Wednesday, June 16, 2004

Wanted: A Mormon Corporate Ethic 

by Mathew
A thread at Times and Seasons titled "LDS Need Not Apply" has sparked discussion of the Marriott Corporation's decision to make p0rnography available to their guests. Mormon's tend to see Marriott as a "Mormon corporation" and are quick to pass judgment on business practices that are perceived to be contradictory to church teachings. Of course Marriott is not the only corporation that is held to this unusual standard, but it is probably the most well known so it is the one I will use as an example.

Two camps generally emerge when discussion turns to whether Mormon owned or Mormon run corporations should be held to a different standard than the rest of their industry. The first camp puts out a "hypocrisy argument," expressing outrage or shock at the businessman's behavior. The second, what I think of as the "duty already owed" argument, says that a duty is owed to a constituency that requires a course of action that may be contrary to the church's teachings or the person's personal beliefs. Several times I have heard fellow church members condemn Marriott for trafficking in p0rn. Occasionally I hear in response that Marriott is a public corporation and the corporation owes a duty to shareholders to maximize profits.

Not maximizing shareholder return itself, however, does not violate any duties-at least in the state where it counts (and every other state that I am aware of). The Delaware courts have held that directors must maximize shareholder value only when the breakup of the corporation is certain or there is a change of control. Corporate directors are required to act in the best interests of their shareholders, but this does not require them to maximize profits without taking other constituencies into consideration. The legal doctrine known as the business judgment rule protects directors and officers from personal liability as long as they are acting in good faith-which amounts to having an articulable reason for pursuing a course of action.

While there is no real legal reason compelling a Mormon director or CEO to act against the teachings of the church, there may be competing moral reasons. I am sympathetic to the Mormon CEO who feels a certain way about an issue but believes that the shareholders to whom he owes a duty expect him to act differently. I'm not sure a CEO ought to feel comfortable imposing his moral values on a company if he doesn't believe it is in the best interests of the company-this is precisely the "imperial CEO" behavior that the business publications have spilt buckets of ink over for the last three years. On the other hand, it seems to me that a Mormon corporate leader is no different than any other corporate director or CEO in that he shouldn't check his ethical and moral convictions at the door.

What I'm interested in, then, is a corporate Mormon ethic that considers competing duties and interests that a Mormon corporate leader faces and thinks about how to approach them systematically.

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