Personal values versus stock value maximization. Conflicts and solutions Presented at the Annual Conference of the Academy of Management. Montreal 2010

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Personal values versus stock value maximization. Conflicts and solutions

Presented at the Annual Conference of the Academy of Management. Montreal 2010

Juan Pablo Stegmann Ph.D.

University of Warsaw
.
Poland

jpstegmann@gmail.com

(904) 287
-

4559



ABSTRACT

Daring to care

(being ethical) is not an easy task for managers in the current economic environment.
Strategic Value Management (SVM) provides a profound explanation for such difficulties and new ways
to solve them. SVM is a new discipline that links managerial decision
s to their impact in terms of stock
value creation. It shows how the need to maximize shareholder value leads managers to maximize profits,
growth and capital, generating abuses of their market power and abuses of resources. One extreme
example of this is
the need for global financial funds to speculate in order to maximize shareholder wealth
leading to devastating consequences such as the current financial meltdown and the speculative attacks on
oil, food and currencies
in the last decades

which left milli
ons without homes, jobs, and food. SVM shows
how consumers and investors are the ones that really put pressure on the firms
;

managers are unable to
enact their personal values as they are ultimately agents hired to maximize the shareholders’ wealth. Th
is

p
aper proposes new courses of action to develop an economic system
based on values, integrating
business management, philosophy, psychology, religion and political economy
.


This
paper

proposes

a link between such disciplines,
which

requires further
interdi
sciplinary
researc
h. It is
based on a paper presented by Juan Pablo Stegmann Ph.D. at the Academy of Management Annual
Conference, 2010.
These ideas are expanded in
www.questforvalues.com





INTRODUCTION

This paper tries to bridge a large number of disciplines, from business, economics,
and
management, to philosophy, religion, psychology,
political economy;
the conducting wire is
values.
I
t is meant to open a new road
,

which is

still preliminary, that will

be

enrich
ed

with the
contributions from specialist
s

in the different disciplines
.

Part of the conclusions of this paper is that several difficulties the humanity is facing today is

because of the fragmentation of the science and knowledge, that lead individuals to wrong
conclusions. This paper strives to re
-
connect disciplines, re
-
integrate knowledge, as a first
necessary step to make right decisions.


Literature review

In two previous papers and a book (Stegmann, 2007 and 2009), I presented the statistical
analysis and literature review required to introduce
Strategic Value Management (SVM)
. They
focus on the integration
of strategic management,
business functions and
st
ock value maximization
literature.

Figure 1 shows
how the mainstream
strategic management
literature
is contingent to
a set of variables, and
therefore
can be placed
at different parts of the
strategy
-
value model.

This paper strives to
show the ethical
co
nsequences of

SVM

by linking
it

with moral philosophy, political economy, psychology,
and
religion
.

Such int
egration is a long term project

which would require the team work of
specialists

coming
from different disciplines; this literature review only
begi
n
s to provide some
preliminary insights

into such vast territory.

I have not found any literature that covers the vast interdisciplinary domain that this paper
covers; I will summarize here some of the most recognized authors in their specific fields, and

some of them that
provided

some
limited
interdisciplinary dimension.

The literature linked with business ethics and moral philosophy is very large (Adams,
1997
;
Beauchamp
,
2004
;
Boatright
,
2003
;
Boylan
,

2001
;
De George
,
1999
;
Finke
, 2005;
Hartman
,
2005;
Jennings
, 2006
; MacIntire, 1979, 1982, 1984
;
Street
, 2005;
Weiss
, 2006
); this paper relies
on them, and in some cases it questions their limited scope;

it is critical to

be interdisciplinary to
really provide an adequate answer to the issues they raise.
A
l
arge part of the literature refers to
the philosophical origins of modern moral philosophy

by
showing atomized views; this paper
introduces Phenomenology as presented by Husserl (1907) and Stein (1922), as an integrating
solution to previous limited philo
sophical approaches.

The literature linking ethics and regulations (Halbert. 2008; Mallor, 2002; Nelson, 2006; Wines,
2006) is focused on the legal and regulatory solutions to several ethical dilemmas;
analyzing
them is important in order to assess

the limited power of regu
lations to solve ethical issues. This
paper

proposes a larger view, incorporating values,
moral philosophy, system
psychology,
religion

and political economy.

The literature connecting ethics and religion (
Cohen, 1998; Dalai Lama, 2002; Freeman, 2005,
2007; Graafland, 2008;
Hunt, 1991;
Main, 1998;
Palmer, 2002; Runzo, 1
991; Weber, 2003;
Wentzel, 1999
) is very enlighten
ing;

part of it provides a
n

integrative
,

holistic
view
; this paper
links the mainstream rel
igions and shows how their insights are consistent among themselves, as
well as with modern psychology and philosophy
; this paper also show
s the impact of such
religions on

other disciplines
.

The literature related to global cultures (Hofstede, 2004
; Ruiz

Quintanilla, 1991
;
Trompenaars,1998) and to US culture (
Baldwin, 2005; Bercovitch, 1975;
Boorstin,1958;
Huntington, 2004
; Macintyre, 1997
; Needlema, 2003; Steele Commager,1950) address
es

the
ethical dimension indirectly; they are extremely enlightening as

they show the differences
between the Eastern and Western cultures
, and the connection with moral philosophy and
religion
; however they do not research into other interdisciplina
ry dimensions
.

The literature conne
cted with values (Fritzsche, 2007; Husser
l, 1907; Kohlberg, 1981; Rokeach,
1973,
1968;
Rawls, 1999;
Schwartz,1990; Stein, 1922; Zahavi, 2003) is central for this research.
It is my intention to expand on this subject in further works, however the purpose of this paper is
solely to introduce the s
ubject.

The literature connected with Bowen System Psychology (
Berenson, 1976; Bowen, 1993; Fogarty;
Gilbert, 1992 and 2004; Riley Sagar,
1997
) provides an excellent support of the link between
values
-
Phenomenology
-
psychology
-
spirituality because of Bowen
’s stress of the individual and
the relational dimensions.

The literature connected with political economy (
Abdelal, 2007; Balaam, 2008; Baylis, 2008;
Cohen, 2008; Cohn, 2005; Crane, 1997; Gilpin, 1987, 2001; Goddard, 2003; Gourevitch, 2005;
Hall, 1986; K
irshner, 2003; Maravall, 1997; Mingst, 2008;
Moeller, 2008;
Oatley, 2008;
Persson, 1990; Screpanti, 2005;
Wendt
, 1999
) is a real challenge, as it is the
least developed
discipline

compared to all the others

in terms of its ability to respond to ethical issues
.


PART 1. THE PROBLEM

The
social
consequences of stock value maximization


Strategic Value Management (Stegmann, 2009) is a new branch of Management that shows how
business strategies impact stock
value maximization. Relying on the Economic Value Added
model (EVA), it correlates strategic and financial variables leading to new powerful insights. In
order to maximize stock value
,

firms must maximize the three main variables of the EVA
equation; there
fore they need:



To have a positive
EVA (profitability
of the firm minus
the average
profits of similar
firms) which is
required to
maximize their
market power



To have positive
sales growth,
which requires innovation (new products, new markets,
new busines
ses, new channels,
etc.)



To have intellectual capital, which requires unique
,

inimitable and rare resources.

The “strategy
-
value model” in Figure
2

synthesizes such views, linking financial and strategic
variables.

This
leads to very

dramatic

insight
s
.
It shows
that in order to maximize stock value a firm

has

to
be at the right of the chart

to create stock value;

it

need
s

to outperform
its

peer firms
.
For
example i
t is not enoug
h to have 10% profitability
;

if

peer firms yield 15%
then the firms

destroy
5% of its
stock value

every year
.

This puts

a tremendous pressure on firms
;

automatically 50% of firms destroy stock value
.

The power of this view is that it helps to integrate all business disciplines, marketing, human
resources, operations, finance, str
ategic planning, under one single framework.

Figure 3 shows
some examples of
how t
o maximize stock value

a firm

need
s

to have some
specific type of
marketing strategies,
organization, strategic
management,
operations
management,
financial
strategies,
international
strategies,
international
organization,
etc.

This is another
dramatic conclusion.

The

pressure
to maximize stock value
is felt by the

entire organization

and this can be a
tremendous stress for any manager. This pressure is then transmitted to the employees, the
suppliers,
the customers and

to every member of the society; everyone must place stock value
maximization first.

SVM

shows in a nutshell the strat
egic environments, strategies and financial results
. It

introduces metrics and accountab
ility into strategic management

and has a powerful critical
thinking framework that integrates all business disciplines. From now on, strategic environment
and strategi
es have a
dollar tag
, therefore some of them can create stock value and others cannot.

This permits t
he visualization of some more profound phenomena

in terms of the social
consequences of managerial decisions.


Optimization of use of capital.
R
esources
strategies

Capital, the
first

variable to maximize stock value, requires that firms maximize their intellectual
capital, by way of unique, inimitable resources.
R
esources are
critical
for the ability of the firm to
create stock value. This leads to a new r
evolutionary insight: the connection between the types of
resources and stock value creation.

The
strategy
-
value model in Figure
4

shows how
entire industries

seem bound to destroy
economic value.
This is a serious
problem for
managers, who
must struggle to
overcome such a
difficult limitation.
This explains why
managers end up
making decisions
which abuse
human and
environmental
resources.

As
SVM

(Stegmann, 2
009)
states: “The abuses of human resources produce: employee
screening, overwork, sweatshops, employee lack of privacy, discrimination, workplace safety,
downsizing, layoffs and abuses in executive pay. The abuse of the environment produces air,
water and

land pollution, depletion of resources, environmental accidents, bio engineering
abuses, global warming, acid rain, ozone layer depletion and hazardous waste.”

Paul Krugman (2008) confirms such concern: “we’re running out of oil, running out of land to
e
xpand food production and generally running out of planet to exploit
.”.

It is important to understand

that stock value maximization may push managers to make
unethical decisions.


Maximization of profits
. The
market power

The
strategy
-
value model in Figure
5

classifies the competitive environment and strategies based
on their ability to produce positive EVAs, the
second

variable required to maximize stock value.
Strategies at the left of the chart are based on actions that the
competition can imitate and
consequently are weak in terms of profits. Strategies at the right are based on unique inimitable
resources, which provide firms market power.

It shows how
critical it is for
managers to
maximize a
firm’s market
power. Firms i
n
perfect
competition
environments
have negative
EVAs. Firms in
monopolistic
competition
struggle to keep
an EVA around
0%; only
oligopolies and monopolies have good EVAs.

This explains why firms have such a
strong

need to maximize market power, which put
s pressure
on their managers and leads to serious ethical consequences.

As
SVM

(Stegmann, 2009)
states: “The need to control consumers leads to consequences such
as: abuses in advert
ising, manipulation of consumer

autonomy, advertising of alcohol and
toba
cco, violence in movies and music, high interest loan market and financial greed, product
liability, product safety and risks, consumer health, genetically modified products, protection of
infants, deception and bluffing in sales, false information about a

product or service, false price
claims, bait and switch practices and unfulfilled promises. The need to control the competition
leads to actions such as: unfair competition, abuse of monopoly power, dumping, contributions
to political parties, espionage a
nd bribery.”

It unveils a very important reality
:
to be successful you need to have high market power
.
This

is
not

a

new

idea

in Economic science;

since 1930 economists know that competition is imperfect.
However t
his is something that managers

and the public

tend to ignore
, and has serious
consequences in political economy, as this demonstrates that Adam Smith’s invisible hand that
leads the markets to make decisions, can lead to bad consequences
.




Sales growth.
I
nnovation strategies

In order to increase
sales, the
third

variable
of stock value
maximization, firms
need innovation
strategies. The
strategy
-
value
model in
Figure
6

shows that in
order to have sustained
growth, firms need
unique resources.

Such resources provide
firms th
e ability to
transform external
environmental conditions (economy, regulations, technology, demand, etc.) into business
opportunities.

The abuse of growth can lead to the exhaustion of the natural resources as well as human
resources.


Financial
speculation

Probably where the negative consequences of the abuses of market power and resources
are

especially dramatic is the recurrent problem of financial speculation.

Even though financial speculation
has existed since the beginning

of capitalism, in

the last
decades it has become more serious. McKinsey (2008) explains it: in the last three decades
global financial funds have grown from 12 to 200 trillion dollars while global GDP has grown
from 10 to 55 trillion dollars per year. According to
Martin W
olf (
2009) the volume of Futures
was 300 trillion dollars by 2006. This reflects the larger dimension, faster growth and
speculative trend of global funds.

And the consequences are dramatic: during the 80s and 90s speculation on currencies left entire
cou
ntries devastated; their financial system’s collapse cost billions of dollars in bailouts. In the
last decade speculation focused on: real estate, raising the price of homes between 100% and
200%; the price of oil which increased by 300% between 2002 and 2
008 even though global
consumption remain comparatively unchanged; the prices of non
-
oil commodities grew by 150%
in the same period (all data based on the Economist Intelligence Unit). The current financial
meltdown is the most serious negative consequenc
e of speculation, as millions have lost their
homes and jobs, governments have raised their leverage dramatically to fund massive bailouts,
and there still exists

the risk of an entire economic system collapse.

According to the Financial Times

(2009)
,
this crisis has been for the most part bad for everyone.
The big losers are:

Main Street, middle class,
employees and

mid
-
size companies that will suffer

many years of austerity ahead
; millions of u
nemployed,
especially young people that cannot find
their
first job; home owners, that either lost wealth or lost their houses; t
ax payers
who must pay
the massive public debt for many years to come; t
raditional banks

that suffer the financial
impact;

and

t
he West

in general wh
ich

has been especially damaged.

Mc
Kinsey
(2009)
adds a gloomy view: according to similar crisis of the past, the deleveraging
process, tight
-
belt, may take up to 10 years.

SVM provides a rationale for this phenomenon. In order to maximize stock value, such funds
abuse their market power a
nd unique resources
--
namely: information, economic size and ability
to move fast
--
manipulating the markets and producing devastating consequences as explained
above.
This leads to an unfair win
-
lose situation: the list above describe
s

who the losers

are
.


Conclusions of part 1, the problem

What are the conclusions so far?

The maximization of stock value has had extraordinary consequences for humanity in terms of
higher human development (longer and healthier life, knowledge, better quality of life,
equality),
lower corruption (bribes, illegal payments, fiscal evasion, informal economy), and better ecology
(less contamination).

However stock value maximization has negative consequences on the community. Can we blame
the firms? Can we blame the manager
s of the firms?


PART 2. THE SOLUTIONS

From Corporate Social Responsibility to
Corporate and
Public Social responsibility

SVM shows a wider picture: w
hen a manager maximizes stock value, he or she is following the
guidelines provided by the shareholders. Who are the shareholders? The investors in stocks,
pension funds,
mutual funds, private investors,

in other words: the public. If a manager does not
ma
ximize shareholder val
ue, he or she can
be fired for not meeting his or her contractual
obligations.

T
here are multiple ethical funds, corporate responsible funds,
with excellent
financial performance and lower risk;
howeve
r their market share is just 1%,

in other words, 99%
of
the public

do
es

not invest ethically.

Who else is responsible for this? The consumers, once again, the public, whenever
the public

do
es

not consider whether the products or services
they

are buying cause any unethical
consequence.

T
here are several
lists

of ethical firms on

the

internet, however almost nobody
cares to make consumption decisions based on them.

The public

blame
s

the firms and managers for unethical actions, when
in fact

the public
promotes such wrongdoings
.


It is critical to see the entire picture: Corporate Social Responsibility
(CSR)
is impossible without
Public Social Responsibility

(PSR)
.

PSR requires that the public acts with values. It is impossible to manage the behavior of billions
of people in a fre
e democracy. The only way to have PSR is by having people with values.

PSR requires that t
he public

has and
enact
s

their

values in
the
ir economic life

when
they

buy
products or services, w
hen
they

invest in stocks or funds,
they

may create an economic sys
tem
based on values. The markets stop being blind. The resources get allocated based on values.

It is
the people’s

responsibility to make sure the markets allocate resources with social responsibility.

We need then to
completely
change our approach,
from
Corporate Social Responsibility to
Corporate and Public Social Responsibility
.


Democratic institutions are not enough: the need for public
values

The public tends to believe

that the government must and can eliminate ethical wrongdoings.

Is
that right?

Professor Gregory Mankiw
from Harvard University
proposes an interesting
paradigm. According to him,
the best way to get rid of
illegal drug trafficking is not
to act on the supply, but on
the demand.

Figure 7 shows how a
cting on
the supply
is inefficient.

It
requires regulating

the

drug trafficking, arresting the producers and distributors
, which leads

to
a

reduction of the supply
, driving

prices up which invites new drug producers and dealers. The
evidence of decades follow
ing

that policy
,
prices go up
,

c
onsumption

is steady,

confirms such
a
view.

However acting on the demand forces prices and consumption down, eventually
completely
eliminat
ing

the problem. This
places


values
” on the addicts: family values, work values, spiritual
values, moral values,
sport values, and others.

When we look at the government to solve corporate ethical issues by more rules and regulations
we do not realize that this action on the supply is inefficient. Acting on the supply is complex: if
one firm wants to be ethical and n
o other firm does it, that firm can
suffer unfair competition
. If
one manager wants to be ethica
l, the firm can fire him or her

for not maximizing stock value,
which was why he or she was hired. Firms in regulated environments like the US suffer unfair
com
petition from firms in unregulated environments.


However acting on the demand is promising
: people with


values

can reduce their
addiction to
consume,
and

to
be wealthier,
reducing the pressure on

stock value maximization, and
allowing
firms
to act with
CSR
.

This

radically

changes the common wisdom that government has to solve all problems
;

the
public is the one that has the primary responsibility and

also has

the means to do it more
efficiently than the government.


Towards a new culture based on
values

We demonstrated above that stock value maximization produces many undesired effects, and
somehow the public is responsible for that.
How can the value system of the society be modified?
How can its behavior be modified? A solution is acting on the culture.
Why focusing on the
culture?

Culture is the acquired knowledge that people use to interpret experience and to generate social
behav
ior. The culture is a complex phenomenon with several elements, ranging from the
language, religion, values and attitudes, customs, manners, aesthetics, to education and even
material components.

Through culture we form values and attitudes that shape ou
r behavior. Understanding

the
culture helps understand
ing

and predict
ing

human behavior.

According to Hofstede, Western countries rank at the top in individualism, especially the United
States. According to Hofstede Eastern and Southern countries are more

collectivist, however
there are some studies that show that those countries are incorporating Western individualism.

Does

our culture

have
society
values
?

Do
es

the public

enact their
values
? How can
the public

develop
social
values
?

What is a
value?

According to Rokeach (1979) “A value is an enduring belief that a specific mode
of conduct or end
-
state of existence is personally or socially preferable to an opposite or converse
mode of conduct or end
-
state of existence”.

Many people believe they shoul
d care just for themselves, and do not care about the negative
impact on their decisions on the community. For them, for example, it is perfectly valid to leave
millions

starving, homeless and jobless

as a result of speculating with powerful global
investment funds. This is social Darwinism, survival of the fittest,
a doctrine quite widespread in
the United States.

How can we develop values that generate universal acceptance and reduce the conflict tha
t our
current value system has? How can we build a culture based on such values?


Philosophy and
values


Is the philosophy responsible for the current high individualism of the Western culture?

The debate about the health care regulation that divided the
country is a good example of how
philosophies are part of the everyday value systems.

On one side British Individualism defends the ethical view that one must maximize one’s
pleasure and minimize one’s pain. Consequently if helping others does not give me pleasure, I
have no obligation to pay more taxes to help others.

On the other side so
me believe that the society should guarantee some level of welfare for all:
this is the ethics of rights, or ethics of justice, and its main defender was Kant, the German
Idealist. For him some things are universal: you cannot lie or steal because if you u
niversalize
that ethical principle, everyone can lie or steal and that would transform the world into chaos.
Similarly, every human being has universal rights; health is one of them. Ethics is universal;
rights are universal; health is a universal right.

Looking at both views it seems there is no solution to the dilemma.

This philosophical controversy reflects the tension within a culture that so far has been unable to
generate common accepted values. PSR and consequently CSR seem impossible if the culture

does not generate common socially responsible values.

This

discussion
shows

that the mainstream prevalent philosophies have proposed values that
do
not have public universal appeal, some embrace more individualistic values

and
some more
collectivist value
s
. T
his
lead
s

to negative consequences
for

the community.

Is there any
solution to this dilemma? Yes.
There is a young philosophy called Phenomenology
that
provides a solution

to such controversy.

Phenomenology explains the ways
an

individual interacts a
nd perceives hi
s

or her external
environment

through

external subjects and objects.
I
nteraction
s lead

individuals to become
aware of their own intentions and motivations, as well as those of others.

This leads to the
discovery of the values that each individual and the community
have

which drives everyone’s
behaviors. This is the foundation of a community where the individuals enrich each other based
on their values.

Phenomenology studies
how
the inte
raction between the individuals and the

community based
on such values

creates a reciprocal
enrichment

on different levels: sensory, material (economic),
mental (emotional, psychological), aesthetic, moral, religious, etc.

Phenomenology, in a simple
way, s
hows how both “I” and the “others” have
value
, which leads us to be willing to interact and
develop a “community” based on our
values
, which leads to mutual enrichment
.

“I”

am extremely important

and my happiness must be optimized in a balance

which is
a
h
armony between myself and others (either people or objects).

This leads to concepts such as
“empathy”, “community”, “
values
”, related to “me” and “o
thers”.

One remarkable conclusion of Phenomenology is the notion that the others must be treated as
“subjects” not as “objects” that I can use for my own benefit. This marks the beginning of a new
ethic based on
values
.

This contrasts with mainstream individualist
ic philosophies, and shows their limitations: it is
good to consider the power and values

of the individual

but it is limited
as long as it

downplay
s

the benefits of the interaction with the community
, the relational side, which triggers the notion
of soci
al responsibility
.

It also shows the limitations of the collectivist views of the ethics of Rights, Justice and Marxism,
showing the massification, depersonalization, multiple confrontation and conflicts that they
generate.

Phenomen
ology is extremely enlig
htening

as it shows that both Individualism and the ethics of
Rights, Justice

and

Marxism

are
partial

and are

therefore bound to conflict
with

each other
. B
oth
present a partial view of ethics
;

both the individual and the community are valuable, therefore
we must consider both in our ethical decisions.

Interestingly, P
henomenology
, which was

introduced a century ago
, has

key concepts that
management science has adopted as essential to have succ
essful organizations:
1.
t
he individual:
self knowledge, self esteem, personality, emotions, values, attitudes, perceptions, motivation,
behavior
;

2.
the

community: interactions individual
-
group, groups (associations) versus teams
(communities)
;

3.
relatio
nal

processes: communication, influence, power, leadership

and

change.


Psychology and
values

Modern psychology also offers a good solution. P
sychology was originated as an outcome of
philosophy: British Empiricism introduced the psychological side with the Utilitarian notion that
an ethical decision must maximize individual pleasure and minimize individual pain. Since then
psychology has been
q
uite linked

with Individualism.

In the last decades a new
psychological
model has demonstrated that
emotional

health,
in terms
of
anxiety, depends on

the

individual

and the relational dimensions.
Bowen System

Theory

states that
to be emotionally healthy and happy each person must
be “differentiated
.”


This

has
two dimensions: the individual must be mature, happy with himself, and also able to relate to
others
. I
n value terms

this means that

he or she must
discover his or her
val
ue
, the
value

of
others and
that of
the world.

This leads to the creation of relationships, a community,
which

produce
s

harmony, happiness
and
health.

It is about

discovering a new world,
even beyond the individual and the

community:
sports, outdoor life,

arts, friendship, work, etc., which are a good way to reduce
anxiety and
addiction
s

to consumption,

wealth,
alcohol,
etc.

Mental health is the outcome of a system where
both the individual and the community are central.

To understand it with a simple
model
, a healthy relationship is like an
“H”
, the two persons are
the vertical sticks, and the relationship is the horizontal stick. The key to being healthy is the
ability of the two persons to be mature, able to stand on their own feet, happy, independen
t and
with a healthy life. The horizontal stick is the relationship that they develop, similar to what we
saw in the other posts in this forum: the two persons are able to look at each other,
“contemplate” each other, and find the other one lovable, valuab
le, and based on this, build a
relationship based on love and mutual compassion

and
attraction, both sharing happy lives.

Bowen calls this: “differentiation
.”

This is the way
values

are developed
. I value myself

as a mature person

who is
happy

and
whole,
a
nd I can look at the other and appreciate his or her qualities, and based on this
,

value myself
and others.

An unhealthy relationship is like an
“A”
, both depend on the other for their own happiness,
consequently if one cannot support the other, if one wal
ks away, or has any problem, the “A”
breaks down and the other falls. This creates co
-
dependence, mutual anxiety

and
cross blaming
.
It creates conversations such as

“I am not happy because you…”

and
emotional fusion

as

the “A”
gets flatter and flatter. It
becomes an anchor that destroys both members of the relationship. In
that “fused” mode the mutual contemplat
ion and love becomes impossible

and the relationship
deteriorates steadily, making both member
s

unhappy.

Bowen calls this: “fusion
.”


This model is
not only useful
for

understand
ing

couples, but

it

also work
s for

relationships,
friendships, etc.

It is even more powerful when applied to macro issues.
.

It helps to understand the limitation of the two mainstream philosophies prevalent in the West.
For example most
Empiricism

and Utilitarianism

has

a strong individualist bias
.

“I” am
import
ant, I must take care of myself. I
f everyone does the same

as me,

the entire society will be
better
. I
do not have to help the jobless or poor
;

if they want a job
o
r better health they must take
c
are of it by themselves. Somehow this view is focused on one of the vertical sticks of the “H”,
quite distant and disconnected from the other vertical stick. Bowen would describe this as a “cut
-
off” relationship, or absence

of relationship.

The alternative

philosophy
, Kant’s idea of universal rights, somehow puts on
one individual’s
shoulders everyone’s

happiness. If other person has the right to health, somehow I have the duty
to pay for that h
ealth. This may lead to the “A
” because

the other person does not assume his or
her responsibilities,
believing

that the society will do it. This may lead to many distortions, such
as people not looking for a job because it is better to live
on

the unemployment benefits. This
“A”, co
-
d
ependence, pulls both sides down

and

impoverishes the entire community.

According to
Bowen this fused relationship leads to anxiety.

Bowen System model is deeply consistent with Phenomenology. O
ur goal in society is to make
sure everyone becomes a vertical

stick, standing on his or her own feet, so

that

everyone can take
care of himself or herself. Th
e horizontal stick

help
s

to develop a community between

people,
institutions

and countries

through mutual appreciation

and communication.

This casts light on t
he myopic view generated by stock value maximization, ignoring the effects
of managerial decisions on the community. It also shows the role of the public, unable to
perceive the values of the community, or unable to enact such values in their consumption o
r
investment decisions, forcing firms to
downplay

their corporate social responsibility.

This shows
that

behind managerial and public decisions there is a psychological dimension: the
inability of the agents to perceive themselves, the others

and
the
resources adequately

in order to

develop and enact values.


Religions and
values

Religions also offer solutions.

The view of individual and community values that we discussed in its philosophical and
psychological dimensions is evident in most

mainstream r
eligions.

For
Eastern religions:
Daoism, Buddhism and Hinduism

meditation or
contemplation leads to

the

discover
y of

the individual’s

true self,
the

value

of the individual
.

Understanding this

help
s
the individual

to
perceive

other people or the world and discover their
value
; this is the origin of
love,
compassion
, wisdom, justice, moderation, integrity, and all other virtues
. This is the
beginning
of a
community

and the backbone of everyone’s happiness
.

For the religi
ons of
the Bible, God is

Trinitarian
: three perso
ns, Father, Son and Holy Spirit.
E
ach one
is
important, has

value
, and
is
able to discover the
value

of the other
s

which
creat
es

a
community.

This is the b
ackbone of all Christian ethics

contained in the 10 Commandments of
the Old Testament and the Beatitudes of the New Testament.

They can be synthesized in the
dignity of the human being, created in the image and likeness of God, capable of doing

good
things

so important that God turned
o
ver

his only Son for salvation
. Jesus’ sacrifice of his life for
humanity is a testimony to

the dignity of the community
.

These intuitions have an amazing consistency with Phenomenology. Phenomenology is born
out
of

the way a person perceives himself or he
rself, perceives others and the world. Meditation is a
practice that enables deep perception.
The Trinity
shows

a communi
tarian God

in
a
mutual
,

contemplative state.

Bowen

System Psychological views are also deeply consistent with these insights: to develop the
“H” community, which is the core of everyone’s emotional health and happiness, each individual
needs to be able to perceive him or herself, as well as others, in a p
rofound way
. I
n that sense
the Eastern religion’s practice of meditation and contemplation play a central role

i
n the
individual’s ability to perceive
.

The Trinity is a perfect model of the “H”: the Father (the first vertical stick of the “H”) is
infinit
ely happy in himself, expresses his happiness in the Word, the second person of the Trinity
(the second stick), and the connection among them engenders an infinite love that is the Holy
Spirit (the horizontal stick).

This is the backbone of the
structure
for

mak
ing

ethical decisions and enact
ing ethical behavior
--
the ability to reflect, to meditate, to contemplate
, to perceive

him or herself
, t
o

perceive
community a
nd the world, and

the

fruit of that,

to
develop values, which lead to

love,
compassion, wisdom, justice, moderation, integrity, and all other virtues.


Towards a new Political Economy based on
values

For centuries we have accepted that markets are blind. We followed Adam Smith
’s

view of the
invisible hand that connects supp
ly and demand, defining prices and efficient allocation of
resources.

During the 1930s two economists introduced the idea of imperfect competition: Chamberlin and
Robinson. After them more economists introduced Game Theory and new ideas of equilibrium
under imperfect competition. Strategic Value Management confirms
such
insights
;

the success of
a firm relies on its ability to accum
ulate and exercise market power

and to monopolize resources.
Smith’s invisible hand, the efficient allocation of resources
,

can hardly be defended. Markets are
not blind

as

it is possible to man
ipulate them.

We need to go a step
further

and introduce political economy into our debate

to understand
whether our economic and political systems are consistent with the values discussed in the
previous discussions of this paper
.

Realism is a political
economy that believes that the world is bad, as Hobbes stated, people are
wicked and
,

as Machiavelli recommended,
the only way to survive is by being powerful.
Ethics,
rights

and

institutions are irrelevant.


Realism show
s

its dark side during the two Worl
d Wars,
and the Great Depression. Realism leads to a win
-
lose situation and continuous conflict which
is

not sustainable in an integrated world.

Liberalism
gained momentum with Bretton Woods

and

has prevailed
ever since. It relies on
Locke’s democratic id
eals

and Kant’s
recommendations

for cooperation

b
ased on a strong rule of
law,

democratic
institutions
and international
organization
s

such as NATO, UN, IMF, WB,
WTO
.

Economic i
ntegration, transnationals and
NGO reinforce peace and stability.

Liberalism s
eems to struggle to integrate both individual and community needs.
However
,

as we
saw in the example
about
drug trafficking, regulations and institutions cannot cure
everything
,
they also need the public’s support
.

As Dee and O’ Sullivan (2009) show, international organizations such as the International
Monetary Fund, the European Commission and governments have little power to control agents
such as the
multinational corporations

and
global

financial
funds. There is

little evidence that
such a liberty leads to a stable and fair system whenever stock value maximization generates a
win
-
lose situation.
The
c
urrent financial meltdown shows that there are agents today

that are

more powerful than international organization
s;
80
% of such agents operate in non
-
West
regulated locations, which make
s

it
difficult

to control. Also the
need to maximize stock value

is a
massive
, pervasive, overwhelming force

that acts in many ways, which

also

makes it impossible
to control.

There

are other political economies, such as
Social Constructivism
, which

has a variety of young
political economy doctrine
s
.
Some of them are rooted in

Phenomenology

and stress

the
relational side, the need to develop a community based on values.

It seems
clear that the humanity still

has

a long road ahead
introduce better values into the

political economy.
Stock value maximization, capitalism, a free economy
sh
ould continue, but

they should be

supported
by

the public’s values.



Next steps

Being ethical is difficult in the current
environment
, mostly for the lack of values of the different
stakeholders. The new wisdom that SVM introduces is the awareness that stock value
maximization, with its drivers, maximization of market power and resour
ces, leads to abuses
that tie the hands of managers who care for the community. Stock value maximization needs to
be re
-
framed with new values so managers can
enact their social values
.

How can we create
such
a values based environment
?

1.

New moral philosop
hy

The Historical Perspective of Social Responsibility (Street, 2007) shows three phases: profit
maximization (before 1920s), trusteeship management (1920s
-
1950s) and quality of life
management (1950s+). We should introduce a phase 4:
CSR and PSR

working
together
,
universal ethics, to improve the ethical standards of our global economy, involving all the agents:
corporations, governments and especially, the public.

2.

New p
olitical
economy

A
new political economy based on values must be developed. Probably
Social

Constructivism

can
be the backbone,

introducing ideas such as global values, global ethics, global leadership, global
team building and several other principles that Organizational Behavior today considers
necessary for business firms. The current w
in
-
lose approach is myopic, unsustainable and puts
the entire economic and political systems at risk.

3.

New p
ublic involvement


PSR should become part of the education

curriculum in

both k
-
12 and higher education.
Consumers and investors need to know that
they are the ones that put pressure on the firms and
financia
l funds to maximize stock value

and that they are ultimately co
-
responsible for the firms’
ethics.

Consumers and investors should direct their financial power to reward socially
responsible firms

and funds, enabling managers to act ethically without conflicting with their
shareholders.

Today there are institutions that score firms based on their CSR such as the Business Ethics 100
Best Corporate Citizens list, an indicator of best practices in th
e area of corporate social
responsibility and the Business Ethics Awards, among others.
T
here are socially responsible
financial funds with excellent financial performance.

The public must be informed about them.


Market information should be improved and

ethical scoring should become part of the packaging
of the
products and financial services

to make the economic system more accountable

and

more
ethical.

4.

New s
trategic “values” management

Strategic value management must be reframed into strategic “values”

management.
Managers
must be aware of the ethical consequences of their managerial decisions. Managers need to
understand the connection between stock value maximization and business strategies, the need
to have profits above the competition which leads t
o abuses of market power and resources. They
must be educated accordingly.

More research and management science must be developed, demonstrating for managers that
human values can be harmonized with stock value maximization in the long run; ethical business
practices lead to reinforcing trust and reliability, which helps firms to

develop intellectual
capital, knowledge and relationships
--
components of stock value.

5.

Values based management

There is a lot that

manager
s

can do today:



Planning.

Many managers tend
to have a myopic view focusing o
n the short run: maximize
stock value today, even if this affects the future negatively. Incorporating values, orientating
the firm to the community, would help the firm to develop knowledge and relations
hips

with
the emp
loyees, suppliers and consumers

bas
ed on mutual trust and appreciation
. T
his should
raise the value of the stock
;

there should be no contradiction.

There are

multiple examples

of successful businesses with strong CSR orientation:

community hospitals where doctors charge lower fees just to serve the community, India has
excellent examples of that; universities such as in Colombia, that teach in the jungle
,

extracting people out of the ranks of the guerrilla and insert
ing

them in
to

the democratic
system
. There are

many others.



Organizing.

Organizations as a discipline, already ha
s

this “values” orientation, internally

which is

the need to care for the employee creating a community
. This is
probably

defined
internally

using other word
s

such as

the team, common goals, communication, leadership
;

and
defined
externally, by creating alliances with suppliers, customers and even competitors.



Leading.

There is a common cons
ensus among leadership theories

that leadership must be
based on values oriented to both people and tasks.



Controlling.

The most advanced theories of control are based on self control. The Baldrige
National Quality Award, promote
s

a systemic view of organization, with common values,
ori
ented to the community.




Concluding thoughts

We live in a time in history when specialization has led most disciplines to become fragmented,
atomized, and disintegrated.

The goal of
this paper

is to try to reintegrate our culture, politics,
and
business over sound and reliable
values
.

The power of
values

is that it helps to
weave

together business with psychology,
religion
, politics and management
, shaping it

into

a
unified

outlook
.

Hope
fully

these insights can generate a debate that helps to bui
ld a more ethical world.




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