Moving Beyond the Corporation: Recovering
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MOVING BEYOND THE CORPORATION: RECOVERING AN ONTOLOGY OF PARTICIPATION TO ENVISION NEW FORMS OF BUSINESS Thesis Submitted to The College of Arts and Sciences of the UNIVERSITY OF DAYTON In Partial Fulfillment of the Requirements for The Degree of Master of Arts in Theological Studies By Maura Stephanie Donahue Dayton, Ohio December, 2011 MOVING BEYOND THE CORPORATION: RECOVERING AN ONTOLOGY OF PARTICIPATION TO ENVISION NEW FORMS OF BUSINESS Name: Donahue, Maura Stephanie APPROVED BY: ________________________________________________________________ Kelly S. Johnson, Ph.D. Faculty Advisor _______________________________________________________________ Vincent J. Miller, Ph.D. Faculty Reader ______________________________________________________________ D. Stephen Long, Ph.D. Faculty Reader, Marquette University _____________________________________________________________ Sandra A. Yocum, Ph.D. Chairperson ii ABSTRACT MOVING BEYOND THE CORPORATION: RECOVERING AN ONTOLOGY OF PARTICIPATION TO ENVISION NEW FORMS OF BUSINESS Name: Donahue, Maura Stephanie University of Dayton Advisor: Dr. Kelly S. Johnson This thesis offers a critique of the publicly traded, for-profit corporate form of business organization in light of the Catholic social tradition. It highlights the ways in which this organizational form is inconsistent with the view of the human person, work, and participation in the economy articulated in Pope John Paul II’s encyclical Laborem Exercens and Pope Benedict XVI’s encyclical Caritas in Veritate. The thesis argues that the corporate form creates moral problems for both shareholders and employees, and it maintains that responses to Benedict XVI’s encyclical that seek positive social change through business must address legal and organizational issues of business structure. This thesis shows how a participatory ontology and deeper understanding of freedom as kenosis (in contrast to the unchecked freedom of the individual that undergirds the modern corporation) can help point the way toward new forms of business organization that seek to ameliorate the moral problems inherent to the corporate form. By engaging the work of John Milbank, D. Stephen Long, and others who, following iii Aquinas, articulate a participatory ontology, the thesis argues that such an ontology is critical to understanding human work and participation in the economy, as it allows the opportunity to question the prevalent understanding of individual freedom and its resulting lack of a unified economic telos. The last chapter responds to Pope Benedict XVI’s call to find new ways to understand business. Drawing on lessons learned about human work, the role of the person in economy, the critique of the corporation, and by engaging an ontology of participation, the thesis explores existing alternative business structures (including microfinance through Catholic Relief Services, the Economy of Communion business model, and the TOMS’ Shoes company) and suggests ways to mobilize the resources of the church as a means by which Christians might respond to Benedict’s call. iv PREFACE My doctoral research in finance developed an empirical model for corporate CEO compensation, performed a quantitative analysis of the impact of excess compensation on the value of the firm, and analyzed the efficiency of corporate boards of directors in setting compensation levels. My graduate school career in finance focused on learning technical details such as pricing stock options and futures contracts, learning theories of bank failure contagion (such as the “too big to fail” doctrine), studying models for making capital budgeting decisions, and learning the theory and practice of statistical research methods; we did not study the history of the discipline nor why we maximize shareholder wealth or quadratic utility functions. While researching and teaching in this discipline in the 1990s, I never questioned the explicitly stated and reinforced goal of corporate financial management: to maximize shareholders’ wealth. Ten years ago, I made a career change and began my work as Director of the Lilly Endowment-funded Program for Christian Leadership, in which I helped to facilitate and create courses and programs for University of Dayton students, faculty, and staff to theologically explore Christian vocation. By collaborating closely with members of the faculty in the humanities, I began to see that it was possible (indeed necessary) to question normative assumptions and claims. I came to understand that the field of economics and the sub-discipline of finance were historically conditioned: economics v had a history of development of ideas, and corporations have gone through a sort of evolution of their own. In my work as director of our Lilly program, I knew that I needed more theological education, so in the summer of 2006, I enrolled in my first course toward a master’s degree in theological studies at UD. As I continued through my coursework, my own worldview began to change. I found I was enthralled by church history, apostolic succession, the mystery of the Trinity, Aquinas’ Summa, the challenge of living as disciples in the 21st century, and practical questions related to moral theology. I was energized by thinking about work as a way in which humans participate in God’s ongoing creation. Then, the massive financial crisis that began in 2008 threatened to destroy our global financial system. Every day in the Wall Street Journal and New York Times I read of the repercussions of the crisis on human lives, and I was motivated to look more deeply at possible root causes of the vast and complex problem. This crisis was more significant than “one bad apple” within a single firm. I began to question the hegemony of the for-profit corporation in the U.S. economy and the assumptions and structures that exist within the publicly traded corporate form of organization that result in moral problems for human action. It is here that the questions of my thesis are located. vi TABLE OF CONTENTS ABSTRACT…………………………………………………………………………..….iii PREFACE………………………………………………………………………………...v INTRODUCTION………………………………………………………………………...1 I. THE CATHOLIC SOCIAL TRADITION AND THE HUMAN PERSON IN THE ECONOMY……………………………………………………………………………….3 John Paul II’s Laborem Exercens…………………………………………………5 Benedict XVI’s Caritas in Veritate.……………………………………………..18 II. A CRITICAL EXAMINATION OF THE CORPORATION………………...………40 Definition and Explanation of the Publicly Traded Corporation...………………40 Moral Problems Inherent to the Corporate Form.…..……………………………43 III. RECOVERING AN ONTOLOGY OF PARTICIPATION..…………………….…57 The Enlightenment’s Legacy…………………………………………………….58 A Participatory Ontology...………………………………………………………71 Implications of a Participatory Ontology………………………………………...74 IV. INCARNATING THE VISION OF AN ONTOLOGY OF PARTICIPATION...….96 The Role of the Church….……………………………………………………….98 Current Approaches Toward Fostering Social Good Through Business...……..102 Conclusion…………………………….………………………………………..113 BIBLIOGRAPHY………………………………………………………………………115 vii INTRODUCTION In 2009, Pope Benedict XVI issued a call for lay people to re-envision ways of engaging in business in such a way that business is characterized by gratuitous love1. Using the papal encyclicals Laborem Exercens and Caritas in Veritate, I assess theological sources to arrive at an understanding of the church’s position on the vision for and role of human work and participation in the economy. From that understanding, I critique the publicly-traded, for-profit corporate form of business organization to show the ways in which its organizational structure is inconsistent with the view of the human person, human work, and the role of persons in the economy articulated in Catholic social teaching. In contrast to Michael Novak, who has argued that the corporation can be viewed as a “metaphor for the ecclesial community,” I discuss the moral problems for both shareholders and employees that stem directly from the publicly-traded, for-profit corporate form of organization.2 This critique intends to make clear that we must respond at a structural level to imagine new models of business organization. Taking into consideration these concerns, I turn to research by John Milbank, D. Stephen Long, and others.3 Together, they offer a theocentric worldview in which 1 Pope Benedict XVI, Caritas in Veritate, Papal Encyclical, July 7, 2009. Henceforth referenced as Caritas in Veritate. 2 Michael Novak, Toward a Theology of the Corporation, American Enterprise Institute for Public Policy Research, Washington, D.C., 1981, 1. 3 Catherine Pickstock states that these authors and others possess a “hermenuetic disposition and…style of metaphysical vision” that has been termed Radical Orthodoxy. See Catherine Pickstock, “Radical Orthodoxy and the Mediations of Time,” in Radical Orthodoxy? – A Catholic Enquiry, ed. Laurent Paul Hemming, (Burlington, VT: Ashgate, 2000), 63-75, at 63. 1 economic activity is not restricted to the secular sphere. Rather, economic activity is one way in which humans participate in the ongoing activity of God’s creation. From this worldview, normative questions follow regarding how humans should participate in the economy, in the exchange of goods and services. In the last chapter, I respond to Pope Benedict XVI’s call for a “profoundly new way of understanding business enterprise.”4 Benedict argues for room in the economy for “economic activity carried out by subjects who freely choose to act according to principles other than those of pure profit,” and he states