Written by Edward Hadas, Economics Editor at Reuters Breakingviews
It is relatively easy to gather 120 people in an elegant building in central London to discuss how businesses can better serve society. “Blueprint for Business”, a group organised by the Catholic diocese of Westminster, did exactly that last Thursday. The group’s goal is to offer a realistic agenda for corporate virtue.
Virtue may rank some way down the agendas of most chief executives and boards of directors. They tend to measure their success in financial terms: revenue growth rates, returns on capital, shareholder value. While companies say nice things about social responsibility, the reality is that they consider it as little more than fluff. Ethics, they think, is someone else’s business.
It is often worse still. Companies frequently focus on a very narrow definition of shareholder value: satisfying the whims of traders. John Kay, the economist columnist, and Justin Welby, the Anglican archbishop of Canterbury, persuasively argued at the conference that the emphasis on short-term financial targets is socially divisive. Kay made the case that it has also harmed long-term shareholders.
The Blueprint alternative is for companies to introduce more formal ethical training and analysis. Unilever is testing an early draft of the programme. The starting point is a highly practical Aristotelian (and Catholic) understanding of virtue as a habit of excellence. The first question is what counts as excellent. What makes something – whether a thing, person or a company – good?
You don’t need to be philosophical or religious to realise that the answer for companies will be to think beyond short-term shareholder returns. The right answer will include focus on producing goods that are truly good and services that truly serve: in recent years, UK banks’ flogging of pointless mortgage insurance has achieved the exact opposite. It will also include the development of Aristotle’s key virtues – justice and prudence – both inside the corporation and in dealing with outsiders.
Corporate leaders, even those who support the Blueprint initiative, need to be wary. A company that judges success in terms of virtues and the common good could look quite different from what they and their financial backers are used to. Until the market consistently punishes bad corporate ethics, virtue will go unrewarded.
This article is used with the kind permission of the author and first appeared on Reuters Breakingviews
About the author
Edward Hadas is Economics Editor at Reuters Breakingviews Twitter: @edwardhadas His column: http://blogs.reuters.com/edward-hadas/