Christos Papoutsy

Corporate Social Responsibility, Business
Ethics, and Economic Freedom

American Hellenic Chamber of Commerce

June 3, 2004

Hilton Hotel, Athens, Greece

First, I would like to thank the American Hellenic Chamber of Commerce for inviting me to participate at this conference. I am honored and pleased to be here.

Today, I would like to talk briefly about moral capitalism, and then touch upon four components
that I believe form its foundation. They are

-- Corporate social responsibility, or CSR

-- Business Ethics

-- Economic Freedom, and

-- Education

Is moral capitalism possible in the context of a CSR business? I believe that it is possible. Seeking market profit through business is honorable and worthy. Moral capitalism is the most appropriate means by which our modern, global civilization can empower people and enrich their lives materially and spiritually.

The most profitable business combines virtue and interest, as it
maximizes the present value of future earnings. The first requirement, therefore, of business success is sustainable profits.

So, what exactly is a socially responsible corporation, and what do they need to do? A CSR company needs to sustain profits over time and replenish the capital that they invest in their business and the community. That capital comes in five different forms:

1. Social Capital

Social capital is the quality of laws, the cultural and social institutions, infrastructure, education, healthcare, and environment. When a business contributes to social capital, it is acting responsibly and ethically.

2. Reputational Capital or "Goodwill"

Reputational capital adds value to a business by attracting and keeping customers, employees, investors, and suppliers committed and loyal. All these are important, critical stakeholders.

3. Finance capital is the classic form of capital. Every company needs access to money.

4. Physical capital is the land, plants, and equipment of a company.

5. The most important form of capital is Human Capital

The creativity, loyalty, and productivity of employees constitute human capital. A business invests in its human capital when it provides better lives and working conditions for its employees and their families.

The successful road for any business that wants to become a CSR company is not a romantic, flower-strewn path with an expansive vista, nor is it easily navigable. The successful CSR company must navigate down the narrow and winding lane of business ethics with its many procedures and laws, avoiding the potholes of sloppy and ineffective business practices, and the soft-shoulders of greed and unethical behavior.

In preserving its access to these necessary five forms of capital, and by paying a return on capital from earnings, a business acts from self-interest but promotes social well-being and social justice at the same time.

The subject of corporate social responsibility has become big business, with a barrage of informational courses, books, articles, and conferences. But all of these are simply words, fashionable and politically correct rhetoric. Without action, without the implementation of these ideas, the words remain empty. Let us not be blinded or misled by the hopes and grandiose visions that we are promised by romantic notions of CSR businesses. A huge gulf separates words from deeds, much like the difference between the Greek phrases, "tha doume" and "egine." The actual transformation of a business into a CSR business can be very difficult and time-consuming. Companies that actually achieve these lofty goals should be congratulated and applauded for reaching the goal of eudaimonia, for they have delivered material and spiritual well-being to the community. This is the ultimate good or telos of society.

However, as we discuss corporate social responsibility, let us not lose focus of one of the most critical elements, business ethics which, in effect, are a set of moral principles. What values will the moral principles be based on? Religious? Cultural? Political? Western or non-western values? In order for business ethics to be effective, the global business community must establish a set of standards and principles acceptable to all businesses worldwide.

I would like to submit for your consideration a few business principles and practices that I believe contribute to the basics of becoming and sustaining a socially responsible business. These are based on my own experience of starting a small company in a garage with two employees, and over a number of years growing it to become recognized as a successful socially responsible business with sales of approximately $200 million—highly profitable—and with over 2,000 employees and plants worldwide. A few of these basic, fundamental proven business principles are

1. Institutionalization

By sharing control, there is a better chance of transparency, real oversight, and accountability. However, no one really likes sharing control, especially Greeks. Institutionalization means sharing control by establishing a professional board of directors instead of a rubber-stamp board. Rubber-stamp boards notoriously contributed to the corruption and subsequent scandals of Enron, Tyco, WorldCom, Adelphia and many more corporations in the United States and elsewhere. A truly professional board will include men and women who are respected, competent, enthusiastic, and willing to roll up their sleeves and word hard. And, most important of all, for a professional board, disagreement is a virtue, not a vice.

2. Solid business practices

A CSR business must have solid business practices embedded into its entire operations, including a real mission statement, strategy, and business plan.

3. A company of citizens

A CSR business must cultivate "a company of citizens" where all employees are welcomed into the corporation as morally competent agents, seen as specially qualified for intelligent work, rather than as mere units of labor.

4. Legal checks and balances

Only a system with legal checks and balances will effectively encourage and enforce corporate responsibility.

The successful road for any business that wants to become a CSR company is not a romantic, flower-strewn path with an expansive vista, nor is it easily navigable. The successful CSR company must navigate down the narrow and winding lane of business ethics with its many procedures and laws, avoiding the potholes of sloppy and ineffective business practices, and the soft-shoulders of greed and unethical behavior.

To summarize, the components which contribute to a CSR business are institutionalization, sharing control, establishing a professional board, oversight, full disclosure, transparency, profits, sound procedures, a company of citizens, and satisfied customers.

The challenge of moral capitalism for all businesses is to tip the weight of wealth creation toward humanity's more noble possibilities in society. But, in order for moral capitalism to be achieved, a business must first be able to operate in an environment of economic freedom.

There are a number of highly respected global institutions that report economic indexes annually on the majority of countries around the world, including measurements on government bureaucracy, corruption, bribery, tariff barriers to trade, income and corporate taxes, government expenditures, the enforcement of contracts, regulatory burdens, labor market regulations and black market activities, including piracy of intellectual property rights. Their indexes reveal that those countries with the most economic freedom are more prosperous and have higher rates of long-term growth than those with less economic freedom. Economic freedom, therefore, is one of the greatest challenges facing today's world, particularly with the globalization of business. Economic liberty is the engine for world economies to succeed and grow.

Because education is a critical component of economic freedom and democracy, my wife Mary and I believe that business ethics and the building blocks of a corporate socially responsible business can be taught. Approximately one year before Enron and the public disclosure that corporations in the U.S. and elsewhere had tipped the balance of wealth creation away from more noble possibilities and towards a corrupt, more brutish behavior, we established a chair in ethics at Southern New Hampshire University. Its mission is to promote and enhance awareness of ethics at the university and in the community at large. The core value that we chose to incorporate into the program was that of the Classics. We placed special emphasis upon the works of ancient Greek writers and intellectuals whose teachings have shaped the history of Western civilization from antiquity to the present. Business students, like the students of humanities who have studied Classical masterpieces, can benefit from understanding the universal questions raised by the Ancient Greeks. The Classics can serve business students well, just as they have been serving students of other disciplines for centuries. We in the business community can look to Greece and its rich ancient history to assist and guide us in bringing moral teachings to the business arena. At SNHU ethics is not just an individual course, but a mental discipline woven into the fiber of every course and the life of the entire university.

So, now that we have touched upon our four components—corporate social responsibility, business ethics, economic freedom, and education—let's return again to our original question, "Is moral capitalism possible within the context of a CSR company?" The answer, as I have attempte

d to show, is a clear "Yes!" Moral capitalism is possible. It is within the reach of every business, although it can be a difficult journey. Moral capitalism and social justice are the dividends yielded by the CSR business. Only by forming close working partnerships with the universities, business community, host countries, and institutions like the American Hellenic Chamber of Commerce will we be able to ensure the health, dignity, and freedom, and creativity of our society. And those, ladies and gentlemen, are worthy and noble goals.

Christos Papoutsy is the former owner and president of Hollis Engineering-Cooper Electronics Co., with sales in the hundreds of millions worldwide, and director of United States Arbitration & Mediation Co. A noted Greek-American philanthropist, Archon of the Greek Orthodox Church, and member of Leadership 100, Mr. Papoutsy presently writes and lectures on business, entrepreneurship and business ethics. He and his wife, Mary Papoutsy, established the Christos and Mary Papoutsy Distinguished Chair in Business Ethics at Southern New Hampshire University in 2001. For more information about Mr. Papoutsy, visit the About Us section of the Hellenic Communication Service (HCS) website at Interested readers may view the entire list of his lectures and articles in the Business Arena section of HCS, among which are "Is Moral Capitalism Possible?" "Corporate Social Responsibility and Ethics," "Mediate, Don't Litigate," "Harvesting the Entrepreneurial Olive Tree," and "Entrepreneurship and Ethics Equal Success." Mr. Papoutsy welcomes comments and may be contacted at .