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21 Adversity pursues sinners, But the righteous will be rewarded with prosperity. 


22 A good man leaves an inheritance to his children's children, And the wealth of the sinner is stored up for the righteous.


23 Abundant food is in the fallow ground of the poor, But it is swept away by injustice . 


24 He who withholds his rod hates his son, But he who loves him disciplines him diligently. 


25 The righteous has enough to satisfy his appetite, But the stomach of the wicked is in need.

Proverbs 13: 21 - 25

The Case for Christian Character



Perhaps the greatest single determining factor of business success – “the character of management”.

“How well managers manage and are managed determines whether business goals will be reached.  It also largely determines how well the enterprise manages worker and work. For the worker’s attitude reflects, above all, the attitude of his management.  It directly mirrors management’s competence and structure.  The worker’s effectiveness is determined largely the way he is being managed.” Peter Drucker, Management.

“No matter how exciting the business concept, most reviewers (venture capitalists) are reluctant to make any kind of commitment to a venture unless they are comfortable with those involved in it.  Venture capitalists have often commented that they invest in management, not in ideas or products.” The Ernst & Young Business Plan Guide.

“The Management team is the key to a successful business.” Pratts Guide to Venture Capital Sources.

Venture capitalists invest in management, rather than products.  As noted by Arthur Rock, principal of Arthur Rock & Company., a San Francisco-based Venture capital company that has funded such companies as Fairchild Semiconductor, Scientific Data Systems, Teledyne, Intel, Diasonics, and Apple Computer, “ The problem with those companies (that fail to 
perform up to expectations) and the ventures I choose not to take part in is rarely one of strategy.  Good ideas and good products are a dime a dozen.  Good execution and good management- in a word, good people-are rare.”  Arthur Rock, “Strategy vs. Tactics from a Venture Capitalist, Harvard Business Review, November-December 1987, p. 63

The case for character.

In the mid 1980’s, Michael Gerber author of the best seller, The E-Myth: Why Most Businesses Don’t Work and What To Do About It, after working with more than 10,000 businesses concluded that the primary reason so many companies fail is that 
people start companies or make investments in companies for all the wrong reasons.  Too many companies are created and funded solely to be sources of revenue with little if any regard to serving the consumer or solving a customer’s problem, need, want, or desire.

Additional evidence can be found in the public capital markets.  The most recent stock market collapse is reminiscent of the Dotcom debacle. Gerber’s conclusion is supported by one of the premier market research companies Forrester Research.  


It is instructive to remember that in April of 2000, several months before the bursting of the Dotcom bubble and corresponding capital markets starting in August of that year, Forrester Research predicted that many of the “” companies would eventually fail.  Not because of any fault with their technology, or an inability to secure additional financing, but simply because of the management’s lack of character.

                                 Dotcom CEO's Lack Depth and Acumen

"Apr 25 2000: In the wake of a global survey on CEO's, the CEO of Forrester Research has deduced that, for the most part, CEO's of Dotcom companies are hollow, shallow and motivated primarily by greed and jealousy.

The aim of the survey was to discern to what extent CEO's believe the Internet will affect their business and what their plans for the next ten years are. 2,500 responded and 20 percent of those were Dotcom CEO's.

In response to the survey results, George Colony, CEO of Forrester, commented, "The biggest revelation was the low quality of Dotcom CEO's when compared to the traditionalists. Many of the Dotcom CEO's lacked depth, experience and common 
business sense".

In addition, Dotcom CEO's tend to be in it for the short-term -the average time of commitment is three years, they are focused on going public rather than providing a service to the customer and their business acumen tends towards simplistic 
mantras such as "Be Like Amazon" and "B2B is the place to be".

According to Colony, there are four contributing factors to the new mentality. Firstly, the perceived need to move fast to gain first mover status, secondly, a prevalent jealousy and greed for money and status, thirdly, the willingness of the public market to invest in anything related to IT or the Internet and fourthly, the encouragement they receive from Venture Capitalists to think short-time and nurture get-rich-quick business plans.

Colony believes that as a result of this short-term thinking, companies are hollow and are not built to deliver value, to deal with competition, to be sustainable and or to last in the market at all. The result; a small number of well-built, well thought-
out companies will dominate the Internet and the hollow Dotcom will be forced to close down. This will be followed by a period of frenzied M&A's as the industry picks up the broken pieces".   

The similarities to our current economic crisis is obvious.  It appears that the Dot come companies simply reflected the values of their financial advisors that simply moved from Dot com after that bubble burst to mortgage securitizations and other similar instruments.

The “character of management” has long been acknowledged by successful investors as the single most determinative factor for a company’s success. Yet for a variety of reasons - in the name of regulatory compliance, political correctness, and anti-discrimination or in the search for short-term financial gain – the true character of management is now frequently 
ignored by many modern investors, bankers, and other financial intermediaries.

Credit history, Credentials, Compliance, Capital, are not indications of – or substitution for - character.

Investors are frequently seduced by hype, technology, demographics, or some other perceived “competitive advantage” no matter how temporary  - while giving little more than lip service when assessing the character of a company’s management.  On the other hand commercial bankers, the primary source of capital for most businesses, when making 
credit decisions rely upon the essential C’s of lending as a guideline – with “Character” supposedly being the most important factor. Yet when bankers speak of “Character” now, they usually mean one’s history of paying debts or a credit score.

In writing the forward to Bob Buford’s Half Time, Peter Drucker reminds the reader that in the 1930’s, in order to obtain a home mortgage in suburban New York, a reference from your church pastor was mandatory.  As late as the 1950’s, people that did not go to church could not get bank loans or decent jobs.

Now, in fact, it is no longer politically correct or legal for bankers to assess someone’s personal integrity or “moral” character.  The Equal Credit Opportunity Act of 1974 made it unlawful for lenders to consider religion in determining credit decisions: U. S. Code Title 15 Sec. 1691. Scope of prohibition Activities constituting discrimination. It shall be unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction on the basis of race, color, religion, national origin, sex or marital status, or age.

This explains much of our current economic crisis.

As bankers must now consider it, character deals with the borrower’s credibility and credit worthiness. This translates into whether the banker can trust the person or entity that is seeking the loan.   For example, if a potential borrower has a history of defaulting on loans, bankers will most often reject the loan application.  For bankers, “character” simply means that a borrow has had the historical good fortune to earn enough current income to keep liabilities current.  It gives no indication what the borrower did to earn the income, nor does it indicate how the borrow may respond to future events or conditions.

Credit represents accumulated experience of the member's habits in performing credit obligations. How has this sense of responsibility been demonstrated? A credit rating (or profile) is a picture of how an individual, repays borrowed money. A credit rating usually requires much information – employment, credit, public record information, personal inquiries, it does NOT included a borrower’s ethics, morals or, religion.

Consequently, according to the banking definition of “Character”, the banker wants a level of trust that the loan will be repaid, - with little apparent concerns with the lengths or methods the borrower may use to repay the loan.

What does this mean?  The single most determinant factor of a company’s long-term economic success is not even considered by most financial intermediaries and investors.  It appears that many fiduciaries have abdicated their responsibility as prudent stewards to evaluate the moral character of the companies in which they invest.  For a variety of 
reasons, they have delegated their responsibility to the rules and regulations of the government – with predictable consequences.

In the age before wide spread regulation of industry and financial markets, John Pierpoint Morgan, 1837-1913, financier extraordinaire, the most important person in American finance, a prominent lay leader in the Episcopal Church, built his colossal financial and industrial empire, not on collateral, capital, or credit scores but on character.

At the time when the burgeoning American economy grew to be the largest and most powerful in the world, he was the driving force behind America. But for Morgan, trust and integrity -- not wealth, power, or money -- were the standards by which he measured his colleagues and clients.  Known as "The Master of the Money,” regarded as the nation's foremost banker and one of the most successful industrialists, when asked by a 1912 U.S. Congressional banking committee if money was not the basis of commercial credit he replied,

"No sir, ... The first thing is character ... before money or anything else," he told the committee. "Money cannot buy it ... because a man I do not trust could not get money from me on all the bonds in Christendom."

From his earliest days Morgan was exposed both to international banking at the highest levels and to the ideals held by his father Junius Spencer Morgan and his partner George Peabody: that personal integrity was indispensable to financial success.   No doubt that he was also influenced by his maternal grandfather John Pierpoint, a lawyer, businessman, poet, and a Unitarian minister, believing that salvation is achieved by character - dependent upon deeds rather than creeds whose ethic derives primarily from that of Jesus Christ.

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