Catholic Entrepreneurship Strives to Follow Church Teaching on Business
The pursuit of profit should be balanced with other goals, such as charitable giving and the fair treatment of customers, employees and investors.
Richard Kelly is a Catholic entrepreneur, but when it came to his business dealings, he wasn’t always putting his faith on the bottom line.
In his mid-20s, he had fallen away from the Church, and it was only an act of economic providence that brought him back.
“When I came down here to Dallas in the early 1980s, making money was really easy,” he said, adding that an economic downturn in the Texas real estate market in the mid ’80s taught him the hard way not to take wealth for granted.
“One of the things that brought me back to the faith,” he said, “was getting my teeth kicked in financially and coming within an ace of personal bankruptcy. It humbles you very quickly.”
Today, Kelly is principal of LumaCorp, Inc., a Dallas real estate company that owns and operates 6,800 apartment units in 28 apartment properties throughout Texas. With about 200 employees and an estimated insured value of $600 million, LumaCorp does well in a competitive market, Kelly says.
“My partners and I raise money from typically wealthy individuals, buy and refurbish apartment buildings, and rent them to a category of tenant that the industry refers to as the workforce housing market — it’s neither high-end nor slum, but somewhere in between. It’s what the working guy — someone who makes between $30,000 and $50,000 a year — can afford. It’s safe, clean, affordable housing.”
Kelly is just one example of the Catholic entrepreneur whom Pope Francis has called on to bring the faith to the marketplace.
In his weekly Wednesday audience in St. Peter’s Square Nov. 7, the Holy Father called on the business world’s entrepreneurs to step up in the fight against poverty and hunger by making greater use of their creativity and business sense.
“If there is hunger on earth,” he said, “it’s not because food is missing. What is lacking is a free and farsighted entrepreneurship, which ensures adequate production, and a solidarity approach, which ensures fair distribution.”
Kelly admits that he and the Pope are not always square on prudential economic matters, but Kelly agrees that the Catholic entrepreneur must take his moral bearings, in his private and professional life, from his faith — and now more than ever. The Holy Father’s words were also a wake-up call to the next generation of entrepreneurs, a call that couldn’t have come at a better time in the U.S.
Jennifer Baugh, the founder and executive director of Young Catholic Professionals (YCP), said Pope Francis has some cause for concern about the future of Catholic entrepreneurship, noting that “rates of business creation have been slowing across the United States — a troubling development since new and young businesses account for nearly all net new-job creation.”
Citing a May 2014 Brookings Institution study, Baugh noted a decline in entrepreneurship as an indicator of “a U.S. economy that has steadily become less dynamic over time.”
Compounding the problem, Baugh says, is the graying of Catholic businesses and Catholic shrinkage in the pews.
“The median age of the Catholic adult in the U.S. is 49 years old — four years older than it was in 2007,” she said. “Catholics are significantly older than members of non-Christian faiths — 40 — and people who are not affiliated with any religion — 36.”
She also notes that with the decline in the Catholic population in the U.S. comes a rise of the “nones” — those who don’t identify with any particular organized religion.
“While the drop in Catholic affiliation is particularly pronounced among young adults,” Baugh said, “it is occurring among Americans of all ages.”
But particularly worrisome is the fact that millennials, representing the rising generation that most business leaders look to for the future of business, are losing enthusiasm for both entrepreneurship and the faith.
“The share of new entrepreneurs between the ages of 20 and 34 (the age historically considered best for entrepreneurship) fell from 34% in 1996 to 23% in 2013,” Baugh said. “Similarly, millennials have been found least likely to attend Mass, with only 17% of young Catholics attending Mass on a weekly basis.”
But as bleak as this might seem, Baugh added, the moment is ripe for Catholic entrepreneurs to emerge as the next business leaders in the country.
“Pope Francis reminds us that work is wonderful because it is, by its very nature, ‘creative,’ she said. “We can create peace and joy through Christ-centered interactions with co-workers or customers. We can create solutions that help others. We can create wealth to support our families and help others get jobs. We can also create fellow disciples by witnessing to the reason for our actions. Everything changes when we remember that Christ is the real master we serve.”
Kelly knows how the creative element in his business has been a primary factor in providing for his employees, his investors and his tenants.
“I have three main constituencies I’m responsible to,” Kelly said. “My tenants, residents who are drawn to our property; my customer base, that is, my investors, to whom I owe a fiduciary responsibility.” The third customer base, Kelly added, “is equally important — my employees. I owe them fair treatment, a safe, non-threatening work environment.”
Informed by his faith, Kelly says he holds firm ethical standards at LumaCorp, standards that were put to the test on at least one occasion.
Several years ago, Kelly said, a wealthy California investment group proposed a business partnership with LumaCorp.
“On the surface, it sounded lucrative,” Kelly admitted. “But as I was talking to the fellow who was representing this group, I discovered he was in Dallas not only to do business but also to visit his mistress. He was cheating on his wife — and I thought at the time, ‘Well, if you’re going to cheat on your wife, you’re going to cheat on me.’ I didn’t do business with him. That’s the luxury of the private business owner — to be able to make that decision.”
According to Kelly, this same freedom to act for the good is at the heart of Pope Francis’ message to entrepreneurs — for true freedom also requires a responsible approach to work.
“I have an obligation to use the goods I’ve been given and that I developed,” he said. “I did cooperate with grace to turn my time and talent into treasure. But, as Francis says, the possession of goods is an opportunity to multiply these goods for others with creativity and use them with generosity — and thus grow in freedom. The freedom Francis is talking about is freedom from possessions: You own them, but you don’t want them to own you.”
Servant and Master
Michael Naughton, The director of the Center for Catholic Studies at the University of St. Thomas in St. Paul, Minnesota, says that Catholic entrepreneurs in the U.S. may be tempted to forget their responsibility and consider possessions — and especially profits — as an end, instead of a means, to sanctification.
“There’s an old business adage,” he said, “that profits make great servants but lousy masters. You have to create wealth to distribute it, but if you create it only for yourself, shortchanging it for everyone else, the entrepreneurship or business basically becomes organized robbery.”
But young Catholic entrepreneurs should take heed, Naughton said, because the desire for wealth has become the lesson of the day for most business schools.
“If you go into just about every finance class in the U.S., professors tell the students to maximize the shareholders’ wealth,” he said. “But I think that Christian businesspeople sometimes catch the disease of the culture.”
As an antidote to this disease, Naughton said, look to the Church’s teaching on private property, especially as it’s embodied in the Catechism of the Catholic Church, which the Pope quoted in his Wednesday audience.
“Man, using created goods, must consider the external things that he legitimately possesses,” the Catechism says, “not only as his own, but also as common, in the sense that they can benefit not only him but also others.”
In 2014, Naughton led the team of advisers who drafted the Pontifical Council for Justice and Peace’s “Vocation of the Business Leader: A Reflection” and recently updated the document to reflect Pope Francis’ contributions to Church teaching on business and commerce. This document elaborates on the Catechism’s teaching, especially as it bears on entrepreneurship.
“Entrepreneurs exercise their creativity to organize the talents and energies of labor and to assemble capital and other resources from the earth’s abundance to produce goods and services,” the document noted. “When this is done effectively, well-paying jobs are created, profit is realized, the resulting wealth is shared with investors, and everyone involved excels. The Church acknowledges the legitimate role of profit as an indicator that a business is functioning well. When a firm makes a profit, it generally means that the factors of production have been properly employed and corresponding human needs have been duly satisfied.”
Along with producing “good goods, good works and good wealth,” Naughton said, the entrepreneur ought also consider giving from his surplus through charitable giving — a practice at which the U.S. excels.
According to an April 2015 report on philanthropy in Europe, the percentage of European donors to charitable causes stood at 44%, and the total amount given was $27.5 billion, while the percentage of donors in the United States reached as high as 95% of the population, giving $229 million.
“If we compare data on the donor population and total individual giving amounts,” the report concluded, “Europe pales [in] significance next to the United States.”
The statist approach to charity in Europe helps explain the discrepancy, says Naughton.
“In the U.S., corporate philanthropy is far more vibrant than you would find in Europe,” he said, “largely because the government is the place where social services would take place.”
As board chair for startup manufacturing company Reell Precision Manufacturing in the Twin Cities, Naughton has seen this disparity between American and European giving play out in the boardroom.
“Reell was started by three Protestant engineers,” he said. “From the beginning, they gave 10% of their pretax profit to charity. There is a strong tradition of that sort of tithing activity in Minnesota, but it’s also true around the country.”
A Dutch subsidiary of Reell, on the other hand, Naughton said, found it strange that a company would tithe its profits.
“When we tried to incorporate that same practice into the Dutch subsidiary, there was a real resistance to it,” Naughton said. “Largely, it was the government that took care of things for the Dutch and not individuals. But the subsidiary is slowly warming to this idea of tithing now.”
Register correspondent Joseph O’Brien writes from Soldiers Grove, Wisconsin.