Do family firms have a moral advantage?

Only a matter of weeks ago, it would have been uncontroversial to write about business being an eternal competition with winners and losers measured in the language of profit and loss. Ideals like collaboration, sharing and community were viewed by many businesses with a mixture of doubt and hostility.

Now, the mood-music of business has acquired a moral tone due to the coronavirus pandemic. Many businesses are aware of the advantages of being seen to share the burden of coping with this crisis among stakeholders, rather than just passing the costs to suppliers and employees. The language of strident individualism has become muted as many accede to the request that individual rights and freedoms need to be sacrificed for the general good.

Displaying moral virtue during this crisis might help to sustain customer loyalty, and, for listed companies, to bolster a share price that is under duress. This virtue signalling might also make it easier to persuade shareholders that they cannot expect dividends when other stakeholders are suffering financially.

Some businesses – including Liverpool FC - have also recently discovered how public shaming can quickly reverse commercial decisions, like claiming taxpayers’ money while placing low-paid staff on leave.

THE INNER STRENGTHS OF FAMILY BUSINESS

This environment could bring to the fore some innate strengths of family owned businesses. They are often lauded for valuing returns on investment that cannot be immediately measured only in financial terms.

For example, it is claimed to be morally good for an enterprising family to build long term value rather than focus on short-term profiteering.
To serve this goal, the owners might adopt progressive employment practices and commit to the place where their business is currently located. Taken together these objectives provide stable employment in a local area and sustainable returns for the owners.

And all of this feeds the family’s desire to be of good reputation and social standing, which may also be expressed through their philanthropy.

My experience is that these returns on investment really matter to enterprising families. However, so does financial success and a family’s commitment to non-financial returns is not entirely altruistic.

In these testing times many families will discover the level of financial pain they are willing to endure in order to achieve the overall return on investment – financial and non-financial – to which they attribute value.

MORAL DILEMMAS POST-COVID 19

When we eventually emerge from this crisis, other moral dilemmas will arise. Businesses whose profits depend on the cavalier exploitation of people or the planet, and their political supporters, will continue to deny that these business models damage lives and our climate.

Many businesses will have a vested interest in returning to the old normal and our desire to seek out pleasurable activities after the lockdown may tempt us to return – or regress - to the past.

The choice to move on from the crisis by looking backwards will be supported by advertisers telling us that ‘we deserve a little luxury.’
In this process we will learn the extent to which moral judgments in business are dictated by the environment, rather than an innate moral compass. What is today seen as morally upstanding (retaining staff while cutting executive remuneration) may be seen as wrong, as the goal of shareholder return resumes its position as the paramount measure of business success.

The recent surge of demonstrating respect for others as moral equals, such as commending care workers for their service, may melt away leaving only a residual sense of us having ever been in something together.

The present and the future poses an age-old moral dilemma. At the moment many businesses are aware of the importance of being seen to do the right thing because it serves a short-term purpose. But this is different from doing the right thing because it is right thing to do, whether or not it is seen and regardless of the financial cost. Meaningful community engagement and respectful relationships among owners, employees, suppliers and customers appeals to many family business owners. I hope that they are sustained by this sense of moral purpose during the current crisis. And I hope their stakeholders will stick with them in the future because they too believe that doing the right thing will always be the right thing to do.

This article was written by Ken McCracken.