider himself
a servant of the community.[37]
Once we understand business as a profession, we are in a
position to understand that the purpose of commercial
activity is to promote the common good by providing products
and services that are true goods for the community and its
members – not merely whatever consumers can be persuaded to
purchase. Prudent financial management is a necessary means
to this end. But, we must avoid the mistake of reversing
means and ends and regarding the provision of products and
services as a means to the end of maximising a financial
variable.
Catholic Social Teaching tells us clearly that the purpose
of business management is not to maximise profit or owner
wealth, because “the exclusive pursuit of material
possessions prevents man’s growth as a human being and
stands in opposition to his true grandeur.”[38]
Leo XIII wrote concerning the relationship between managers
and their subordinates:
Doubtless,
before deciding whether wages are fair, many things have to
be considered; but wealthy owners and all masters of labour
should be mindful of this – that to exercise pressure upon
the indigent and the destitute for the sake of gain, and to
gather one’s profit out of the need of another, is condemned
by all laws, human and divine.[39]
Pius XI condemned the use of unethical means to increase
profit:
Since the
instability of economic life, and especially of its
structure, exacts of those engaged in it most intense and
unceasing effort, some have become so hardened to the stings
of conscience as to hold that they are allowed, in any
manner whatsoever, to increase their profits and use means,
fair or foul, to protect their hard-won wealth against
sudden changes of fortune.[40]
The Second Vatican Council pointed out that production to
promote development must aim at more than profit:
The
fundamental finality of this production is not the mere
increase of products nor profit or control but rather the
service of man, and indeed of the whole man with regard for
the full range of his material needs and the demands of his
intellectual, moral, spiritual, and religious life; this
applies to every man whatsoever and to every group of men,
of every race and of every part of the world.[41]
John Paul II wrote in 1981 about the negative effects of
profit maximisation on workers:
The conflict
[between “capital” and “labour”] originated in the fact that
the workers put their powers at the disposal of the
entrepreneurs, and these, following the principle of maximum
profit, tried to establish the lowest possible wages for the
work done by the employees....
The attainment
of the worker’s rights cannot however be doomed to be merely
a result of economic systems which on a larger or smaller
scale are guided chiefly by the criterion of maximum profit.[42]
In 1987, John Paul II identified the desire for excessive
profit as a handicap to development:
Among the
actions and attitudes opposed to the will of God, the good
of neighbour and the “structures” created by them, two are
very typical: on the one hand, the all-consuming desire for
profit, and on the other, the thirst for power....
What is
hindering full development is that desire for profit and
that thirst for power already mentioned....
Though it be
with sorrow, it must be said that just as one may sin
through selfishness and the desire for excessive profit and
power, one may also be found wanting with regard to the
urgent needs of multitudes of human beings submerged in
conditions of underdevelopment, through fear, indecision
and, basically, through cowardice.[43]
In 1991, John Paul II explained that profit cannot be the
sole measure of success in business:
The Church
acknowledges the legitimate role of profit as an
indication that a business is functioning well. When a firm
makes a profit, this means that productive factors have been
properly employed and corresponding human needs have been
duly satisfied. But profitability is not the only indicator
of a firm’s condition. It is possible for the financial
accounts to be in order, and yet for the people – who make
up the firm’s most valuable asset – to be humiliated and
their dignity offended.... Profit is a regulator of the life
of a business, but it is not the only one; other human
and moral factors must also be considered which, in the
long term, are at least equally important for the life of a
business.[44]
In the same document, John Paul II discussed alienation and
the mistake of reversing means and ends:
Alienation is
found also in work, when it is organized so as to ensure
maximum returns and profits with no concern whether the
worker, through his own labour, grows or diminishes as a
person, either through increased sharing in a genuinely
supportive community or through increased isolation in a
maze of relationships marked by destructive competitiveness
and estrangement, in which he is considered only a means and
not an end.[45]
Finally, The Catechism of the Catholic Church stated
in 1992:
A theory that
makes profit the exclusive norm and ultimate end of economic
activity is morally unacceptable. The disordered desire for
money cannot but produce perverse effects. It is one of the
causes of the many conflicts which disturb the social order.[46]
From this brief survey of documents in the tradition of
Catholic Social Teaching, it is clear that any theory of
business management consistent with this tradition must
regard the business firm as a community and must understand
its purpose to be service to larger communities – in the
case of large, multinational corporations, the global
community. The members of the corporation must be regarded,
not as individuals whose self-interest conflicts with the
self-interest of the owners of the corporation, but as
persons whose individual good is consistent with the
corporation’s common good.
3. Conclusion
In our present age of globalisation, we need a theory of
global business management designed to promote the common
good of all national communities in the world, as well as
the global community. Anglo-American management theory is
incapable of meeting this challenge. It views the business
firm as a collection of individuals, all of whom are
attempting to maximise their own utility, when they should
be maximising the material wealth of the firm’s owners. Such
a firm is characterised by “conflict of interest”. When put
into practise, Anglo-American management theory is
reasonably successful in maximising total wealth, but not in
promoting the common good.
Because it correctly understands the nature of human persons
and human communities, Catholic Social Teaching can serve as
the starting point for developing a more adequate theory of
global business management. Such a theory can, of course,
also make use of whatever is good and true in other
cultural, philosophical, and religious traditions. The
development of such a theory will require much more than
what has been accomplished in this paper. Nevertheless, two
central elements of such a theory must be correct
understandings of the nature and of the purpose of the firm.
Once such a theory is developed, the next step will be to
teach it to present and future managers. This will require
significant change in most schools of business
administration. The assumption in most Catholic universities
is that an Anglo-American business education plus business
ethics equals a Catholic business education. What students
of business administration need, however, is not an
unethical business management theory plus a business ethics
theory that contradicts it. As long as it is granted that
the purpose of business management is to maximise profit or
owner value, business ethics can be nothing more than a
means to that end. Why should we be ethical? Because we will
make more money – at least in the long run – if we are
ethical.
Unfortunately, that is not true. Ethical business actions
sometimes do and sometimes do not lead to more profit and
owner value than unethical actions. In many situations, one
can maximise profit and owner wealth by acting unethically.
One of the challenges of business ethics is to motivate
business managers to be ethical in situations where they
could make more money by being unethical.
Instead of an unethical theory of business management plus a
business ethics theory that contradicts it, students need a
single, comprehensive theory of ethical business management.
Some components of present business education would not
change. Others, however, would need to be transformed.
Financial management would still be among the most important
components of business education. But prudent financial
management would be regarded as a means to the end of
promoting the common good – something that is real, but
unquantifiable. This would require some change in the way
financial management is taught.
While this is true of Catholic business education, the same
changes would need to take place in non-Catholic academic
institutions that are now teaching Anglo-American management
theory, but see a theory consistent with Catholic Social
Teaching, traditional cultures, and human nature as a
superior alternative.
In my judgment, such a theory of business management and
such a change in business education is needed especially in
Africa. True development in this part of the world will
require an increase in the productivity of African workers,
but in a manner consistent with all that is good in
traditional African cultures. Adopting Anglo-American
management practises will result in increased production,
but at the cost of destroying traditional cultures. The gain
would not be worth the loss. Adopting and applying a theory
of business management consistent with Catholic Social
Teaching, on the other hand, would be an important step
towards true development in Africa and what John Paul II
called “global solidarity”.[47]
End Notes
[1]
Libreria Editrice Vaticana, 2004.
[2]
Economists in the Anglo-American tradition tend to
speak of the maximisation of profit, while
management scholars usually speak of maximisation of
owner wealth. Strictly speaking, the two are not
identical. For present purposes, however, the
distinction is insignificant.
[3]
See, for example, Michel Albert, Capitalisme
contre capitalisme, Paris:
Editions du Seuil, 1991;
trans. Paul Haviland, Capitalism against
Capitalism, London: Whurr Publishers, 1993.
Albert contrasts Anglo-Saxon capitalism with “Rhine
capitalism”, and urges France to choose the latter.
[4]
Confucius, Analects, trans. James Legge,
XVII, vi.
[5]
Confucius, Analects, trans. James Legge, I,
ii.
[7]
Aristotle, Politics, I, ii.
[8]
Kwame Gyekye, ‘Person and
Community in African Thought’, in Kwasi Wiredu and
Kwame Gyekye, eds., Person and Community,
Washington: Council for Research in Values and
Philosophy, 1992.
[9]
W. Emmanuel Abraham,
‘Prologue: Crisis in African Cultures’, in Kwasi
Wiredu and Kwame Gyekye, eds., Person and
Community, Washington: Council for Research in
Values and Philosophy, 1992.
[10]
Jean-Paul Sartre, “Existentialism”, trans. Bernard
Frechtman, in Existentialism and Human Emotions,
New York: Philosophical Library, 1957, p. 15: “There
is no human nature, since there is no God to
conceive it.”
[11]
To be sure, some aspects of African traditions are
inconsistent with Catholicism. For example, polygamy
is practised in many traditional African cultures,
but is not permitted by Catholicism. The claim that
I am making about consistency between Catholic
Social Teaching and traditional African cultures
concerns the relationship between the person and the
community, the relationship between the individual
good and the common good, and the fact that both the
individual good and the common good involve more
than material goods.
[12]
John Paul II, Encyclical Letter Sollicitudo Rei
Socialis, 30 December 1987, ¶ 41.
[13]
Pius XI, Encyclical Letter Quadragesimo Anno,
15 May 1931, ¶ 10.
[14]
Pius XI, Encyclical Letter Quadragesimo Anno,
15 May 1931, ¶ 120.
[15]
John Paul II, Encyclical Letter Centesimus Annus,
1 May 1991, ¶ 42.
[16]
Thomas Hobbes, Leviathan, London: Andrew
Crooke, 1651, p. 60.
[17]
John XXIII, Encyclical Letter Pacem in Terris,
11 April 1963, ¶ 16.
[18]
Second Vatican Ecumenical Council, Pastoral
Constitution on the Church in the World of Today
Gaudium et Spes, 7 December 1965, ¶ 6.
[19]
Second Vatican Ecumenical Council, Pastoral
Constitution on the Church in the World of Today
Gaudium et Spes, 7 December 1965, ¶ 32.
[20]
Second Vatican Ecumenical Council, Pastoral
Constitution on the Church in the World of Today
Gaudium et Spes, 7 December 1965, ¶ 52.
[21]
Paul VI, Encyclical Letter Populorum Progressio,
26 March 1967, ¶ 38.
[22]
Milton Friedman, Capitalism and Freedom,
Chicago: University of Chicago Press, 1962, p. 33.
[23]
I speak of the “traditional family”, because
“family” can be applied in contemporary American
English to any collection of individuals who happen
to cohabitate.
[24]
Milton Friedman, “The Social Responsibility of
Business is to Increase Its Profits”, New York
Times Magazine, 13 September 1970, p. 32.
[25]
Thomas Hobbes, Leviathan, London: Andrew
Crooke, 1651, p. 1.
[26]
Michael C. Jensen and William H. Meckling, “Theory
of the Firm: Managerial Behavior, Agency Costs, and
Ownership Structure,” Revised Version, in
Economics and Social Institutions: Insights from the
Conferences on Analysis and Ideology, ed. Karl
Brunner, Boston: Martinus Nijhoff, 1979, pp. 170-71.
[27]
Second Vatican Ecumenical Council, Pastoral
Constitution on the Church in the World of Today
Gaudium et Spes, 7 December 1965, ¶ 25.
[28]
John Paul II, Encyclical Letter Laborem Exercens,
14 September 1981, ¶ 4.
[29]
John XXIII, Encyclical Letter Mater et Magistra,
15 May 1961, ¶ 91.
[30]
John Paul II, Encyclical Letter Laborem Exercens,
14 September 1981, ¶ 20.
[31]
John Paul II, Encyclical Letter Centesimus Annus,
1 May 1991, ¶ 32.
[32]
John Paul II, Encyclical Letter Centesimus Annus,
1 May 1991, ¶ 35.
[33]
Milton Friedman, “The Social Responsibility of
Business is to Increase Its Profits”, New York
Times Magazine, 13 September 1970, p. 32.
[35]
Lex Donaldson and James H. Davis, “Stewardship
Theory or Agency Theory: CEO Governance and
Shareholder Returns”, Australian Journal of
Management, 16, 1, June 1991, p. 62.
[36]
Pius XI, Encyclical Letter Quadragesimo Anno,
15 May 1931, ¶ 86.
[37]
Pius XII, “Vocation of Businessmen,” Address to the
Delegates of the World Congress of Chambers of
Commerce, 27 April 1950; The Catholic Mind,
48 (August 1950), pp. 510-11.
[38]
Paul VI, Encyclical Letter Populorum Progressio,
26 March 1967, ¶ 19.
[39]
Leo XIII, Encyclical Letter Rerum Novarum, 15
May 1891, ¶ 20.
[40]
Pius XI, Encyclical Letter Quadragesimo Anno,
15 May 1931, ¶ 132.
[41]
Second Vatican Ecumenical Council, Pastoral
Constitution on the Church in the World of Today
Gaudium et Spes, 7 December 1965, ¶ 64.
[42]
John Paul II, Encyclical Letter Laborem Exercens,
14 September 1981, ¶¶ 11, 17.
[43]
John Paul II, Encyclical Letter Sollicitudo Rei
Socialis, 30 December 1987, ¶¶ 37, 38, 47.
[44]
John Paul II, Encyclical Letter Centesimus Annus,
1 May 1991, ¶ 35.
[45]
John Paul II, Encyclical Letter Centesimus Annus,
1 May 1991, ¶ 41.
[46]
The Catechism of the Catholic Church, 1992, ¶
2424.
[47]
John Paul II, Encyclical Letter Sollicitudo Rei
Socialis, 30 December 1987, ¶ 45.
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