Evangelical Christian Executives

A New Model for Business Corporations

Lewis D. Solomon

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351322904
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

"[In Evangelical Christian Executives, ] Dr. Solomon has captured the essence of an effective and refreshingly different approach to business. In telling the compelling stories of six Christian CEOs, he shows us an alternative to an ethic of greed that has so tarnished corporate America." --John D. Beckett, CEO and Chairman of R.W. Beckett Corp. Events of recent years have encouraged a high degree of skepticism and doubt about business institutions and markets. In the face of widespread cynicism about corporate credibility, business leaders are seeking to restore the trust and confidence not only of investors, but of employees, customers, suppliers, shareholders, potential investors, and the public-at-large. In this volume, Lewis D. Solomon focuses on evangelical Christians who have founded or come to lead six firms. He explores whether religion offers a constructive way to think about corporate governance and the tensions between profitability and social responsibility. Solomon finds that many Christian executives have a private faith, leading quietly by example. Others want their faith to shine forth. Solomon focuses on this latter group, dividing them into two categories. The first group he identifies as preachers, who weave visible demonstrations of their faith into the fabric of their businesses. The second are those who take a more sophisticated approach, based on two biblical principles: stewardship and/or servant-leadership. In addition to examining how these leaders of faith have successfully brought their religious values into their businesses, he assesses the consequences of incorporating their faith and values into their business organizations, considering profitability, employee and customer satisfaction, legal and environmental compliance, and charitable giving. Together with these leadership styles and results, Solomon presents three business models--constant, transformational, and evolving--that enable readers to gain a further understanding of the six companies. While Solomon shows that it is possible to integrate financial profitability and broader religious goals, he finds that it is difficult, though not impossible, to maintain a biblically based leadership style after a firm goes public or expands. With the growth of evangelical Christianity in many sectors of American public life, this volume will be of broad interest to business executives, sociologists, students of religion, and economists. Lewis D. Solomon is Theodore Rinehart Professor of Business Law at the George Washington University Law School, where he has taught corporate and tax law for over twenty-five years. A prolific author on legal, business, public policy, and religious topics, he has written over fifty books and numerous articles. He is an ordained rabbi and interfaith minister.

1

Introduction: The Crisis in Corporate Leadership and Governance

Business is the dominant social institution in the United States (and globally) at the beginning of the twenty-first century. Corporations, not nation states, control the world’s economy. The vast majority of individuals in the United States work for private sector organizations.

A corporation’s reputation is built, in part, on honesty—telling the truth in its communications and dealings with others—and integrity—doing what is right regardless of the consequences. For corporate executives, integrity connotes the courage to hold to one’s convictions and remain true to oneself and to implement policies and practices in accordance with these convictions.

In the early years of the twenty-first century, many weeks were marked by a firm’s or its top executive’s reputation exploding, splattering the public, in general, and shareholders and investors, in particular, with frustration, disillusionment, and a deep loss of trust and confidence. Thousands of employees lost their jobs and pensions. Corporations confessed to cooking their books; the reputation of once-respected accounting firms has been tarnished. In short, now familiar litany, Enron, WorldCom, Adelphia, and Arthur Anderson, among other corporate scandals, names indelibly etched in the business hall of shame, created a public backlash against business and its captains.

The ethic of greed and deceit in the marketplace came under intense scrutiny, unmatched since the 1930s. Business executives, once granted near superstar status, became the stuff of ridicule and disdain.

In commenting on the demonizing of corporate managers in the summer of 2002, Andrew S. Grove, chairman of Intel Corp., wrote:

I grew up in Communist Hungary. Even though I graduated from high school with excellent grades, I had no chance of being admitted to college because I was labeled a “class alien.” What earned me this classification was the mere fact that my father had been a businessman. It’s hard to describe the feelings of an 18-year-old as he grasps the nature of a social stigma directed at him. But never did I think that, nearly 50 years later and in a different country, I would feel some of the same emotions and face a similar stigma.

Over the past few weeks, in reaction to a series of corporate scandals, the pendulum of public feeling has swung from celebrating business executives as the architects of economic growth to condemning them as a group of untrustworthy, venal individuals….

I am proud of what our company has achieved. I should also feel energized to deal with the challenges of today, since we are in one of the deepest technology recessions ever. Instead, I’m having a hard time keeping my mind on our business. I feel hunted, suspect—a “class alien” again.

I know I’m not alone in feeling this way. Other honest, hard-working and capable business leaders feel similarly demoralized by a political climate that has declared open season on corporate executives and has let the faults, however egregious, of a few taint the public perception at all. This is just at a time when their combined energy and concentration are what’s needed to reinvigorate our economy. Moreover, I wonder if the reflexive reaction of focusing all energies on punishing executives will address the problems that have emerged over the past year.¹

Alan Greenspan, chairman, Board of Governors, Federal Reserve System, in his semiannual report to the United States Senate Banking Committee, captured the ethos of material self-aggrandizement that prevailed in the late 1990s. He pointed to a corporate culture blighted by “infectious greed” that seemed to grip much of the business culture as the cause of the breakdown in investor confidence. One key factor, according to Greenspan, was the plethora of stock options given to top executives. Knowing that stock option grants made executives’ wealth almost entirely dependent on their respective firm’s stock price, top managers had an incentive to improve the profits they reported. By pushing and manipulating a firm’s financial numbers, they drove up stock prices, allowing executives to cash in their options. In other words, stock options enabled managers to get rich if they inflated or even faked profits and a few did. Greenspan stated:

An infectious greed seemed to grip much of our business community….Too many corporate executives sought ways to “harvest” some of those stock market gains [from the rapid increase of stock prices in the late 1990s]. As a result, the highly desirable spread of shareholding and options among business managers perversely created incentives to artificially inflate reported earnings in order to keep stock prices high and rising….The incentives they created overcame the good judgment of too many corporate managers. It is not that humans have become any more greedy than in generations past. It is that the avenues to express greed had grown so enormously.²

In a climate of fear and distrust and with the corner suite becoming scandal central, even honest executives came to obsess about the worst possible outcome of every business decision. The “CEO class,” as one prominent journalist put it, became “seized by risk aversion….CEOs are hunkering down at the threat of jail. As a class they’re under legal, political and societal assault, brought about by apparent crimes of a few of their peers, a general impression of excess by imperial CEOs and, of course, the collapse in share values after the boom from mid-1999 to mid-2000.”³

In place of the do-anything-to-succeed mentality of the 1990s characterized by a maniacal focus on maximizing short-term profits in any possible way and at all costs as well as a focus on day-to-day, never mind quarterly, stock price fluctuations, came a new search for corporate purpose and executive leadership. Beyond beating earnings projections as the only goal for publicly held firms, more businesses came to realize that to be sustainable and profitable in the long run, they must establish objectives and adopt (and implement) values beyond mere profitability. In striving to build something lasting, more and more corporate executives came to ask: What is the role of business in society? What is the relationship between a firm and its shareholders, employees, customers, suppliers, and the communities in which it operates? Can you run a business that respects human beings and achieves true and lasting relationships with its employees, customers, suppliers, and the broader community, without sacrificing profits?

The Enduring, but Fundamental, Questions

The debate over corporate goals and stakeholder interests reaches well back into the twentieth century. Defenders of a narrower set of corporate goals and constituency interests argue that corporations should be concerned exclusively with maximizing the profits they can earn for their shareholders within the law and measuring performance on the basis of increasing share prices. Critics maintain that for-profit business corporations should be more “responsible” and that they should take account of all constituencies affected by their operations.

In the early 1930s, two leading corporate law scholars, Adolf A. Berle and E. Merrick Dodd, debated the role of the corporation. Berle’s view was that corporate powers were held in trust and were “at all times exercisable only for the ratable benefit of the shareholders.”⁴ Dodd’s thesis was that the business corporation was properly seen “as an economic institution which has a social service as well as a profit-making function.”⁵ But as Berle later astutely observed, the effect of the discussion was to recognize that “modern directors are not limited to running business enterprise for maximum profit, but are in fact and recognized in law as administrators of a community system.”⁶

However, Professor Dodd’s “managerialism” view, because it treats corporate managers as professionals whose duties require the exercise of almost statesmanlike responsibility, came under attack, most notably by Nobel laureate Milton Friedman. Looking to maximizing shareholder value based on the premise that shareholders are the only stakeholders in a business organization, Friedman stated in his landmark book, Capitalism and Freedom:

[T]here is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engage in open and free competition without deception or fraud.⁷

It remains unclear whether Friedman merely wanted corporate managers to stay within the law, or whether his use of the phrase “rules of the game” refers to some broader obligations. Subsequently, in a celebrated newspaper article, Friedman suggested that the “responsibility” of business is “to make as much money as possible while conforming of the basic rules of society, both those embodied in law and those embodied in ethical custom.”⁸ Beyond these linguistic quagmires, Friedman has come to represent the view that the sole responsibility of corporations is to make increasing profits for their shareholders.

In looking beyond short-term profit maximization for the sole benefit of shareholders, executives with a broader mindset often find comfort in the American legal framework, where courts have given firms considerable flexibility in undertaking socially responsible activities. In one leading case, the New Jersey Supreme Court upheld as valid a corporate charitable contribution to Princeton University, on the grounds that the gift at least arguably advanced the donor corporation’s long-run business interests.⁹ Thus, while retaining the profit maximization and efficiency goals of free market economists, the more moderate and flexible corporate governance model considers the time frame for assessing profitability to encompass long-term corporate profit and shareholder gain, and also enlarges the scope of corporate conduct. Under this approach, the use of corporate funds for philanthropic, humanitarian, or educational purposes does not require the showing of a likely, direct benefit. Rather, courts have recognized the allocation of corporate resources for one of these purposes as an end in itself, regardless of corporate benefit, on the ground that this type of corporate activity maintains and sustains a healthy social system that necessarily serves a long-run corporate purpose.¹⁰

In 1977, the American Law Institute (ALI), a nonprofit group devoted to the improvement of the law through restatement and reform of legal principles, embarked on a project to unify the basic standards of corporate governance, especially in areas not addressed by state corporation statutes. Many areas of the project proved controversial. However, in 1993, after more than fifteen years, the project came to a conclusion when the ALI approved the final version of its Principles of Corporate Governance (Principles). In reflecting the need to consider the long-term, broad gauge corporate interests, the section of the Principles dealing with the objective and conduct of the corporation provides:

(a)…[A] corporation…should have as its objective the conduct of business activities with a view to enhancing corporate profit and shareholder gain.

(b) Even if corporate profit and shareholder gain are not thereby enhanced, the corporation, in the conduct of its business: (1) Is obliged, to the same extent as a natural person, to act within the boundaries set by law; (2) May take into account ethical considerations that are reasonably regarded as appropriate to the responsible conduct of business; and (3) May devote a reasonable amount of resources to public welfare, humanitarian, educational, and philanthropic purposes.¹¹

In the context of this flexible legal framework, many corporate executives increasingly see that firms must deal fairly with their employees, customers, and others (such as suppliers) to remain viable and succeed financially. For these leaders, as corporate stewards entrusted with protecting the interests of various groups, the term “stakeholder” has come to encompass all the individuals, groups, and institutions that affect or are affected by a business organization. They must build and sustain authentic relationships with their firm’s various stakeholders.

Striving to orient their approach to corporate governance around multiple stakeholders: shareholders, employees, suppliers, customers, the surrounding communities, and various levels of government, modern managers realize their businesses must produce high quality products or services and provide employees with a work environment conducive to their personal growth and development while at the same time increasing shareholder wealth. But how can a business entity go about resolving these often-conflicting goals? It’s not an either-or proposition. Rather, the religious faith and values of evangelical Christian executives provide a way of thinking about managing modern business corporations.

Evangelical Christian Executives Bring Their Religious Faith and Values to Their Corporations

This book focuses on the reconceptualization on the goals and stakeholders of modern business corporations. This time of doubt provides an unparalleled opportunity for a fundamental reexamination of the for-profit business corporation. Specifically, I want to examine the two longstanding questions: in whose interest and to what ends should corporations be run? Some executives have sought to go beyond Friedman’s arguments that the only responsibility of business is to make a lawful profit and increase shareholder wealth— with shareholders as a business organization’s only stakeholders or the ALI’s approach that permits managers to take into account ethical considerations as well as public welfare, humanitarian, and philanthropic purposes. These corporate leaders have sought, and others in the future may seek, to bring religious faith and values into the workplace and their corporations. As Charles (Chuck) Colson, a Watergate co-conspirator, reborn as an evangelical Christian, who serves as chairman of Prison Fellowship Ministries (an organization designed to lead prisoners to Jesus, help them grow in their religious faith, and equip them to be responsible and productive citizens on their release) stated:

I stand as living proof that cure comes not from laws and statutes but from the transforming of the human heart—the embracing of a moral code to which conscience is bound. The real hope for corporate America lies in cultivating conscience, a disposition to know and do what is right….

The alternative is to take a bracing dose of reality, to recognize that the enemy is moral relati...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• Acknowledgments
• 1. Introduction: The Crisis in Corporate Leadership and Governance
• 2. Who are the Evangelical Business Executives and What are Their Leadership Styles?
• 3. Covenant Transport, Inc.: A Religious-Based Corporation Led by a Preacher-Leader
• 4. R.B. Pamplin Corp.: A Religious-Based Corporation Led by Steward-Leaders
• 5. The ServiceMaster Co.: From a Religious to a Secular, Spiritual-Orientation
• 6. Herman Miller, Inc.: A Transition from a Corporation Led by Evangelicals to a Secular Approach
• 7. Interstate Batteries System of America, Inc.: From Secularism to Religion Under a Preacher-Steward Leader
• 8. R. W. Beckett Corp.: From Secularism to a Bible-Based Orientation Under a Steward-Servant Leader
• 9. Conclusion: What Can Other Businesses Learn from These Firms and Their Executives?
• Selected Bibliography
• Index