Spring 2016 stories

By Ann Skeet
Director of Leadership Ethics,
Markkula Center for Applied Ethics,
Santa Clara University

In his encyclical Laudato Si’, Pope Francis opens a dialogue which involves both inquiry and advocacy, asking big questions. John Denniston spoke from an innovator’s perspective, noting the possibilities that market forces create. Markets at their core are a gathering of people.

Successful innovation meets people’s needs— sometimes those they can identify, sometimes those they may not even realize they have. Denniston noted shifts that he feels have clouded the exchange around our planet’s condition and future. These include individualism, political extremism, and realities such as the lower cost of information distribution over the Internet, offering an echo chamber of digital communications for special interests. What I welcome in Laudato Si’ and Pope Francis’ overall leadership is his willingness to reframe this set of issues in a way that invites us to consider that all of our interests might be met because they are shared.

As Denniston has related, Pope Francis builds on the comments of previous church leaders in advancing our discussion of the planet we inhabit. Pope Francis is moving us from language associated with political views, words like “climate change” and “global warming,” and brings us instead to “our common home.” As a student of leaders in all sectors—public, private, and nonprofit, each with their own set of market forces—I am encouraged by this shift. As Denniston noted, Pope Francis is far from the first Pope to advance environmental issues. It is how he does it that is helpful to us now.

Moving from the power of Pope Francis’ chosen language, I want to comment on Denniston’s observations about impact investing in our own current Gilded Age. I support and amplify Denniston’s view that markets, these gathering places of people, offer us opportunities to care for our common home in unique, hopeful, and positive ways. Pope Francis says, “We look for solutions not in technology but in a change in humanity” (§9)—not because he does not believe technology will help us or innovation will not improve our circumstance. Rather, Pope Francis is reminding us, as did Denniston with the example of Shared-X and the small farmer, that our motivations matter.

Pope Francis brings us to the ethical and spiritual roots of environmental problems by pointing out that we must change our goals if technology is to be used for the good of our shared nature with the Earth.

However, I would take the stories Denniston shared today about the power of impact investing and Pope Francis’ evident endorsement of this approach even further. Scholars today reinforce that multiple stakeholders can and should be considered in business, supporting Denniston and Pope Francis’ view that impact investing is a commercial opportunity to improve our shared natural condition rather than see business or its capitalistic underpinnings as problematic.

Problems arise when leaders act in ways that limit stakeholders served by business to narrow interests. A working paper published in 2015 by Robert Eccles and Tim Youmans at Harvard Business School explored laws around the globe regarding shareholder primacy,² the notion that corporate boards must place shareholder return as the sole interest they protect. Eccles and Youmans found that such a view is “ideology” only, not law. Shareholder value, they contend, is an outcome of how a corporation’s capital is used, not the objective of the corporation.

Eccles and Youmans are not just calling for more research, a typical academic paper’s conclusion. They are also actively campaigning for adding a “statement of material audiences” to the set of corporate reports legally required to improve transparency and advance understanding of a corporation’s intent and time horizon.³ Others in business today are trying to counter a trend in activist shareholders driving corporate decision-making for the short-term by reminding corporations of their ability to consider the longterm as an appropriate timeline over which to create value. Such a position was recently and notably taken by Larry Fink at BlackRock. Mr. Fink reminds us in a letter now publicized widely in business media, that a director’s duty of care is to the corporation, not to individual shareholders.⁴

What does this have to do with Pope Francis’ and John Denniston’s thoughtful reflections on how innovators and businesses can find common ground in caring for our common home? The work of these scholars and the comments of business influencers like Larry Fink should fuel the courage of people serving in board and management roles to think broadly about their responsibilities. They should feel comfortable and right in setting goals to be realized over the long term, to serve interests beyond just those of financial investors, and to actively design the larger business system they operate within to promote ethical behavior.

St. Ignatius of Loyola, who inspires Pope Francis and those of us here at a Jesuit university, reminds us that we are all leaders. Leadership is not a job but a way of living. Markets are not preventing us from protecting our ecosystem. How people choose to lead and govern within a market economy will make the difference.

Ann (Gregg) Skeet is director of leadership ethics at the Markkula Center for Applied Ethics, a position that directs the Center’s work in business ethics, nonprofit ethics, and considers the unique ethical concerns of those in leadership positions.  Skeet served as CEO of American Leadership Forum Silicon Valley for eight years, as president of Notre Dame High School San Jose for three years, and as a media executive for Knight Ridder at the San Jose Mercury News for a decade. Skeet is a magna cum laude graduate of Bucknell University and member of Phi Beta Kappa. She holds a master of business administration degree from Harvard Business School.

Notes

1. Ann Skeet, “Leadership Ethics and Laudato Si’,” public lecture, Our Future on a Shared Planet: Silicon Valley in Conversation with the Environmental Teachings of Pope Francis conference, 4 November 2015, Santa Clara University.
2. Robert G. Eccles and Tim Youmans, “Materiality in Corporate Governance,” Harvard Business School (3 September 2015), working paper 16-023, available at www.hbs.edu/faculty/ Publication%20Files/16-023_f29dce5d-cbac-4840-8d5f- 32b21e6f644e.pdf, accessed 3 September 2015.
3. Ibid.
4. Larry Fink, “BlackRock CEO Larry Fink Tells the World’s Biggest Business Leaders to Stop Worrying about Short-term Results,” Business Insider (14 April 2015), available at www. businessinsider.com/larry-fink-letter-to-ceos-2015-4, accessed 3 September 2015.