The ESG and DEI movements face significant headwinds as a result of the 2024 election results, with the new administration expected to “almost certainly escalate the growing backlash,” according to a Harvard Business Review article earlier this week. How should business leaders be thinking now about their companies’ social responsibilities: about corporate virtue?
While attempting to establish new norms for corporate social responsibility, both ESG and DEI have suffered criticism for being coercive, costly, or merely performative. Some also saw them as a covert attempt to undermine the market economy itself. Is there a constructive, and less controversial, way forward?
Some ESG and DEI efforts are expected to go underground, with their principles and goals intact while the names change or disappear. Firms might continue to invest in DEI, but without the fanfare of the recent past. The Corporate Governance Institute expects an increase in “green hushing”: companies minimizing their ESG disclosures for fear of criticism—of doing too little or too much.
At the opposite extreme is a desire to jettison the idea of corporate social responsibility entirely, following Nobel economist Milton Friedman’s argument that companies should “… conduct the business in accordance with [shareholders’] desires, which generally will be to make as much money as possible…”
Is there a more nuanced approach? Professor Hitendra Wadhwa teaches the most popular MBA leadership course, on Personal Leadership and Success, at Columbia Business School, and has advised government leaders on diversity. He argues that “diversity efforts are part of a noble quest to make the world more equal, accessible, and inclusive, and it’s time to humbly step back and focus not on what divides us, but on what we all have in common as human beings.”
Virtue As A Common Morality
What do we have in common as human beings, as far as morality is concerned? While we may argue vigorously about specific moral questions, we tend to agree that morality itself is important, and that we do have moral expectations of others. In a recent Gallup poll, 98% of respondents said that it is important that businesses make money in ways that are ethical. When firms don’t fulfill such expectations, however ambiguous they may be, they invite customer backlash, employee morale issues, and additional government regulation.
Indeed the Friedman quote above continues: firms should make as much money as possible, “… while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.” In 1970, when Friedman’s article was published, there was more of a consensus around ethical custom. Where should today’s executives look for ethical guidance?
Powin Energy is at the forefront of developing clean energy solutions. According to CEO Jeff Waters, “with employees, customers and investors that span four continents, Powin needs to be grounded in universal virtues that transcend borders and politics, like treating others justly.” He continues, “we care deeply that all of our stakeholders are treated fairly and with dignity by the company, and that they do the same with their stakeholders. It unites us and sets a timeless compass for decision making.”
Indeed, this “compass”—the ancient idea of virtue—is enjoying somewhat of a revival. Best-selling books are being written about it, young people around the world are attempting to live by it, scholars at Harvard, Oxford, and elsewhere are studying its application to contemporary problems, and many K12 schools, both privately and publicly funded, and a few colleges and military academies, already teach it.
Defining Virtue
The word can be misleading, though: “virtue,” to some ears, means being moralistic, rather than moral; judgmental, rather than discerning; and merely performative, as in “virtue-signaling.” Many dictionaries omit its original definition: a habit of excellence.
It is this original definition that is relevant. The ancients recognized four principal habits of excellence, or “cardinal virtues”: prudence, or practical wisdom, the habit of making wise, thoughtful decisions; justice, the habit of treating others fairly and respecting their dignity; courage, the habit of proceeding despite fear; and temperance, or self-discipline, the habit of only following one’s desires when it makes sense to do so. Each also had several related virtues.
The idea of using habits as a tool for behavior change has become popular. But virtues go further than everyday habits do. Three decades of research into these virtues in the field of positive psychology suggest that the ancients were onto something—that growing in wisdom, justice, courage, and self-discipline, as well as in related virtues like generosity, gratitude, diligence, perseverance, and others, leads to greater effectiveness, happiness and health. Each virtue seems to impart a superpower to the person growing in it. Virtues aren’t just any habits, they are “superhabits.” Consultants at Deloitte and at McKinsey & Company have published papers on their foundational importance (although without calling them “virtues.”)
Virtue As Both Practical and Moral Excellence
Virtues integrate both moral and practical dimensions, seamlessly, as several recent, popular books show. Peter Rea’s Better Humans, Better Performance, Ryan Holiday’s multiple works on the Stoic virtues, and the author’s own Superhabits: The Universal System for a Successful Life, along with the earlier Virtuous Leadership, by Alexandre Savard, argue that it is simultaneously both morally good and more productive for employees to exercise the virtues: to become better at making decisions, as well as to be more just, courageous, and self-disciplined.
Best of all, they show that virtues, understood as a moral framework based on habits of excellence, have a broad appeal, unusual in this time of great polarization. While incorporated into many of the major world religions, the virtues are not tied to any specific religious belief system. Many of the same virtues are highlighted in both Protestant and Catholic Christianity, in Judaism, and in Islam. The four “yamas,” or virtues — do no harm; give generously; have compassion; and live in a self-controlled way — are an important part of Hinduism, and the ancient Stoic virtues are practicedo by those who profess no religion at all.
Employee reading and discussion groups, followed by voluntary practice of various virtues, can be an effective way to foster these habits in firms. The VIA (Values in Action) Institute on Character is a non-profit organization dedicated to sharing the finds and benefits of positive psychology research on character and virtue. Their “Workplaces at Their Best” program offers self-paced programs for employees.
A virtue-based approach to business promises a non-controversial approach to strengthening both social responsibility and business performance, simultaneously.