Companies worldwide could learn from Pope's management style

Business Professor believes Pontiff’s decisive actions effectively communicate values of the organization

Should managers accused of severe wrongdoing be permitted to keep their positions until proven guilty, or should they be removed once substantial accusations have been made? Pope Francis I is changing centuries of Church practice by decisively detaching accused prelates from their positions rather than waiting years, or even decades, for determinations of guilt, and University of Chicago Booth School of Business Professor Luigi Zingales believes he is setting an example that companies across the globe should follow.

The Pontiff's decisions to reorganize the Vatican Bank, to lay off controversial and spendthrift Church leaders ("the Bishop of Bling") and to approve the arrest of a former Vatican ambassador on charges of pedophilia "communicate to the outside, in credible ways, the values of those who sit at the top and, therefore, of the organization itself."

Zingales explains that others who run large businesses should emulate Francis' actions. "Too often, company leaders make proclamations solely for the purpose of image. Employees know it and ignore them. Only when statements are followed by facts do employees begin to listen. From today on, the Church’s war on pedophilia is not only a proclamation: it is a reality."

Key to this new corporate behavior, according to the professor, is the understanding of the difference between criminal and managerial responsibility. He points out that while citizens have the constitutional right to be considered innocent until proven guilty, organizations do not have a duty to protect powerful members until definitive sentence is pronounced.

For a criminal conviction, Zingales says, one needs proof beyond reasonable doubt. While for disciplinary action, removal or layoff, the standards are and should be much lower, especially in the case of top managerial positions.

"In fact, in some cases, like that of the bishop, proof is not even needed: it is enough to have a reasonable doubt. It is a merely managerial 'cost vs. benefits' calculation."

“If laws and rules are enforced, the first who should follow them are the leaders. Pope Francis has nothing to fear: he, himself, is an example. But is the same true for the summits of our large companies?” Zingales asks. Clearly, he thinks it should be, and with more companies taking responsibility for their leaders, they might be.