Vatican Inc.

 

Twenty-five years ago, Gillian Zacharias wrote an outstanding MA thesis for the School of International Affairs at Carleton University comparing the Catholic Church, its organization and management, to that of a multinational corporation. The thesis provides a background for current developments taking place at the Vatican head office, where the Cardinals have elected a new Pope, and in the Catholic Church throughout the world, where its subsidiaries are offering competing brands of the dogma of Catholic beliefs. Recent events suggest how a corporate type analysis helps in understanding what is going on.

Selecting a Pope

Prior to March 13th, 2013, much of the focus was on which of the voting cardinals would get two-thirds plus one of the eligible votes to become Pope. The 38 cardinals over 80 are disqualified from voting, although the newly elected, Cardinal Bergoglio, to be known as Francis I, at age 76, will likely lead the organization well into his eighties.

The voting was rumoured to be split between supporters of a Cardinal with either conservative or ultra conservative views. None were in favour of women joining senior management by becoming either Pope, Cardinal or Bishop, although some candidates suggested that there is room for women to take a greater role in the church. The glass ceiling of the Sistine Chapel appears to have none of the cracks which have appeared in public corporations. This means that the church, in its marketing, could alienate about half the people who might consider their religious brand. On the other hand, it does appeal to a niche market, males, who make up the other half the world’s population.

In Europe and North America, Catholicism is losing market share against competing religions, while in Africa and Latin America it is gaining members. The head office remains in Rome, which is understandable as the Vatican is recognized as a state, but Europe with 24% of the world’s Catholics has 34% of the cardinals – Italy alone has 28 cardinals and the rest of Europe 32. Meanwhile, Latin America has 41% of the Catholics and 11% of the cardinals. The fact that Francis I comes from Argentina may help to correct this. Due to sunk costs, I doubt the head office will be moved.

Head Office

One group of cardinals lives and works in the Vatican where they get to know each other, while those who travel to Rome, if they decide to run for office, or if they want to lobby for a papal candidate, have a harder job campaigning. In this sense, the church is more like a government or exclusive club than a corporation, as in the election of a pope the shareholders/church members have no say, leaving it to the present Cardinals, who have been appointed by former Popes to act as the electorate for a new one. The voting procedure is closely monitored and the ballots burned so that there is no direct way to undertake a recount.

Troubling Times

Headlines involving the Vatican in recent years include the relationship which priests have with each other, with young boys, women, and with members of their congregations. All this makes for salacious reading, which receives public airing and sometimes, but probably not often enough, leads to the disciplining of priests. In an era of social media and the willingness of insiders to leak information, which then becomes public knowledge over what has happened and how the church has responded, the church can no longer hide the facts. Social media has also allowed victims to liaise with each and to coordinate their responses. The message goes viral.

The other public relations disaster which the church has had to deal with relates to financial management or mismanagement, a situation not unknown to private sector firms. Publicly traded firms are forced to have published annual audits undertaken by independent auditors. Accounting firms and elected directors can be sued for releasing misinformation and carry insurance to limit their legal liability. (I don’t know whether church executives carry such insurance).

No similar disciplining forces relate to the Catholic Church (and similar religious organizations of other faiths) which are usually treated as charities for tax purposes, and where the Cardinals as senior managers are appointed by the Pope as CEO, who in turn is elected by the Cardinals. Charities are given tax breaks and do not make profits, however in any year their income may exceed their costs in which case the surplus (profit with a fairer name) can be used to construct buildings like the Sistine Chapel and support  lifestyles, not unlike executive perks in the private sector. Their surroundings and way of life becomes difficult for ecclesiastical management to explain to their congregations, especially those in poor countries in Africa and Latin America. Francis 1 may be an exception, as he chose to live in an apartment not the available palace in Buenos Aires, and he is a strong supporter of an Argentinian soccer team.

The dubious financial dealings of the Vatican have arisen a number of times. An example from the eighties involved The Institute for Works of Religion, known as the Vatican Bank, located inside Vatican City and managed by a CEO who reports to a committee of Cardinals and ultimately to the Pope

“The Institute was involved in a major political and financial scandal in the 1980s, concerning the 1982 $4.7 billion collapse of Banco Ambrosiano, of which it was a major shareholder. The head of IOR from 1971 to 1989, Archbishop Paul Marcinkus, was under consideration for indictment in 1982 in Italy as an accessory of the bankruptcy; however, he was never brought to trial due to the Italian courts’ ruling that the priest, being a high-ranking prelate of the Vatican, had diplomatic immunity from prosecution. As a private organization performing banking-like functions for religious institutions, it is not subject to public scrutiny.”

http://en.wikipedia.org/wiki/Vatican_Bank

Subsequently, Roberto Calvi, President of the Bank, was found dead hanging under Blackfriars Bridge in London. The week before, his secretary, after denouncing him, committed suicide by jumping from a window in Rome.

A balance sheet

In one sense the Catholic Church has substantial assets in terms of the buildings and furnishings at the Vatican, and throughout the world. Assets also include the goodwill it has generated over time, although adversely affected at times. Its liabilities include, amongst others, any outstanding debts from borrowing and for claims resulting from court cases.

However there is a problem with the tangible assets. If the Vatican or parts of it are put up as a guarantee to a lender, that lender may realize the difficulty posed if foreclosure is necessary. This arises for any church or historic building which offers its buildings as collateral for a loan. Tangible assets exist but may be difficult to use as in order to raise money.

Conclusion

As the earlier research discussed, many aspects of the Catholic Church are similar to those found in a profit driven multinational enterprise. It also has aspects of a political organization or club with its voting and appointments procedures. A combination of economic and political analytical tools helps to explain its operation.

While it is easy to focus on the church’s scandals past and present which make for good reading, Catholicism has been around for 2000 years, and as an organization it has outlasted governments and corporations by centuries. One indirect comparison is the British Empire which lasted for about 500 years, but was only a major world force for about 20% of this time. If anything, the Catholic Church is a survivor, and while it might benefit from learning how corporations operate, the reverse may apply and corporations learn from the Church’s survival in competition with other major religions.

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One Response to “Vatican Inc.”

  1. cmaule Says:

    Comment by Tony Halliday

    CATHOLIC CHURCH AS MNE – A MODEST PROPOSAL

    The analogies are quite striking and, I note, have also occurred in the Economist.
    Some further analogical threads can be tweaked.

    Religion: a Natural Monopoly

    First like all companies, and however much they may embrace ecumenicalism, the Church of Rome and in reality its competitors are happiest when operating as a monopoly. Without the distraction of competing brands, Rome would be able to concentrate on its core competences – preparing the brand’s consumers for a happy after- life by remaining loyal to the brand on this earth. The presence of competitors can only confuse customers and requires much marketing effort to maintain or enhance market share. Moreover the presence of rivals can also erode the mutually beneficial relationships that Rome has built up with Regulators. Protestant churches and the milder forms of Islam are generally less monopolistic and easily tolerate Catholic and other competing brands.

    Rome (and its rivals) can reinforce brand loyalty by marketing strategies, such as special events like baptism, confirmation, marriage and funerals that help reinforce loyalty to the brand among consumers. A consumer switching brands loses all the accumulated loyalty points.

    Multinational corporations produce annual reports of approximate veracity. In the case of the Church, how do the governing directors themselves or outside commentators measure their effectiveness. Although the Directors (and probably most of their customers) believe the brand delivers the best results in the hereafter, they have yet to devise a meaningful measure of success in this dimension. However, there are good proxy statistics showing how well the Church is faring in marketing its message to its earthly customers. Consumer satisfaction and the credibility of the brand can be deduced from Church attendance and more prosaically from the flow of funds from the faithful.

    The Catholic Church’s performance has in recent years in its home markets been disappointing. There has been a marked decrease in church attendance, particularly in Western Europe. However the brand continues to sell well in the developing world.

    According to the Directors, the brand’s success in new markets is the result of strong central quality control and reliability in product delivery through a well-trained sales staff. Not for them the unfortunate experience of Coca Cola and the introduction of “Classic”. They also think too risky the experiment of MacDonald’s in allowing subsidiaries more control over local marketing. Hence the refusal to dilute the brand to suit local taste, e.g. by permitting female ordination in markets where male priests with real vocation are becoming very scarce. However, in one respect the Church has shown a remarkable switch to local responsibility. Bishops and their synods, and not the curia in Rome, manage and settle litigation under local laws notably those that are held to be the direct result of Rome’s insistence on priestly celibacy.

    Regulatory Capture

    Back when, the Church was self- regulated in the papal states and German Archbishoprics, where it enjoyed temporal as well as spiritual sovereignty. But also, under aggressive Popes like Gregory, the Church was able to abuse its dominant position in the market through excommunication of particular unfriendly secular regulators (think Henry Hohenstaufen, Barbarossa and Henry the VIIIth).

    In the sixteenth century consumer tastes underwent radical change and Rome faced major dissatisfaction with its brand. This led in Northern Europe to mass defections to new entrants and wasteful price wars that threatened the viability of the Churches and Regulators alike. In 1648 the Regulators themselves agreed to an anticompetitive market sharing arrangement (the Peace of Westphalia). In England the Regulator decided to nationalize Rome’s real estate holdings and take over personal control of the local subsidiary (while retaining its local monopoly and brand)
    Rome did not meekly accept the Regulators Westphalian deal and wherever possible sought to enhance market share. This was facilitated in Britain and Ireland when regulation was relaxed and low-key marketing permitted with prudential safeguards to ensure an orderly market.

    The Imperial Age emerging in the 18th Century generally benefitted the Christian churches in their competition with local brands. Christian missionaries were encouraged to market to Hindu untouchables in India, animists in Africa, and Buddhists and Taoists in China). In Muslim states such as Turkey, the Catholic Church benefitted from the heft of France in securing rights for Maronites. In Uganda a fierce pricing war broke out between (French) Catholics and (British) Protestants that resulted in the local regulator (The Kabaka of Buganda) expelling the Catholics. This was followed by the insertion of a new regulator, the British colonial government. In West Africa, during the Scramble, the British and French Governments supported anti-competitive market sharing arrangements whereby the competing brands were accorded local monopoly powers in marketing and education. The Regulators were not necessarily captive – they saw that brand rivalries could lead to a breakdown of order to the detriment of all Christian brands and local Regulators.

    Now in the post Imperial age, Christian brands no longer enjoy any monopoly or even privileged positions. On the contrary, outside Western Europe and the Americas, Rome faces entrenched local rivals who either enjoy local monopolies or strong support from “captured” regulators. In Saudi Arabia the Royal regulators allow only Wahhabis to market and establish branches. In Russia the Kremlin uses truth in advertising laws to block the Pentecostals. In China the Government challenges Rome’s claim to appoint local Directors.

    Happily Rome has generally adapted well to the exigencies of modernity; more diverse and intense competition and, frequently, intrusive regulators. Where there is a level regulatory playing field its brand stands up well to those of its traditional Christian rivals as well as Muslims and Buddhists. Where it can, Rome is not above some regulatory capture of its own. In Ontario the Regulator has been persuaded to fund Rome’s advertising budget through educational grants.

    Combatting Regulatory Capture: A UN Convention on Religious Freedom.

    It is quite possible that the Directors of the Roman Church faced with restrictive regulation in some key markets would welcome an agreement among regulators, which unlike the Peace of Westphalia was pro-competitive. Such an agreement might take the form of a UN Convention open to all Members. What might such a Convention look like?

    1. General Principles
    (a) Member Governments recognize the right of all belief groups (Marxist and atheist as well as “religious”: to establish and be treated equally under domestic laws and Charters
    (b) Church and State should be kept separate;
    (c) No religious group shall enjoy reduced duties to the State – e.g. with respect to military service.

    2. Right of Establishment
    All Religious Brands should enjoy the same right of establishment (MFN and National Treatment) in matters such as:
    (a) Licensing
    (b) Purchasing property
    (c) Building and operating places of worship
    (d) Taxation
    (e) Opening and managing schools that meet the requirements of local curricula
    (f) Recruiting Directors and Agents from abroad
    (g) Owning and operating newspapers and broadcasters

    3. Regulatory Neutrality
    (a) There would be no “established” church (may be with grandfathering for the Churches of England and Scotland – see “Particular Exceptions”)
    (b) Subject only to avoidance of “hate” message and incitements to violence at home and abroad, free speech provisions should cover education and marketing in all media;
    (c) Civil and criminal Law will not discriminate against particular religious brands in family law, dress, dietary habits, and holidays
    (d) Some restriction might be permitted for reasons of peace order and good government, and health, (no public halal slaughter)
    (e) Any tax measure (e.g. charity status) or public subsidy directed to a faith group should be available on the same terms to any other group

    4. General Exceptions
    Obligation with respect to Entry and Regulation may be suspended to the extent necessary for (a) the maintenance of public order,
    (b) prevailing societal norms relating to decency (e.g limits Shia Ashura self-flagellation, or Tamil body piercing)
    (c) National Security and Foreign Policy
    The Introduction of new regulation introducing exceptions shall be subject to review by the judiciary.

    5. Particular Exceptions
    Contracting Parties would have the opportunity to negotiate a list particular exceptions at time of accession, but any amendments would need to approved by a waiver procedure requiring assent from 75% of Members.

    Although an Agreement among regulators, a parallel organization of religious bodies acceptable to 50% of Member Governments, would be established to debate issues and submit recommendations to the intergovernmental body. The Vatican is a State and could be a full member of the Intergovernmental body. The Catholic Church as the largest Christian group could expect to be a powerful voice in the religious assembly.

    These ideas might profitably be pursued by and doubtless improved upon by the newly appointed Ambassador for Religious Freedom.

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