What is the Church's Objective Function?

Mirror of Justice Describes a sympisum at St. Thomas School of Law reagrding the intersection of business and legal eithics. It made me think about a question I asked on a final exam last year. Thinking of Professor Sisk's post I have an inital observation. One reason lawyers may be aggressive in protecting their clients is to prevent unmeritorious cases from being lumped into the meritorious cases. I guess I am being charitable here in ascribing that view to the lawyers providing advice to the various dioceses around the country. I agree, however, it is disingenuous for some in the hierarchy to say “our lawyers made us do it” when they are the leaders and the decision makers—not the lawyers. Lawyers are good at giving legal advice, but unless they are trained in moral philosphy, they may not be good at giving moral advice. Decision makers at the top need to look at the how choices they make affect the value of the organization as a whole. Delay and denial are rarely successful strategies for preventing bad information from leaking and developing adversely to the organization. This leads to the question: What is the Church’s objective function? In my course on Corporate Risk Management I asked a final exam question that was based on the scandal in the Archdioceses of Boston. The question I asked was whether the Archdiocese should declare bankruptcy to protect itself from further liability losses. Under traditional corporate finance theory, a firm should enter bankruptcy if the value of the firm is greater in bankruptcy than outside of bankruptcy. I received this answer from almost every student. I took this type of answer to be the text book answer for one who didn’t think about the institution that was the subject matter of the question. However, a number of them said something to the effect that “isn’t this a church we are talking about?” And if it is a church, are its objectives necessarily the same as a corporation’s?” This was an excellent observation as under economic theory we believe the firm should maximize the value to the shareholders. However, what is the objective function of a Diocese? It is not profit in the temporal sense, but it is something else. The good answers went on to say that the value of the organization for the long run may require the corporation to avoid bankruptcy if the sole reason to enter bankruptcy is to deny likely legitimate claims. Thus (and I am preaching here), dealing with the problem in a forthright way may cause some short-run costs, but are likely to be consistent with the values of the organization which involve charity and love. One student even compared the behavior of Johnson and Johnson with the Archdiocese of Boston and I am paraphrasing here: “Why is it that Johnson and Johnson took the fall for the Tylenol poisoning cases in Chicago when it was not its fault? It is because management wanted to restore the customers’ faith in its products. Why is it that J&J have a credo that places its customers first? It is because J&J wants to make sure the customer has faith in it.” I think it is funny faith and credo are associated with J&J and not the Church.