Building Moral Courage: How Leaders Resolve Economic and Social Tensions
While progress was made toward stakeholder capitalism, we are taking a few steps back, which will likely continue during the next two to four years. Traditional capitalism emphasizes shareholder value above all else. Today's responsible leaders increasingly recognize the value to a broader set of stakeholders – employees, customers, communities, and the environment. This evolution brings new tensions between profit and purpose, business and society, and stability and change.
For-profit social enterprises sit at the forefront of this transformation. These organizations deliberately pursue both financial sustainability and social impact, making them natural laboratories for studying how leaders navigate competing demands. Through in-depth interviews with 14 social enterprise executives, we uncovered patterns in how these leaders develop and deploy moral courage.
The Moral Imperative
Interestingly, the stakeholder-focused view traces back to Adam Smith, traditionally seen as capitalism's founding father. While many know Smith for "The Wealth of Nations," his earlier work "The Theory of Moral Sentiments" argued that an economic system should serve moral ends. Smith believed in the importance of sympathy, which we call empathy today. Sympathy is a way to imagine the impacts of our decisions and actions on those different than ourselves. Imagining the circumstances and potential outcomes brings an understanding without having a close relationship with those impacted. Using our moral imagination enables understanding without bias arising from a relationship, an effective practice for ethical conduct.
This historical context proves remarkably relevant today. We found that successful social enterprise leaders embody these principles through what they call "steeliness," a steadfast commitment to understanding diverse perspectives while remaining true to their mission.
Three Core Tensions
Our study identified three fundamental tensions that social enterprise leaders must navigate:
1. Profit vs. Purpose
Rather than seeing these as opposing forces, effective leaders view profit as enabling purpose. One participant noted, "It becomes much more about how your values get impacted by financial decisions, less about purpose versus profit." Many found that staying true to purpose actually drove better financial outcomes. One CEO described how their company only became profitable after shifting focus from finances to mission.
2. Business vs. Society
Leaders emphasized using organizational values rather than personal ones to guide engagement with social issues. They distinguished between political matters and moral imperatives affecting their stakeholders. Clear communication and open dialogue proved essential when taking stands on societal issues.
3. Stability vs. Change
While social enterprises inherently drive change, leaders recognized the need to balance transformation with organizational stability. They described needing both "open heart and protected," which is having the courage to understand current systems while remaining open to change. Many adopted a co-creation approach, bringing stakeholders into the change process.
The Moral Courage Framework
Our research's indispensable contribution is a practical model for developing moral courage capacity, called the "moral sentiments trilogy." This framework consists of three interdependent practices:
1. Narrative Curiosity
This practice involves actively seeking to understand different stakeholder perspectives through deep listening and inquiry. Rather than just imagining others' viewpoints, leaders directly engage with those affected by decisions. They make "tell me more" a habit and ensure diverse voices are present in decision-making.
2. Unafraid Openness
Leaders must willingly absorb new viewpoints without becoming defensive. This requires leaving comfort zones to learn from those with different perspectives. As one participant noted, "My whole life is running towards the edges because that's where the juice happens. That's where the growth happens."
3. Outcome Ideation
This involves visualizing potential impacts of decisions across stakeholder groups. Leaders use collaborative scenario planning to understand possible futures and their ethical implications. They hold multiple possible outcomes simultaneously while seeking creative and ethical solutions that serve diverse interests.
Building Moral Courage Capacity
Engage three practices for greater moral courage within your organization to tackle challenging innovations and strategies.
Building Moral Courage in Practice
Our research revealed several practical insights for developing moral courage:
Start with Self-Awareness
Leaders emphasized the importance of self-reflection and what one called "the mirror test," being able to feel good about decisions at day's end. As one participant noted, "Courage will win in the end. I feel like I have been able to give a lot, and somehow there's a moral currency that comes back to me in feeling good."
Embrace Productive Tension
Rather than avoiding friction, successful leaders lean into it constructively. They view tensions as opportunities for growth and innovation. One participant described this as "enlightened disruption," finding creative solutions beyond the edge of established approaches.
Build Creative Capacity
Moral courage development isn't just individual; it requires building creative and collaborative capacity within organizations and stakeholder communities. Leaders described creating environments where people feel safe engaging with differences and contributing to change.
Focus on Learning
The research found that effective leaders maintain a learning mindset. They're willing to adapt when new information emerges and view setbacks as opportunities for growth. This flexibility helps them navigate complex situations while maintaining ethical principles.
The Path Forward
As environmental and social pressures intensify, moral courage will become increasingly vital for business leaders. The research suggests several key takeaways:
Moral courage can be developed systematically through specific practices and processes.
Balancing competing demands requires both principle and pragmatism.
Effective change requires engaging diverse and edge perspectives.
Leadership identity forms through repeatedly facing difficult choices.
Organizational culture shapes capacity for moral action.
Perhaps most importantly, our study demonstrates that pursuing profit and purpose isn't just idealistic; it's practical. One participant observed, "The long-term game almost always favors doing the right thing over doing the more profitable thing."
Summary
By developing moral courage capacity, leaders can better navigate the complex tensions of modern business while creating sustainable value for all stakeholders. The moral sentiments trilogy offers a practical framework for this vital leadership development.
In an era of mounting social and environmental challenges, this research provides timely guidance for leaders seeking to make a positive impact while building successful organizations. The path forward requires courage, but it's a capacity we can cultivate deliberately through practice and commitment to serving the greater good.
Note:
At a time when businesses face mounting pressure to balance profits with purpose, our study reveals how successful social enterprise leaders cultivate moral courage to navigate complex economic and social tensions. The research was conducted by Candace Bloomquist, PhD and me (Jon Mertz, EdD), and it offers a practical framework for developing moral courage - an essential capacity for modern business leaders. Dr. Bloomquist served as my dissertation chair.
To read the full study, please read it in the Open Journal of Leadership.