Faith Integration

Running head: FAITH INTEGRATION

FAITH INTEGRATION 4

Abstract

What is a business run without Christian principles? Can it be successful and serve its customers, employees, and community? The authors provide a detailed analysis of these questions in the following paragraphs. Regardless of the organizational and capital structures, the integrity of the financial proformas creates trust and transparency among all the different layers of the business; internal and external. The Bible provides key points on the behaviors, thinking, and vision one should have to operate a business effectively, by creating a positive impact on the surrounding ecosystem. Following, the authors provide a correlation on the topics of corporate forms and function, financial statement integrity, and debt to the principles exposed in the Bible.

Corporate Forms and Functions

Corporations can be structured in many different ways, but no matter how one is organized, this structure is an integral part of any success the corporation may achieve (Brealey, Myers, & Marcus, 2018, p. 9). In Paul’s first letter to the Corinthians, he tries to convey the importance for the Church to organize and structure itself utilizing the distinct, varying spiritual gifts of each Christian within that structure. 1 Corinthians 12:12 (NIV) states: “Just as a body, though one, has many parts, but all its many parts form one body, so it is with Christ.” In this same way, a corporation must organize itself in the most advantageous way for that company and at the same time best utilize the distinct, varying gifts its management team and skilled workers bring to the table. Brealey, Myers, and Marcus (2018) explain that a corporation is a “distinct, permanent legal entity” that may be privately owned or have its shares traded in public markets (p. 9). While diverse and alternative corporate forms, governance, and company objectives are becoming increasingly more common, the basic goal of every corporation is to generate value by maximizing the positive impact on its stakeholders while limiting all negative impacts (Boeger, 2018, p. 10).

The smallest of the corporate structures is the sole proprietorship (Booth, 2003, p. 1434). The sole proprietor can be viewed as being much like the temple of God that is the individual Christian. Each Christian is responsible for his or her own actions, and in this same way, the sole proprietor is legally, personally responsible for any debt their business may accrue (Brealey, Myers, & Marcus, 2018, p. 9). At the opposite end of the spectrum, the general corporation is much more similar to a large church with many members. A large corporation has a board of directors, executive officers, and perhaps hundreds of thousands of shareholders (Brealey, Myers, & Marcus, 2018, p. 9). In this same way, the Church is structured with a lead pastor, perhaps an array of assistant pastors, a “board” made up of deacons and elders, and many “shareholders” who are members of the Church. The Bible frequently speaks of the importance of working together as a team for the betterment of the individual and the Church as a whole. Ecclesiastes 4:9-10 (ESV) says: “two are better than one because they have a good reward for their toil. For if they fall, one will lift up his fellow. But woe to him who is alone when he falls and has not another to lift him up!” This verse is a perfect example of how the structure of the Church, as well as that of the corporation, is meant to work successfully. The Church has been one of the most influential organizations worldwide over the last 2,000 years. It is easy to see why many of the most effective corporations have utilized similar structures.

The Integrity of Financial Statements

Integrity is defined as being honest and having strong moral principles. In addition, people’s actions and positions under difficult circumstances reflects their integrity (Toledo, 2006). Financial statements are reports and records that describe the economic position of a business. In addition, financial statements are used by the managers for decision making. Also, the statements are presented to investors and creditors for investment purposes. However, managers can have an influence on issuing misleading financial statements for their own or potential shareholder benefits. (Anderson, Mansi, & Reeb, 2004). A study which was conducted by Kiattikulwattana (2014), reveals that firms with or without managers responsibility of financial statements, tend to manipulate their earnings by reducing their expenditures or increasing their production to show a better financial position of the company in the market. Therefore, unfortunately, the integrity of financial statements is not consistent in all of the companies and investors should be more careful about their investing decisions.

Companies with honest and unbiased financial statements have higher ethical and moral values. The honest representation of financial statements helps investors and creditors make better decisions which are detrimental to the future economic positions of any organization. On the other hand, companies with manipulated financial statements, mislead their stakeholders and potential investors with false information. As it is mentioned in Luke 6:31, “Do to others as you would like them to do to you.” Financial managers and accountants should always provide accurate financial statements to their users even in tough situations since they are part of the company and they would not like it if someone took advantage of their trust and mislead them with inaccurate information.

The Debt Villain

Many companies in the airline, utilities, real estate development, steel, and chemical industries rely heavily on debt. Through our discussion of financing, we understand that financial managers frequently manipulate the firm’s securities to ensure the company’s market value is maximized and shareholders are provided the most beneficial gains. According to Modigliani and Miller’s (MM’s) debt-irrelevance proposition, we cannot manipulate the capital structure to affect the firm’s market value positively. Furthermore, MM’s approach assumes that “either passive debt management with predetermined debt levels or active debt management with capital structure targets is applied” to the firm’s financial strategy (Dierkes and Schafer, 2017). While MM’s stance is debatable, it is valuable in that it sheds light on the idea that the cost of acquiring debt is less than the cost of equity which, can place significant financial risk on a firm.

While the Bible does not condemn debt, it urges that debt be acquired responsibly and paid off quickly. Scripture highlights that “when you are in debt to another, you enter into a slave/master relationship with your creditor” (Proverbs 22:7). Therefore, it is important for individuals to, “pay to all what is owed to them” and also give to others that are less fortunate (Romans 13:7). While beneficial, “the more firms borrow, the higher the odds of financial distress,” which can ultimately result in bankruptcy (Brealey, Myers, & Marcus, 2018, p. 491). A plausible solution for firms is for financial managers to ensure adequate financial slack exists. Additionally, internal financing options should be exhausted prior to searching for external options which carry more threat. If internal financing options are available, further business opportunities can be funded, and capital shortages can be alleviated (He, Chen, & Hu, 2019).

Conclusion

Operating a business under Christian principles creates trust and transparency with everyone involved; including customers, partners, and employees. When one focuses on the longevity of a business, it cares to operate with integrity and honesty, without hesitation. A great business follows what one learns from Ecclesiastes 4:9-10: “two are better than one because they have a good reward for their toil. For if they fall, one will lift up his fellow. But woe to him who is alone when he falls and has not another to lift him up!” A successful business is one that follows and applies the Christian principles at all times, regardless of the cost.

References

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Booth, R. A. (2003). Form and Function in Business Organizations. The Business Lawyer, 58(4), 1433-1448. doi:10.2139/ssrn.378740

Dierkes, S., & Schäfer, U. (2017). Corporate taxes, capital structure, and valuation: Combining

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He, Y., Chen, C., & Hu, Y. (2019). Managerial overconfidence, internal financing, and

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