Profits at the service of people: The core of Catholic business ethics

By Fr. Thomas More Garrett, O.P., Catholic World Report

Do good and avoid evil.”

This advice, while solid to be sure, provides little practical direction.

Critics have suggested that the same might be said of the church’s teachings concerning business ethics. In other words, there is a general perception that the church, while offering much that is aspirational in tone, is far too general to offer a lot of direction when she speaks on commercial matters.

Some find little concrete guidance aside from that which would apply generally. Without greater specificity, moral direction can, practically speaking, offer little help to today’s business owner or manager.

There is something to this claim. For her part, the church has repeated in several instances that she does not offer technical solutions to commercial problems or establish specific models to govern business affairs. There is no desire on the church’s part to micro-manage the contours of commercial pursuits.

That aside, there is perhaps one guideline that supplies something of a moral compass for all business owners and managers, regardless of the size of their commercial enterprise. Pope Francis and  his two most recent predecessors have especially emphasized this central idea. Moreover, concrete ways to inject their guidance into the commercial sphere are gathering attention and growing in popularity.

Profit is not ultimate goal

The lesson is this: The pursuit of profit should never be the main aim of any commercial endeavor. The “Catechism of the Catholic Church,” in a short section discussing economic activity, instructs those responsible for business enterprises that they have obligations beyond increasing profits (no. 2432).

“The Compendium of the Social Doctrine of the Church,” a document produced under the direction of St. John Paul II to complement the catechism, adds that the “individual profit of an economic enterprise, although legitimate, must never become the sole objective” (no. 348).

The popes of the past several years have provided further insight into these ideas by explaining that profit, while obviously necessary to the success of any business enterprise, must always be subordinate to another, nobler, goal. In other words, profit should be used as an instrument to serve a higher objective.

Noble ends of business

A sampling of recent magisterial documents illustrates the point. In his apostolic exhortation “Evangelii Gaudium,” Pope Francis explains that “business is a vocation, and a noble vocation, provided that those engaged in it see themselves challenged by a greater meaning in life” (no. 203). The way to live the nobility of the vocation is to link the generation of material resources to non-pecuniary goals.

Benedict XVI writes in his social encyclical, “Caritas in Veritate,” that profit should not be the primary business objective, but rather “a means for achieving human and social ends” (no. 46).

St. John Paul II probably offers the most succinct description of the proper objective of business pursuits when he writes the following in his encyclical “Centesimus Annus”: “In fact, the purpose of a business firm is not simply to make a profit, but is to be found in its very existence as a community of persons who in various ways are endeavoring to satisfy their basic needs, and who form a particular group at the service of the whole of society. Profit is a regulator of the life of a business, but it is not the only one; other human and moral factors must also be considered which, in the long term, are at least equally important for the life of a business” (no. 35).

What this means is that, while profit is ultimately necessary for business success, it cannot be the sole measure of achievement. The generation of material wealth must be linked to higher, more lasting values.

Profits should serve people

Francis sums up the idea well when he writes in “Laudato Si”: “The principle of the maximization of profits, frequently isolated from other considerations, reflects a misunderstanding of the very concept of the economy” (no. 195). These words of Francis should be kept in mind lest the business world become a place where people serve profits, instead of one where profits serve people.

The notion that businesses should have a social purpose is an idea that has gained traction in recent years. Legislative changes throughout the United States have followed upon the growing interest in an expanding notion of corporate social responsibility. Over the last several years, 33 states and the District of Columbia have adopted benefit corporation laws that allow for the creation of corporations that, while designed to seek profit, are devoted toward pursuing an identified social benefit.

Benefit corporations are not nonprofits. They are taxed as any other private corporation. However, unlike general for-profit organizations, benefit corporations incorporate into their charter a business mission to pursue a public or social purpose. The public or social purpose can be general or specific and need not satisfy more stringent legal standards defining charitable purposes.

Specific, non-financial goals

The central characteristic of a benefit corporation is that, while organized on a for-profit basis, its purpose explicitly includes nonfinancial goals that are more than a means toward a financial end. For example, one Delaware benefit corporation, Kickstarter – an online funding platform – embeds five public benefits in its corporate charter (artistic, charitable, cultural, educational and environmental) and specifies in the charter its commitment to each area.

Consistent with the broader purpose of the legislation, the statute expands the legally defined fiduciary duties of a benefit corporation’s managers and directors to require, rather than simply allow, the consideration of interests other than shareholder profit.

A similar idea lies behind the movement toward social responsibility certifications. Certifications from non-profit independent parties like B Lab confer designations on for-profit institutions that meet certain specifications for social and environmental performance, accountability and transparency. The designation serves as an independent assessment that the entity engages in commercial pursuits in a manner mindful of certain social concerns. B Lab counts popular eyewear producer Warby Parker and e-commerce site Etsy among its list of certified “B corp” entities.

Both B Lab certifications and benefit corporation laws arose within the context of a trend toward corporate social responsibility that intensified toward the turn of the century. The certification and legislation are among the initiatives that form part of a global push for a more robust notion of corporate citizenship.

These initiatives reflect earlier, but lesser known, Catholic commercial movements such as the Economy of Communion (EoC), a global business network inspired by the lay organization Focolare. Members of the EoC are private, separately owned, for-profit entities united by a common spirituality inspired by an Italian lay woman, Chiara Lubich, whose cause for canonization was opened in 2015.

Consistent with Lubich’s own work, EoC entities place a special emphasis on business as a meeting place for people where commerce offers the potential for cooperative personal development.

While the particular manifestations of these person-oriented commercial practices vary, one universal characteristic of EoC entities is a shared commitment to a three-fold division of firm profits. Each EoC entity agrees to devote one part of the firm’s profits to reinvestment in the firm’s future growth, another portion to the support of the infrastructure designed to spread the EoC movement and a third to assisting the poor.

Wider community in mind

The portion that the firm dedicates to the poor is directed either to specific recipients in the community in which the entity conducts business or to Azione Mondo Unito, the movement’s international organization founded to support projects in the developing world.

The profit-sharing arrangement aims at more than mere philanthropy. EoC entities unite their business success with an active apostolate to those in need. The arrangement changes the character of the relationship between the business and those who share in its success. Rather than being simply a recipient of surplus funds, or the beneficiary of an end-of-the-year giving campaign, the EoC brings into its business a kind of “silent partner” who participates in its commercial performance. In this way, charitable service is no mere add-on to the business. Instead, the apostolate is incorporated into the business plan itself.

Some popular benefit corporations mirror EoC practices in their own work. Kickstarter’s corporate charter, for example, commits the company to donating a portion of its after-tax profits to arts and music education. Patagonia, a popular apparel maker, pledges to contribute 1% of its annual net revenues to nonprofits that promote environmental conservation and sustainability.

Of course, one cannot ignore the fact that substantial disagreement about what is truly socially beneficial exists. Nothing, this side of heaven, is free from the potential of being placed at the service of evil. Simply subordinating the pursuit of profit to other goals does not, in itself, render those other objectives beneficial.

Nonetheless, with the right goals in mind these new forms of organization provide vehicles through which business professionals can answer the challenge that the church places before them. Expanded use of these models among Christian professionals can be a means of giving witness to what truly benefits people and society.

Principles can work anywhere

Of course, one need not work through a benefit corporation or an EoC entity in order to subordinate the generation of material resources to a higher aim. Other less prescribed methods may be preferable for a variety of reasons, especially for early-stage entities and other new business ventures. Nevertheless, regardless of the size of the enterprise, companies exist as part of community.

In a recent letter to public company CEOs, Larry Fink – head of BlackRock, Inc., the world’s largest asset manager – endorsed the idea that businesses of all sizes should serve a social purpose.

Yet even where not well suited, the example set by these new initiatives is instructive. An environment populated by businesses that incorporate concerns beyond their own commercial success can be expected to generate a healthier moral climate. Wider adoption of the pattern set by these institutions can usher in a society where progress in business is ultimately measured in terms other than dollars alone.

Re-orienting commercial activity to support the human community is a matter about which the church has been unmistakably clear. While placing profit in a proper perspective is not the entirety of Catholic business ethics, it is a bedrock principle that serves as a practical guide.

Dominican Father Thomas More Garrett is a contributor to Catholic World Report (www.catholicworldreport.com), a free online magazine that examines the news from a faithfully Catholic perspective. His article is reprinted with permission.