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Title
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Introduction to the Corporate Governance of Religion
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Author
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Rost, Katja
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Research Area
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Social Institutions
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Topic
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Religious Institutions
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Abstract
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Stationed at the border between the past and the present, the corporate governance of religion is concerned with the governance mechanisms by which religious organizations are controlled and directed. Building on similarities between contemporary organizations and their predecessors in Roman Catholic monasticism, this essay illustrates that studying the past can be of enormous benefit. It allows us to see familiar problems in a new light: for example, bureaucratic rules—nowadays no longer linked to efficiency—that emerged in Catholic orders and enabled organizational learning, innovations, and survival in uncertain environments. The study of the past is also an appreciation for the kind of governance mechanisms that have staying power: Catholic orders can be viewed as pioneers of corporate governance and show what kind of governance is suitable to reduce agency problems. Finally, when abstract organizational theories are presented in a historical context, it makes them more palatable, more understandable, and more interesting: the theory of the optimal colocation of decision rights within the specific knowledge framework of organizations is supported in Catholic orders. They decentralize their local communities the higher the ratio of credence goods produced, and centralize their local communities the higher the ratio of search/experience goods produced.
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Identifier
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etrds0433
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extracted text
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Introduction to the Corporate
Governance of Religion
KATJA ROST
Abstract
Stationed at the border between the past and the present, the corporate governance
of religion is concerned with the governance mechanisms by which religious organizations are controlled and directed. Building on similarities between contemporary organizations and their predecessors in Roman Catholic monasticism, this essay
illustrates that studying the past can be of enormous benefit. It allows us to see
familiar problems in a new light: for example, bureaucratic rules—nowadays no
longer linked to efficiency—that emerged in Catholic orders and enabled organizational learning, innovations, and survival in uncertain environments. The study of
the past is also an appreciation for the kind of governance mechanisms that have staying power: Catholic orders can be viewed as pioneers of corporate governance and
show what kind of governance is suitable to reduce agency problems. Finally, when
abstract organizational theories are presented in a historical context, it makes them
more palatable, more understandable, and more interesting: the theory of the optimal
colocation of decision rights within the specific knowledge framework of organizations is supported in Catholic orders. They decentralize their local communities the
higher the ratio of credence goods produced, and centralize their local communities
the higher the ratio of search/experience goods produced.
INTRODUCTION
The secularization thesis—in the last century widely perceived as an
irrevocable fact—has these days become highly disputed (Iannaccone,
1998; Martı, 2014). The recognition of the continued relevance of religion
has reawakened interest in this subject. While the sociology of religion
(Davie, 2013; Johnstone, 2015) and the economics of religion (Iannaccone,
1998; Nelson, 2014) are well established fields in sociology and economics,
organizational research has for a long time refrained from a stronger
focus on studies of religion. The corporate governance of religion is a
relatively new emerging field concerned with the governance mechanisms
by which religious organizations are controlled and directed, including,
Emerging Trends in the Social and Behavioral Sciences.
Robert Scott and Marlis Buchmann (General Editors) with Stephen Kosslyn (Consulting Editor).
© 2017 John Wiley & Sons, Inc. ISBN 978-1-118-90077-2.
1
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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
for example, the distribution of decision rights, responsibilities and rules
in religious organizations, the instruments for selection and election of
leaders for interest alignment and the monitoring of actions, and the
robustness of these mechanisms in the context of social, regulatory, and
market change. This essay aims to show that a comparison between the
governance mechanisms of religious organizations and contemporary
organizations may be fruitful. It cannot consider all forms of religious
organizations. While the most basic forms of communities of believers
comprise religious movements (e.g., the early Christian movement), denominations (e.g., the Roman Catholic Church), sects, and cults, the essay
concentrates on Roman Catholic monasticism. This rather narrow focus is
caused by the fact that evidence on other forms of religious organizations is
still rare.
ROMAN CATHOLIC MONASTICISM AS A PREDECESSOR OF MODERN
ORGANIZATIONS
In the Western world, the Roman Catholic Church is the oldest and most
enduring organization (Ekelund, Hébert, & Tollison, 1989; Ekelund, Tollison,
Anderson, Robert, & Davidson, 1996). The economics of religion has viewed
the Roman Catholic Church as a monopolistic “multidivisional” firm. This
type of firm is characterized by a central office that not only controls the most
relevant financial allocations and has the last word on strategic planning but
also allows its divisions a high degree of autonomy in matters of operation.
Around 500 A.D. the first Catholic orders were established (Schmidtchen &
Mayer, 1997). Rivalry and what can be described as “product differentiation” led to the emergence of numerous Catholic orders (Ehrmann, Rost, &
Inauen, 2013). A Catholic religious order is an organization, recognized by
the Roman Catholic Church, whose members strive to achieve a common
purpose through formally dedicating their life to God. Catholic orders
are parent institutions composed of local communities, in most cases of
monasteries. These local communities are embedded in a hierarchical
structure of geographic regions (e.g., congregations or provinces), the
order (e.g., headed by a superior general or a confederation), and the Holy
See. Religious orders are regulated by Church law, by the religious rule
they have adopted, and by their own norms (Rost, Inauen, Osterloh, &
Frey, 2010).
Religious orders can be viewed as sub-brands of the Roman Catholic
Church and analyzed as intra-brand competition within the Roman
Catholic Church distribution system (Ehrmann et al., 2013). The Roman
Catholic Church entered into license agreements with religious orders
(Davidson, 1995; Schmidtchen & Mayer, 1997). To get licensed by the
Introduction to the Corporate Governance of Religion
3
Church, religious orders had to estimate their profitability or to justify
their legitimacy. Under the Roman Catholic Church’s umbrella brand,
religious orders occupy niche markets by offering specialized products
and services under a sub-brand, and use identifiable brand names that
help to assure the customer of uniform product quality (Brickley & Dark,
1987). For example, some religious orders strictly isolate their members
from the outside world (e.g., Carthusians and Cistercians), whereas other
religious orders require their members to interact with the secular world
by teaching (e.g., Jesuits and Salvatorians), missionary work (e.g., Divine
World Missionaries and White Fathers), or social work (e.g., Franciscans and
Camillians) (Schwaiger & Heim, 2008). Put differently, the various religious
orders are something like McCafe and the Big Mac under McDonalds’
umbrella brand.
In many respects, Roman Catholic monasticism can be seen as a precursor of capitalism with its underlying governance structures, incentive
systems, and monitoring instruments. For example, Ekelund et al. (1996)
use the term franchise system to describe the governance structure of the
Medieval Church. An article by Davidson (1995) develops this idea further
by showing that the Cistercian Order can be seen as a vertically integrated
downstream “franchise system” of the medieval Roman Catholic Church.
Also, the analysis of the concept of purgatory within the medieval Church
has been identified as an innovative incentive system to appropriate rents
(Le Goff, 1986; Schmidtchen & Mayer, 1997), or the analysis of medieval
judicial ordeals revealed that it was an accurate monitoring instrument
to test accused criminals’ guilt and innocence (Leeson, 2012). Furthermore, as Weber (1958, 1973) points out, it was in monasteries where work
first assumed an ascetic value. Through the process of rationalization,
medieval monasteries were rapidly transformed into major institutions of
capitalist enterprise (Kieser, 1987). The income of monasteries came from
general commerce, which included selling their own crops, fish, game,
and grain, as well as books, holy water, and candles. It also came from
leasing, imposing market dues, and collecting penalties, fees for juridical
services, and toll charges for rivers and country roads (Smith, 2009). Indeed,
medieval monasteries can be viewed as “the most efficient production
organizations of that time” (Kieser, 1987, p. 104). Catholic orders with
their monasteries became enormously rich through their rational labor
organization and their work morale and, as a result and as illustrated
in Figure 1, spread from Europe throughout the world in a short period
(Rost & Grätzer, 2014; Schmiedl, 2011). The resulting wealth was a significant reason why governance mechanisms became this important: it was
not uncommon for abbots and even entire monasteries to live a life of
luxury.
4
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
2500
80
Number of Catholic
monasteries
Number of Catholic
orders
2000
70
60
50
1500
40
1000
30
20
500
10
0
529
629
729
(a)
829
929 1029 1129 1229 1329 1429 1529 1629 1729 1829 1929
Year A.D.
(1)
(2)
(4)
(3)
(5)
(b)
0
Introduction to the Corporate Governance of Religion
5
Figure 1 (a) The worldwide diffusion of Roman Catholic monasticism over time.
(b) (From the top left to the bottom right): Number of Catholic orders and
monasteries over (1) 500–1000 A.D. (228 monasteries in 13 countries); (2)
1001–1500 A.D. (2771 monasteries in 31 countries); (3) 1501–1700 A.D. (1909
monasteries in 59 countries); (4) 1701–1900 A.D. (1009 monasteries in 69
countries); (5) 1901–2012 A.D. (1746 monasteries in 115 countries). Data: Census
of all ever existing 4342 Catholic monasteries of 81 Catholic orders.
WHAT IS THE VALUE OF STUDYING ROMAN CATHOLIC
MONASTICISM?
The former arguments illustrate that Roman Catholic monasticism and
contemporary organizations have many similarities. A comparison between
the governance mechanisms of both organizational forms may be fruitful.
However, one could argue that, by its nature, the study of Roman Catholic
monasticism (and also of other forms of religious organizations) is necessarily stationed at the border between the past and the present, whereas
organizational studies—mostly conceived as the study of contemporary
organizations—is forward looking. Is it reasonable, therefore, for organizational scholars to concentrate on past triumphs and failure? It depends.
Merely looking backward for nostalgia′ s sake is of benefit for historians,
but it is of no particular benefit for organizational scholars. Of great benefit
for organizational scholars is, however, a keener understanding of the
governance mechanisms used in contemporary organizations by exposure
to the shortcomings and the advantages of past governance mechanism
used in religious organizations. In the following, three particular benefits
of studying the past will be illustrated by giving examples on the corporate
governance of Roman Catholic monasticism and by comparing it with
contemporary organizations. It will be demonstrated that studying the past
first allows us to see familiar situations or problems in a new light. Second,
studying the past can give us appreciation for the kind of governance
mechanisms that have staying power. Third, it can make abstract organizational theories more palatable, more understandable, and more interesting
(Ekelund & Hébert, 2013).
FAMILIAR PROBLEMS IN A NEW LIGHT: THE VALUE
OF BUREAUCRATIC RULES FOR ORGANIZATIONAL LEARNING
Studying the past allows us to see familiar problems in a new light. Both
monasteries and contemporary organizations need to secure an economic
6
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
foundation and need to deal with environmental complexity, for example,
due to technological shift, political upheaval, or differences in cultures
and norms within the organization. Monasteries impressively demonstrate
that organizational rules, as a primary feature of bureaucracy, are the main
enabler for organizational efficiency, for learning, and for survival under
environmental complexity. This is surprising because “nowadays the term
bureaucracy, at least in everyday language, is no longer linked to ‘rationality’
or ‘efficiency’, but to cumbersome, overregulated, and impersonal processes
that individuals are forced to adhere to” (Beck & Kieser, 2003, p. 794).
This neglect also becomes reflected in research: organizational rules were
a recurrent theme in the classical work of organizational scholars (Blau,
1955; Cyert & March, 1963; Weber, 1964 [1921]), but in the recent past
we find only a few studies explicitly dealing with organizational rules.
Monasteries shed new light on the importance of organizational rules in
contemporary organizations by showing that they help organizations to
improve efficiency, to innovate, and to deal with heterogeneous problems
and complexity.
History reveals that it was in the monastery where the rule-following
bureaucracy emerged as a consequence of the process of rationalization
(Weber, 1958, 1973). Around 323 A.D., the Egyptian Saint Pachomius set out
to design rules for all ascetic life (Kieser, 1987; Treiber & Steinert, 1980) with
the intention to bring together individual ascetics who did not have the
physical ability or skills to live a solitary existence in the desert. The rule of
Pachomius changed the existing view on work by stating that monks have
the duty to work because labor is the basis for the monks’ subsistence and
for charity, and thus enables them to live in the Spirit of Christ (Kieser, 1987).
In the following centuries, a number of religious movements, which later
became Catholic orders, were founded. Following Pachomius’s example,
they managed their affiliated monasteries by rules. “Though their Rules
varied considerably in details, the main themes remained the same: the
design of the monastic buildings, religious ceremonies, labor, and work
organization” (Kieser, 1987, p. 106).
For example, in the sixth century, Benedict of Nursia’s Rule—which
became the most influential one—was written down. The introduction of
bureaucratic rules and the redefinition of labor within these rules explain
why the early medieval monastery can be seen as a “perfect laboratory
for the production of an industrious, reliable person” (Kieser, 1987, p. 108;
Treiber & Steinert, 1980). In Benedict’s Rule, for example, directives contained construction plans of a monastery such as the arrangement of water,
the mill, and various crafts within the enclosure to avoid the monks’ straying
outside of its bounds; a sophisticated forecasting rule for the food needed,
which was concerned with precise enumeration of the goods, what to do to
Introduction to the Corporate Governance of Religion
7
secure deliveries in case of shortfalls, and how to distribute the food within
the monastery; or concepts of timing to ensure that everything would be
fulfilled at its proper time. According to Gimpel (1976), a “blind Cistercian
monk moving into any of the monasteries would instantly have known
where he was. In certain ways, the discipline imposed by Saint Bernard on
his monks—the rigid timetable, the impossibility of deviating from the Rule
without facing punishment—rings to mind the work regulations that Henry
Ford imposed on his assembly lines.”
Because of this rational organization, medieval monasteries developed
innovative management, production, and architectural methods such as the
art of planting orchards, improving fruit trees through grafting, breeding of
livestock, wine and beer making, and developing methods for heating and
sanitation (Kieser, 1987; McGrath, 2005, 2007; Melville, 2012). Handwriting
became a crucial art to provide blueprints of the monastic rule in order
to socialize new members in far-flung monasteries (Kieser, 1987). “This,
in turn, led to a differentiation of artistic and scientific professions within
the monastery and to a concentration of research and teaching in monastic
schools” (Kieser, 1987, p. 114). For example, the Franziscans became one of
the most influential late-medieval financial experts (Todeshini & Melucci,
2009). They created an economic key vocabulary in order to distinguish
between “good” fluid capital and “bad” fixed capital, or the Franziscan Luca
Pacioli wrote the first teaching book for double-entry bookkeeping (Kehnel,
2012). Because of bureaucratic rules in medieval monasteries, the process
of rationalization thus proceeded at a much faster rate than in other social
institutions of this time.
Organizational rules also explain why monasteries of some Catholic orders
survived longer, and here, in particular, under complexity or in times of
uncertainty (Rost & Grätzer, 2014). In general, each founder of a Catholic
order set up his own monastic rule. Also, the adoption of an already existing
rule to a new community was possible (Melville, 2012). Rost and Grätzer
(2014) used a sample of 4606 monasteries of 89 Catholic Orders over a
period of 1483 years and showed that, after 500 years, monasteries managed
by a large number of rigorous rules existed with a 20% higher likelihood
as compared to entities managed by a smaller number of rules and more
fuzzy definitions of problem areas. The results further indicate that a large
number of rigorous rules, in particular, improve organizational survival
under complexity and in times of uncertainty, that is, rigorous rules are, in
particular, helpful to manage entities of large and international diversified
orders, to manage geographically distant monasteries, or to extenuate
negative or positive spillover effects in the environment. According to
theories of organizational learning, organizational rules are repositories of
organizational knowledge and competence (Kieser, Beck, & Tainio, 2001;
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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
March, Schulz, & Zhou, 2000). Organizations learn from experiences, and
learning results in formal rules. Formal rules help the organization to avoid
current and anticipated problems by abiding by the rules. Rules allow
the transfer and accumulation of organizational experiences over time
and enable organizational members to solve problems in a highly flexible
manner (Beck & Kieser, 2003). From this point of view, “organizational rule
production is driven by experiences with organizational problems ( … ) A
rich supply of problems supports more intense rule production than a meager supply of problems” (Schulz, 1998, p. 852). It follows that governance by
bureaucratic rules helps organizations to deal with heterogeneous problems
and complexity.
GOVERNANCE WITH STAYING POWER: THE SOLUTION OF AGENCY
PROBLEMS IN CATHOLIC ORDERS
What separates good organizational design from bad organizational design?
Why did certain types of Catholic orders survive until the present long
after their emergence centuries before? Traditional organizational studies
have little time and no data for such issues, yet the answers have an
enormous impact on organizational theory and governance alternatives for
contemporary organizations. For example, in the last decades the corporate
governance of contemporary organizations has often been criticized for
excessive manager compensation and fraudulent bookkeeping (Jensen,
Murphy, & Wruck, 2004). It became clear that the exclusive trust in external
control mechanisms, as recommended in agency theory (Jensen & Meckling,
1976; Jensen & Murhpy, 1990), cannot prevent excessive risk taking and the
abuse of power in a satisfying way (Frey & Osterloh, 2005). The weaknesses
in current corporate governance practice suggest that it may be useful to
approach these issues from alternative perspectives. Catholic orders can be
viewed as pioneers of governance, and demonstrate that alternative models
may be more suitable to reduce agency problems. The great economic
success of numerous monasteries in medieval times led to the temptation of
misuse (Rost et al., 2010). There exist also more recent historical examples
about financial scandals in the church. In the early 1990s, the Church of England lost hundreds of millions of pounds in reckless property speculation by
Church Commissioners, who were established as a consequence of post-war
development of London and controlled the church’s investments (Lovell,
1998). As a reaction, sophisticated governance systems were established
within religious orders. A fast growing literature has studied how the
different Catholic orders have solved their agency problems.
First, monasteries are extremely robust organizations, and agency
problems are relatively small. For example, Rost et al. (2010) analyze
Introduction to the Corporate Governance of Religion
9
all Benedictine monasteries that ever existed in Baden-Württemberg,
Bavaria and German-speaking Switzerland. The findings indicate that,
on average, monasteries survived 460 years, and only a quarter of the
monasteries studied were unable to survive because of agency problems. Feldbauer-Durstmüller, Sandberger, and Neulinger (2016) replicate
these findings by analyzing all Benedictine monasteries in Austria.
The average lifespan of monasteries amounts to 558 years; only 3% of
the monasteries studied were unable to survive as a result of agency
problems.
Second, Catholic orders developed efficient governance mechanisms over
time to solve agency problems. For example, Inauen, Rost, Osterloh, and
Frey (2010) study the 896-year-old Benedictine monastery of Engelberg and
analyze whether monastic corporate governance prevents agency problems.
They searched the historical biographies of Engelberg to make a distinction
between “good” and “poor” abbots. Words and phrases such as “incompetent”, “dissipation of commodities”, “not up to his job”, or “irritating” were
classified as poor performance. Phrases such as “exemplary”, “energetic”,
or “outstanding” indicate good leadership. “Good” abbots have an average
tenure of 19.44 years, whereas “poor” abbots have an average tenure of only
7.54 years. Thus, poor monastic leaders were not able to install themselves at
the top of the monastery, even though they are essentially elected for life.
The monastic structures facilitate the dismissal of poor abbots because of
two mechanisms: external visitation, that is, the regular evaluation of the
monastery by the umbrella organization to detect irregularities and to support monasteries in trouble; and internal pressure because an abbot largely
depends on the goodwill of his convent. In line with these arguments, the
results show that only 11% of the “good” abbots were not democratically
elected, that is, their election was externally manipulated, whereas 67% from
the abbots associated with agency problems were not democratically elected.
Second, only 6% of the “good” abbots had a poor or inconspicuous track
record, while 79% of the poorly performing abbots had a poor or inconspicuous track record.
Third—even though the governance mechanisms between the various
Catholic orders largely differ—all Catholic orders build on the interplay between internal and external control mechanisms. For example,
Benedictine monasteries build on strong internal control through a common value system, careful selection, socialization, participation, and
monitoring and backed up their internal arrangements with external
arrangements, for examle, periodical monitoring or jurisdiction (Dobie,
2015; Feldbauer-Durstmüller et al., 2016; Inauen et al., 2010; Rost et al.,
2010). Internal control was complemented by external control mechanisms.
Accounting and accountability were an essential component in the life of
10
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
a healthy Benedictine monastery (Dobie, 2015). Knowledge of the financial
transactions of a house was extended beyond the immediate participants to
the wider monastic community. The process of visitation can be regarded
as an early attempt at quality control. The chapters was an important
instrument for the dissemination of improved accounting practices. In
contrast to the Benedictines, Dominicans do not have the obligation of
the stabilitas loci and the activities of the monasteries are largely outward
looking. The analysis nevertheless reveals similar governance mechanisms
as used by the Benedictines (Wirtz, 2016; Wirtz, Paulus, & Charlier, 2012;
Wirtz, Paulus, & Charlier, 2013). For example, Dominicans have always
devoted a lot of time to regular discussions to socialize their members.
They developed democratic practices which are reflected in the regular
holding of deliberative bodies at different levels (monastery, province,
and order), in the election and the regular rotation of “top managers”,
in the limited tenure of elected persons, or in the general chapter, which
covers the whole order and has a legislative function because it can amend
the constitutions. Finally, also the Jesuits use a combination of internal
and external control mechanisms (Wirtz, 2014). What fundamentally distinguishes the Jesuit governance from those of other religious orders is
that the Jesuits elect the Superior General, who directs the Jesuits for life
because his authority will be greater if he cannot be changed, because he
will be better known by all, and because he has experience in the role.
However, the very strong authority of the Superior General interacts
with an equally strong authority from the community. The community
is represented by delegates at all levels of the congregations (provincial
and general). The community does elect the Superior General, but the
community works with him as an equal force when it concerns important
questions other than the election. In other words, the Jesuit governance
builds on an equal power relationship between the “body” and the
“head”.
Insight into Abstract Theories: Securing Unique Knowledge by Colocation
of Decision Rights
When abstract organizational theories are presented in a historical context, it
makes them more palatable, more understandable, and more interesting. For
example, in general, organizations face the problem of controlling the actions
of their branch offices to ensure the continued value and uniqueness of their
trademark. For the central company, that is, the headquarters, the question
arises of how many decision rights and how much monitoring authority
should be maintained to assure product quality within its local branches
(Fama & Jensen, 1983). To answer this question, Jensen and Meckling (1995)
Introduction to the Corporate Governance of Religion
11
make a distinction between specific and general knowledge. They define specific knowledge as knowledge that is costly to transfer among agents, and
general knowledge as knowledge that is easy and cheap to move. Logically,
two ways for the colocation of knowledge and decision rights can be conceived. One is to move the knowledge to those with the decision rights; the
other is to give the decision rights to those who have the knowledge. Total
organizational costs are the sum of the costs due to lack of knowledge and
the costs due to the wrong use of information advantages. It depends on the
shape of both marginal costs curves whether more centralization or more
decentralization is appropriate.
Ehrmann et al. (2013) test this theory with a sample of 114 local communities of 20 religious orders of the Roman Catholic Church. Religious orders
are viewed as sub-brands of the Roman Catholic Church and their local communities as local branches. Ehrmann et al. (2013) posit that the production of
all goods with observable characteristics, that is, of search/experience goods
(for example such products as beer, herbs, farming, mission, or solidarity
with the poor), should be organized centrally because the knowledge
involved is easily available higher in the hierarchy of the religious order.
Vice versa, all credence goods (e.g., salvation goods like contemplation,
catechesis, saints, afterlife, or prayers) should be decentralized because
it requires specific knowledge, which is costly to transfer among agents.
The empirical findings give support for the hypothesis by showing that
the religious orders centralize their local communities the higher the
ratio of search/experience goods produced, and decentralize their local
communities the higher the ratio of credence goods produced.
OUTLOOK
Studies on the corporate governance of religion promise to enhance organizational studies by exploring how culture more broadly, whether through
religion or morals, affects the design and control mechanisms in organizations, by showing how governance mechanisms in organizations can be
modified to address questions about norms, values, and social capital, or
by generating information about governance mechanisms in “nonmarket”
organizations. A lot of research is still missing in the field. First, knowledge
on forms of religious organizations other than Roman Catholic monasticism,
including other denominations, religious movements, sects, and cults, is
necessary to generalize findings about governance mechanisms in order to
compare alternative forms of governance mechanisms or to understand how
culture and time affect governance mechanisms. Second, while a qualitative
design is helpful to understand the historical feature of corporate governance, large-scale quantitative evidence is more suitable to test the validity
12
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
of these features for social sciences. Large-scale quantitative evidence
is still rare in the field. Finally, current research focuses on a selective
choice of organizational theories. A variety of organizational concepts have
their early beginnings in religious organizations and could be tested. For
example, organizational diversity started in religious organizations because
being a nun was one of the few “occupations” available to women in the
Middle Ages. Religious organizations offer an excellent starting point for
neo-institutional theories because, during their history, these organizations
were exposed to different institutional settings including changes in state
borders, changes in dynasties, governments, popes, and, thus, changes in
institutional quality. Religious organizations allow us to study changing
views on organizational legitimacy: even though charity is a central topic
in all these organizations, it has been implemented very differently because
religious organizations are also answers to the varying needs of their times.
Finally, theories of radical paradigmatic change could be tested because
religious organizations survived, were founded, or died out in times of
transition from a paradigm in crisis to a new one, from which a new tradition
of normal science emerged.
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Introduction to the Corporate Governance of Religion
15
KATJA ROST SHORT BIOGRAPHY
Katja Rost is Professor of sociology at the University of Zurich. She studied
sociology and completed her PhD and Habilitation degrees in management
and organizational studies. Before moving to the University of Zurich, she
was an Assistant Professor for organizational sociology at the University of
Mannheim, and a Full Professor for management at the Friedrich Schiller
University, Jena. Her research focuses on economic and organizational sociology, for example, on corporate governance in contemporary organizations
and on the governance mechanisms in Catholic orders.
RELATED ESSAYS
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Trends in Religiosity and Religious Affiliation (Sociology), Kevin J. Christiano
Institutional Change in American Religion (Sociology), Casey Clevenger and
Wendy Cadge
Trust and Economic Organization (Sociology), Karen S. Cook and Bogdan
State
Stability and Change in Corporate Governance (Sociology), Gerald F. Davis
and Johan S. G. Chu
The Sociology of Religious Experience (Sociology), Douglas Porpora
Religion (Anthropology), Benjamin Grant Purzycki et al.
The Institutional Logics Perspective (Sociology), Patricia H. Thornton et al.
-
Introduction to the Corporate
Governance of Religion
KATJA ROST
Abstract
Stationed at the border between the past and the present, the corporate governance
of religion is concerned with the governance mechanisms by which religious organizations are controlled and directed. Building on similarities between contemporary organizations and their predecessors in Roman Catholic monasticism, this essay
illustrates that studying the past can be of enormous benefit. It allows us to see
familiar problems in a new light: for example, bureaucratic rules—nowadays no
longer linked to efficiency—that emerged in Catholic orders and enabled organizational learning, innovations, and survival in uncertain environments. The study of
the past is also an appreciation for the kind of governance mechanisms that have staying power: Catholic orders can be viewed as pioneers of corporate governance and
show what kind of governance is suitable to reduce agency problems. Finally, when
abstract organizational theories are presented in a historical context, it makes them
more palatable, more understandable, and more interesting: the theory of the optimal
colocation of decision rights within the specific knowledge framework of organizations is supported in Catholic orders. They decentralize their local communities the
higher the ratio of credence goods produced, and centralize their local communities
the higher the ratio of search/experience goods produced.
INTRODUCTION
The secularization thesis—in the last century widely perceived as an
irrevocable fact—has these days become highly disputed (Iannaccone,
1998; Martı, 2014). The recognition of the continued relevance of religion
has reawakened interest in this subject. While the sociology of religion
(Davie, 2013; Johnstone, 2015) and the economics of religion (Iannaccone,
1998; Nelson, 2014) are well established fields in sociology and economics,
organizational research has for a long time refrained from a stronger
focus on studies of religion. The corporate governance of religion is a
relatively new emerging field concerned with the governance mechanisms
by which religious organizations are controlled and directed, including,
Emerging Trends in the Social and Behavioral Sciences.
Robert Scott and Marlis Buchmann (General Editors) with Stephen Kosslyn (Consulting Editor).
© 2017 John Wiley & Sons, Inc. ISBN 978-1-118-90077-2.
1
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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
for example, the distribution of decision rights, responsibilities and rules
in religious organizations, the instruments for selection and election of
leaders for interest alignment and the monitoring of actions, and the
robustness of these mechanisms in the context of social, regulatory, and
market change. This essay aims to show that a comparison between the
governance mechanisms of religious organizations and contemporary
organizations may be fruitful. It cannot consider all forms of religious
organizations. While the most basic forms of communities of believers
comprise religious movements (e.g., the early Christian movement), denominations (e.g., the Roman Catholic Church), sects, and cults, the essay
concentrates on Roman Catholic monasticism. This rather narrow focus is
caused by the fact that evidence on other forms of religious organizations is
still rare.
ROMAN CATHOLIC MONASTICISM AS A PREDECESSOR OF MODERN
ORGANIZATIONS
In the Western world, the Roman Catholic Church is the oldest and most
enduring organization (Ekelund, Hébert, & Tollison, 1989; Ekelund, Tollison,
Anderson, Robert, & Davidson, 1996). The economics of religion has viewed
the Roman Catholic Church as a monopolistic “multidivisional” firm. This
type of firm is characterized by a central office that not only controls the most
relevant financial allocations and has the last word on strategic planning but
also allows its divisions a high degree of autonomy in matters of operation.
Around 500 A.D. the first Catholic orders were established (Schmidtchen &
Mayer, 1997). Rivalry and what can be described as “product differentiation” led to the emergence of numerous Catholic orders (Ehrmann, Rost, &
Inauen, 2013). A Catholic religious order is an organization, recognized by
the Roman Catholic Church, whose members strive to achieve a common
purpose through formally dedicating their life to God. Catholic orders
are parent institutions composed of local communities, in most cases of
monasteries. These local communities are embedded in a hierarchical
structure of geographic regions (e.g., congregations or provinces), the
order (e.g., headed by a superior general or a confederation), and the Holy
See. Religious orders are regulated by Church law, by the religious rule
they have adopted, and by their own norms (Rost, Inauen, Osterloh, &
Frey, 2010).
Religious orders can be viewed as sub-brands of the Roman Catholic
Church and analyzed as intra-brand competition within the Roman
Catholic Church distribution system (Ehrmann et al., 2013). The Roman
Catholic Church entered into license agreements with religious orders
(Davidson, 1995; Schmidtchen & Mayer, 1997). To get licensed by the
Introduction to the Corporate Governance of Religion
3
Church, religious orders had to estimate their profitability or to justify
their legitimacy. Under the Roman Catholic Church’s umbrella brand,
religious orders occupy niche markets by offering specialized products
and services under a sub-brand, and use identifiable brand names that
help to assure the customer of uniform product quality (Brickley & Dark,
1987). For example, some religious orders strictly isolate their members
from the outside world (e.g., Carthusians and Cistercians), whereas other
religious orders require their members to interact with the secular world
by teaching (e.g., Jesuits and Salvatorians), missionary work (e.g., Divine
World Missionaries and White Fathers), or social work (e.g., Franciscans and
Camillians) (Schwaiger & Heim, 2008). Put differently, the various religious
orders are something like McCafe and the Big Mac under McDonalds’
umbrella brand.
In many respects, Roman Catholic monasticism can be seen as a precursor of capitalism with its underlying governance structures, incentive
systems, and monitoring instruments. For example, Ekelund et al. (1996)
use the term franchise system to describe the governance structure of the
Medieval Church. An article by Davidson (1995) develops this idea further
by showing that the Cistercian Order can be seen as a vertically integrated
downstream “franchise system” of the medieval Roman Catholic Church.
Also, the analysis of the concept of purgatory within the medieval Church
has been identified as an innovative incentive system to appropriate rents
(Le Goff, 1986; Schmidtchen & Mayer, 1997), or the analysis of medieval
judicial ordeals revealed that it was an accurate monitoring instrument
to test accused criminals’ guilt and innocence (Leeson, 2012). Furthermore, as Weber (1958, 1973) points out, it was in monasteries where work
first assumed an ascetic value. Through the process of rationalization,
medieval monasteries were rapidly transformed into major institutions of
capitalist enterprise (Kieser, 1987). The income of monasteries came from
general commerce, which included selling their own crops, fish, game,
and grain, as well as books, holy water, and candles. It also came from
leasing, imposing market dues, and collecting penalties, fees for juridical
services, and toll charges for rivers and country roads (Smith, 2009). Indeed,
medieval monasteries can be viewed as “the most efficient production
organizations of that time” (Kieser, 1987, p. 104). Catholic orders with
their monasteries became enormously rich through their rational labor
organization and their work morale and, as a result and as illustrated
in Figure 1, spread from Europe throughout the world in a short period
(Rost & Grätzer, 2014; Schmiedl, 2011). The resulting wealth was a significant reason why governance mechanisms became this important: it was
not uncommon for abbots and even entire monasteries to live a life of
luxury.
4
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
2500
80
Number of Catholic
monasteries
Number of Catholic
orders
2000
70
60
50
1500
40
1000
30
20
500
10
0
529
629
729
(a)
829
929 1029 1129 1229 1329 1429 1529 1629 1729 1829 1929
Year A.D.
(1)
(2)
(4)
(3)
(5)
(b)
0
Introduction to the Corporate Governance of Religion
5
Figure 1 (a) The worldwide diffusion of Roman Catholic monasticism over time.
(b) (From the top left to the bottom right): Number of Catholic orders and
monasteries over (1) 500–1000 A.D. (228 monasteries in 13 countries); (2)
1001–1500 A.D. (2771 monasteries in 31 countries); (3) 1501–1700 A.D. (1909
monasteries in 59 countries); (4) 1701–1900 A.D. (1009 monasteries in 69
countries); (5) 1901–2012 A.D. (1746 monasteries in 115 countries). Data: Census
of all ever existing 4342 Catholic monasteries of 81 Catholic orders.
WHAT IS THE VALUE OF STUDYING ROMAN CATHOLIC
MONASTICISM?
The former arguments illustrate that Roman Catholic monasticism and
contemporary organizations have many similarities. A comparison between
the governance mechanisms of both organizational forms may be fruitful.
However, one could argue that, by its nature, the study of Roman Catholic
monasticism (and also of other forms of religious organizations) is necessarily stationed at the border between the past and the present, whereas
organizational studies—mostly conceived as the study of contemporary
organizations—is forward looking. Is it reasonable, therefore, for organizational scholars to concentrate on past triumphs and failure? It depends.
Merely looking backward for nostalgia′ s sake is of benefit for historians,
but it is of no particular benefit for organizational scholars. Of great benefit
for organizational scholars is, however, a keener understanding of the
governance mechanisms used in contemporary organizations by exposure
to the shortcomings and the advantages of past governance mechanism
used in religious organizations. In the following, three particular benefits
of studying the past will be illustrated by giving examples on the corporate
governance of Roman Catholic monasticism and by comparing it with
contemporary organizations. It will be demonstrated that studying the past
first allows us to see familiar situations or problems in a new light. Second,
studying the past can give us appreciation for the kind of governance
mechanisms that have staying power. Third, it can make abstract organizational theories more palatable, more understandable, and more interesting
(Ekelund & Hébert, 2013).
FAMILIAR PROBLEMS IN A NEW LIGHT: THE VALUE
OF BUREAUCRATIC RULES FOR ORGANIZATIONAL LEARNING
Studying the past allows us to see familiar problems in a new light. Both
monasteries and contemporary organizations need to secure an economic
6
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
foundation and need to deal with environmental complexity, for example,
due to technological shift, political upheaval, or differences in cultures
and norms within the organization. Monasteries impressively demonstrate
that organizational rules, as a primary feature of bureaucracy, are the main
enabler for organizational efficiency, for learning, and for survival under
environmental complexity. This is surprising because “nowadays the term
bureaucracy, at least in everyday language, is no longer linked to ‘rationality’
or ‘efficiency’, but to cumbersome, overregulated, and impersonal processes
that individuals are forced to adhere to” (Beck & Kieser, 2003, p. 794).
This neglect also becomes reflected in research: organizational rules were
a recurrent theme in the classical work of organizational scholars (Blau,
1955; Cyert & March, 1963; Weber, 1964 [1921]), but in the recent past
we find only a few studies explicitly dealing with organizational rules.
Monasteries shed new light on the importance of organizational rules in
contemporary organizations by showing that they help organizations to
improve efficiency, to innovate, and to deal with heterogeneous problems
and complexity.
History reveals that it was in the monastery where the rule-following
bureaucracy emerged as a consequence of the process of rationalization
(Weber, 1958, 1973). Around 323 A.D., the Egyptian Saint Pachomius set out
to design rules for all ascetic life (Kieser, 1987; Treiber & Steinert, 1980) with
the intention to bring together individual ascetics who did not have the
physical ability or skills to live a solitary existence in the desert. The rule of
Pachomius changed the existing view on work by stating that monks have
the duty to work because labor is the basis for the monks’ subsistence and
for charity, and thus enables them to live in the Spirit of Christ (Kieser, 1987).
In the following centuries, a number of religious movements, which later
became Catholic orders, were founded. Following Pachomius’s example,
they managed their affiliated monasteries by rules. “Though their Rules
varied considerably in details, the main themes remained the same: the
design of the monastic buildings, religious ceremonies, labor, and work
organization” (Kieser, 1987, p. 106).
For example, in the sixth century, Benedict of Nursia’s Rule—which
became the most influential one—was written down. The introduction of
bureaucratic rules and the redefinition of labor within these rules explain
why the early medieval monastery can be seen as a “perfect laboratory
for the production of an industrious, reliable person” (Kieser, 1987, p. 108;
Treiber & Steinert, 1980). In Benedict’s Rule, for example, directives contained construction plans of a monastery such as the arrangement of water,
the mill, and various crafts within the enclosure to avoid the monks’ straying
outside of its bounds; a sophisticated forecasting rule for the food needed,
which was concerned with precise enumeration of the goods, what to do to
Introduction to the Corporate Governance of Religion
7
secure deliveries in case of shortfalls, and how to distribute the food within
the monastery; or concepts of timing to ensure that everything would be
fulfilled at its proper time. According to Gimpel (1976), a “blind Cistercian
monk moving into any of the monasteries would instantly have known
where he was. In certain ways, the discipline imposed by Saint Bernard on
his monks—the rigid timetable, the impossibility of deviating from the Rule
without facing punishment—rings to mind the work regulations that Henry
Ford imposed on his assembly lines.”
Because of this rational organization, medieval monasteries developed
innovative management, production, and architectural methods such as the
art of planting orchards, improving fruit trees through grafting, breeding of
livestock, wine and beer making, and developing methods for heating and
sanitation (Kieser, 1987; McGrath, 2005, 2007; Melville, 2012). Handwriting
became a crucial art to provide blueprints of the monastic rule in order
to socialize new members in far-flung monasteries (Kieser, 1987). “This,
in turn, led to a differentiation of artistic and scientific professions within
the monastery and to a concentration of research and teaching in monastic
schools” (Kieser, 1987, p. 114). For example, the Franziscans became one of
the most influential late-medieval financial experts (Todeshini & Melucci,
2009). They created an economic key vocabulary in order to distinguish
between “good” fluid capital and “bad” fixed capital, or the Franziscan Luca
Pacioli wrote the first teaching book for double-entry bookkeeping (Kehnel,
2012). Because of bureaucratic rules in medieval monasteries, the process
of rationalization thus proceeded at a much faster rate than in other social
institutions of this time.
Organizational rules also explain why monasteries of some Catholic orders
survived longer, and here, in particular, under complexity or in times of
uncertainty (Rost & Grätzer, 2014). In general, each founder of a Catholic
order set up his own monastic rule. Also, the adoption of an already existing
rule to a new community was possible (Melville, 2012). Rost and Grätzer
(2014) used a sample of 4606 monasteries of 89 Catholic Orders over a
period of 1483 years and showed that, after 500 years, monasteries managed
by a large number of rigorous rules existed with a 20% higher likelihood
as compared to entities managed by a smaller number of rules and more
fuzzy definitions of problem areas. The results further indicate that a large
number of rigorous rules, in particular, improve organizational survival
under complexity and in times of uncertainty, that is, rigorous rules are, in
particular, helpful to manage entities of large and international diversified
orders, to manage geographically distant monasteries, or to extenuate
negative or positive spillover effects in the environment. According to
theories of organizational learning, organizational rules are repositories of
organizational knowledge and competence (Kieser, Beck, & Tainio, 2001;
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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
March, Schulz, & Zhou, 2000). Organizations learn from experiences, and
learning results in formal rules. Formal rules help the organization to avoid
current and anticipated problems by abiding by the rules. Rules allow
the transfer and accumulation of organizational experiences over time
and enable organizational members to solve problems in a highly flexible
manner (Beck & Kieser, 2003). From this point of view, “organizational rule
production is driven by experiences with organizational problems ( … ) A
rich supply of problems supports more intense rule production than a meager supply of problems” (Schulz, 1998, p. 852). It follows that governance by
bureaucratic rules helps organizations to deal with heterogeneous problems
and complexity.
GOVERNANCE WITH STAYING POWER: THE SOLUTION OF AGENCY
PROBLEMS IN CATHOLIC ORDERS
What separates good organizational design from bad organizational design?
Why did certain types of Catholic orders survive until the present long
after their emergence centuries before? Traditional organizational studies
have little time and no data for such issues, yet the answers have an
enormous impact on organizational theory and governance alternatives for
contemporary organizations. For example, in the last decades the corporate
governance of contemporary organizations has often been criticized for
excessive manager compensation and fraudulent bookkeeping (Jensen,
Murphy, & Wruck, 2004). It became clear that the exclusive trust in external
control mechanisms, as recommended in agency theory (Jensen & Meckling,
1976; Jensen & Murhpy, 1990), cannot prevent excessive risk taking and the
abuse of power in a satisfying way (Frey & Osterloh, 2005). The weaknesses
in current corporate governance practice suggest that it may be useful to
approach these issues from alternative perspectives. Catholic orders can be
viewed as pioneers of governance, and demonstrate that alternative models
may be more suitable to reduce agency problems. The great economic
success of numerous monasteries in medieval times led to the temptation of
misuse (Rost et al., 2010). There exist also more recent historical examples
about financial scandals in the church. In the early 1990s, the Church of England lost hundreds of millions of pounds in reckless property speculation by
Church Commissioners, who were established as a consequence of post-war
development of London and controlled the church’s investments (Lovell,
1998). As a reaction, sophisticated governance systems were established
within religious orders. A fast growing literature has studied how the
different Catholic orders have solved their agency problems.
First, monasteries are extremely robust organizations, and agency
problems are relatively small. For example, Rost et al. (2010) analyze
Introduction to the Corporate Governance of Religion
9
all Benedictine monasteries that ever existed in Baden-Württemberg,
Bavaria and German-speaking Switzerland. The findings indicate that,
on average, monasteries survived 460 years, and only a quarter of the
monasteries studied were unable to survive because of agency problems. Feldbauer-Durstmüller, Sandberger, and Neulinger (2016) replicate
these findings by analyzing all Benedictine monasteries in Austria.
The average lifespan of monasteries amounts to 558 years; only 3% of
the monasteries studied were unable to survive as a result of agency
problems.
Second, Catholic orders developed efficient governance mechanisms over
time to solve agency problems. For example, Inauen, Rost, Osterloh, and
Frey (2010) study the 896-year-old Benedictine monastery of Engelberg and
analyze whether monastic corporate governance prevents agency problems.
They searched the historical biographies of Engelberg to make a distinction
between “good” and “poor” abbots. Words and phrases such as “incompetent”, “dissipation of commodities”, “not up to his job”, or “irritating” were
classified as poor performance. Phrases such as “exemplary”, “energetic”,
or “outstanding” indicate good leadership. “Good” abbots have an average
tenure of 19.44 years, whereas “poor” abbots have an average tenure of only
7.54 years. Thus, poor monastic leaders were not able to install themselves at
the top of the monastery, even though they are essentially elected for life.
The monastic structures facilitate the dismissal of poor abbots because of
two mechanisms: external visitation, that is, the regular evaluation of the
monastery by the umbrella organization to detect irregularities and to support monasteries in trouble; and internal pressure because an abbot largely
depends on the goodwill of his convent. In line with these arguments, the
results show that only 11% of the “good” abbots were not democratically
elected, that is, their election was externally manipulated, whereas 67% from
the abbots associated with agency problems were not democratically elected.
Second, only 6% of the “good” abbots had a poor or inconspicuous track
record, while 79% of the poorly performing abbots had a poor or inconspicuous track record.
Third—even though the governance mechanisms between the various
Catholic orders largely differ—all Catholic orders build on the interplay between internal and external control mechanisms. For example,
Benedictine monasteries build on strong internal control through a common value system, careful selection, socialization, participation, and
monitoring and backed up their internal arrangements with external
arrangements, for examle, periodical monitoring or jurisdiction (Dobie,
2015; Feldbauer-Durstmüller et al., 2016; Inauen et al., 2010; Rost et al.,
2010). Internal control was complemented by external control mechanisms.
Accounting and accountability were an essential component in the life of
10
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
a healthy Benedictine monastery (Dobie, 2015). Knowledge of the financial
transactions of a house was extended beyond the immediate participants to
the wider monastic community. The process of visitation can be regarded
as an early attempt at quality control. The chapters was an important
instrument for the dissemination of improved accounting practices. In
contrast to the Benedictines, Dominicans do not have the obligation of
the stabilitas loci and the activities of the monasteries are largely outward
looking. The analysis nevertheless reveals similar governance mechanisms
as used by the Benedictines (Wirtz, 2016; Wirtz, Paulus, & Charlier, 2012;
Wirtz, Paulus, & Charlier, 2013). For example, Dominicans have always
devoted a lot of time to regular discussions to socialize their members.
They developed democratic practices which are reflected in the regular
holding of deliberative bodies at different levels (monastery, province,
and order), in the election and the regular rotation of “top managers”,
in the limited tenure of elected persons, or in the general chapter, which
covers the whole order and has a legislative function because it can amend
the constitutions. Finally, also the Jesuits use a combination of internal
and external control mechanisms (Wirtz, 2014). What fundamentally distinguishes the Jesuit governance from those of other religious orders is
that the Jesuits elect the Superior General, who directs the Jesuits for life
because his authority will be greater if he cannot be changed, because he
will be better known by all, and because he has experience in the role.
However, the very strong authority of the Superior General interacts
with an equally strong authority from the community. The community
is represented by delegates at all levels of the congregations (provincial
and general). The community does elect the Superior General, but the
community works with him as an equal force when it concerns important
questions other than the election. In other words, the Jesuit governance
builds on an equal power relationship between the “body” and the
“head”.
Insight into Abstract Theories: Securing Unique Knowledge by Colocation
of Decision Rights
When abstract organizational theories are presented in a historical context, it
makes them more palatable, more understandable, and more interesting. For
example, in general, organizations face the problem of controlling the actions
of their branch offices to ensure the continued value and uniqueness of their
trademark. For the central company, that is, the headquarters, the question
arises of how many decision rights and how much monitoring authority
should be maintained to assure product quality within its local branches
(Fama & Jensen, 1983). To answer this question, Jensen and Meckling (1995)
Introduction to the Corporate Governance of Religion
11
make a distinction between specific and general knowledge. They define specific knowledge as knowledge that is costly to transfer among agents, and
general knowledge as knowledge that is easy and cheap to move. Logically,
two ways for the colocation of knowledge and decision rights can be conceived. One is to move the knowledge to those with the decision rights; the
other is to give the decision rights to those who have the knowledge. Total
organizational costs are the sum of the costs due to lack of knowledge and
the costs due to the wrong use of information advantages. It depends on the
shape of both marginal costs curves whether more centralization or more
decentralization is appropriate.
Ehrmann et al. (2013) test this theory with a sample of 114 local communities of 20 religious orders of the Roman Catholic Church. Religious orders
are viewed as sub-brands of the Roman Catholic Church and their local communities as local branches. Ehrmann et al. (2013) posit that the production of
all goods with observable characteristics, that is, of search/experience goods
(for example such products as beer, herbs, farming, mission, or solidarity
with the poor), should be organized centrally because the knowledge
involved is easily available higher in the hierarchy of the religious order.
Vice versa, all credence goods (e.g., salvation goods like contemplation,
catechesis, saints, afterlife, or prayers) should be decentralized because
it requires specific knowledge, which is costly to transfer among agents.
The empirical findings give support for the hypothesis by showing that
the religious orders centralize their local communities the higher the
ratio of search/experience goods produced, and decentralize their local
communities the higher the ratio of credence goods produced.
OUTLOOK
Studies on the corporate governance of religion promise to enhance organizational studies by exploring how culture more broadly, whether through
religion or morals, affects the design and control mechanisms in organizations, by showing how governance mechanisms in organizations can be
modified to address questions about norms, values, and social capital, or
by generating information about governance mechanisms in “nonmarket”
organizations. A lot of research is still missing in the field. First, knowledge
on forms of religious organizations other than Roman Catholic monasticism,
including other denominations, religious movements, sects, and cults, is
necessary to generalize findings about governance mechanisms in order to
compare alternative forms of governance mechanisms or to understand how
culture and time affect governance mechanisms. Second, while a qualitative
design is helpful to understand the historical feature of corporate governance, large-scale quantitative evidence is more suitable to test the validity
12
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
of these features for social sciences. Large-scale quantitative evidence
is still rare in the field. Finally, current research focuses on a selective
choice of organizational theories. A variety of organizational concepts have
their early beginnings in religious organizations and could be tested. For
example, organizational diversity started in religious organizations because
being a nun was one of the few “occupations” available to women in the
Middle Ages. Religious organizations offer an excellent starting point for
neo-institutional theories because, during their history, these organizations
were exposed to different institutional settings including changes in state
borders, changes in dynasties, governments, popes, and, thus, changes in
institutional quality. Religious organizations allow us to study changing
views on organizational legitimacy: even though charity is a central topic
in all these organizations, it has been implemented very differently because
religious organizations are also answers to the varying needs of their times.
Finally, theories of radical paradigmatic change could be tested because
religious organizations survived, were founded, or died out in times of
transition from a paradigm in crisis to a new one, from which a new tradition
of normal science emerged.
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Introduction to the Corporate Governance of Religion
15
KATJA ROST SHORT BIOGRAPHY
Katja Rost is Professor of sociology at the University of Zurich. She studied
sociology and completed her PhD and Habilitation degrees in management
and organizational studies. Before moving to the University of Zurich, she
was an Assistant Professor for organizational sociology at the University of
Mannheim, and a Full Professor for management at the Friedrich Schiller
University, Jena. Her research focuses on economic and organizational sociology, for example, on corporate governance in contemporary organizations
and on the governance mechanisms in Catholic orders.
RELATED ESSAYS
Lived Religion (Sociology), Nancy T. Ammerman
Trends in Religiosity and Religious Affiliation (Sociology), Kevin J. Christiano
Institutional Change in American Religion (Sociology), Casey Clevenger and
Wendy Cadge
Trust and Economic Organization (Sociology), Karen S. Cook and Bogdan
State
Stability and Change in Corporate Governance (Sociology), Gerald F. Davis
and Johan S. G. Chu
The Sociology of Religious Experience (Sociology), Douglas Porpora
Religion (Anthropology), Benjamin Grant Purzycki et al.
The Institutional Logics Perspective (Sociology), Patricia H. Thornton et al.
Introduction to the Corporate
Governance of Religion
KATJA ROST
Abstract
Stationed at the border between the past and the present, the corporate governance
of religion is concerned with the governance mechanisms by which religious organizations are controlled and directed. Building on similarities between contemporary organizations and their predecessors in Roman Catholic monasticism, this essay
illustrates that studying the past can be of enormous benefit. It allows us to see
familiar problems in a new light: for example, bureaucratic rules—nowadays no
longer linked to efficiency—that emerged in Catholic orders and enabled organizational learning, innovations, and survival in uncertain environments. The study of
the past is also an appreciation for the kind of governance mechanisms that have staying power: Catholic orders can be viewed as pioneers of corporate governance and
show what kind of governance is suitable to reduce agency problems. Finally, when
abstract organizational theories are presented in a historical context, it makes them
more palatable, more understandable, and more interesting: the theory of the optimal
colocation of decision rights within the specific knowledge framework of organizations is supported in Catholic orders. They decentralize their local communities the
higher the ratio of credence goods produced, and centralize their local communities
the higher the ratio of search/experience goods produced.
INTRODUCTION
The secularization thesis—in the last century widely perceived as an
irrevocable fact—has these days become highly disputed (Iannaccone,
1998; Martı, 2014). The recognition of the continued relevance of religion
has reawakened interest in this subject. While the sociology of religion
(Davie, 2013; Johnstone, 2015) and the economics of religion (Iannaccone,
1998; Nelson, 2014) are well established fields in sociology and economics,
organizational research has for a long time refrained from a stronger
focus on studies of religion. The corporate governance of religion is a
relatively new emerging field concerned with the governance mechanisms
by which religious organizations are controlled and directed, including,
Emerging Trends in the Social and Behavioral Sciences.
Robert Scott and Marlis Buchmann (General Editors) with Stephen Kosslyn (Consulting Editor).
© 2017 John Wiley & Sons, Inc. ISBN 978-1-118-90077-2.
1
2
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
for example, the distribution of decision rights, responsibilities and rules
in religious organizations, the instruments for selection and election of
leaders for interest alignment and the monitoring of actions, and the
robustness of these mechanisms in the context of social, regulatory, and
market change. This essay aims to show that a comparison between the
governance mechanisms of religious organizations and contemporary
organizations may be fruitful. It cannot consider all forms of religious
organizations. While the most basic forms of communities of believers
comprise religious movements (e.g., the early Christian movement), denominations (e.g., the Roman Catholic Church), sects, and cults, the essay
concentrates on Roman Catholic monasticism. This rather narrow focus is
caused by the fact that evidence on other forms of religious organizations is
still rare.
ROMAN CATHOLIC MONASTICISM AS A PREDECESSOR OF MODERN
ORGANIZATIONS
In the Western world, the Roman Catholic Church is the oldest and most
enduring organization (Ekelund, Hébert, & Tollison, 1989; Ekelund, Tollison,
Anderson, Robert, & Davidson, 1996). The economics of religion has viewed
the Roman Catholic Church as a monopolistic “multidivisional” firm. This
type of firm is characterized by a central office that not only controls the most
relevant financial allocations and has the last word on strategic planning but
also allows its divisions a high degree of autonomy in matters of operation.
Around 500 A.D. the first Catholic orders were established (Schmidtchen &
Mayer, 1997). Rivalry and what can be described as “product differentiation” led to the emergence of numerous Catholic orders (Ehrmann, Rost, &
Inauen, 2013). A Catholic religious order is an organization, recognized by
the Roman Catholic Church, whose members strive to achieve a common
purpose through formally dedicating their life to God. Catholic orders
are parent institutions composed of local communities, in most cases of
monasteries. These local communities are embedded in a hierarchical
structure of geographic regions (e.g., congregations or provinces), the
order (e.g., headed by a superior general or a confederation), and the Holy
See. Religious orders are regulated by Church law, by the religious rule
they have adopted, and by their own norms (Rost, Inauen, Osterloh, &
Frey, 2010).
Religious orders can be viewed as sub-brands of the Roman Catholic
Church and analyzed as intra-brand competition within the Roman
Catholic Church distribution system (Ehrmann et al., 2013). The Roman
Catholic Church entered into license agreements with religious orders
(Davidson, 1995; Schmidtchen & Mayer, 1997). To get licensed by the
Introduction to the Corporate Governance of Religion
3
Church, religious orders had to estimate their profitability or to justify
their legitimacy. Under the Roman Catholic Church’s umbrella brand,
religious orders occupy niche markets by offering specialized products
and services under a sub-brand, and use identifiable brand names that
help to assure the customer of uniform product quality (Brickley & Dark,
1987). For example, some religious orders strictly isolate their members
from the outside world (e.g., Carthusians and Cistercians), whereas other
religious orders require their members to interact with the secular world
by teaching (e.g., Jesuits and Salvatorians), missionary work (e.g., Divine
World Missionaries and White Fathers), or social work (e.g., Franciscans and
Camillians) (Schwaiger & Heim, 2008). Put differently, the various religious
orders are something like McCafe and the Big Mac under McDonalds’
umbrella brand.
In many respects, Roman Catholic monasticism can be seen as a precursor of capitalism with its underlying governance structures, incentive
systems, and monitoring instruments. For example, Ekelund et al. (1996)
use the term franchise system to describe the governance structure of the
Medieval Church. An article by Davidson (1995) develops this idea further
by showing that the Cistercian Order can be seen as a vertically integrated
downstream “franchise system” of the medieval Roman Catholic Church.
Also, the analysis of the concept of purgatory within the medieval Church
has been identified as an innovative incentive system to appropriate rents
(Le Goff, 1986; Schmidtchen & Mayer, 1997), or the analysis of medieval
judicial ordeals revealed that it was an accurate monitoring instrument
to test accused criminals’ guilt and innocence (Leeson, 2012). Furthermore, as Weber (1958, 1973) points out, it was in monasteries where work
first assumed an ascetic value. Through the process of rationalization,
medieval monasteries were rapidly transformed into major institutions of
capitalist enterprise (Kieser, 1987). The income of monasteries came from
general commerce, which included selling their own crops, fish, game,
and grain, as well as books, holy water, and candles. It also came from
leasing, imposing market dues, and collecting penalties, fees for juridical
services, and toll charges for rivers and country roads (Smith, 2009). Indeed,
medieval monasteries can be viewed as “the most efficient production
organizations of that time” (Kieser, 1987, p. 104). Catholic orders with
their monasteries became enormously rich through their rational labor
organization and their work morale and, as a result and as illustrated
in Figure 1, spread from Europe throughout the world in a short period
(Rost & Grätzer, 2014; Schmiedl, 2011). The resulting wealth was a significant reason why governance mechanisms became this important: it was
not uncommon for abbots and even entire monasteries to live a life of
luxury.
4
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
2500
80
Number of Catholic
monasteries
Number of Catholic
orders
2000
70
60
50
1500
40
1000
30
20
500
10
0
529
629
729
(a)
829
929 1029 1129 1229 1329 1429 1529 1629 1729 1829 1929
Year A.D.
(1)
(2)
(4)
(3)
(5)
(b)
0
Introduction to the Corporate Governance of Religion
5
Figure 1 (a) The worldwide diffusion of Roman Catholic monasticism over time.
(b) (From the top left to the bottom right): Number of Catholic orders and
monasteries over (1) 500–1000 A.D. (228 monasteries in 13 countries); (2)
1001–1500 A.D. (2771 monasteries in 31 countries); (3) 1501–1700 A.D. (1909
monasteries in 59 countries); (4) 1701–1900 A.D. (1009 monasteries in 69
countries); (5) 1901–2012 A.D. (1746 monasteries in 115 countries). Data: Census
of all ever existing 4342 Catholic monasteries of 81 Catholic orders.
WHAT IS THE VALUE OF STUDYING ROMAN CATHOLIC
MONASTICISM?
The former arguments illustrate that Roman Catholic monasticism and
contemporary organizations have many similarities. A comparison between
the governance mechanisms of both organizational forms may be fruitful.
However, one could argue that, by its nature, the study of Roman Catholic
monasticism (and also of other forms of religious organizations) is necessarily stationed at the border between the past and the present, whereas
organizational studies—mostly conceived as the study of contemporary
organizations—is forward looking. Is it reasonable, therefore, for organizational scholars to concentrate on past triumphs and failure? It depends.
Merely looking backward for nostalgia′ s sake is of benefit for historians,
but it is of no particular benefit for organizational scholars. Of great benefit
for organizational scholars is, however, a keener understanding of the
governance mechanisms used in contemporary organizations by exposure
to the shortcomings and the advantages of past governance mechanism
used in religious organizations. In the following, three particular benefits
of studying the past will be illustrated by giving examples on the corporate
governance of Roman Catholic monasticism and by comparing it with
contemporary organizations. It will be demonstrated that studying the past
first allows us to see familiar situations or problems in a new light. Second,
studying the past can give us appreciation for the kind of governance
mechanisms that have staying power. Third, it can make abstract organizational theories more palatable, more understandable, and more interesting
(Ekelund & Hébert, 2013).
FAMILIAR PROBLEMS IN A NEW LIGHT: THE VALUE
OF BUREAUCRATIC RULES FOR ORGANIZATIONAL LEARNING
Studying the past allows us to see familiar problems in a new light. Both
monasteries and contemporary organizations need to secure an economic
6
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
foundation and need to deal with environmental complexity, for example,
due to technological shift, political upheaval, or differences in cultures
and norms within the organization. Monasteries impressively demonstrate
that organizational rules, as a primary feature of bureaucracy, are the main
enabler for organizational efficiency, for learning, and for survival under
environmental complexity. This is surprising because “nowadays the term
bureaucracy, at least in everyday language, is no longer linked to ‘rationality’
or ‘efficiency’, but to cumbersome, overregulated, and impersonal processes
that individuals are forced to adhere to” (Beck & Kieser, 2003, p. 794).
This neglect also becomes reflected in research: organizational rules were
a recurrent theme in the classical work of organizational scholars (Blau,
1955; Cyert & March, 1963; Weber, 1964 [1921]), but in the recent past
we find only a few studies explicitly dealing with organizational rules.
Monasteries shed new light on the importance of organizational rules in
contemporary organizations by showing that they help organizations to
improve efficiency, to innovate, and to deal with heterogeneous problems
and complexity.
History reveals that it was in the monastery where the rule-following
bureaucracy emerged as a consequence of the process of rationalization
(Weber, 1958, 1973). Around 323 A.D., the Egyptian Saint Pachomius set out
to design rules for all ascetic life (Kieser, 1987; Treiber & Steinert, 1980) with
the intention to bring together individual ascetics who did not have the
physical ability or skills to live a solitary existence in the desert. The rule of
Pachomius changed the existing view on work by stating that monks have
the duty to work because labor is the basis for the monks’ subsistence and
for charity, and thus enables them to live in the Spirit of Christ (Kieser, 1987).
In the following centuries, a number of religious movements, which later
became Catholic orders, were founded. Following Pachomius’s example,
they managed their affiliated monasteries by rules. “Though their Rules
varied considerably in details, the main themes remained the same: the
design of the monastic buildings, religious ceremonies, labor, and work
organization” (Kieser, 1987, p. 106).
For example, in the sixth century, Benedict of Nursia’s Rule—which
became the most influential one—was written down. The introduction of
bureaucratic rules and the redefinition of labor within these rules explain
why the early medieval monastery can be seen as a “perfect laboratory
for the production of an industrious, reliable person” (Kieser, 1987, p. 108;
Treiber & Steinert, 1980). In Benedict’s Rule, for example, directives contained construction plans of a monastery such as the arrangement of water,
the mill, and various crafts within the enclosure to avoid the monks’ straying
outside of its bounds; a sophisticated forecasting rule for the food needed,
which was concerned with precise enumeration of the goods, what to do to
Introduction to the Corporate Governance of Religion
7
secure deliveries in case of shortfalls, and how to distribute the food within
the monastery; or concepts of timing to ensure that everything would be
fulfilled at its proper time. According to Gimpel (1976), a “blind Cistercian
monk moving into any of the monasteries would instantly have known
where he was. In certain ways, the discipline imposed by Saint Bernard on
his monks—the rigid timetable, the impossibility of deviating from the Rule
without facing punishment—rings to mind the work regulations that Henry
Ford imposed on his assembly lines.”
Because of this rational organization, medieval monasteries developed
innovative management, production, and architectural methods such as the
art of planting orchards, improving fruit trees through grafting, breeding of
livestock, wine and beer making, and developing methods for heating and
sanitation (Kieser, 1987; McGrath, 2005, 2007; Melville, 2012). Handwriting
became a crucial art to provide blueprints of the monastic rule in order
to socialize new members in far-flung monasteries (Kieser, 1987). “This,
in turn, led to a differentiation of artistic and scientific professions within
the monastery and to a concentration of research and teaching in monastic
schools” (Kieser, 1987, p. 114). For example, the Franziscans became one of
the most influential late-medieval financial experts (Todeshini & Melucci,
2009). They created an economic key vocabulary in order to distinguish
between “good” fluid capital and “bad” fixed capital, or the Franziscan Luca
Pacioli wrote the first teaching book for double-entry bookkeeping (Kehnel,
2012). Because of bureaucratic rules in medieval monasteries, the process
of rationalization thus proceeded at a much faster rate than in other social
institutions of this time.
Organizational rules also explain why monasteries of some Catholic orders
survived longer, and here, in particular, under complexity or in times of
uncertainty (Rost & Grätzer, 2014). In general, each founder of a Catholic
order set up his own monastic rule. Also, the adoption of an already existing
rule to a new community was possible (Melville, 2012). Rost and Grätzer
(2014) used a sample of 4606 monasteries of 89 Catholic Orders over a
period of 1483 years and showed that, after 500 years, monasteries managed
by a large number of rigorous rules existed with a 20% higher likelihood
as compared to entities managed by a smaller number of rules and more
fuzzy definitions of problem areas. The results further indicate that a large
number of rigorous rules, in particular, improve organizational survival
under complexity and in times of uncertainty, that is, rigorous rules are, in
particular, helpful to manage entities of large and international diversified
orders, to manage geographically distant monasteries, or to extenuate
negative or positive spillover effects in the environment. According to
theories of organizational learning, organizational rules are repositories of
organizational knowledge and competence (Kieser, Beck, & Tainio, 2001;
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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
March, Schulz, & Zhou, 2000). Organizations learn from experiences, and
learning results in formal rules. Formal rules help the organization to avoid
current and anticipated problems by abiding by the rules. Rules allow
the transfer and accumulation of organizational experiences over time
and enable organizational members to solve problems in a highly flexible
manner (Beck & Kieser, 2003). From this point of view, “organizational rule
production is driven by experiences with organizational problems ( … ) A
rich supply of problems supports more intense rule production than a meager supply of problems” (Schulz, 1998, p. 852). It follows that governance by
bureaucratic rules helps organizations to deal with heterogeneous problems
and complexity.
GOVERNANCE WITH STAYING POWER: THE SOLUTION OF AGENCY
PROBLEMS IN CATHOLIC ORDERS
What separates good organizational design from bad organizational design?
Why did certain types of Catholic orders survive until the present long
after their emergence centuries before? Traditional organizational studies
have little time and no data for such issues, yet the answers have an
enormous impact on organizational theory and governance alternatives for
contemporary organizations. For example, in the last decades the corporate
governance of contemporary organizations has often been criticized for
excessive manager compensation and fraudulent bookkeeping (Jensen,
Murphy, & Wruck, 2004). It became clear that the exclusive trust in external
control mechanisms, as recommended in agency theory (Jensen & Meckling,
1976; Jensen & Murhpy, 1990), cannot prevent excessive risk taking and the
abuse of power in a satisfying way (Frey & Osterloh, 2005). The weaknesses
in current corporate governance practice suggest that it may be useful to
approach these issues from alternative perspectives. Catholic orders can be
viewed as pioneers of governance, and demonstrate that alternative models
may be more suitable to reduce agency problems. The great economic
success of numerous monasteries in medieval times led to the temptation of
misuse (Rost et al., 2010). There exist also more recent historical examples
about financial scandals in the church. In the early 1990s, the Church of England lost hundreds of millions of pounds in reckless property speculation by
Church Commissioners, who were established as a consequence of post-war
development of London and controlled the church’s investments (Lovell,
1998). As a reaction, sophisticated governance systems were established
within religious orders. A fast growing literature has studied how the
different Catholic orders have solved their agency problems.
First, monasteries are extremely robust organizations, and agency
problems are relatively small. For example, Rost et al. (2010) analyze
Introduction to the Corporate Governance of Religion
9
all Benedictine monasteries that ever existed in Baden-Württemberg,
Bavaria and German-speaking Switzerland. The findings indicate that,
on average, monasteries survived 460 years, and only a quarter of the
monasteries studied were unable to survive because of agency problems. Feldbauer-Durstmüller, Sandberger, and Neulinger (2016) replicate
these findings by analyzing all Benedictine monasteries in Austria.
The average lifespan of monasteries amounts to 558 years; only 3% of
the monasteries studied were unable to survive as a result of agency
problems.
Second, Catholic orders developed efficient governance mechanisms over
time to solve agency problems. For example, Inauen, Rost, Osterloh, and
Frey (2010) study the 896-year-old Benedictine monastery of Engelberg and
analyze whether monastic corporate governance prevents agency problems.
They searched the historical biographies of Engelberg to make a distinction
between “good” and “poor” abbots. Words and phrases such as “incompetent”, “dissipation of commodities”, “not up to his job”, or “irritating” were
classified as poor performance. Phrases such as “exemplary”, “energetic”,
or “outstanding” indicate good leadership. “Good” abbots have an average
tenure of 19.44 years, whereas “poor” abbots have an average tenure of only
7.54 years. Thus, poor monastic leaders were not able to install themselves at
the top of the monastery, even though they are essentially elected for life.
The monastic structures facilitate the dismissal of poor abbots because of
two mechanisms: external visitation, that is, the regular evaluation of the
monastery by the umbrella organization to detect irregularities and to support monasteries in trouble; and internal pressure because an abbot largely
depends on the goodwill of his convent. In line with these arguments, the
results show that only 11% of the “good” abbots were not democratically
elected, that is, their election was externally manipulated, whereas 67% from
the abbots associated with agency problems were not democratically elected.
Second, only 6% of the “good” abbots had a poor or inconspicuous track
record, while 79% of the poorly performing abbots had a poor or inconspicuous track record.
Third—even though the governance mechanisms between the various
Catholic orders largely differ—all Catholic orders build on the interplay between internal and external control mechanisms. For example,
Benedictine monasteries build on strong internal control through a common value system, careful selection, socialization, participation, and
monitoring and backed up their internal arrangements with external
arrangements, for examle, periodical monitoring or jurisdiction (Dobie,
2015; Feldbauer-Durstmüller et al., 2016; Inauen et al., 2010; Rost et al.,
2010). Internal control was complemented by external control mechanisms.
Accounting and accountability were an essential component in the life of
10
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
a healthy Benedictine monastery (Dobie, 2015). Knowledge of the financial
transactions of a house was extended beyond the immediate participants to
the wider monastic community. The process of visitation can be regarded
as an early attempt at quality control. The chapters was an important
instrument for the dissemination of improved accounting practices. In
contrast to the Benedictines, Dominicans do not have the obligation of
the stabilitas loci and the activities of the monasteries are largely outward
looking. The analysis nevertheless reveals similar governance mechanisms
as used by the Benedictines (Wirtz, 2016; Wirtz, Paulus, & Charlier, 2012;
Wirtz, Paulus, & Charlier, 2013). For example, Dominicans have always
devoted a lot of time to regular discussions to socialize their members.
They developed democratic practices which are reflected in the regular
holding of deliberative bodies at different levels (monastery, province,
and order), in the election and the regular rotation of “top managers”,
in the limited tenure of elected persons, or in the general chapter, which
covers the whole order and has a legislative function because it can amend
the constitutions. Finally, also the Jesuits use a combination of internal
and external control mechanisms (Wirtz, 2014). What fundamentally distinguishes the Jesuit governance from those of other religious orders is
that the Jesuits elect the Superior General, who directs the Jesuits for life
because his authority will be greater if he cannot be changed, because he
will be better known by all, and because he has experience in the role.
However, the very strong authority of the Superior General interacts
with an equally strong authority from the community. The community
is represented by delegates at all levels of the congregations (provincial
and general). The community does elect the Superior General, but the
community works with him as an equal force when it concerns important
questions other than the election. In other words, the Jesuit governance
builds on an equal power relationship between the “body” and the
“head”.
Insight into Abstract Theories: Securing Unique Knowledge by Colocation
of Decision Rights
When abstract organizational theories are presented in a historical context, it
makes them more palatable, more understandable, and more interesting. For
example, in general, organizations face the problem of controlling the actions
of their branch offices to ensure the continued value and uniqueness of their
trademark. For the central company, that is, the headquarters, the question
arises of how many decision rights and how much monitoring authority
should be maintained to assure product quality within its local branches
(Fama & Jensen, 1983). To answer this question, Jensen and Meckling (1995)
Introduction to the Corporate Governance of Religion
11
make a distinction between specific and general knowledge. They define specific knowledge as knowledge that is costly to transfer among agents, and
general knowledge as knowledge that is easy and cheap to move. Logically,
two ways for the colocation of knowledge and decision rights can be conceived. One is to move the knowledge to those with the decision rights; the
other is to give the decision rights to those who have the knowledge. Total
organizational costs are the sum of the costs due to lack of knowledge and
the costs due to the wrong use of information advantages. It depends on the
shape of both marginal costs curves whether more centralization or more
decentralization is appropriate.
Ehrmann et al. (2013) test this theory with a sample of 114 local communities of 20 religious orders of the Roman Catholic Church. Religious orders
are viewed as sub-brands of the Roman Catholic Church and their local communities as local branches. Ehrmann et al. (2013) posit that the production of
all goods with observable characteristics, that is, of search/experience goods
(for example such products as beer, herbs, farming, mission, or solidarity
with the poor), should be organized centrally because the knowledge
involved is easily available higher in the hierarchy of the religious order.
Vice versa, all credence goods (e.g., salvation goods like contemplation,
catechesis, saints, afterlife, or prayers) should be decentralized because
it requires specific knowledge, which is costly to transfer among agents.
The empirical findings give support for the hypothesis by showing that
the religious orders centralize their local communities the higher the
ratio of search/experience goods produced, and decentralize their local
communities the higher the ratio of credence goods produced.
OUTLOOK
Studies on the corporate governance of religion promise to enhance organizational studies by exploring how culture more broadly, whether through
religion or morals, affects the design and control mechanisms in organizations, by showing how governance mechanisms in organizations can be
modified to address questions about norms, values, and social capital, or
by generating information about governance mechanisms in “nonmarket”
organizations. A lot of research is still missing in the field. First, knowledge
on forms of religious organizations other than Roman Catholic monasticism,
including other denominations, religious movements, sects, and cults, is
necessary to generalize findings about governance mechanisms in order to
compare alternative forms of governance mechanisms or to understand how
culture and time affect governance mechanisms. Second, while a qualitative
design is helpful to understand the historical feature of corporate governance, large-scale quantitative evidence is more suitable to test the validity
12
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
of these features for social sciences. Large-scale quantitative evidence
is still rare in the field. Finally, current research focuses on a selective
choice of organizational theories. A variety of organizational concepts have
their early beginnings in religious organizations and could be tested. For
example, organizational diversity started in religious organizations because
being a nun was one of the few “occupations” available to women in the
Middle Ages. Religious organizations offer an excellent starting point for
neo-institutional theories because, during their history, these organizations
were exposed to different institutional settings including changes in state
borders, changes in dynasties, governments, popes, and, thus, changes in
institutional quality. Religious organizations allow us to study changing
views on organizational legitimacy: even though charity is a central topic
in all these organizations, it has been implemented very differently because
religious organizations are also answers to the varying needs of their times.
Finally, theories of radical paradigmatic change could be tested because
religious organizations survived, were founded, or died out in times of
transition from a paradigm in crisis to a new one, from which a new tradition
of normal science emerged.
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Introduction to the Corporate Governance of Religion
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KATJA ROST SHORT BIOGRAPHY
Katja Rost is Professor of sociology at the University of Zurich. She studied
sociology and completed her PhD and Habilitation degrees in management
and organizational studies. Before moving to the University of Zurich, she
was an Assistant Professor for organizational sociology at the University of
Mannheim, and a Full Professor for management at the Friedrich Schiller
University, Jena. Her research focuses on economic and organizational sociology, for example, on corporate governance in contemporary organizations
and on the governance mechanisms in Catholic orders.
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