For hundreds of years, corporate leaders have been judged on their ability to create wealth for their shareholders. But for almost as long, some people have been searching for a different way to do business. This was the subject explored by James O'Toole, recently the first Daniels Distinguished Professor of Business Ethics at the University of Denver's Daniels College of Business, and now a Senior Fellow at the Markkula Center for Applied Ethics' Business and Organizational Ethics Partnership.
In a talk entitled "The Mindful Managers: Two Centuries of Courageous and Virtuous Corporate Leadership," O'Toole began by discussing a near-universal pattern among business leaders: focusing on the bottom line for shareholders and worrying about ethics and other stakeholders in retirement, if at all.
For example, Francesco Datini, also called the Merchant of Prato, lived from 1335-1410 and became one of the wealthiest men in Italy. He kept detailed documentation of his business and his life – providing a window into the business practices of the time. Datini's focus on making his fortune seems to have kept him from finding fulfillment in other parts of his life. He wrote, "Destiny has ordained that I should never know a whole happy day." He died a very unhappy individual.
American industrialists John D. Rockefeller and Andrew Carnegie devoted their lives to making money; one of Rockefeller's employees warned him that the company was "quoted as the representation of all that is evil." Both Rockefeller and Carnegie spent their senior years atoning for the way in which they had made their fortunes.
"Almost all histories of business have been that way until fairly recently – but there have been exceptions," O'Toole said. "We think problems are modern and no one has ever faced them before. Then we look at history."
Recently, new metrics for business success have been emerging: whether the organization is ethical and whether it is socially and economically sustainable.
History offers numerous examples of leaders whom O'Toole describes as "mindful managers": those who are attentive to all of their responsibilities. Being a mindful manager is not the same as being a philanthropist – these managers were capitalists who created profitable businesses. However, they also had strong ethical compasses, respected others, and wanted to use their organizations to foster human development.
O'Toole offered several examples of these mindful managers:
* Robert Owen (1771-1858), a Scottish mill owner, "called upon his fellow business leaders to understand that they had a responsibility to treat their employees and customers in such as a way as they could create a good society," O'Toole said. Owen created a model community with good housing, schooling for the children, and adult night school for the workers. He warned customers when yarn prices were about to rise. His company became one of the most profitable in the world – yet he was attacked from all sides. And in the end, he failed to convince others to follow his lead.
* James Cash Penney (1875-1971) was a devout Christian who opened stores based on the Golden Rule: treating everyone the way he would want to be treated. He made every manager of a new J.C. Penney branch a partner in the organization. When he found that one of his stores was more profitable because it was marking up goods to a higher level, he told them to stop, since this would not be good for the "brand" or repeat business in the long run. However, after he retired, he stopped focusing on the company, and the company also lost focus.
* William Lever (1851-1925) founded the company that is today known as Unilever. He created the bar of soap, as well as the first commercial jingle. He also created a community for his workers with company-sponsored schools and health care, and he focused on safety in his plants. He returned profits to investors, management, and workers. He said it was in capitalists' interest to treat people well so they could live in a good society. However, as the company diversified, it ran into trouble, and Lever lost control of it.
* James Lincoln (1883-1965) built Lincoln Electric Co., among the most productive manufacturing companies in the United States. Lincoln based his management on four elements: Workers were given access to all managerial data and participated in decisions. People were paid for what they produced. Merit-based bonuses augmented workers' pay. The company guaranteed employment even during recessions. The company, though a bright spot in Cleveland's economy, now faces challenges maintaining these values.
* John Spedan Lewis (1885-1963) ran the John Lewis Partnership, whose goal was to serve all stakeholders while maintaining a culture of integrity. Today, the company is owned by its employees, who share the profits, and is the most successful chain in Britain.
* Anita Roddick, who founded The Body Shop in 1976, promoted environmentalism in business. The Body Shop did not use animals for testing and disclosed all its ingredients. "Everything she did, she had critics," O'Toole said. When she sold the company to L'Oréal, she said she planned to work from within to change the larger company's culture. However, she died soon after the sale.
* Thornton Bradshaw (1917-1988) practiced what he preached as president of oil company Arco. He said that the job of a leader is to balance the needs of the customer, the environment, the workers, and others.
"None of these companies changed the world," O'Toole said, "but each was able to affect the lives of stakeholders in a positive way."
O'Toole cited several lessons from these examples. The first is that it is difficult to be a mindful manager – and even more difficult to be one consistently. In addition, all the leaders O'Toole cited embraced the notion of stewardship: that running a business was a public trust and that one of an "owner's" duties was to pass on a healthy institution to the next generation.
O'Toole cited several myths about mindful management, including the idea that a company can't "do well" financially and "do good" for the community at the same time. However, he also said it's not true that good deeds automatically lead to better financial results. The key is to have informed leaders who govern based on values that lead to serving all of the stakeholders who have a long-term interest in the well-being of the firm.
Margaret Steen is a freelance author.
May 1, 2013
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