Written by: Georgie Lee
The business of business is business? Modern managers have only a weary smile left for this theory of economist Milton Friedman. Today, most of them are committed to the ESG – environmental, social, governance – approach. The result is changes in compliance and sanctions, but not changes of heart that would be needed for a genuine transformation of capitalism.
"There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."
Milton Friedman (1912 – 2006)
American economist awarded with the Nobel Prize for Economics
Two recent global scenarios reveal much of today’s corporate culture. In January 2021, WhatsApp announced changes to its privacy policy and terms of service. The news stoked users’ fears over broader data sharing with WhatsApp owner, Facebook, raising privacy concerns, and sparked a mass exodus of subscribers to other messaging apps
like Telegram and Signal.
It was precisely such privacy concerns that led WhatsApp co-founder Brian Acton to part ways with Facebook chiefs Mark Zuckerberg and Sheryl Sandberg in 2017. He left before his
final tranche of stock grants worth US$850 million vested. Acton’s decision was described by Forbes magazine as ‘perhaps the most expensive moral stand in history’.
Is there anything wrong with maximising profits?
Big Tech’s scrutiny
Acton who is a pro-privacy zealot and boasted ‘no ads, no games, no gimmick’ under his watch, had then balked at the Facebook chiefs’ plans to monetise WhatsApp through targeted ads, and the sale of business analytics tools that risked encroaching on WhatsApp’s end to-end encryption. He had proposed to the Facebook chiefs to monetise the messaging service by charging heavy users a small fee. But his proposal was shot down, he believed, on grounds that it was far less lucrative.
Driven by the pursuit of profit, Big Tech has revolutionised the way we live. Unknown to
us, our lives are constantly under their scrutiny twenty-four hours a day, seven days a
week. They know everything we have purchased, everywhere we have been, and
everything we want. In short, they know more about everything than anyone ever has
in the history of mankind, leveraging on the power of data and artificial intelligence.
The Big Techs not only generate a lot of profit, but they virtually captured the brightest and most innovative minds in the world under their employment. And what are they doing with all of this? Well, the blunt truth is that their main focus is selling tiny little ads that appear on every screen you look at. These businesses, after all, were started to make money, and, ahem, are they lapping it up!
The Inequality Virus
Moving to a vastly different scenario, the World Health Organization (WHO) warned the Covid-19 vaccine divide between rich and poor nations is worsening by the day.
‘Rich countries are rolling out vaccines, while the world’s least developed countries watch and wait,’ said WHO Director-General, Tedros Adhanom Ghebreyesus. Not only that, the
pandemic has spawned widening inequalities. Today’s profit-driven world has enabled a super-rich elite to amass wealth in the middle of the worst recession since the Great Depression, while billions of people are struggling to pay bills and put food on the table.
The two scenarios are just outcomes of shareholder capitalism which has embedded much
of Wall Street’s culture and egged corporations on the path of profit maximisation.
In search of perfect markets
Celebrated economist and Nobel Laureate Milton Friedman’s seminal essay, headlined,
'The social responsibility of business is to increase its profits,’ published in the New York Times of 13 September 1970, became the cause célèbre for free market and shareholder capitalism. It was arguably the most consequential economic idea of the latter half of the twentieth century.
The Big Techs are not rule-takers but rule-makers.
‘There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game,
which is to say, engages in open and free competition without deception or fraud,’ Friedman
wrote. He warned of the danger of thinking about anything but profit. Everything else is thought to lead to inefficiency and self-indulgence. In short, Friedman believed that the
only business of business is business.
Scottish moral philosopher Adam Smith’s ‘invisible hand’ conjecture which said that the
pursuit of self-interest would lead, as if by an invisible hand, to the well-being of society found resonance with him. Hence, profit maximisation, he believed, would lead to a maximisation of social welfare.
Friedman has his detractors. Such a belief, Prof. Marianne Bertrand of the University of
Chicago Booth School of Business, in a New York Times interview, explained, rested on the assumption of markets functioning perfectly. ‘Unfortunately, such perfect markets exist
only in economics textbooks.’ Functioning markets operate under a set of rules or norms, whether explicit or implied. Do today’s ‘Big Techs’ and corporate behemoths truly stay
within the rules of the game? The sad truth is that they are not rule-takers or price-takers, but rule-makers. They have also become arbiters of truth. ‘They play games whose rules they have a big role in creating, via politics,’ wrote Martin Wolf in a Financial Times opinion
piece.
While there is a trend towards corporate virtue and stakeholder capitalism (as opposed to
shareholder capitalism), the penchant for pursuit of profit remains the dominant force
behind enterprise. Major corporations using the cloak of supporting progressive causes are
in effect doing so to protect their bottom line. The rising tide of woke culture seeping into
boardrooms is giving this another spin.
The rise of woke capitalism
Increasingly, corporations are sucked into woke capitalism, a term coined by New York
Times columnist Ross Douthat. They are aligning themselves to progressive social concerns,
such as race, and gay and transgender rights, while they continue to push their own
economic self-interest. In reality they are paying homage to the cultural ‘left’ to avoid
criticisms and win acceptance in order to fulfil their primary objective: making money. So-called progressive values have become powerful branding tools. Corporations today are under siege to embrace political correctness to avoid being ‘cancelled’. Capitalist enterprises and the cultural ‘left’ have become strange bedfellows for the sake of mammon.
Notwithstanding this, there is still a welcome shift towards socially responsible investment,
spurred by concerns on climate change and the environment as well as social justice
issues. ESG (environmental, social and governance) themed investing is becoming mainstream. Currently, over $100 trillion in investments are managed by firms that have signed on to the United Nation’s Principles for Responsible Investment. Larry Fink, CEO of
multi-trillion-dollar asset manager Black-Rock, predicted a ‘fundamental reshaping of finance’ that would see investors allocating more capital to businesses that are addressing
climate change and its socioeconomic implications. Companies that operate in a sustainable
manner, Fink argued, would ‘provide better risk-adjusted returns to investors’.
"Well, if you have a standard operating procedure for it, it cannot be grace. Grace is something that you have to struggle with and grapple with. It must come from the heart and it must be borne with the spirit."
Philip Ng (1958)
CEO of the Far East Organization,
one of Asia's largest hospitality groups
Is ESG more than a public relations strategy?
Prof. Klaus Schwab, Founder and Executive Chairman of the World Economic Forum (WEF), wrote in his book, ‘We can’t continue with an economic system driven by selfish values, such as short-term profit maximisation, the avoidance of tax and regulation, or the externalising of environmental harm. Instead, we need a society, economy, and international community that is designed to care for all people and the entire planet.’
Sustainability goes mainstream
The ESG trend has helped focus attention beyond financial capital to natural, human and social capital. But with public opinion weighing heavily in the direction of ESG, there is cynicism that much of the pious corporate proclamations are little more than opportunistic public relations strategies.
ESG is only the latest iteration of its precursor concepts such as corporate social responsibility and the triple bottom line. While fresh ideas have emerged, a key difference is its focus on climate change and the environment. The moral necessity of ESG has gained wide acceptance. But it is heading not in the direction of cultivating true altruism but in enforcing behavioural change through compliance metrics and external sanctions. Regulations have limited effectiveness as they are quickly circumvented when there is no real change. Without inner change, it is simply behaviour modification, aided by the law.
Exploring spiritual capital
Only spiritual change from inside out can bring the desired human wellness and flourishing. It is not just a mindset change but a heart-set change that is needed for genuine transformation to take place in the world. That takes us to the oft-forgotten but most needed recognition of the importance of spiritual capital in human enterprise.
Rooted in faith, spiritual capital infuses a strong sense of purpose and mission, and promotes the practice of not only virtue but faith in business for human betterment. Faith has a powerful impact on lives, and similarly so, on business. It shifts the focus of enterprise
beyond the material and the self, offers hope and builds trust, a key ingredient for business
success. It is transformational.
Speaking of spiritual capital, Michael Novak of the American Enterprise Institute said: ‘Capitalism carries in its wake the potential for immense transformation, a true and permanent change that is moral in nature. Those nations, peoples and businesses that neglect the moral ecology of their own cultures cannot enjoy the fruits of such transformation and capitalism must be essentially moral or it falters, declines, and fails. Spiritual enterprise is capitalism in its most profound (…) form.’
Every religious faith has its own prescription for spiritual capital. However, the Christian faith offers a unique proposition that gives business a redemptive purpose beyond just the
temporal. Hence, the Biblical model of business can best be described as a redemptive
enterprise. King Solomon writing in the book of Ecclesiastes in the Bible reminds us that work ‘done under the sun’, that is, from a human perspective without God, is ‘vanity and grasping of the wind’. It is a meaningless activity. However, when done from ‘above the sun’, that is from God’s perspective, work or business finds meaning and purpose.
God’s redemptive plan
What is God’s ‘telos’ (Greek for ‘end goal’) for business? Well-known theologian and author J. I. Packer’s narrative of God’s mission in the world provides illumination for this. Packer
declared that the mission of God is nothing less than the redemption and re-creation of the entire fallen created order.
The book of Genesis tells us that God made man in His own image. All of creation lived in harmony with Him and with one another. The world was perfect when God first created it.
But the disobedience of Adam and Eve resulted in sin which led to the fall of man and separation from God.
God's plan is to restore the fallen world.
But God in His grace made redemption from sin available to all who turn to Him. John’s account in the Bible says it all: ‘For God so loved the world that He gave His only begotten Son, that whoever believes in Him should not perish but have everlasting life.’ (John 3:16)
The sacrificial death and resurrection of Jesus Christ who took away the sins of the world
made reconciliation with God possible when we acknowledge Jesus as Lord and Saviour.
God’s redemptive plan, therefore, is to restore the fallen created world back to His original intent and design which is to have His entire creation live in peace or ‘shalom’ with Him
and with one another and to have human flourishing. And not just that, it will also be a renewal of creation as Jesus Christ has declared that He will make all things new. Therefore, from a Biblical perspective, business is a platform for man to exercise his talents and gifting to steward all of God’s creation for meeting needs of human beings and to lead them back to a relationship with God.
Enterprises on a mission
A redemptive enterprise operates on the premise that God has created the necessary
conditions for doing business and generating value for human flourishing. It also affirms
that our assets and abilities are God’s gifts for creating wealth to ensure abundant life for
all. We are therefore entrusted with the responsibility and mission of wisely stewarding this redemptive enterprise. God is the owner and has empowered us to be His stewards.
In His sermon on the mount, Jesus taught His disciples ‘to seek first His Kingdom and His
righteousness’. A redemptive enterprise advances the values of the Kingdom of God by ensuring all business goals and operations are determined by a clear understanding of God’s
righteousness and truth. We are mandated to conduct just and ethical business in total allegiance to Jesus and His Kingdom.
An enterprise is an artificial person with no morality, or spirituality of its own. Its ‘conscience’
is a derivative from the stewards of the enterprise. Hence, in a redemptive enterprise,
the stewards are people of the Kingdom who acknowledge Jesus as both their saviour
and King. Good virtues and doing good alone, without the intent of serving God’s purpose,
do not make an enterprise redemptive. God’s righteousness goes beyond what theologian John Stott called, ‘social righteousness’ – doing social good. It is a righteousness that is
based on God’s law which proceeds from the person of Jesus. It is a call to mirror Christ’s
love and righteousness.
Profit is a by-product of the pursuit of truth.
Meeting a redemptive entrepreneur
At the crux of this is the denial of self-entitlement – the surrendering of self-interest for
the interest of others, a dying of oneself as in Christ’s sacrificial love. The goal of righteousness is reconciliation with God through Jesus.
As righteousness is embodied in a person, and business involves a relationship with other persons, the same righteousness must also prevail over the relationship between stewards of a business and those interacting in the business. A redemptive entrepreneur therefore does not merely seek to lead a person to the right ends but engages the person
through the right means.
Echoing this, Philip Ng, CEO of Singapore - based Far East Organization, one of
Asia’s largest real estate and hospitality groups, said: ‘We remind ourselves at Far East
Organization that we are not just about the ends, we are about the means too. The means
matter more than the ends. In business, many will set targets and do all it takes to achieve
the targets. That cannot be the way of a Christian enterprise. The Christian enterprise has targets, and we want to achieve them in the way that a Christian enterprise does it – in the way of the Lord Jesus Christ. No cheating. Truth in Sales. Ethical. Love your customers. Jesus tells us, ‘Love your neighbours’, love even your enemies.’ Businesses that are just focused on the ends may be obscuring the truth. Truth is the integrity of truly doing what you say you are doing. Most businesses are in pursuit of ends that have to do with profit maximisation but disguise their real intent with virtuous platitudes. They are in business just for the money.
Former Dutch Prime Minister and theologian Abraham Kuyper believed that business conducted to the glory of God is business that restrains evil and promotes flourishing. Business that expresses God’s truth and purposes will transform corporate structures and socioeconomic systems.
Creating true wealth
Profit is not a dirty word in a redemptive enterprise. It ensures sustainability. Renowned architect Moshe Safdie said: ‘He who seeks truth shall find beauty. He who seeks beauty shall find vanity.’ Beauty is a by-product of truth. Similarly, profit is a by-product of the pursuit of truth. Profit-generation becomes a welcome result of redemptive business activity, rather than a goal in its own right.
To a redemptive enterprise, business is more than a transactional process for the sole benefit
of shareholders. It values relationships just as God values His relationship with us. It exists in an ecosystem web, comprising various stakeholders – employees, suppliers, customers,
government, environment and competitors – who will care for one another’s
interest in obedience to God’s command to love one another.
Business has a special capacity to create financial wealth, but also has the potential to
create different kinds of wealth for many stakeholders, including social, intellectual,
Profit is a by-product of the pursuit of truth. 18 physical and spiritual wealth. Redemptive enterprises are brokers of hope in a broken world.
Is a redemptive enterprise and the denial of self-interest too idealistic? It sure is from a
human perspective. A virtuous corporation can at best exhibit what former Singapore’s
Deputy Prime Minister, the late Dr. Goh Keng Swee, described as ‘enlightened self-interest’. The Christian faith, on the other hand, provides its followers with the power of the Holy Spirit which makes selflessness possible.
Redemptive businesses are catalysts of change.
The making of a redemptive enterprise is a journey. No one arrives till the Lord Jesus
Christ returns the second time. Are there such enterprises in the world? Be inspired by
Far East Organization’s enterprise statement:
‘We seek to be a community of love and a workplace of grace that welcomes Christians and non-Christians (…). We embrace the eternal truths of God’s Word. We apply these truths to our business as these are words of life and business is, after all, a part of life itself. Thus, we operate our business on the solid foundation of our values and our rock who is Jesus Christ. Our core values are Business with Grace, Unity, Integrity, Love, Diligence and we practise these values alongside the teachings of Jesus.’
How to operationalise grace
‘Business with grace is about according dignity and respect to all of our staff, business
partners, and customers. It is also about valuing relationships and the needs of others. With
grace, we are able to achieve win-win outcomes, without any party profiting at the expense of another. In doing so, we build relationships that endure, and are able to do good business and do good in business.’
‘How do you operationalise grace?’, one of his managers asked CEO Philip Ng. His reply, ‘Well, if you have a standard operating procedure for it, it cannot be grace. Grace is something that you have to struggle with and grapple with. It must come from the heart and it must be borne with the spirit.’
The WEF’s message is not enough
Without inner change, there can be no real human betterment. The heart of the matter is
a matter of the heart. God warns us through the prophet Jeremiah, ‘The heart is deceitful
above all things.’ Heart change is a matter of the spirit and that is the business of God.
When the World Economic Forum, WEF, meets to deal with challenges the world is facing, high on the agenda is collaboration among stakeholders. Prof. Schwab’s key message to
them is: ‘To create welfare, you have to take care of human, social and natural capital apart
from just financial capital.’
This is all well and good. However, the crucial missing piece in all these, if I may add, is
spiritual capital. That’s what makes redemptive enterprises such a compelling antidote for
a troubled world.