The case against CEO as a moral compass

Related to the recent Nordic Business Forum, this internationally recognized topic of "CEO as a moral compass" has just reached Finland. The original discussion took place some two months ago: http://money.cnn.com/2017/08/18/news/quests-profitable-moment-american-ceos/index.html.

Some visible social justice enthusiast CEOs are praised by the media for making strong statements about society. These statements are not merely professional insights about the economy, but very subjective feelings or other virtue signalling. One Finnish company claims that it will not sell its products to "bad people". The framing is absurd: functional corporations that focus on fulfilling the wishes of their owners and customers by efficient utilization of core competencies are just greed and suspicious, not taking responsibility of the society. If their CEOs are making some witty comments about Trump or even refusing to cooperate with people of wrong opinions, these companies can redeem a label as a moral and responsible entity in society. A couple of things are worth noting here. I am not either contrasting virtuous or morally conscious actions with ignorance. Nearly everything we do can be interpreted as "moral". It is apparently becoming a codeword for signalling and complying to fashionable virtues of certain interest groups.

Already for some months I have been collecting observations that support a notion of a "moral" or political CEO as the future form of corporate social responsibility. Companies may think that they are responsible and required to take a political or moral position in heated public discussions. For example, it could mean a policy of not hiring or having employees that are visibly against fashionable and "good" thoughts (like James Damore who got fired by Google). Effectively organizations end up being responsible for such, as they are accidentally establishing new standards via visible discussion and action. Combined with already existing broader stakeholder ideology and social media culture, politically active and biased crowd are in fact given more influence that used to belong to more essential elements of business: owners, customers and legislation. We already saw a futuristic example of this "responsibility" in the case of CNN blackmail: a media giant tried to blackmail a random person for making an edgy internet meme about Trump beating the CNN logo. How does that relate to any business logic or ethics?

On the other hand, "responsibility" or "moralization" of business can be interpreted as a transformation of certain product and business models. Connections of the "core competence", "product" and "moral responsibility" in business reveal the case. If aforementioned categories overlap significantly, it is not honest or "responsible" anymore to talk about them as separate concepts - especially in popular contexts. Is it relevant to talk about "morally responsible" business if the customers are in in the first place paying for virtue signalling and charity that the company is doing in its supply chains? Free market approach would suggest a complementary view. Even a conventional competitive functional organization can be "morally responsible" by obeying laws and allocating scarce resources in a way that makes them more valuable to society than their parts would be separately. This holds especially in functional cases where becoming politicized would have high alternative costs.

CEOs are not usually the brightest moral philosophers or even philosophers in general - and for a good reason. They may be creative and visionary, but mostly they get paid for having completely different competencies and skill sets than competing with sophisticated philosophical moral statements. Even those CEOs that are praised for their visibly moral stands are usually poor representations of real philosophy. This leaves us with a situation where politically or "morally" active CEOs are comparable to whatever political campaign leaders or popular motivational speakers that reach for the masses or easy segments by speaking easy words. They integrate their feelings and social insights into the service-product-combination. Thus, signalling and being part of a social movement become inevitable attributes of the product. Thus, in many cases "responsibility" is not a conceptually novel feature, but a rationally motivated profit-maximizing marketing niche.

Economically thinking, trying to bundle politics and moral statements with whatever manufacturing and service deliveries would be a terrible suggestion. Keynote speakers and even some practical business school teachers have already started to preach about it as a general fashion. For some specific products, this extended "responsibility" or particular political stance would sure add value. Remembering that everything we do is some way "moral", there are multiple ways to channel that. Constant participation in political and cultural clashes is probably tearing people apart than bringing different groups together nor increasing understanding.

Any ideological or distinguished fashionable moral stance is not a novel feature of business. It is just another attribute of the whole product-service-combination that a customer is either willing or reluctant to pay for. Economically thinking, some organizations may be as well "morally responsible" by rejecting participation in political fashions and virtue signalling.