The give and take of corporate stewardship

* Newsweek magazine, under the headline "The Hit Men," gives villainous profiles of a dozen chief executive officers, calling them "greedheads."

* A leading Catholic scholar and journalist compares layoffs to ethnic cleansing in Bosnia and says that the CEO of a major utility "belongs in jail."

* The Dilbert Principle by Scott Adams (Harper Business, 1996), a cynical look at management, goes to the top of the best-seller list.

ON A DAY WHEN THE MAJOR PRODUCT OF BUSINESS seems to be insecurity, it may be naive to talk about corporate stewardship. Yet thousands of businesspeople, many of them Catholic, try daily to exercise stewardship in boardrooms and in corporate offices. These business people may not consciously be bringing the gospel to the marketplace. Nor do they express their management philosophy in explicitly Christian language. But many of them are motivated by their Christian upbringing and by their continued reflection on the gospel and the church's tradition.

Throughout its history the church has analyzed the relationship between Christians and the world around us. That reflection has yielded a social philosophy that can guide Christians as they fashion institutions and policies in the marketplace. This Catholic social thought—sometimes capsulated in arcane principles like solidarism, subsidiarity, the preferential option for the poor, and several more—must be continually applied to new circumstances, or it means nothing.

Among the Catholic social principles is corporate stewardship. Unfortunately the concept of stewardship is used in churches only when an appeal for money is on the way. However, "Stewardship is not just charitable giving," according to a group of 50 Chicago Catholic CEOs known as Business Executives for Economic Justice. In their position paper, "The Buck Stops Here: Perspectives on Stewardship," the CEOs explain that stewardship "is a deeply spiritual yet essentially practical question of how we react to the gifts and resources over which we have some measure of control and influence. . . . That includes the corporate or institutional resources we manage.''

Indeed, writes Father William Byron, S.J. in the New Catholic Encyclopedia, "stewardship is an instrument of social justice. . . . All we have is held in trust for others. . . . The exercise of stewardship, if it were real and active in these times, could feed the hungry, assist the poor and free the oppressed."

What the corporate steward looks like
It is impossible to write the ten commandments for corporate stewardship. The conduct of business is too fluid, too complicated. Any large corporation is bound to have a myriad of policies and products—some exemplary, others questionable. Reebok, a major footwear company, for example, is highly regarded for its promotion of strict environmental and safety standards and its efforts toward urban development. The company is also noted for its progressive on-site day-care facility. Yet, explains the Wall Street Journal, the company "has prospered, in part by closing 15 factories, mostly in depressed areas, and moving most of its production to various low-cost Asian countries," where it pays skilled workers about $31 for a 57-hour week and unskilled packers and sorters about $15 a week.

To get some perspective on his or her corporate stewardship, a thoughtful businessperson might step back and square the reality of his or her business against three emerging models of corporate stewardship—each having positives and negatives.

Generous to a fault
The corporate philanthropist

This long-established method of corporate citizenship is practically taken for granted. Without it, much of American life would disappear: private colleges, research in medicine and in social science, concert halls, settlement houses, youth centers, social change organizations, and a hundred more examples. Some businesses establish foundations; some make donations directly; some do both. Some businesses give away money; some give away products; some give away employee time and talent; some do all of the above.

Yet for all its commonplace, corporate philanthropy needs more examination. The positives of this model of stewardship may be obvious, but it comes with at least two caveats.

Be aware, the first says, that stewardship is more than throwing money at causes, no matter how great the need. As Aristotle once put it: "Anybody can give money. But to give it to the right persons, to give the right amount and to give it at the right time and for the right cause and in the right way, this is not what anybody can do, nor is it easy."

It would seem that businesses would surely be concerned with the efficiency of the organizations to which they donate. The contrary is often the case, says John Staley, managing partner of accounting firm Ernst & Young in Chicago. The last thing on the mind of businesspeople when they're making a contribution is how well their money will be used.

There's a difference between a "lofty strategy" of philanthropy and an "involved strategy," explain Alan Strudler and Eleonora Curlo in the journal Philosophy and Public Policy. The goal of the lofty strategy is to appear altruistically impartial by giving to lots of really great causes. Chase Manhattan Bank, for example, annually donates about 1 percent of its pretax income to over 1,500 charities—several receiving $500. But, the authors say, the strategy lacks some "moral adequacy" because the giver takes no responsibility for the outcome of any of the endeavors.

By contrast, the San Francisco investment firm Kohlberg, Kravis and Roberts, through its foundation, is quite involved with its charities. It gives to groups that start businesses for the unemployed or for disadvantaged youth. The foundation's director spends most of his time teaching the charitable agencies how to manage the small businesses so that the agencies themselves will make money and thus depend less on donations and grants. A recent "unusually blunt" report from this foundation, however, rightly notes that philanthropy can get too involved—to the detriment of the charitable organizations. Some agencies, under pressure from the foundation, got so absorbed in the professional qualifications of their staff and the details of the small business ventures that the agencies completely lost sight of their original mission.

When it comes to giving "to the right cause in the right way," the Catholic principle of subsidiarity offers guidance. It states that decisions should be made as close as possible to the people being affected by those decisions. Subsidiarity further suggests that human services be delivered through mediating structures like churches, unions, neighborhood groups, ethnic clubs, clinics, and schools. Not every nongovernmental agency offering human services, it should be noted, is a mediating structure. The involved businesspeople might well ask how many of the agency's employees and volunteers live in the same zip code as the clients. To get involved with a true mediating structure the businesspeople will have to be comfortable with agency leaders who lack, for example, full academic resumes—never, however, accepting good intentions as a substitute for competence.

The second related caveat to the philanthropy model of corporate stewardship has to do with the motives behind the giving. Beneficiaries of philanthropy are always grateful for the support, but what is being asked in return? While it is normal for business to expect some goodwill in return for donations, some corporate do-gooders sometimes seek something else.

Philip Morris, for example, has poured millions annually into the arts. In New York City it provides essential support to the Metropolitan Museum, to the Brooklyn Academy of Music, and to several innovative art and music programs in poor neighborhoods. Through its donations Philip Morris gives needed assistance to thousands of artists and patrons of the arts. But when the New York City Council recently considered a strict antismoking ordinance, Philip Morris called on its grantees in the arts community to lobby against it. The troops—none of whom have any stake in seeing the ordinance defeated—complied. So cowed were they by their benefactor that when major newspapers attempted to do a story on the issue, not a single arts' official would speak for attribution.

Being good doesn't always pay
The corporation as provider of socially desirable products or services

Some corporations try to create a strong identity between corporate stewardship and the actual product or service they offer. This is the implicit premise of some for-profit corporations in the health, education, and human service sectors. It is the credo of some manufacturing and financial corporations that trace their story back to 1960s idealism. It has become the model for a few banks and real estate developers that, more or less, found that they were located in a changing neighborhood.

Faustin Pipal, recently deceased CEO of St. Paul Federal Bank originally based in Oak Park, Illinois, said that driving to work in the early 1970s "wasn't a pretty sight. Panic peddling was beginning. Banks had stopped making conventional mortgages. Landlords deferred maintenance on apartment buildings and home owners were losing their pride of ownership." It was likely that the area would quickly change. Pipal had to either "bail out or practice stewardship of the community." With few examples to follow, Pipal and his colleagues decided to make integration and stability the cause of his bank. Today Oak Park is one of the few truly integrated, middle-class communities in the country, and Pipal's neighborhood bank now has a solid reputation and many branches.

Likewise, the Shorebank Corporation, headquartered in Chicago, breathes life into decaying communities by making loans for housing rehab, small business development, and educational efforts. In the last 20 years the bank has loaned over $250 million to 10,000 borrowers. Shorebank advertises nationally and invites individuals and church groups to invest in the bank's vision. The bank is a solid operation.

Other ventures in this model of corporate stewardship have been less successful. One of the better known socially responsible investment funds has failed to keep up with the rising stock market, leaving progressive investment advisors in an embarrassing position with their progressive customers.

Thus the corporate steward who thinks of his or her business as being especially enlightened has, it seems, added responsibility when the business fails to meet the promise it makes to its workers and investors. Think of the church as an example. What happens to stewardship when the church uses its scarce resources to provide education in poor communities with teachers who receive less than a living wage? What comes first—a socially responsible product, the bottom line, or justice to employees? Are the various goals of business internally compatible? Are there different expectations and standards for a company that is basically marketing its ideals?

Even the best slip up
The corporation as enlightened employer
The moral outcome of business today are often so contingent and so far removed that many businesspeople have concluded that they best exercise stewardship through face-to-face care of people—primarily employees but also customers and suppliers. Contrary to older management theories, this concern for employees quite often improves productivity.

The CEO of a very successful engine plant in the Midwest believes that all employees are entitled to know the ins and outs of the company. All information about productivity, overhead absorption, purchasing, marketing, and other business matters is communicated to janitors, secretaries, welders, sales representatives, and officers alike. A team spirit fills the factory. The company doesn't "use information to intimidate, control, or manipulate people," the CEO explains. We "use it to teach people how to work together to achieve common goals and thereby gain control over their lives." As a result of this respect for workers, the business is "more responsive to changing marketplace conditions while providing a tremendous inner satisfaction and sense of meaning to employees." The workers at this company set their own productivity goals that are tied to quarterly bonuses and an employee stock ownership plan. Profits and employee morale remain high in a competitive industry.

In their paper "The Buck Stops Here," the CEOs of Chicago sagely warn, however, that "stewardship of people can very easily become paternalistic."

Take the enlightened CEO at the Midwest engine company. He has repeatedly taken steps to keep unions out of the plant. He once subverted a delivery drivers' strike by dressing his employees in religious habits and sending them in school buses to get the deliveries. He claims not to be antiunion, but in a classic paternal phrase says that a union would be welcome at his plant only if he could join.

It is a rare businessperson today who believes that business has no social responsibility beyond making a profit. "Most companies have made the case that community involvement is good business," says John Weithers of the Midwest Stock Exchange. But by definition a corporation cannot act altruistically. Any effort at corporate stewardship has to make business sense. In the case of publicly traded companies, Weithers says, "the corporate steward has a legal responsibility [not to] disburse excessive amounts of the assets of shareholders—thereby taking away their ability to make their own personal stewardship decisions." Shareholders expect that corporations will publicize their good deeds. In fact, public relations around corporate stewardship is quite appropriate. It encourages more stewardship within the company and from its competitors. But, as is true for individuals, corporations need to exercise a degree of humility.

A very popular beverage retailer recently promulgated a code of ethics which "supports workers' right to organize" and pledges "to raise standards of health, education, workplace safety and economic well-being in communities where [the company] does business." In recognition of this ethics' code the company was given a prestigious human rights award. Not long after, the company's vice-president had to admit that, "we've done nothing yet." The award, it turns out, was given based on the company's mission statement alone.

Many sincere executives have spent countless hours lobbying for and crafting codes of ethics in their companies. "As well-meaning as [the codes of ethics] purport to be," write professors Jon Entine and Martha Nichols, they can too easily "shift focus away from corporate behavior to the never-never land of good intentions." Unfortunately in our image-dominated society, perceptions are often substituted for reality.

On the other hand there is a major, publicly traded cereal and bakery goods producer headquartered in the Midwest. The company makes its share of donations to concert halls, schools, and hospitals. Its annual report devotes several pages to its role in community affairs. But not mentioned is the company's long-standing practice of each month loading several semitrailers with "the first fruits" from the bakery. Skids of breakfast products, cakes, and snacks are shipped and unloaded at food pantries all around the state. The churches and agencies receiving the donations are instructed to keep the source anonymous. The company's officers believe that, in addition to normal corporate donations, their product obliges them in a special way to feed the hungry. When it comes to giving away food, the officers do not believe that their company should get anything in return.

Focus on the issues
Obviously these three models are not distinct in the real world. They are meant to foster, not limit, reflection.

"My thinking on corporate stewardship," says Robert Senser of the Asian American Free Labor Institute, "starts not with models, but with concrete issues. Take the new problems created by hollow corporations based in the United States. These are companies that manufacture nothing but design and distribute products that its foreign partners manufacture. In the United States the typical home office would not hire 11-year-old children; it would not discriminate against women; it would not burn a child with a hot iron or beat an employee. But that is happening all over Asia and elsewhere in the new industries begun by partners of United States businesses. I have doubts that moral suasion alone will effect any change in corporate attitudes in this matter. Which means that models of stewardship won't help, except perhaps for a few."

It is true that simply articulating models of corporatestewardship will not result in better corporate behavior. On the other hand, introspection is a prerequisite for those corporate executives who want the world to better reflect the evolving plan of God. Thinking about the pros and cons of stewardship models might stimulate that meditation. The practice of corporate stewardship, say the Business Executives for Economic Justice, "means going beyond what is minimally required by law or even prevailing opinion. It means taking the long view of costs and profits."

That's the attitude of those printing companies in the Great Lakes region that have joined the Great Printers Project. They know that their industry is a major source of pollution. Yet they also know that one printer acting alone is virtually helpless in improving the environment. The competition will win out if only one printer uses recycled paper and cleaner, which involves more expensive waste-control procedures. And so acting together and in cooperation with their unions, suppliers, and large customers, several printers have taken specific steps "to set a standard for incorporating prevention into environmental protection," even if it means a short-term increase in expenses.

Not all business executives are interested in corporate stewardship. Nor will any executive be successful in single-handedly improving the marketplace. Consumers have a necessary role in rewarding good business practices and shunning undesirable products and services. Professional associations have a necessary role in monitoring their members. Unions and employee associations have a role in representing the rights of workers. Government has a role—perhaps more, perhaps less—to regulate the market. Nonetheless, businessmen and businesswomen as insiders to the system have a great opportunity to practice stewardship and advance the common good. 

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