Moral Capitalism
Moral Capitalism
Reconciling Private Interest
with the Public Good
Moral Capitalism
1600 – 1750
Capitalism begins and grows prosperous in
Holland, England and Scotland
An Inquiry into the Origins and Causes of the
Wealth of Nations
Adam Smith, 1776
2
Moral Capitalism
1830 - 1840
Abuses of capitalism –
(dark, satanic mills of Manchester;
Ebenezer Scrooge)
Communist Manifesto
Das Kapital
Karl Marx
3
Moral Capitalism
1880 - 1980
Non-communist response:
welfare state capitalism
Bismark’s reforms
Free trade unions
John Maynard Keynes / New Deal
Japan, Inc.
4
Moral Capitalism
1991 - 2003
Collapse of communism
Rise of CSR
CRT Principles for Business (1994)
Global Compact (2000)
Moral Capitalism (2004) Stephen B. Young
5
Moral Capitalism
Premises of Moral Capitalism
1) Values
Outcomes
2) Values Congruent with Self-Interest
Moral Capitalism
Values Drive Real Outcomes
Moral Capitalism
Traditional Chinese Business Value
Ideal
order; peace; harmony
“T’ai He”
Principles
channel self-interest;
repress autonomy;
prevent anarchy
hierarchy; licenses; seek
permission; conform to
government policies and wishes
Standards
Stakeholder
Benchmarks
Customers
compete on
price; caveat
emptor
Employees
paternalism;
dependency;
low wages;
routine
tasks; follow
orders
Owners/
Investors
“quan xi”
cronies;
family; share
risks; no
transparency
Suppliers
low cost
Competitors
cartel;
Divide
markets
Outcomes
Steady sustained growth; little innovation; corruption
Communities
seek government
favors; “quan
xi”; responsible
only for assigned
duties; no
transparency
Moral Capitalism
Japanese Corporate Value Pyramid
“Ninjo”
Ideal
Principles
“giri-on”
Keiretsu
Standards
group process; cross-holdings;
stability; inflexible strategy;
flexible contracts
Stakeholder
Benchmarks
Customers
market share
Employees
lifetime
employment
Owners
Suppliers
debt over
Keiretsu;
equity; low just in time;
margins; no
share risk
bankruptcy;
Japan, Inc.
Competitors
Japan, Inc.;
divide
markets; live
and let live
Outcomes
Upmarket — Growth: 1954—1990
Downmarket — Stagnation: 1990—2002
Community/
environment
“tanin”/ low
value
Moral Capitalism
Suggested Mexican Business Value Pyramid
Dominion
(“hacendado”; “patron” ideal)
Ideal
Honor;
respect
Standards
Position;
title
Benchmarks
Stakeholders
Consumers
compliant;
accept
product as
offered
Employees
paternalism;
obedience; no
responsibility;
low
productivity;
many positionstitles;
procedure
Personal
discretion
Ownership
prerogatives
Owners /
Investors
equity over
debt; few
trusted
insiders;
family
Property;
“territory”
Scope of
influence;
number of
“dependencias”
Suppliers
submissive
Competitors
enemies;
buy political
influence
Community
little or no value
or importance
except as
subordinates;
buy influence social and
political
Outcomes
Small entrepreneurial middle class; wide gaps in wealth/income;
capital flight; weak civil society; low social capital; high mistrust
Moral Capitalism
Crony Capitalism
Ideal
Social Dominance
Rent Seeking; Insider
Favoritism; Buy
Obedience; Use Police
State for Security
Principles
Insider Networks; Capture of State
Functions; Monopolies & Cartels;
No Accountability
Standards
Stakeholder
Benchmarks
Customers
Capture with
Monopolies
& Cartels;
Price at
Monopoly
Premium
Employees
Indentured
Retainers
Owners/
Investors
Families;
Political
Insiders; No
Corporate
Governance
Suppliers
Price
Takers;
Low
Quality
Competitors
Removed by
Government
Fiat
Outcomes
Mafia-style Administration; Kleptocracy;
Large Scale Transfer of Wealth to Elite Families
Communities
Maximum
Externalization
of Costs;
Corruption of
Politics
Moral Capitalism
The Irresponsible Corporation—ENRON
Ideal
Greed; Social Darwinism
Principles
Maximize $
irrespective of
consequences to
others
Standards
Stakeholder
Benchmarks
ROI
Consumers
caveat
emptor
Employees
layoff 20%
a year;
lock in
401(k) stock
Total
compensation
Owners/
investors
“aggressive”
accounting;
conceal
liabilities
Suppliers
squeeze
and bully
Stock
price
Competitors
collude or
destroy
Outcome
Destruction of equity investment
Financial loss for employees, creditors, suppliers
Communities
Maximize
externalities; seek
government
favoritism; no
transparency
Moral Capitalism
Moral Capitalism
World Religions
(Kyosei, Human Dignity, Stewardship)
Ideal
Sustain
Principles
Success Feedback
CRT Principles
for Business
Inform
Standards
CRT Self-Assessment Process
Elaborate and Quantify
Customers
Chapter 7
Employees
Chapter 8
Owners/ Suppliers
Investors Chapter
Chapter 9
10
Competitors
Chapter 11
Communities
Chapter 12
Stakeholder Benchmarks
Focus
Corporate Action
Management Decision Making
Accountable for
Outcomes
Moral Capitalism
Theory of the Moral Firm
(self interest considered upon the whole)
Finance
capital
INPUTS
Reputational
capital
Physical
capital
Conversion
processes
OUTPUT
Goods/services
Customers
Social capital
Human
capital
Return on Capital
(preserve adequacy of capital inputs)
$;
sustainable
profits;
low beta;
maximum
value
Moral Capitalism
Theory of the Moral Firm: 2
CRT
Principles
Vision
Stakeholders
Corporate
Governance
Leadership
Strategy
Value
Drivers
Shareholder
Value
Moral Capitalism
Stakeholders:
-Customers – moral compass for capitalism
-Employees – moral agents, not parts for a machine
-Owners and Investors – fiduciary duties of loyalty and
due care
-Suppliers – friends, not foes
-Competitors – compete with quality and innovation,
not price
-Communities – enhance social capital to enhance
future profitability
Moral Capitalism
Moral Capitalism
Aspirations
(Kyosei, Human Dignity, Stewardship)
Core Behaviors
Creating New Markets, New
Consumer Paradigms
Values -Driven
Business Case
Leadership
Styles
Transforming
Integrated
Innovative
Social License to
Operate
Engaged
Legal Compliance,
Short-termism
Basic
Visionary
Values
Champion
Value Steward
Supportive
Disconnected, Erratic,
Reactive
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Moral Capitalism
Self Assessment Framework – Criteria Matrix
Category
1.
Fundamental
Duties
2.
Customers
3.
Employees
4.
Owners/
Investor
s
5.
Suppliers/
Partners
6.
Competitors
7.
Communiti
es
1. Responsibilities of
Business
Criterion
1.1
Criterion
1.2
Criterion
1.3
Criterion
1.4
Criterion
1.5
Criterion
1.6
Criterion
1.7
2. Economic
and Social
Impact of
Business
Criterion
2.1
Criterion
2.2
Criterion
2.3
Criterion
2.4
Criterion
2.5
Criterion
2.6
Criterion
2.7
3. Business
Behavior
Criterion
3.1
Criterion
3.2
Criterion
3.3
Criterion
3.4
Criterion
3.5
Criterion
3.6
Criterion
3.7
4. Respect for
Rules
Criterion
4.1
Criterion
4.2
Criterion
4.3
Criterion
4.4
Criterion
4.5
Criterion
4.6
Criterion
4.7
5. Support for
Multi- lateral
Trade
Criterion
5.1
Criterion
5.2
Criterion
5.3
Criterion
5.4
Criterion
5.5
Criterion
5.6
Criterion
5.7
6. Respect for
the
Environment
Criterion
6.1
Criterion
6.2
Criterion
6.3
Criterion
6.4
Criterion
6.5
Criterion
6.6
Criterion
6.7
7. Avoidance of
Illicit
Operations
Criterion
7.1
Criterion
7.2
Criterion
7.3
Criterion
7.4
Criterion
7.5
Criterion
7.6
Criterion
7.7
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Moral Capitalism
Assessment
Framework
Criterion/Benchmark ExampleExample
Assessment
Framework
– –Criterion/Benchmark
2.2. Customers
CUSTOMERS (Section B)
How does the company contribute to the social well being of its customers
Does
the company
its customers
with communications?
quality products and services at reasonable prices, and on fair terms, while protecting
through
its provide
marketing
and
1B - Beyond Shareholders towards Stakeholders - Customers
their health and safety and their physical environment, and respecting their culture and individual dignity?
2.2.1. How does the company respect the integrity of the culture(s) of its
customers?
Point(s): Please circle
POINTS TO CONSIDER – The company seeks customer feedback on its practices, monitors impacts, and is prepared to modify
production or service as a result, plus provides relevant training of staff.
2 does the
3 company
4
5 situations
6
2.2.2. How
address
where7 prevailing evidence
Please
writeadown
any concerns,
explanations
additional
comments onWhat
how or how
not,does
the company
is performing.
deems
product
harmful
inorany
country?
role
disclosure
play in
__________________________________________________________________________________________________________
this
strategy?
__________________________________________________________________________________________________________
1
2B - Economic & Social Impact of Business - Customers
2.2.3. How does the company provide remedies for customer dissatisfaction?
Do the company’s products and services contribute to the economic and social advancement of its customers and to the well-being
Describe
applicable mechanisms for redress through recalls, warranties, and
of their communities?
claims
POINTS TOprocedures.
CONSIDER – Quality of product/service development; product quality and safety; adherence to relevant customer,
safety and environmental codes; products / services positively impact living standards?
2.2.4. How does the company follow relevant consumer codes to protect
group?
1vulnerable
2 consumer
3
4
5
6
7
Point(s): Please circle
Please write down any concerns, explanations or additional comments on how or how not, the company is performing.
2.2.5.
What are the company’s current levels and trends in key measures of
__________________________________________________________________________________________________________
19
__________________________________________________________________________________________________________
product/service performance and applicability?
Moral Capitalism
Value Drivers (positive or negative) - 1
Capital Adequacy
Finance
Reputation
Customer loyalty;
quality; financial
standing; brand
awareness; compliance
CRT Tool -
Dividends; interest;
stock price;
transparency; corporate
governance; risk profile
CRT Tool-
Physical
Supply chain;
depreciation expense
Social
Taxes; citizenship
duties; acceptable
externalities
(ISO 14000); legal;
contributions;
community service
CRT Tool
CRT Tool
Human
Compensation;
work environment;
corporate culture
CRT Tool-
20
Moral Capitalism
Value Drivers (positive or negative)
Management Sensitive
Capital
-2
Conversion Processes
Production processes (ISO 9000); costs;
HR process; credit/liquidity;
R&D process; inventory control;
Procurement productivity
;
Outputs
CRT Assessment Tool
Value Drivers (positive or negative)
Market Sensitive
Conversion
processes
-3
Output
Goods/Services
Quality (ISO 9000); innovation;
market knowledge/research
Customers
CRT Assessment Tool-
Value Drivers (positive or negative)
Market Sensitive
Output
Customers
Quality; price, warranties; service;
advertising; sales; distribution;
market research
-4
$ Profits
21
CRT Assessment- Tool
Moral Capitalism
Assess Board Management and
Employee Decision –Making
•Phase I – 60 minutes – CEO, Board
Members, Senior Management Team
•Phase II – 60 minutes per stakeholder –
Other Management Executives & Company
Leaders
22
Moral Capitalism
The Corporate Improvement Cycle
Performance Improvement
Performance Feedback
to Management
Management Action
CRT Assessment
23
Moral Capitalism
The Problem of Poverty
- For Individuals –
use time and the assets of others
- Debt
- Education
- Savings
-For Nations – Build social capital
- Rule of Law
- Trust
- Education
- Infrastructures
Moral Capitalism
Business
Wealthy
Poor
Government
Moral Capitalism
Required for Moral Capitalism
- Moral Courage
- Leadership
Moral capitalism doesn’t happen; it is made
to happen
Moral Capitalism
Conclusion:
1) Our Values Make a Difference
2) How to Analyze and Apply Values
Moral Capitalism
Common Assumption: Virtue Conflicts with
Self-Interest
(St. Paul, Kant, Marx, Social Darwinism)
Virtue
Conflict
Self-Interest
“My Kingdom is not of this World”
“You cannot serve both God and Mammon”
“He who dies with the most toys, wins”
Moral Capitalism
Conclusion:
There can never be a moral capitalism!
- Capitalism needs private property and
profits
- Private property objectifies selfishness
- Profits encourage avarice and greed
Moral Capitalism
Virtue
Other-Regarding
The Moral Sense
Self-Regarding
Self-Interest Considered upon
the whole
Self-Interest Narrowly
considered
Basic physical and Ego needs
Self Interest
30
Moral Capitalism
Stewardship
Service
Power for common good;
Ethical leadership; Kyosei
Fear
The Moral Sense
Exploitation
Power only for self
Dysfunctional Leadership
Dominion
31
Moral Capitalism
Cosmos
The
Basic
Self
Moral Capitalism
Virtue
Self interest
Moral Capitalism
Business Culture Dynamic
ASPIRATIONS (LEVEL OF NOMATIVITY )
INQUIRERS
INNOVATION
MARKET
ADJUSTMENTS
RULEBENDERS
STRATEGY
KYOSEI
GROWTH
UNIFIERS
IMPLEMENTATION
MANAGEMENT
PRAGMATISTS
BUSINESS RESULTS (LEVEL OF FACTICITY)
Copyright Caux Round Table
34
Moral Capitalism
CRT Principles for Business
Seven Principles:
1. Recognize stakeholder constituencies
2. Create wealth for development of the world
3. Act with sincerity, candor and truthfulness
4. Respect the law
5. The World is one economic community
6. Sustain the environment
7. Avoid corruption and illicit dealings
35
Moral Capitalism
CRT Principles for Business
Stakeholder Constituencies
1. Customers
2. Employees
3. Owners/Investors
4. Suppliers
5. Competitors
6. Communities
36
Moral Capitalism
Caux Round Table Principles for Business
&
Significant Ethical Traditions:
Congruence Amidst Diversity
37
Moral Capitalism
CRT General Principles & Ethical Vision of The Koran
Principle 1: The Responsibilities of Business
Koran 4:36; 6:165; 16:16 – Create wealth for others
Principle 2: The Economic and Social Impact of Business
Koran 4:36; 6:165; 16:16 – Create wealth for others
Principle 3: Business Behavior
Koran 2:174; 23:1 – Keep promises
Principle 4: Respect for Rules
Koran 5:87 – Do not transgress
Principle 5: Support for Multilateral Trade
Koran 4:26 – Promote trade
Principle 6: Respect for the Environment
Koran 55:1 – Do not transgress the balance
Principle 7: Avoidance of Illicit Operations
Koran 2:188; 30:38 – No unjust acquisition of property
38
Moral Capitalism
CRT Stakeholder Principles & Ethical Vision of The Koran
Stakeholder Principle: Customers
Koran 6:149 – Just weight and full measure
Koran 64:12 – Preserve self from greed
Stakeholder Principle: Employees
Koran 42:35; 16:90 – No oppression
Stakeholder Principle: Owners & Investors
Koran 16:16 – Seek bounty
Stakeholder Principle: Suppliers
Koran 83:1 – Treat fairly
Stakeholder Principle: Competitors
Koran 64:12 – Preserve self from greed
Stakeholder Principle: Community
Koran 42:35; 46:19 – No pride or injustice
39
Moral Capitalism
CRT Stakeholder Principle: Customers – Religious Foundation
Foundational Judeo-Christian Old Testament Visions of Social Justice
Leviticus 19:13; proverbs 20:17; 11:1
Canonical Protestant Moral Authorities
Golden Rule; Matthew 5; Matthew 25:32-46
Papal Teachings On Business Responsibility
Respect for the human person – Laborem Exercens;
Avoid excessive self-love – Centissimus Annus
Ethical Vision of The Koran
Koran 6:149 – Just weight and full measure; Koran 64:12 – preserve self from greed
Thai Theravada Buddhist Teachings
Eightfold way: right livelihood
Mahayana Buddhist Teachings
Eightfold way: right livelihood; wise discernment
40
Moral Capitalism
CRT Stakeholder Principle: Customers – Religious Foundation
Expression of Original Confucian Morality
Analects, Bk XVI, Ch X
Hindu Varnas as Expressed in the Law of Manu Text
Manu, Ch 2, 93; Ch 7, 3; Ch n7, 49
African Spiritual Understandings
Reciprocity; do not diminish life force of another
Way of the Japanese Kami
Upright and honest heart; strategic thinking
Meso-American Indigenous Theology
No self-magnification; no deception
41
Moral Capitalism
From Normativity to Facticity
(Jurgen Habermas)
The Moral Individual
Leadership
Development
Personal Capacity
Mindfulness Practice;
Prayer, Zen Mind
Awareness
Discourse, Reading
Bill Sykes Workshops
Vision
(Religion)
Conscience
Moral sense
(A. Smith, Mencius)
Reflection
Virtues
Honesty
Compassion
Courage
Character / Identity
(Determination)
(Superego)
(External Pressures)
Trustworthiness
Feedback
Exercise self-control;
Form habits; Coaching
Goals
Management
Consider
Alternatives;
Mentoring
$
Career
Family
Education
Justice
Decision-Making
(Courage)
(Ego-id conflicts)
(External Pressures)
Skills/Competencies
Learning
Personality Style
(Myers-Briggs)
Training
Experience
Action
Accomplishment
Judgment
Discernment
Moral Capitalism
Improve Decision-Making Skills Enhance Your Reflective Thinking
Step 1: Find the right time and place to think.
Step 2: Listen to your own thoughts as they come.
Step 3: Briefly write down all your thoughts in no particular order
Step 4: Become aware of and then ignore superficial and distracting concerns and worries.
Step 5: Develop remaining thoughts in more complexity and assess those that become
more important.
Step 6: Gain confidence in accuracy of inner convictions.
Step 7: Take action.
43