A ‘divided life’?
Do you feel that you are expected to live a ‘divided life’ whereby you leave the best of your personal values and morals formed outside of the workplace at the door when you go to work?
Do you feel that you are expected to live a ‘divided life’ whereby you leave the best of your personal values and morals formed outside of the workplace at the door when you go to work?
The stories on this page are illustrative of only some of the situations that people in business face. The decisions that people in business make can have profound implications for many people: not only the people within the business and the people transacting with the business (such as customers, suppliers, sources of credit and investors) but also the wider community and society at large that can benefit from or be harmed by those decisions. We believe the Blueprint can help people in business reflect on the human and business implications of their decisions and in so doing provide a framework which can bring a sense of purpose and wellbeing to their personal and business lives.
Sarah received an email from her boss, David Hammond, who was passing on one from the CEO. The CEO’s email, subject “Bonus Policy” said “David. Can you give some thought to our policy on staff bonuses, to make sure it’s water-tight?” It was signed JM.
David had added a note of his own – “Sarah. Can you advise on this? To me, our duty is to maximise shareholder value, and that’s still the right way to decide who gets one and how much. As we do. DH.”
She replied straight away – “I wondered what he meant by watertight. Strictly contractual? Reputational? Moral? Overtaken by events, or shifts in business sentiment? Give me a couple of days and I’ll prepare you a note for JM.
He replied, briefly, “Thanks, but give me some thoughts to be going on with. I’m seeing him tomorrow about something else, and he might raise this.”
So she said: “Frankly there is a problem with configuring the criteria just to shareholder value, and maybe we might need to revisit our last policy statement adopted in 2005. Shareholder value alone can be misleading or even dangerous, as it can overlook the way personal performance is influenced by benign or tough market conditions. And if one is not careful the whole point of the business is skewed, away from making paper boxes that provide a real alternative to plastic packaging, to just trying to boost our overnight price on the FTSE. I sometimes wish our managers would remember why we exist.
“At the seminar in the Business School I attended on behalf of the company last year, a specialist in company law emphasised that regard for share price is by no means a director’s only duty. He told us this (I wrote it down):
“The UK Companies Act 2006 requires directors of companies “to promote the success of the company for the benefit of its members as a whole‟ and sets out the following six factors regarding a director’s duty to promote success:
“It might be argued that bonus policy should not just incentivise or reward contributions to shareholder value, but should recognise all the above six factors to be taken into account of a modern business, some of which have a non-economic dimension. Sarah.”
David emailed back – “Thanks for that. I think we need to talk about this. More to it than I imagined. Maybe we should even involve JM more deeply, and get the lawyers in too. What do other companies do, do you know? David”
She replied: “I think they mostly just ignore it and carry on as they are used to, for as long as they can. But would JM want to do that? He’s quite keen on doing the right thing, even pushing the envelope a bit. Big question is – what conduct do we want to encourage and reward? Bottom line, or more than that?
This isn’t just about bonuses by the way, but the whole remuneration policy. And corporate governance.”
David came back. “Your point is…?”
She tried again, aware this was getting a bit outside her boss’ comfort zone. “If we just fend him off aren’t we a bit in danger here of getting out of step with the way things are moving – read the features page of the FT any day. That’s what the Business School chap said at the seminar. Do you think JM might expect some sign of that in your reply; ie – why else did he send that email? People are starting to talk about the purpose of incentives, and the way a poorly structured and thought-out scheme can drive unintended behaviour. Not just short-termism. I’m just wondering if that’s last year’s model? Just thinking aloud. We need to find out where JM stands. Sarah.”
David, finally – “Thanks. Grateful for that. Times are changing I agree. Will get back to you. I’ll ask Phil to fix up a meeting.
“Meanwhile something else to think about. JM knows about the Companies Act, of course, but he said to me just the other day that the new Act didn’t really change anything, partly because the priority of shareholder value remained, and partly because that is easily measured, whereas the other factors to which we have to ‘have regard’ are vague and impossible to put figures on.
“But where I agree with you is that the scale and spread of incentives seems to have become a lightning rod for a public debate on what a company stands for and what behaviours the company values. My concern is that if we focus on a narrow discussion of ‘watertight’ we will allow JM to be drawn into something that doesn’t reflect some of the good things the company stands for and is valued for. So what you say is very helpful.
“But don’t forget JM’s world is ruled by the need to show the market our quarterly earnings. You’re right to mention short-termism. The demands of the markets and the needs of the business can pull in opposite directions. That’s got to change eventually, in my book. DH”
When Sarah said “corporate governance” she was thinking about the structure of the company she works for, not just individuals being “moral” – whatever that means. Structure affects culture. We know that at many points in the life of a business manager there are choices to be made, big and small, and how he or she makes them will depend on a lot of things, including what type of person she is and how she thinks her company and her colleagues expect her to behave. Appropriate behaviour is not just signalled by pronouncements from on high but through the choices made which are approved, encouraged and rewarded. That’s culture.
Sarah is well known in her offices as a critic of the testosterone-fuelled type of businessman (or occasionally, woman) for whom ruthless competition is the only thing that matters, and success is exclusively measured by shareholder value and annual bonuses.
An important step was to show people that the legal business framework was not a barrier to a broader view of their responsibilities, but an invitation to take that broader view into account.
Ricky Wilson is a senior manager at a biggish FTSE-250 type British company, regarded as a high flyer. He wanted to work at the company because it had a good brand name and it looked good on his CV. But increasingly, as he be-came more senior, he was unsure that what he was doing was worthwhile. He had the temptation to chuck it in, and perhaps do something quite different, e.g. train as a teacher or social worker.
His doubts focus on a feeling he has when he enters the building where he works and presses the button for the lift. The feeling is that at this point of the day, every day, he must force himself to leave behind something important, something he describes as “baggage not wanted on the voyage.” Call it his better nature. He often asked himself why he got more personal satisfaction helping to manage a local charity on whose board he had agreed to serve, which seemed like a different but more human world.
He does not know whether anybody else has this feeling and he has never talked to anyone about it. But he saw a small paragraph in the FT which set him thinking. “Vatican warns business about “divided life‟,” it was headed. He wouldn’t normally have glanced twice at such a story, but the phrase rang bells. He Googled it, and found more on the New York Times website, to which he had a subscription.
There was a quote from a document. “When businesses and market economies function properly and focus on serving the common good, they contribute greatly to the material and even the spiritual well-being of society.” Curiosity aroused, Ricky read on.
“Obstacles to serving the common good come in many forms — lack of rule of law, corruption, tendencies towards greed, poor stewardship of resources — but the most significant for a business leader on a personal level is leading a “divided life‟. This split between faith and daily business practice can lead to imbalances and misplaced devotion to worldly success.”
He wasn’t sure about faith, that wasn’t where he was at, but if he mentally substituted “core values” the sentence described his feeling very well. He’d been brought up a straight sort of guy; he tried to raise his own kids likewise. At work, however, he felt he was being required to split himself into two people, leaving one of them at home even though that was the Ricky he preferred. He printed out the page and stuffed it in his briefcase.
But the idea wouldn’t leave him alone, so he Googled again and found the original document, and read down it until he saw this…
“When business activity is carried out justly and effectively, customers receive goods and services at fair prices; employees engage in good work and earn a livelihood for themselves and their families; and investors earn a reasonable return on their investment. Communities see their common resources put to good use and the overall common good is increased.
“When managed well, businesses actively enhance the dignity of employees and the development of virtues, such as solidarity, practical wisdom, justice, discipline, and many others. While the family is the first school of society, businesses, like many other social institutions, continue to educate people in virtue, especially those young men and women who are emerging from their families and their educational institutions and seeking their own places in society.”
“As if…” he thought. “But thank you, Vatican, whoever you are.”
Ricky suddenly felt he needed to connect with that missing part of himself. He wondered if he’d made a Faustian pact – earn as much money as possible as quickly as possible to give his family a good start in life, then get the hell out. But he also wondered whether he’d left it too late. Or was there another way – to take that whole Ricky, the human being as well as the smart businessman, up to the ninth floor in the morning? “What would happen?” he wondered – or “How long before I got fired?”
Then it occurred to him – “Supposing the reason I’m here is to try to turn the thing round, to make the world a slightly better place by starting just with the bit of it I can influence myself.”
Helen is just back from America where she had been vice-dean of a well-known business school. Her brother-in-law Ivan has invited her on to the board of directors of a finance house in the City, CKMQ, which he chairs. Today is her first board meeting. There is a crisis in the house, a scandal. It is all over the media.
Ivan opens the discussion. “Now we come to a painful business. As most of you know so I needn’t go into it, a trusted employee has resigned from a senior position and attacked the hand that fed him – handsomely, if I may say so. I’ve told the legal department to go after him but their advice is – don’t. There’s enough truth in what he says to make that too dangerous. So…”
He glowered round the boardroom table. Nobody wanted to catch his eye. “What are we to do? Jake? You’re our company secretary. Can we just turn the other cheek, for God’s sake? The share price has fallen through the floor!”
Jake was known for his timidity. “Chairman, what else can we do? I think we have to. I’ve been on the phone all day reassuring our clients that we simply do not regard them as Wombles, or whatever this individual said, but treat them with the utmost respect…”
“Yeah, but we don’t.” The speaker was down the table, across from Helen, clearly agitated. Ivan signaled him to go on. “Speak your mind, Don. You always do.”
“You and I know bloody well what goes on down on the trading floor,” he resumed. “These guys we’ve been recruiting, we’ve deliberately encouraged them to think – me first, CKMQ next, rest nowhere. There was bound to be trouble. I told you so, over and over, for pity‟s sake. F**king disaster, pardon my French.”
There was an awkward silence. The man next to Helen raised his hand, which she didn’t think was strictly necessary.
“Yes, George,” said Ivan a little wearily. “What do you make of it?”
“We’ve spent a lot of money over the years,” said George, “on public relations. What I want to know is – what did we get for it? When this row started, they couldn’t do a damn thing. And another thing. What about all that money we put into Corporate Social Responsibility, showing what a good citizen we were? That was your idea, chairman. And all that mission statement stuff. Cost us thousands. Completely down the drain.”
“George,” said Ivan, “I’m sorry you brought that up again, we’ve thrashed this out plenty of times. The point is we can’t expect the public to give us credit for what the company contributes to society if they believe we practice different values to make money.
“Well, now… I’m going to ask our newcomer, Helen, if she would give us the benefit of her wisdom. And for starters what I’d like to ask her particularly is this – are we uniquely exposed, or does this sort of thing go on all over the place? We’re not alone, are we?”
Helen hadn’t expected to make her boardroom debut in quite such a fraught atmosphere. But she knew what she thought, and if they wanted to hear it they could.
“What we have to understand,” she began patiently, “is that companies like ours do not exist in isolation. Because we are so competitive we forget that we are also part of the business community, and that relies above all on trust. People will not do business with us if they think we are liars or cheats, obviously. Certainly not if they think it is in the company DNA to be liars and cheats. So we have a very good reason not to be liars and cheats. If you drained away all the trust, emptied the pool of it, business would come to a complete stop. But there’s an even better reason – that we don’t think it is right to be liars and cheats, it offends us, it’s out of step with who we really are.”
“Who are you calling a liar and a cheat?” The man at the end had broken his silence. Ivan rescued her. “She’s not, she’s making a serious point, Larry. I want to hear her out. Helen…”
“OK, forget liars and cheats, I mean anything that is disreputable, like disregarding the interests of our clients in order to maximise our profits. That comes close to failing a fiduciary duty, as we are in a relationship of trust; but for heaven’s sake, there’s a moral issue here too, far more important. One thing I have learned in my years in the States at the business school – you can’t leave morality out of it any more. That’s over, gone, finished. If the sub-prime mortgage fiasco and the way it escalated said anything to us, it said – never again!”
Embarrassed silence. “You’re a bit harsh” said Jake eventually. “We’ve been through this business ethics thing before. Never got us anywhere.”
“So do we just put our hands up?” asked Ivan.
“If I may…” said Helen.
“Many, many businesses made two fundamental mistakes. The first was to think of business ethics as an add-on, nothing to do with the heart of the business which was purely and simply to make money. So forget business ethics, of that sort anyway. That’s not going to help us. What we need is virtue ethics, which is a whole different thing to do with as person’s moral character. Second fundamental mistake was thinking that a nice cuddly CSR policy was all that was required to turn a corporation into a good corporate citizen. Look what happened in 2007-08. On the one hand they – or rather we, we were all in it – laid waste the financial world, nearly wrecked the global economy for good. On the other hand corporate philanthropy – social responsibility – set an all-time record, certainly in the States, possibly here too. That wasn’t just hypocrisy. They thought – we’re doing good. Look at all those cheques we signed, made out to colleges, clinics, churches, what have you. So how can we be doing bad? Businesses let it blind them to the reality.”
“Helen,” said Ivan, “you’ve given us a great deal to think about. I think we’d better set aside a whole meeting for this one topic. First I‟d like you to write down what you said to us, expand it a bit, bring us up to date with what’s what. We’ll circulate your paper. And I’m going to ask every single board member to respond, whether they want to or not. So gentleman – and lady – some home-work… Now, next business…”
Occasionally a manager feels out on a limb, without clear guidance. Take Gerald.
He instinctively feels the purpose of business includes doing the right thing, not just profit at any price. If only that principle was written down somewhere, Gerald would have been more confident that he was doing the right thing. At least he might find the Companies Act language to be a sign that society believes his instincts are more widely shared than he might imagine.
Gerald works in a company associated with oil exploration. He has become increasingly conscious that some of the decisions he is expected to make were questionable. For instance he was given a document which was being prepared about an oil extraction project, which estimated the risk of environmental damage on the low side. He knew that an earlier draft had referred an estimated 40,000 to 100,000 litres of noxious effluent that would have to be treated. The new version simply said “around 40,000”.
He restored the earlier estimate, with its higher top figure, knowing that that would not be regarded as helpful by the people who were keen for the deal to go ahead. There was indeed a bit of resistance, and the situation bothered him. The draft was altered yet again, omitting the higher figure.
Now his brother Phil had gone into academia after gaining a first in philosophy, and was now a professor of that subject, specialising in something called “virtue ethics”. Gerald talked to Phil about the problem over a glass of wine, not expecting he had anything to contribute to its solution but to get it off his chest.
Phil talked about Aristotle, and seemed to regard Gerald’s dilemma as a perfect illustration of how virtue ethics worked. “Aristotle was concerned with being of good character, virtue in action in order to be a good citizen,” he told Gerald, “First, your action in reinstating the higher figures qualifies as virtuous in three ways. One, it was brave, because you knew it would make you unpopular; in some companies, being a stickler for the facts does not go down well and may even have a price attached. So score one for courage. Score another one for justice, as you owe it to your company and to whoever else reads this document, to tell them the truth. When we perform a duty, giving what is due, we are acting justly. Also justice in the sense that we owe it to future generations to leave the planet inhabitable. You can have one for prudence as well, because producing misleading documents could eventually rebound badly on all the people involved. You are looking at the broader situation and the wider consequences, which is what prudence is about. Wider consequences for the company but also for the environment.”
“Weren’t there four virtues, I thought you said the other day? What‟s the other one?” asked Gerald.
“Temperance,” said Phil, examining his empty glass. “For now let’s settle for just the three..”
“So,” said Gerald, “what do I do?”
“When in doubt, apply the virtues. I think courage comes first. But how about this? Try and build some trust. Go and see the guys who want to stick to the 40,000 litres figure. See if there is a way to reflect the concerns they have about the way you are disclosing the higher figure, without misleading people. Say you understand their problem. Warn them about the long term risks of misrepresentation, including litigation. Prudence, you see. And justice. I think you need to make the first move, show you are a human being, expose yourself a little, be friendly. Sticking your head above the parapet takes courage. Let them see you‟re not a fanatic, an environmental headbanger, but a sensible balanced guy. That’s what temperance really is. The fourth virtue.”
The final document? It said around 40,000, but could be as high as 100,000, though the company is committed to keeping it as low as possible.
The deal still went through. And Gerald was unexpectedly promoted. His line manager praised what he called his “constructive challenge with the company’s best long-term interests at heart.”
“You see – justice,” said Phil. “Virtue is supposed to be its own reward. But virtue imitates virtue.”
There was an interesting sequel. In fact his company was in the process of developing a policy on sustainability. Had that been in force earlier it would have given extra weight to his misgivings about minimising the risk of environmental and ecological externalities in that oil exploration document. After the sustainability policy was adopted he discovered that the CEO had specified that the noxious affluent in question had to be kept down below 20,000 litres and the additional costs had to be absorbed elsewhere in the project. There were health and safety risks for staff in handling that amount of effluent and some risk to the health of local people. He had explained that “widening the aims of management to measure to mitigate the impact of their operations on society and the environment is an example of broader corporate governance.” Gerald had obviously been on the cautious side – he hadn’t realised which way the wind was blowing.
Businesses do not usually think of themselves as schools of virtue, places for building character. Gerald’s case suggests that perhaps they should. He wasn’t at all sure that his company expected him to possess, or display in his work, the virtues of courage, prudence, justice and so on. The cultural message wasn’t clear. Yet the place where we work and who we work with has enormous power over our lives for good or ill, and helps to shape us as human beings. As well as the four cardinal virtues (on which other virtues depend) there are the three so-called theological virtues, faith, hope and charity – which does not just mean giving to deserving causes, but an attitude of care, respect and appreciation for other people at all levels.
Widening the aims of management to take account of environmental factors is an example of good corporate governance. It is the very opposite of short-termism – the environment is still going to be here long after we’re dead and gone. Also, Gerald’s company wasn’t so centralised in its decision-making that it didn’t allow individuals to challenge decisions that did not seem quite right, provided they went about it in a sensible way.
Some of the stories refer to Aristotle’s virtue ethics and Catholic Social teaching – these are some of the learnings from which the Blueprint Principles and Framework are drawn.
Many young people want to work in an environment where they feel they can give something back to society. We asked a number of students what they want business to be.
The Blueprint tools are drawn from strong foundations of learning from society, including philosophy, faith teachings and social and behavioural science.
Blueprint is not faith led but it is faith enabled. We explored the extent to which faith teachings could contribute to ‘better business’.