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Guest opinion: Highest-bar ethics — Church or church members?

By Brad Oates - Special to the Standard-Examiner | Mar 18, 2023

With the recent news about The Church Of Jesus Christ Of Latter-day Saints (“Church”) and Ensign Peak Advisors (the Church’s affiliated investment advisor) settling with the SEC over financial reporting practices and paying a $5 million fine, there are a number of legal and business professionals associated with the Church and its institutions (particularly BYU) that are having to reconcile something they have not had to reconcile before; namely, the Church’s actions are as much a reflection, positively and negatively, on the reputations of its members, as vice versa. This truism has certainly rung true for me regarding my reputation relating to professional ethics.

I have worked closely with the BYU Marriott School (particularly, with esteemed professors Brad Agle and Eva Witesman) on a number of business ethics initiatives; and was co-chair of a Wheatley Institution Ethics Council. Dr. Agle and Dr. Witesman also asked me to be a co-author with them in writing a chapter on LDS conscious capitalism that will be in a faith-based book centered on social economics ethics. As a BYU Law School graduate (class of ’82 ), I have worked with the BYU Law School Alumni Organization to help the Law School become a recognized Top 20 Law School by emphasizing its academic reputation for professional legal ethics.

As a banking professional, I have worked closely with banking regulators to help resolve over 50 failed bank situations, many of which failed because of bad lending practices … and outright fraud. Additionally, as a professional governance advisor, I currently counsel companies on corporate governance best practices, particularly governance oversight of enterprise risk management, including regulatory compliance.

I also feel an additional responsibility to be an “ethical professional” from being a former BYU football team captain and All-American collegiate football player (1976) and having a professional football career in the NFL with the Cardinals, Lions, Chiefs, Bengals, Packers, where my associations with BYU and the Church were publicly noted. It is truly an understatement to say I feel an immense responsibility to represent the Church with the highest-bar professional, and personal, ethics. And I know many other legal and business professionals associated with the Church feel the same way.

But, how should one feel when the Church’s actions potentially reflect negatively on one’s reputation for trying to be an ethical professional … as could happen from this SEC settlement? It is understandable, to me, the Church wanted a measure of confidentiality regarding the 13-F investment portfolio managed by Ensign Peak. I, personally, support the “reserve purpose” of the Church’s investment portfolio and investments in highly liquid stocks. But we cannot ignore the manner in which the investment portfolio confidentiality was structured. And I believe we cannot make an excuse the investment portfolio was structured, and managed, based on legal advice … that turned out to be not so “advisable.”

From a professional standpoint, I have had to acknowledge to others, with great disappointment, that the highest-bar ethical standards were seemingly not met in the way the Church’s 13-F investment portfolio was structured and managed. I admittedly do not know all the facts involving Ensign Peak. And it may be that a full understanding of all the facts might mitigate some of my disappointment. But I think a bigger question from the Church’s settlement with the SEC remains to be answered. “As Church members, how should we feel, and what should we do, when the Church’s institutional actions seem to not reflect the highest-bar ethics?”

I can understand if some legal and business professionals now feel they need to “professionally distance” themselves from the Church because of the SEC settlement … even if they remain faithful members otherwise. It takes decades to build a professional reputation for trying to live up to the highest-bar ethics. Conversely, it only takes one ethical lapse (ethical failure?) by yourself, or someone you closely identify with, to diminish your reputation for being an ethical professional. For me, “reputation capital” is more valuable than “financial capital.”

I have as many reasons as anyone to professionally distance myself from the Church because of the SEC settlement … if not more. But I won’t. Why? Becausethe Church has made a positive difference in my life. It has helped me become a better man than I otherwise would be, particularly in building trusted relationships with family, friends, professional colleagues and my community. So I won’t quit trying to make a positive difference to the Church.

I won’t pretend to speak for those who feel they need to distance themselves from the Church to protect their professional reputations. I will only speak for myself here. Criticize Church leaders, if you will, for the Church’s actions noted in the SEC settlement. I will not … for the same reasons I won’t make an excuse for, or minimize, the Church’s 13-F investment portfolio being structured, and managed, in a way that is not allowed under SEC regulations. The “regrettable mistakes” acknowledged by the Church in the SEC settlement cannot be dismissed as merely technical violations. The “Cloned LLC” structure, and opaque management control, of the Church’s 13-F investment portfolio was, to me, an example of “ethical failure” to uphold the highest-bar ethics. And we have to be brutally honest with ourselves that it is just that … an ethical failure. But I have learned in my life, we can become better by learning from life’s seeming “failures.”

In my professional opinion, from what I have read thus far, this type of ethical failure appears to be a “governance oversight failure,” similar to the governance oversight failures we see all too often in the corporate world. By this, I mean that given the magnitude for potential reputational harm, there should have been at least two levels of oversight within the Church’s governance structure overseeing Ensign Peak’s actions (in addition to Church auditing department oversight), where oversight committees with delegated governance oversight authority and responsibility asked these three fundamental questions:

1. Are these actions in complete harmony with the mission of the Church?

2. Do these actions meet the highest-bar ethical standards that should be upheld?

3. Could these actions reflect negatively on members of the Church in some way?

Ideally, each oversight committee would have three oversight members, and each member would be specifically responsible for thoughtfully considering one of the above oversight questions in an expanded way.

I feel certain that if these oversight questions had been asked and answered … with a view to uphold the highest-bar ethics … the Church’s investment portfolio would have been structured and managed in full compliance with SEC regulations, notwithstanding any legal advice the investment portfolio “could” be structured in a way to avoid aggregate control reporting. The Church leaders I know would have, absolutely, required full compliance with SEC regulations if rigorous governance oversight policies and procedures were fully in place and strictly followed as designed.

I leave it to Church leaders to take the appropriate actions to prevent this type of governance oversight failure from happening again. And, while the Church may consider the “matter closed,” members of the Church cannot, and should not, consider the “matter closed” as it relates to our personal and professional lives. Let me explain.

Many view the Church as a top-down hierarchical institution … with Church leaders teaching Church members to “be honest in all things,” and Church members, then, trying to live up to Church expectations as faithful members. But, maybe this view misses the mark? This top-down hierarchical view of the Church is a “lesser law” construct. The “higher law” is a bottom-up self-governing community of Church members that hold themselves primarily responsible for living up to the highest bar ethical standards … even if the institutional Church (sometimes) falls short of those same standards. And this gets to the core question for us to answer as members of the Church: “How should we feel, and what should we do, even if the institutional Church seemingly falls short of the highest-bar ethics at times?”

Simply put, we as members of the Church need to feel an increased responsibility to live up to the highest-bar ethics in our personal and professional lives … even if the Church sometimes makes regrettable mistakes as an institution.

I acknowledge it may not be easy to reconcile “mistakes” in the institutional Church … past, present or future. But doesn’t being reconciled to Christ also mean reconciling our “mortal natures” that are imperfect at times … with His Church’s “institutional nature” that is imperfect at times too? To me, the word “reconciled” is just another way to express a path of progression to “Godly perfection” by learning from one’s own imperfections and mistakes … or those of others. And I say this without minimizing the seriousness of the mistakes that were made in how the Church investment portfolio was structured and managed.

I believe the atonement of Jesus Christ and His perfection covers a broader and deeper multitude of imperfections and mistakes than many of us fully understand. This “higher law” understanding has also helped me better reconcile some of the more difficult history and doctrine of the Church that can otherwise cause faith doubts.

I invite every legal and business professional associated with the Church to join me in making a greater commitment to live up to the highest-bar ethics in our personal and professional lives. I will make a greater commitment to uphold the highest-bar ethics because of my faith in Jesus Christ … and, more importantly, His faith in me.

Just as Christ can help good men and women become better, so too can a good Church become even better when its self-governing members become even better. The actions of the Church and its members do, indeed, reflect on each other … both positively and negatively. In that sense, living up to the highest-bar ethics is a “sacred responsibility” and should also be a “shared commitment.”

Brad Oates is chairman of Stone Advisors, a business advisory firm headquartered in Dallas, Texas. He is a husband, father, grandfather, son, brother and uncle, and a member of The Church Of Jesus Christ of Latter-day Saints.


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