Commutative Justice
Other names:
Justice in exchange; integrity, fairness, upstanding character
Definition:
Justice between individuals.
"...regulates exchanges between persons in accordance with a strict respect for their rights. Commutative justice obliges strictly; it requires safeguarding property rights, paying debts, and fulfilling obligations freely contracted." (CCC 2411)
Advice:
Empirical Research:
[CSV: Integrity?]
Case examples:
Gifts of the Holy Spirit
Further reading:
Vices opposed:
Murder
Bodily injury
Theft and robbery: injustice against private property
Fraud: injustice in exchange of goods (e.g. violation of just price; injustice in trade)
Usury: injustice in exchange of money
Perjury, Derision, Backbiting, Tale-bearing, etc. (injustice using words)
Perjury, Derision, Backbiting, Tale-bearing, etc. (injustice using words)
Case Study
ReplyDeleteIn More Than a Hobby, Hobby Lobby founder David Green explains how his early dealings with the impact of corporate dishonesty led him to make integrity and commutative justice a cornerstone of his business practice. "Early in my working life at another retailer, before I started Hobby Lobby, I succeeded a store manager who had been stealing from the company. Everybody in the store knew it, and when the district manager found out, he justifiably fired the guy. As a young twenty-four-year-old, I was sent to that store to set a new and better tone.
"The curious thing was this: Within six months, I had to dismiss seven employees—about half the workforce—for stealing! The infection of taking what you wanted had spread in all directions. The staff had gotten their cues from the previous manager, so he was not an isolated case. We had multiple problems to straighten out.
"Leaders in business—and anywhere else, for that matter—are watched every day to see what kind of character they possess. America has had a fair number of corporate embarrassments recently, from Enron to Tyco to insider trading. The 1990s, it seems, was a greedy decade. The stock market was soaring, everybody wanted to post good numbers, and there was a lot of pressure on executives to cut corners. While many of them stood firm, some yielded and got caught.
"We at Hobby Lobby had a good decade, with profits rising 1,271 percent from 1990 to 1999. But as far as I know, we did it with integrity. I can’t imagine running a business any other way. The idea of making a promise to someone and not following through with it is just not acceptable. The old Quakers used to have a saying: “His word is his bond.” In other words, if he says something, you don’t need to ask for a bond or a security deposit or anything else; he’s a Quaker, and that means he’ll do it, come what may. I try to run my business in the same manner." (David Green, More Than a Hobby, ch. 9)
Case Study
ReplyDeleteIn his autobiography, Eat Mor Chikin: Inspire More People, Chick-fil-A founder S. Truett Cathy explains how fairness and predictability help foster loyalty amongst one's employees. "When Jimmy Collins came to work at Chick-fil-A, he knew how the fast-food business worked. He had been designing restaurant kitchens for years and had seen the high turnover rate. Anticipating a similar experience with Chick-fil-A, he wrote a plan of action for terminating a Chick-fil-A Operator. He brought the plan to me to review and approve, but when I realized what it was, I stopped reading.
"'We won't need this plan,' I said handing it back to him. 'We won't be making any changes.'"
"He looked at me as if he didn't understand, so I explained that with the Chick-fil-A Operator Agreement I had established at the first restaurant in Greenbriar Shopping Center, plus my commitment to selecting only the best people as Operators, our people wouldn't leave.
"We would be loyal to them, treating them as we wished to be treated, and they would reciprocate. They did. Fewer than 5 percent of our Operators leave the chain in any given year. Other chains tout their 'knowledge management' with their computer and communications systems; we manage knowledge by keeping people - and their knowledge - in the organization. The food tastes better with that kind of long-term Operator stability.” (Cathy, Eat Mor Chikin, pp. 96-97)
In Beyond the Norm, former Interstate Batteries CEO Norman Miller offers an excellent example of going the extra mile to maintain fairness in pricing with his battery exchange program. "There was a time when the price of lead jumped way up, and because the cost of batteries is based on the value of lead, the price of batteries climbed way up too. However, Interstate has always sold batteries on an exchange basis; when a dealer sells a new battery, he gives us an old battery back in exchange.
ReplyDelete"So when the price of lead goes up and we have to pay more for new batteries, we automatically get paid more for the old batteries. This keeps our pricing on both the wholesale and the retail level stabilized.
"In the early days, most of our competitors didn't have this sell/exchange program, so they weren't able to offset the price increases when lead skyrocketed. They were operating on a percentage of profit basis, which is normal - all accounting principles operate on percentages. But at that time, we weren't. We operated on unit profit and kept things very simple. If one of our distributors made six dollars on a battery and sold six thousand batteries, he would make $36,000 gross profit. If it took $12,000 to run the business, he had earned $24,000.
"By selling on an exchange basis and not operating on percentages, we weren't continually adjusting our prices as new battery costs kept going up, solely because of lead price increases. The end result was that prices got off line in the battery business, but Interstate was substantially under the competition - always a nice place to be if you can do it and make a profit. This really helped us get established with new car dealerships across the country. We were able to go in, sell low, and build relationships based on trustworthiness, quality, service, and everything the automotive world expects and desires in a supplier. We won many of them to our way of doing business.
"Since our batteries were always priced fairly, we didn't have to get into any price wars. This gave us a big foothold in the market with continued advantage for more growth." (Miller, Beyond the Norm, pp. 74-75)
Case Study
ReplyDeleteAs owner of one of the most successful businesses in America at the turn of the 20th Century, H. J. Heinz not only employed large number of immigrant women in his factory, but offered special programs to help them integrate into American society in cooperation with his factory foreman, Agnes Dunn. According to Quentin Skrebac, Jr. in H. J. Heinz: A Biography, "immigrant women were brought in on jobs such as onion peeling, washing bottles, cleaning strawberries, skinning tomatoes, and cleaning potatoes. Heinz set up programs to teach them English as well as practical homemaking skills… Agnes Dunn, the general foreman, helped these immigrant girls move into American society as well. Lunchtime and evening lectures were planned to help them learn American culture. Dunn also cared for the physical issues of her girls, sending them frequently to the company hospital for check-ups. Girls who showed office potential were encouraged to attend Duff's College. The company might even help pay for it, but more likely the company assured an office position upon completion of the business program." (Skrabec, Jr., H. J. Heinz, pp. 143-44)
Case Study
ReplyDeleteFor J. C. Penney founder James Cash Penney, commitment to the Golden Rule meant commitment to justice and fairness in all business transactions, as David Delbert Kruger explains in J. C. Penney: The Man, the Store and American Agriculture. “Journalists frequently inquired about the secret behind Penney’s success, and this answer typically involved a verbatim review of six principles he had adopted over the course of his life:
“1. I believe in preparation.
“2. I believe in hard work.
“3. I believe in honesty.
“4. I believe in having confidence in men.
“5. I believe in appealing to the spirit of men.
“6. I believe in the practical application of the Golden Rule as taught by the Master nearly two thousand years ago.
“‘I believe they contain the essentials of success,’ Penney remarked of these six principles, emphasizing that the Golden Rule permeated the ideals of public and private justice, and that it was still visible in every one of his enterprises, retail or agricultural. ‘You well imagine how cynically these lofty ideals were received by my business contemporaries,’ Penney added. ‘The policies that I had determined upon were successful because they never forgot the “other fellow.” I never overlooked the great business truth that every transaction must be profitable and satisfactory to both participants.’” (Kruger, J. C. Penney, p. 234)
Case Study
ReplyDeleteIn his book, Thinking Outside the Box: The Wine Group Story, Arthur Ciocca, founder of Wine Group, Inc., describes how he committed his company to commutative justice early in his tenure as CEO. “In the early years, our personal and corporate integrity was put to the test. When we were nearly drowning in the oversupply of low quality wine, it would have been easy to improve performance by reneging on oppressive grape contracts. There were loopholes in those contracts that our predecessors signed and a lot of tactics a winery could employ to negate them. In our desperation, we even tested a few, but quickly concluded we would have no future if our word and our contracts were no good. The short-term impact of the decision to play it straight was burdensome. But over the long term, we more than made up for it by developing strong loyalties with members of the grower community who demonstrated they would be honorable and loyal in return. Those allegiances paid off with extra high quality grapes when others were short.” (Ciocca, Thinking Outside the Box, p. 34)
Case Study
ReplyDeleteIn his book, Thinking Outside the Box: The Wine Group Story, Arthur Ciocca, founder of Wine Group, Inc., explains how his company learned to cultivate strong personal relationships with its grape growers early in its history, founded upon mutual integrity. “We developed relationships with our growers based upon mutual trust. We learned that dealing with marginal growers, much like dealing with marginal people, wasn’t worth our time. So, when we could help our loyal growers without disadvantaging the winery, we did and they reciprocated. Many of the growers who sold us grapes each year never signed long- term contracts with us. We considered them “our” growers and they considered our winery ‘home’ for their grapes. We had a simple understanding based on handshakes and mutual trust.
“The more we got to know our farmers, the more we liked them. Our guys were simple, straightforward men of integrity and honor. In the early days of the rough-and-tumble world of alcohol distributing and retailing, this was not always the case. There were quite a few customers with their hands out and a number of illegal deals to be done worth tons of business. Just a few dozen of these deals would have helped us enormously. To make matters worse, others were doing them, making it more difficult for us to be competitive. There were a lot of ways to cover your tracks, so the odds of getting caught were slim. We were seriously tempted in the beginning as our lean sales force lost out on sales.
“I was lamenting this industry plague one day with my boss, Bill Sullivan, Coke-NY’s Executive Vice President. He looked at me and said, ‘Art, I’ll do anything in the world for this company except sit on my tail in jail.’ That was helpful perspective, but in the end it wasn’t what influenced us. We concluded that we would not compromise our principles. We knew if we built our business supported by doing shady deals, we would attract shady customers who would be loyal only until a better deal came along. That was the very opposite of building long-term brand loyalty, which was our mission from the outset. We also knew anything short of living by the highest standards of integrity would corrupt our organization and drain resources, both of which we needed desperately for the long-term brand-building effort." (Ciocca, Thinking Outside the Box, pp. 35-35)
Case Study
ReplyDeleteIn his book, Thinking Outside the Box: The Wine Group Story, Arthur Ciocca, founder of Wine Group, Inc., explains how his management team dealt with a complex ethical dilemma regarding one or their early vineyard acquisitions “On the surface it was a perfect fit, but as they got into due diligence, they determined that a significant block of business was supported by highly questionable deals and would be lost as soon as the companies merged. At first, they rationalized that the acquisition plan still worked with-out this business, but quickly cooled on the deal when they realized the corrupting influence it would have on our organization. When they lost confidence in the integrity of people, they terminated negotiations. When this team pulled out, one of our competitors stepped in and purchased it. Within three years, this artificial volume vanished just as we had expected. It was a costly mistake for them.” (Ciocca, Thinking Outside the Box, p. 35)
Case Study
ReplyDeleteIn Thinking Outside the Box: The Wine Group Story, Arthur Ciocca, founder of Wine Group, Inc., explains how his company exercised commutative justice in navigating a complex power-struggle in the late ‘70s, between the Teamsters Union, which represented Franzia’s grape growers, and the United Farm Workers Union of César Chavez. “The United Farm Workers Union was somehow trying to take over from the Teamsters and our workers were caught in the middle, uncertain which way to turn. Our management team had little experience in matters such as these so Morris Ball hired a consultant named Joe Sanchez. Joe had a lot of experience with field worker unions. He had been a worker himself and now acted as a consultant. Joe was a down-to-earth, smart, practical problem-solver who clearly understood all sides of our dilemma.
“His strategy was straightforward and simple: eliminate the union middlemen, thereby enabling workers to keep the dues, and create a meritocracy where workers were rewarded in proportion to performance. After identifying his goal for the workers, he got management to buy into it. Once we did, he took Morris and me out to meet with various workers at their stations in the vineyards. We told our story, talked and answered questions with Joe interpreting from English to Spanish and back.
“Within a few weeks, our workers voted the union down almost unanimously. Joe had orchestrated a true victory. The workers received higher pay and better benefits at no extra expense to the winery. This set the stage for subsequent productivity improvements and benefits which were shared, as promised.” (Ciocca, Thinking Outside the Box, pp. 38-40)