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Christ's Parables and Bank CEOs--Skeel

I’m just back from a wonderful visit to Liberty University’s law school, where I gave a talk called “Making Sense of the New Financial Deal.” (I also had a chance to spend several hours in the Jerry Falwell archives). The talk was based on the book I wrote this summer (due out any day now), and in addition tried to consider some of the Christian implications of the crisis and financial reforms.  

One of the sources I used for the last part of the talk was Christianity and the Social Gospel, a 1907 book by Walter Rauschenbusch, the most famous representative of the social gospel.   In critiquing the heads of the giant corporations of his own day, Rauschenbusch drew on Christ’s servant parables:
 
“In the parables of the talents and the pounds [Matthew 25:14-30; Luke 19:11-27], he evidently meant to define all human ability and opportunity as a trust. His description of the head servant who is made confident by the continued absence of his master, tyrannizes over his subordinates, and fattens his paunch on his master’s property [Matthew 25: 45-51], is meant to show the temptation which besets all in authority to forget the responsibility that goes with power. …”
 
Like the servants in the parable, Rauschenbusch argues, the head of a large corporation (such as, in our context, the CEO of a financial institution like Bear Stearns or Lehman Brothers) is a steward of the enterprise he oversees and bears the responsibility of a steward.
 
I find the connection Rauschenbusch draws between the servant parables and the heads of corporate enterprise quite compelling. And it strikes me as a very useful framework for thinking about the failures of the CEOs of the largest financial institutions that contributed to the recent crisis.
 
In my view, Rauschenbusch’s analysis also offers a useful illustration of the extent to which Scripture gives us clear and at times uncontestable teaching on a political or social issue, on the one hand, and the extent to which the implications are less clear, on the other. Based on his analysis of the servant parables, Rauschenbusch makes an argument for nationalization of many large corporations. While his conclusion that the parables offer a telling critic of poor business leadership (and suggest what true servant leadership would look like) is persuasive, the policy implications he draws from this are much more debatable. In my view, Rauschenbusch’s call for nationalization would correct for the abuses of corporate leaders by inviting comparable abuses by government overseers of the big businesses. At least in the current environment, a more modest strategy of correcting regulation that encouraged misbehavior by bank executives (such as tax rules that abetted risktaking) seems more promising.
 
Like Rauschenbusch’s, my policy conclusion is of course debatable. I would argue that the critique of corporate leadership that flows from the servant parables is not.

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Comments ( 2 )

I'm not familiar with Rauschenbusch. Is his idea of servant leadership in the corporate context ever incompatible with the concerns of shareholders?

I agree with your post. Financial reporting must strike a balance between competition in a global marketplace and accurately reporting financial condition and performance. Our current reporting standards, promulgated by FASB, and enforced by the SEC, need to get upgraded. They aren't sophisticated enough to prevent the manipulation of financial reporting. Companies can easily manipulate their statements to achieve objectives. In the past, they have formed private entities (controlled by board members) and transferred billions worth of assets to that private, off-shore entity (Enron), and done things that are unethical, but completely legal, and also within applicable accounting guidelines. For instance, companies routinely fail to recognize billions of liabilities related to operating leases. Instead, they simply report an recurring rent expense. In addition, firms inflate operating cash flows through stock buybacks, and then pay for those buybacks through financing cash flows. This distorts the source of the cash, and makes the company's operations appear to generate more cash than it really generates, distorting solvency. There are simply too many ways for our publicly traded companies to distort their performance and mislead investors. In addition to improving our financial reporting guidelines (which are being "merged" with european financial guidelines issued through IAS), we need executives who are trustworthy and ethical. It is not enough to just follow the law, and applicable accounting guidelines. You must be trustworthy and ethical.