The conviction that leaders and their companies can perform well by doing what is good or right has been on the rise again in the past decade, according to Martijn Hendriks in a recent overview of scientific literature on this topic [in Dutch, unfortunately]. This increased attention has also resulted in the appearance of various books for a larger audience. In this article, four recent books are discussed and compared.
The books reviewed in this article are:
- The Enlightened Capitalists; Cautionary Tales of Business Pioneers Who Tried to Do Well by Doing Good.
- Conscious Capitalism Field Guide; Tools for Transforming Your Organization
- Business Ethics; A Virtue Ethics and Common Good Approach.
- Leadership in Practice; Theory and Cases in Leadership Character
This is a translation of a book review in Dutch that has appeared in a special issue on ‘motivation, virtues and leadership’ of the journal Management & Organisatie, number 2/3 of 2020.
The Enlightened Capitalists; Cautionary Tales of Business Pioneers Who Tried to Do Well by Doing Good
The conviction that leaders and their companies can perform well by doing what is good or right has been on the rise again in the past decade, according to Martijn Hendriks in a recent overview of scientific literature on this topic [in Dutch, unfortunately]. That this is by no means a new idea is convincingly illustrated by The Enlightened Capitalists; Cautionary Tales of Business Pioneers Who Tried to Do Well by Doing Good (2019), written by James O’Toole, professor of business ethics at the University of Denver. He discusses the life, ideas and work of about 30 American and European “enlightened capitalists” in historical order. The questions that these “enlightened capitalists” asked themselves at the time, says O’Toole, are still relevant today. The book starts with British industrialist Robert Owen (1771-1858) and discusses the American Ben Cohen (1951), co-founder of the famous ice cream brand Ben & Jerry’s, as the youngest example.
What the capitalists discussed have in common, O’Toole notes at the end of the book, is that none of them acted from a philanthropic motivation, but were very aware that virtue cannot compensate for mismanagement and poor business decisions. The cases in the book show, without exception, that operating a business in a socially responsible way and making profit can go hand in hand. The stories make concrete what responsible and respectful interaction with stakeholders, including employees, can consist of and what the challenges are.
In several cases, the commitment of the enlightened capitalist to the well-being and development of employees in particular stands out. For example, Owen saw it as a primary goal of his factories to provide an environment for his workers “in which they could become industrious, prosperous, virtuous and happy” (p.15), and went far to achieve that goal. However, not everyone appreciated that. Among other things, he faced accusations of paternalism (a theme that is more common in the book). And surprisingly, left-wing reformers and working-class leaders were also highly critical, as Owen would falsely make his workers think that their interests could be aligned with those of the capital owners and managers – which in the long run would hamper revolution or reform (another theme that appears in multiple cases).
Another example of an inspiring way of dealing with employees is the case of James Lincoln (1883-1965, founder of Lincoln Electric), who viewed them as partners. He was convinced “that workers are motivated to cooperate with management when they are respected as human beings and given a chance to develop – and use – their talents on the job.” And that this is the key to optimally serving customers with quality products for a low price. He created “a managerial system based on trust and a strong sense of community – virtues he would consciously and carefully nurture over decades” (p.113). The company is still successful.
But what this case also makes clear, O’Toole explains, is that such a system and corporate culture demands a lot from the work ethics and virtues of employees. Employees are therefore carefully selected and go through a long test period before they get a permanent contract (which has meant that nobody has been fired since 1947!). Interestingly, there exist a striking number of family relationships between the employees, and O’Toole assumes this is because these families cultivate virtues that fit the corporate culture. Therefore, the Lincoln Electronic model may not be a solution for the entire economy.
The cases that O’Toole has brought together in this book provide wonderful examples of how business can serve societal goals while remaining profitable. Unfortunately, the “enlightened capitalists” hardly seem to have succeeded in inspiring their peers to follow their example. In part, O’Tool suggests at several places in the book, this was because they tended to place too much emphasis on the ethical importance of their policies and too little on the benefits for the company. However, even when emphasized one does emphasize this, O’Toole himself noted in his conversations with MBA students and senior managers over the years, people have a tendency to respond with objections (O’Toole provides a list of the objections that he has heard on p.118- 119).
Furthermore, it is worth noting that the “enlightened capitalists,” so Toole argues, often paid a considerable personal price for their courage to do good; It required tireless efforts on their part, a constant tinkering with the company to reach – and maintain – a proper balance between different values and interests. Doing the right thing in every dimension of business turns out to be rather difficult. “Virtue requires hard work, indeed,” O’Toole sighs after the sixth case (p.144).
Nevertheless, O’Toole hopes that today’s leaders will learn from the examples in the book. The depth of his stories will certainly contribute to that; He discusses the social context in which the capitalists operated, their motivations and considerations, the main choices they made in shaping their business, whether it was successful or not, the reactions of others to their actions, and how all this developed over time. Personal details make the ‘enlightened capitalists’ come alive as real people (the reader learns that Owen was somewhat clumsy in his social interactions, but once on the dance floor he became the light of any corporate party), people that are also fallible (William Lever, the founder of the predecessor of Unilever, was known to be a rather authoritarian micromanager, who only really listened to his wife). Amusing details here and there make the book a bit lighter to digest (the pigs that Ben & Jerry acquired to take care of one of the factory’s waste streams in an environmentally friendly way apparently like all flavours of ice cream, except Mint Oreo).
Although each and everyone of the stories is interesting and keeps you hooked as a reader, the book starts to become a bit ‘too much of a good thing’ at some point in the more than 500 pages. It lends itself better to reading a single story now and then, giving yourself some time to process, than to reading it fully in one go.
In three closing chapters, O’Toole reflects on what we can learn from his historical cases and looks ahead to the future of capitalism. His most important observation: the capitalists included in the book all tried to minimize the influence of shareholders. Rightly so, he believes; After the pioneer’s departure, fewer than a handful of companies stayed on the ethical course set for more than two generations of leaders. In the cases where the ethical course was maintained, it was because the policy could be embedded in the management structure, which was possible because the company is owned by families, foundations and / or employees. Ownership, concludes O’Toole (p.436), “is more than anything else the most important predictor of sound business practices, and in particular the key to its sustainability.” The author is therefore concerned about the emergence and development of Anglo-American laissez-fair shareholder capitalism. The recent change of direction of Unilever and the fate of idealist Paul Polman, who was CEO from 2009 to 2019, is mentioned as a recent illustration of this problem. These reflections – and his critical comments on some of the positive trends he also identifies, such as the rise of the ‘Conscious Capitalism’ movement – make the closing chapters of the book unfortunately quite pessimistic.
Conscious Capitalism Field Guide; Tools for Transforming Your Organization
Much more optimistic in tone – and completely different in approach – is another fairly recently published book, the Conscious Capitalism Field Guide; Tools for Transforming Your Organization (2018). The authors – Raj Sisodia, Timothy Henry and Thomas Eckschmidt – are part of the core of Conscious Capitalism. The basic premise of this organization is that capitalism is inherently ethical because it involves voluntary transactions that benefit all parties involved, as well as fighting poverty and creating wealth. The Conscious Ctapitalism website mentions about 20 companies as the main sponsor, and about 100 companies as involved in local / regional departments.
The tremendous problem of shareholder capitalism, O’Toole argues in his critical discussion of Conscious Capitalism (p. 453), is not recognized by the movement. According to co-founder John Mackey, government regulation would not be necessary, as long as companies understand – in the words of philosopher Govert Buijs – the reason why they are on the earth. It is Conscious Capitalism’s mission to stimulate companies to make this change in perspective. In the foreword that Mackey wrote for the Field Guide the position of the conscious capitalists seems, however, more nuanced than O Toole claims; Mackey does identify short-term profit-oriented, activist shareholders as a “clear and present danger” (p.xiii) for the Conscious Capitalism movement. The relatively new legal status of “benefit corporation” can help to resist this, but he say that as a society we also need to explore how “financial capitalism” (p.xiv) can be reformed. However, the focus of this book is on what a company can do itself.
In an earlier book from 2013,1Mackey, John & Sisodia, Raj (2013). Conscious Capitalism: Liberating the Heroic Spirit of Business. Boston, Massachusetts: Harvard Business Review Press.2 John Mackey (founder and CEO of Whole Foods Markets) and Raj Sisodia (professor of marketing) already outlined the philosophy of Conscious Capitalism, including the four basic principles that form the structure of the Field Guide:
- higher objective,
- stakeholder orientation
- conscious leadership and
- conscious organizational culture.
The first chapter of the Field Guide briefly summarizes this business philosophy. It notes that people inevitably pursue their own self-interest, but at the same time have a deep-rooted urge to care about people and things outside themselves. These two human tendencies, the authors argue, should form the engines of capitalism. The two seminal works of Adam Smith, The Wealth of Nations (1776) and The Theory of Moral Sentiments (1759), must be reconciled. The chapter refers to research that shows that operating in an ethically responsible manner does not harm companies financially. With the disclaimer that this cannot compensate for poor management. In that regard, the contemporary ‘conscious capitalists’ are thus on the same page as the historical ‘enlightened capitalists’ described by O’Toole.
The rest of the Field Guide delivers on what the title promises: it is a very practical book that offers many assignments and exercises, primarily intended for company leaders and their direct team. The introduction promises that working through the book yields a plan of priorities for 1 to 1.5 years, and a vision of the company’s intended transformation in 3 to 5 years. In addition to exercises, the book contains interludes with reflections, short examples and stories of companies and leaders who have previously worked with the Conscious Capitalism (CC) principles. QR codes are also printed in various places in the book, which should lead to videos and additional information on a website accompanying the book. Unfortunately, this site is no longer working, or was at least not working at the time of writing this review.
To give an impression of the tone and content of the book: employees form one of the six types of stakeholders, who each receive the same amount of attention in part two of the book (stakeholder orientation). Suppliers, customers, investors, the community and the natural environment make up the other five categories. According to the authors, this is the core of what it means to treat employees as a stakeholder:
“First, we need to recognize the central role that they play in creating value. We must appreciate that human beings are not a resource; they are a source. They are capable of extra-ordinary acts of innovation, creativity and caring. Employees deserve to be cared for, inspired, recognized, and celebrated. Their well-being and that of their families is inherently important. It means recognizing that their work is an inherent part of their identity and can be a source of deep fulfillment and meaning. ” (p.112 / 113)
That implies, the authors argue, that the following ‘practices’ should be introduced (p.113):
- “treat each employee as a precious human being”,
- “strive to be a good steward of their lives “,
- ” give them opportunities to grow and evolve “,
- “help heal them and make them whole “, and
- “empower them to share their gifts and realize their potential.”
These are high-minded ambitions rather than concrete practices. In the accompanying exercise it becomes somewhat clearer how this could be realized in practice. The exercise consists of a questionnaire with 20 statements about how the company deals with employees. Examples of statements are “we provide employees opportunities to engage in meaningful community development projects in company time” and “we actively foster diversity in ideas, backgrounds, and experiences.” The proposal is that 10 C-level executives and HR managers and 100 employees complete the questionnaire to find out to what degree the company is currently dealing with employees in a conscious way. Unfortunately, nothing more is said on the subject of ’employees as stakeholders’.
The importance of virtues is in this book implicitly present in the background, but never discussed in those terms. For example, love is mentioned as one of the qualities that a compelling purpose for the company (part 1 of the book) must have; The business objective “must emanate from the deep reservoir of love and caring largely untapped in most of us” (p.42). In the handbook on character strengths and virtues by Peterson and Seligman (2004) love is one of the traits that are part of the virtue of humanity. “Strength” is one of the desirable traits for conscious leaders (part 4 of the Field Guide), and according to Sisodia and his co-authors, it means that strong leaders are confident and courageous, but not arrogant. Courage is also one of the virtues of Peterson and Seligman, and modesty is in their handbook one of the traits associated with the virtue of temperance. Flexibility is another feature that conscious leaders should have according to the Field Guide. Conscious leaders “can embody seemingly opposite qualities such as wisdom and lightheartedness, and toughness and love, simultaneously” (p.253) and they do so in response to what is needed in a specific situation. This ability to respond to concrete circumstances is also essential in virtue ethics.
Business Ethics; A Virtue Ethics and Common Good Approach
Considering the importance that virtue ethics potentially has for Conscious Capitalism, it may be a missed opportunity that the Field Guide does not explicitly refer to this philosophical tradition.3 The third book in this review, Business Ethics; A Virtue Ethics and Common Good Approach (2018) is specifically about this tradition, but has a very different primary target group than the CC Field Guide, namely students. The three editors all work at the University of Navarra, two as professors of business ethics and one as associate professor of moral theology. According to them, Business Ethics (207 pages) is the first text book in that field that has been written fully from a virtue ethics perspective. The geographical / cultural diversity of the authors who contributed to the book is noteworthy; There are not just American and European authors, but also contributors from Africa, Asia and Latin America.
The premise of the book is that the ultimate reason for existence of business is to promote the public interest or the common good. The consequence of this is, the editors argue in the preface, that maximizing profit cannot be the goal. The more than 200 pages of the book focus on three sources of virtue ethics: Aristotle, Alasdair MacIntyre and Catholic social doctrine. The book begins with an introductory chapter on virtue ethics and these three elaborations thereof. This is followed by seven chapters which each discuss one function or aspect of business operations, namely leadership, finance, production, marketing, human resources, legal affairs and the management of companies. The chapters after the introduction have a uniform structure: an introduction with point-by-point learning objectives, successively a discussion of the three ethical sources in relation to the subject, then a concrete case and finally a number of discussion questions. The book ends with an additional chapter in which a fourth virtue ethics approach is discussed: Confucianism.
Within the above-mentioned structure for the seven functional chapters, authors make different choices in their discussion of the three virtue ethical traditions. For example, the chapter on human resource management focuses on Aristotle’s distinction between action (praxis) and production (poiesis) as the result of work, and the chapter on governance focuses on the virtue of practical wisdom (phronesis) and the vice of cunning (panourgia). And from Catholic social doctrine, the chapter on human resource management borrows the four fundamental principles of 1) human dignity, 2) the shared good, 3) subsidiarity and 4) participation. The chapter on leadership, on the other hand, focuses mainly on the social nature of man and the importance of social communities as an implication of the claim that people are created in God’s image (Dei image).
What is a pity, I think, is that only three of these seven chapters provide a concrete list of the virtues required for making the aspect of the business process under discussion contribute to the common good. The chapter on leadership pays the most attention to this. The author successively discuses diligence, professionalism and competence; courage; justice; temperance and sobriety; veracity or truthfulness; humility; prudence, and love, kindness and magnanimity. In the chapter on marketing fairness, trustworthiness, respect and empathy are briefly discussed. Finally, the chapter on legal affairs mentions and defines discernment, prudence, fairness, a long-term view, moderation, courage, justice and practical wisdom.
As the editors acknowledge in their preface, the structure chosen for the book inevitably means that there is some overlap and repetition between the chapters. Nevertheless, my impression is that a slightly more systematic structure and further coordination between the authors of the chapters would have been possible; Some explanations, for example about MacIntyre’s distinction between internal and external goods and between practices and institutions, keep recurring. In addition, it is a regrettable gap that it is not discussed what Aristotle has said about man as a social animal, in above mentioned chapter that discusses the social nature of man according to Catholic doctrine. Furthermore a joint virtue list would have been a good starting point – the next book discussed in this reviews does a better job in that respect! – within which the authors could of course have worked with different priorities, interpretations and examples per chapter.
As for the cases in the book: these include both large multinationals and small and medium-sized companies. In terms of length and depth, they occupy a middle position between the short examples of 1 to 2 pages in the Field Guide and the extensive discussions of 20 to sometimes 30 pages per company in The Englightened Capitalists. Contrary to the cases in these two books, the cases in Business Ethics are not just exemplary model companies; One case concerns Primark, which struggles with the sustainability of fast fashion and the responsibilities of factory workers in Asia. As you would expect in a textbook for students, each case contains one or more concrete protagonists who struggle or have struggled with ethical issues and themes.
A case that stands out is that of Ben & Jerry’s, a company that was also covered in The Enlightened Capitalists. In Business Ethics, the case is fully embedded in fiction, in a story about David. He had heard of Ben & Jerry’s in one the courses on business ethics that he took in college, started his career with ambitious goals at a more conventional company, but is now delighted to be part of the close-knit community that Ben & Jerry’s employees form. In the story David comes to realize that there are similarities between what it takes for his lacrosse sports team to function well and for the company where he works to function well. He also reflects on what he learned during his studies about business administration and business ethics, his work experience afterwards and what he now observes and experiences at Ben & Jerry’s. In fact, David’s story is as much an illustration of a virtuous company that considers human flourishing of paramount importance as it is of a virtuous employee who has learned what life is really about. Just as in The Enligthened Capitalists good companies and virtuous founders / leaders go hand in hand, in this story good employees and good companies are intertwined. Writing the whole case in fictional form could easily have become an artificial-looking exercise, but the story is well written and a smooth read.
Leadership in Practice; Theory and Cases in Leadership Character
The last book to be discussed in this review, Leadership in Practice; Theory and Cases in Leadership Character (2018), is an edited volume (333 pages) as well. It is primarily intended for business administration students. The editors are Gerard Seijts (a Canadian professor of organizational behavior) and Karen MacMillan (associate professor of organizational behavior and HRM, also in Canada). The aim of the book, they explain, is to make students understand the importance of character formation, to give them a vocabulary to reflect on it and to illustrate how this can be applied in practice.
While Business Ethics takes a number of ethical-philosophical theories as a starting point, Leadership in Practice is based on social science research, more specifically on a well-known framework developed by Mary Crossan, Gerard Seijts, and Jeffrey Gandz. This framework is explained in the introduction. It divides exemplary leadership in three components: character, competencies and commitment – the so-called 3C model. A character dimension, in turn, is also a combination of three elements: values, virtues and personality traits. The introduction distinguishes 11 of such dimensions of character, namely drive, collaboration, humanity, humility, integrity, temperance, justice, accountability, courage, transcendence and judgment. The last one, judgment, takes a special place within this list, it is the central dimensions to which all other dimensions contribute. At first glance similar to the central place that practical wisdom occupies in the virtue ethics of Aristotle.
The 31 chapters of the book contains are organized according to four levels of leadership: individual, team, organization and society. The book contains two types of chapters, namely cases written as educational material (18 chapters), interspersed with reprinted articles (13 pieces). Most of the latter chapters provide theoretical background for the cases. Titles include The Cross-Enterprise Leader, Developing Leadership Character, Good Leaders Never Stop Learning, Why Vulnerability Leads to Great Leadership, and Rising Costs of Bad Leadership. However, some of the reprinted articles are not theoretical, but also deal with a case study from practice. For all chapters but one Seijts, MacMillan and / or Crossan are either the authors or one of them is a co-author.
The cases take place in different countries worldwide (for example Iceland and India) and are – in keeping with the four distinct levels of leadership – more diverse in nature than in the previous books. For example, there is a case about a radio host – Jian Ghomeshi – at the Canadian Broadcasting Corporation, but also about a culture struggle with the Australian army. The cases were not written by Crossan, MacMullan and / or Seijts, but in almost all cases – as is always stated on the first page – they were written under the supervision of one of them. Contrary to the previous book, there are no discussion questions per case, but contemplative questions in a final chapter, organized according to the aforementioned list of character dimensions or virtues. The idea is that lecturers can use these questions at any time when discussing the articles and cases.
To conclude: these are some very different books about virtues in companies and organizations, with – in order of discussion – a historical, practical, philosophical and social-scientific approach. Two are primarily aimed at current leaders (the CC Field Guide and The Enligthened Capitalists), two at students as prospective future leaders (Business Ethics and Leadership in Practice). The books differ in depth from quite profound (The Enlightened Capitalists) to rather superficial (CC Field Guide). Although one could also say that the latter book is not so much superficial, but accessible to the very busy target group and sufficient as a first stimulus for an in-depth internal discussion. The best book to take up, it will be clear, will depend on your background and your motivation to dive into the topic.