Successful Companies Live Up to This

ETHICS

Ancient Greek Ideal

by Gabriel Karageorgiou and Dominic Selwood
November 02, 2020

Frederick Bass/Getty Images

Companies’ priorities are rooted in the culture of their times. The East India Company, for
example, systematically asset-stripped the Indian subcontinent for more than 200 years —
and was largely celebrated by its shareholders as a roaring success. Now we look back in
horror at the bloodshed, slavery, drug money, corruption, and exploitation that were its
daily currency, and we note that today’s leading companies (hopefully) have strikingly
different definitions of success.
Today, most people would argue that successful companies are not just financially sound,
but must also be socially responsible and environmentally sustainable, which can be
assessed with various environmental, social, and governance (ESG) metrics. We propose,
however, that ESG metrics are merely the observable result of a more fundamental set of
values: a notion we call corporate philotimy.

Find a Greek friend and ask what philotimo (φιλότιμο) means. The reaction will probably be
a starry-eyed smile from deep inside. Then ask for an English translation, and that smile
will turn to a look of bewildered helplessness. While the word’s etymology is simple —
philos, or friend/love, and timi, or honor — philotimo carries a universe of rich meanings.
It is decency, dignity, honesty, altruism, and a dozen other ideals encapsulating what it
means to live with integrity. It is greater than the individual, with a person’s act of
philotimo reflecting positively on his or her family, community, organization, and society.
It was first spoken of by the pagan poets of antiquity, and St. Paul — a native Greek
speaker — included it in his letters numerous times, urging his readers in Thessaloniki to
fill their lives with philotimo. It is a universal, transcendent good, an internal ethical
compass of fairness, compassion, and justice.

In the context of an organization, corporate philotimy is the immutable DNA that

determines how a company operates at the cellular level. It is the principle that guides a
company’s sustainability behavior, which can then be quantified with ESG metrics.

Corporate Philotimy Creates Corporate Value

A recent PwC report identified investment in ESG as the “growth opportunity of the
century.” Over the past 10 years, investment strategies focused on nonfinancial parameters
(that is, strategies prioritizing companies with a strong sense of corporate philotimy) have
exploded. And those strategies are paying off: Investors are finding that companies with a
strong sense of philotimy consistently outperform less-virtuous companies. The reason is
fourfold:

. Companies with a culture rooted in sincere empathy treat their employees well. They
are therefore able to attract and retain the best human capital, which enables them to
 create the most-innovative products and services.
. These companies are mindful and respectful of the communities in which they operate.
They acknowledge and address community concerns, increasing engagement and
facilitating smooth interactions and collaborations.
. Compassion for all stakeholders inspires these companies to take care of the
resources —  human, environmental, and others — on which they rely, making their
success more sustainable.
. These companies are managed with transparency and accountability, so all stakeholders
understand their processes and key competencies and are able to make better-informed
decisions.

Ultimately, a culture of corporate philotimy enables companies to build trusted brands,

leading to loyal customers, engaged employees, and supportive shareholders. As a result,
many companies are experiencing increased pressure from regulators, asset owners, and
society to improve their ESG profiles, spurring a race to better performance. In this new
arena, some companies have been accused of “greenwashing” — that is, of publishing
shiny corporate social responsibility reports without living the values behind them. But
although ESG metrics can be padded, corporate purpose is much harder to fake. Corporate
philotimy requires strong virtues to be held as an end in and of themselves, not merely
invoked for a quick win.

Building Corporate Philotimy Starts with Hiring People with Philotimo

How do you build a company with a strong sense of corporate philotimy? It starts with
people. The notion that aggressive employees drive success is long dead. Research has
definitively shown that productive teams are the direct result of positive work cultures —
of deeply held corporate philotimy. In such environments, individuals feel a moral
responsibility not to let their teams down. When they see colleagues struggling, they react
with compassion. They give credit for collective achievements and avoid blaming others
for failures. As a team, they forge a strong “we are in this together” bond, focused not on
the bare minimum they are asked to do but on anything and everything they can do to
contribute to the team’s success.
Both academic and anecdotal evidence support this. In 2012 Google launched a now-
famous project to understand what makes a perfect team. The study — dubbed Project
Aristotle, in honor of the philosopher’s well-known dictum that the whole is greater than
the sum of its parts — found that cultures of empathy and kindness give teams a
psychological safety net. This structural reassurance translates into greater levels of trust,
respect, and engagement, enabling individuals to take initiative and share new ideas
without fear of judgment. Other research confirms these findings, showing that
demonstrating strong ethics and providing a sense of safety are among the most important
competencies for leaders looking to build positive, productive workplaces.

How, then, do you hire people who will bring a strong sense of philotimy to your team?
Virtue can be tricky to assess, but there are tells: candidates who use “we” rather than “I,”
who share credit, own errors, and enjoy contributing to collective success. There are no
easy answers or foolproof recruiting practices, but prioritizing individual philotimy in
your hiring process is central to building organizational integrity.

How Investors Can Identify Corporate Philotimy

There’s another piece of the puzzle: ensuring that companies that demonstrate philotimy
get the support they need to grow. Investing in sustainable companies is a sensible
strategy both financially and ethically, but how can investors identify those opportunities?
It’s challenging, because ESG disclosure is not yet universal, and many companies don’t
voluntarily disclose or self-regulate their behavior. Moreover, even when companies do
share some metrics, it can be hard to tell the difference between genuine, values-driven
performance and a marketing stunt. But understanding a company’s true culture is not
impossible.

To start, ask the following questions: Is the company’s core business opportunistic, or does
it serve a wider social purpose? Does it prioritize short-term benefits over long-term
opportunities? Are management and shareholder interests aligned? And what is the
company’s track record on employee, customer, and stakeholder loyalty? Evaluating
performance in these areas will provide an indication of the ethics and priorities driving
the company’s actions.
 ***

Societies increasingly expect companies to be genuinely sustainable. They expect the

businesses they support to look after their customers, their employees, their communities,
and the planet. These characteristics — the hallmarks of corporate philotimy — demand a
deeply ingrained sense of individual and organizational responsibility, and they create a
positive work culture that inevitably translates into higher productivity. Companies that
embrace philotimy don’t promise more than they can deliver, and they deliver more than
they promise. To paraphrase Socrates, an undying sense of philotimy is what inspires
individuals and organizations to behave as they would wish to be remembered.

Tackling the world’s most-pressing social and environmental issues will take authentically
self-motivated, purpose-driven organizations working together to build a global business
culture of corporate philotimy. In a world where more often than not, politicians and
regulators fail to address these vital issues, companies must act with philotimo, embracing
their moral obligation to serve as a force for good in their local communities and around
the globe.

Gabriel Karageorgiou is a Partner at Arabesque Asset Management Ltd.

Dominic Selwood, PhD is a journalist, historian, author, barrister, and a co-founder and Partner at Arabesque
Asset Management Ltd.

This article is about ETHICS

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