“Go and Do Likewise”…in Investing
June 3, 2022
Who is My Neighbor?
What does a common Sunday school lesson have to do with financial advising and investing? Maybe more than you think.
The well-known Parable of the Good Samaritan, found in Luke 10:25-37, addresses neighborly love head on. Contrary to popular business education and practice, neighborly care is an essential component of faithful commerce, not to mention relationships with our actual neighbors up and down our streets.
Jesus’ interlocutor in this famous parable is a lawyer — an expert in Jewish religious law — who inquires, “What must I do to inherit eternal life?” In terms that the solicitor would uniquely understand, Jesus responds with a question: “What is written in the law? What do you read there?” To which the man, out of a lifetime of scholarship replies, “love the Lord your God with all your heart, and with all your soul, and with all your strength, and with all your mind; and your neighbor as yourself.”
“You have given the right answer; do this, and you will live,” Jesus responds.
But the religious scholar — having little or no perceived sense of his own limitations to love others well — presses on, asking Jesus a final question: “Who is my neighbor?” His question still resonates two thousand years later. It is central to the challenges we face today in many arenas including geopolitics, race relations, voluntary associations, business, and yes, financial services and investments.
What constitutes neighborliness? To whom are we responsible? What are the fundamental ties that bind?
The instinct of many of us in our acrimonious culture is to invert this question. Rather than consider to whom we are accountable, we first ask to whom we are not? First-century culture was not dissimilar. Many biblical commentators agree that the lawyer’s query about neighborliness was really a limit-seeking question about who might be excluded or cast off — who could be regarded as a non-neighbor.
The Parable as Told by Jesus
It is in response to the religious scholar’s non-neighbor question that Jesus tells the parable of the Good Samaritan — a tale of timeless resonance:
A man was going down from Jerusalem to Jericho, and fell into the hands of robbers, who stripped him, beat him, and went away, leaving him half dead. Now by chance a priest was going down that road; and when he saw him, he passed by on the other side. So likewise a Levite, when he came to the place and saw him, passed by on the other side. But a Samaritan while traveling came near him; and when he saw him, he was moved with pity. He went to him and bandaged his wounds, having poured oil and wine on them. Then he put him on his own animal, brought him to an inn, and took care of him. The next day he took out two denarii, gave them to the innkeeper, and said, “Take care of him; and when I come back, I will repay you whatever more you spend.” (Luke 10:25-35, NRSV)
To understand the import of this story, some background is critical. First, before the day started, it is unlikely that the characters knew each other. What brought them together was a need — a man in peril requiring urgent care. Second, the left-for-dead traveler in the parable — understood by Jesus’ listeners to be a Jew, based on his Jerusalem-to-Jericho itinerary — has just traversed an 18-mile steep descent, desolate, and prone to bandit attacks. Third, the priest and Levite who pass by the injured man are Jewish religious leaders subject to strict cleanliness laws. Rather than providing care, they cross over to avoid touching what might be a dead person that could cause their defilement. Lastly, the final passerby, a Samaritan, is the one who shows compassion, tending wounds and taking the Jew to an inn for longer-term convalescence. He then paid the innkeeper two denarii — a sum large enough to house someone for four to eight weeks — and promised to pay even more, if needed, on his return.
A Samaritan caring for a stricken Jew would have shocked first-century listeners. Such benevolence cannot be overstated. Why? Through a Jewish cultural lens, Samaritans were half-breeds, traitors, and enemies of the Jews. The bad blood between them went back centuries. When the nation of Israel divided, Samaria became the capital of the northern kingdom, where Samaritans intermarried with non-Jews and pursued different worship practices than those in the southern kingdom, resulting in lasting enmity between the two communities.
The Parable Replicated by Social Scientists
The distinctiveness of the priest’s, Levite’s, and Samaritan’s actions are not limited to Jesus’ time.
In a classic 1970 study at Princeton Theological Seminary1, two behavioral scientists—John Darley and Daniel Batson—replicated the Good Samaritan parable in a social psychology experiment. They assigned seminary students to one of three urgency groups (high, intermediate, and low) to walk to a nearby building to complete a task — either deliver a talk on the Parable of the Good Samaritan or an unrelated vocation-oriented message. Confronted by a stricken stranger (a secret confederate to the study) while en route, participants’ helping behaviors (or lack thereof) varied widely. No matter the focus of their talk, results showed that seminarians in the high hurry group were less likely to help. Those assigned to less hurried groups were significantly more likely to aid the confederate.
The study is highly nuanced and somewhat dated, but a couple of important lessons emerge. Ethical helping behavior is conditioned by our perceived sense of hurriedness in completing a task. And, even when conditioned toward neighborliness — such as being tasked to preach on the Parable of the Good Samaritan — there’s no guarantee we’ll act accordingly.
If this observation is valid for seminarians training for ministerial service, likely it is also true for women and men serving in other, less-direct helping professions. Contextualized for the financial services and investment sectors, we might ask, what impedes neighborly love? The obsession with profit-making on behalf of shareholders certainly provides part of the answer.
Making Sense of Shareholder Primacy
In 2019, the Business Roundtable — a prominent association of CEOs from leading global companies — announced a revised policy on its understanding of the purpose of a corporation. Their co-authored document, signed by 181 chief executive officers of major corporations, reversed a 22-year-old statement that declared the chief purpose of business to be shareholder value maximization. Broadening primacy to other stakeholder groups, the Statement on the Purpose of a Corporation seemed a radical shift to many.
Our American preoccupation with shareholder value dates back at least 50 years to a 1970 article, “The Social Responsibility of Business is to Increase its Profits,” that economist Milton Friedman penned in The New York Times Magazine. According to Friedman, “In a free-enterprise, private-property system, a corporate executive is an employee of the owners of a business . . . That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to their basic rules of the society, both those embodied in law and those embodied in ethical custom.”
Furthermore, Friedman understood social responsibility in business as “spending someone else’s money,” or, as he put it, imposing a tax and then deciding how to spend it. “Insofar as his actions in accord with his ‘social responsibility’ reduce returns to stakeholders, he is spending their money. Insofar as his actions raise the price to customers, he is spending the customers’ money. Insofar as his actions lower the wages of some employees, he is spending their money.”
In delineating the role of a corporate executive, Friedman emphasized the difference between principal and agent. As a principal or sole proprietor, corporate executives can do whatever they want. But as an agent, they must first serve their outside investors. In Friedman’s words: “The whole justification for permitting the corporate executive to be selected by the stockholders is that the executive is an agent serving the interests of his principal. This justification disappears when the corporate executive imposes taxes and spends the proceeds for ‘social’ purposes.”
Friedman saw social responsibility by corporate executives as short-sighted, gaining them favor in the near term but in the long-term strengthening the “already too prevalent view that the pursuit of profits is wicked and immoral and must be curbed and controlled by external forces.” Once turned loose, in Friedman’s view, “the external forces that curb the market will not be the social consciences . . . of the pontificating executives; it will be the iron fist of the Government bureaucrats.”
For Friedman, free markets were the best available means of exercising neighborliness, which to him included ending apartheid in South Africa and improving race relations and public education in the United States. Despite regular excesses and breaches of integrity in business, Friedman’s adherents make similar optimistic claims today.
The value of Milton Friedman’s economic insights must be acknowledged. But his insistence that unencumbered free markets are the panacea for social ills has proved harmful. The market does not always bandage wounds in Jericho. Market-driven companies often extract rather than add value. Emphasizing shareholder value at the expense of other stakeholder groups limits our moral imagination and capacity for neighborly love.
The value of Milton Friedman’s economic insights must be acknowledged. But his insistence that unencumbered free markets are the panacea for social ills has proved harmful. The market does not always bandage wounds in Jericho.
If we are going to rehumanize our work in business and investing, we need a larger, more inspiring narrative than that of unbridled self-interest. That will be our subject in Part 2.
Image Credit: The Good Samaritan (c. 1845), John Adam Houston