BOOK REVIEW: EVANGELICAL CHRISTIAN EXECUTIVES: A NEW MODEL FOR BUSINESS CORPORATIONS. By Lewis D. Solomon. New Brunswick, N.J.: Transaction Publishers. 2004. Pp. 177.
Reviewed by Kathleen A. McKee† | 2 Regent J. Glob. Just. & Pub. Pol. 165 (2015)
Since the 1990’s, the public has been made a spectator to corporate behavior that has had a significant adverse impact on society at large. The collapse of Enron Corporation,1 the fiasco of mortgage backed securities,2 and more recently, the disclosure of Volkswagen’s manipulation of its emissions data3 have resulted in either a disruption of the financial market itself or, in the case of Volkswagen, a significant drop in sales. This, in turn, has provoked public discussion of the need for greater governmental regulation of corporations and of the stock market as well as the social responsibility of corporations. The concept of the social responsibility of corporations is of relatively recent coinage. It reflects a shift in focus from the thinking of earlier economists such as Milton Friedman. In 1970, Friedman published an article in The New York Times Magazine titled “The Social Responsibility of Business Is to Increase Its Profits.”4 In this article he observed that
The discussions of the “social responsibilities of business” are notable for their analytical looseness and lack or rigor. What does it mean to say that “business” has responsibilities? Only people have responsibilities. A corporation is an artificial person and in this sense may have artificial responsibilities, but “business” as a whole cannot be said to have responsibilities, even in this vague sense. The first step toward clarity in examining the doctrine of social responsibility of business is to ask precisely what it implies for whom.5
In 2002, in presenting his semiannual report on the economy to the Senate Banking Committee, Alan Greenspan, the chairman of the Federal Reserve Bank, focused on the recent upheaval in the stock market vis a vis the relationship between corporate managers and stockholders.6 Although he referenced other uncertainties that could impact the stock market such as future disclosure of corporate malfeasance, and global political events and terrorism, his analysis did not extend to a discussion of the general social responsibilities of corporations.7 He limited his discussion to the role of corporate infrastructure and market forces.
Why did corporate governance checks and balances that served us reasonably well in the past break down? At root was the rapid enlargement of stock market capitalizations in the latter part of the 1990’s that arguably engendered an outsized increase in opportunities for avarice. An infectious greed seemed to grip much of our business community. Our historical guardians of financial information were overwhelmed. Too many executives sought ways to harvest some of those stock market gains. As a result, the highly desirable spread of shareholding and options among business managers perversely created incentives to artificially inflate reported earnings in order to keep stock prices high and rising. This outcome suggests that the options were poorly structured, and consequently they failed to properly align the long-term interests of shareholders and managers, the paradigm so essential for effective corporate governance. The incentives they created overcame the good judgment of too many corporate managers.8
He went on to say that
[S]hareholders must perceive that corporate governance is properly structured so that financial gains are fairly negotiated between existing shareholders and corporate office holders. Shareholding is now predominantly for investment, not corporate control. Our vast and highly liquid financial markets enable large institutional shareholders to sell their shares when they perceive inadequacies of corporate governance, rather than fix them. This has place de facto control in the hands of the chief executive office. Shareholders routinely authorize slates of directors recommended by the C.E.O. Generally, problems need to become quite large before C.E.O.’s are dislodged by dissenting shareholders or hostile takeovers.9
In the aftermath of such corporate scandals, Congress enacted legislation to further regulate corporations,10 and the U.S. Department of Justice has undertaken investigations that in some instances have resulted in criminal prosecutions.11 Some firms have chosen to respond by promulgating their own codes of ethics as an institutional response to the corporate scandals.12
Lewis Solomon’s book, Evangelical Christian Executives, examines an alternative model for business corporations in which the business founders integrate faith in their day-to-operation of their businesses and define corporate responsibility to encompass shareholders, employees, customers, and the community at large. Solomon limits his study to six companies in six different industries: Covenant Transport; R.B. Pamplin Corporation; ServiceMaster Company; Herman Miller, Inc.,; Interstate Batteries System of America, Inc.; and R.W. Beckett Corporation. The individual case studies examine a number of different aspects of these businesses. Among them are the leadership styles of the chief executive officers, the core values of each business, the challenges faced by each business, and how these businesses have resolved external controversies.
I. FORM OF CORPORATE LEADERSHIP
As a stepping off point, Lewis examines the form that corporate leadership takes in each of the six companies reviewed.13 He divides the leaders into two groups.14 One group not only weaves its faith into the operation of the business but seeks to use the business as a vehicle for proselytizing non-believers (e.g., Covenant Transport, Inc.).15 The other group prefers what Solomon refers to as “a more sophisticated approach, based on the biblical principles of stewardship or servant-leadership (or both concepts), actively pursu[ing] a values management strategy” (e.g., R.B. Pamplin Corp).16 The companies are furthered divided into three different models of evangelical Christian business leadership: constant, transformational, and evolving.17 He designates Covenant Transport, Inc. and R.B. Pamplin Corp. as constant firms (i.e., “[C]ontinually managed with a religious-orientation from their founding to the present day.”).18 Service Master Co. and Herman Miller, Inc. are designated as transformational firms.19 They have undergone a transformation over the years becoming more secular but have retained a “spiritual, broadly inclusive” approach in conducting business.20 Interstate Batteries system of America, Inc. and R. W .Beckett Corp. are offered as examples of evolving models of business.21 Each started as a secular organization but has evolved into a religious-based entity.22
1 See Behind the Enron Scandal: Chronology of a Collapse, TIME,
http://content.time.com/time/specials/packages/article/0,28804,2021097_2023262_2023247,00.html (last visited Dec. 29, 2015). On February 20, 2001, Enron stock closed at $75.09 per share. By August 14, 2001, the value of a share of Enron had dropped by almost 50% to $39.55 per share. By December 2, 2001, when Enron filed for bankruptcy, its stock closed at $.26 per share. 2 See David Ingram & Peter Rudegeair, U.S. Accuses Bank of America of Mortgage-Backed Securities Fraud, REUTERS (Aug. 6, 2013, 7:04 PM), http://www.reuters.com/article/us-bofa-justice-idUSBRE9750ZU20130806.
3 See Graeme Wearden & Jullia Kollewe, VW Emissions Scandal: Misconduct,
Process Failure and Tolerance of Rule-breaking Blamed—as It Happened, THE GUARDIAN (Dec. 10, 2015, 9:59 PM), http://www.theguardian.com/business/live/2015/dec/10/volkswagen-vw-grilling-emissions-scandal-bank-of-england-business-live; see also Nathan Bomey, Volkswagen U.S. Sales Feel Effects of Emissions Scandal, USA TODAY (Nov. 3, 2015, 11:25 AM), http://www.usatoday.com/story/money/cars/2015/11/03/volkswagen-us-salesfeel-effects-emissions-scandal/75090104/.
4 Milton Friedman, The Social Responsibility of Business Is to Increase Its Profits, N.Y. TIMES MAG., Sept. 13, 1970. 5 Id.
6 Corporate Conduct: Excerpts from Report by Greenspan at Senate, N.Y. TIMES, July 17, 2002, http://www.nytimes.com/2002/07/17/business/corporate-conduct-excerpts-fromreport-by-greenspan-at-senate.html.
7 Id.
8 Id. 9 Id.
10 See Larry Bumgardner, Reforming Corporate America: How Does the SarbanesOxley Act Impact American Business, 6 Graziadio Bus. Rev. (2003), http://gbr.pepperdine.edu/2010/08/reforming-corporate-america/; see also Brooke Masters, Enron’s Fall Raised the Bar in Regulation, FIN. TIMES (Dec. 1, 2011, 5:38 PM), http://www.ft.com/cms/s/0/ 9790ea78-1aa9-11e1-ae14-00144feabdc0.html#axzz3viBA8xzU.
11 See Matt Apuzzo & Ben Protess, Justice Department Sets Sights on Wall Street Executives, N.Y. TIMES, Sept. 9, 2015, http://www.nytimes.com/2015/09/10/us/politics/new-justice-dept-rules-aimed-at-prosecuting-corporate-executives.html?_r=0.
12 Steven Savides, Firms Raise Their Own Codes of Ethics, THE CHRISTIAN SCI. MONITOR, Nov. 4, 2002, http://www.csmonitor.com/2002/1104/p18s01-wmcr.html.
13 Lewis D. Solomon, EVANGELICAL CHRISTIAN EXECUTIVES: A NEW MODEL FOR BUSINESS CORPORATIONS 8-12 (2004). 14 Id. at 9.
15 Id.
16 Id. at 9-12.
17 Id.
18 Id.
19 Id.
20 Id.
21 Id.
22 Id.
† Associate Professor of Law, Regent University School of Law.