Aristotle’s entrepreneurial ethics

Aristotle’s entrepreneurial ethics

“Learning mutual esteem and trust, without which nothing can happen, takes time – no crisis can teach us that.” Costas Petropoulos, the 78-year-old owner of Petros Petropoulos SA, a Greek company nearing its centenary, is the Platonic ideal of the philosopher-businessman. His firm, which used to make car engines, trucks and tractors, but now mostly represents foreign manufacturers (of cars, outboard motors, lubricants), has recently become a favorite among international investors.

A few weeks ago, the Jersey-based hedge fund Brevan Howard became the third foreign investor to snap up shares in the Athens-listed company, buying up 8.15 percent of its share capital. I visited the company’s main offices in the Greek capital to find out why.

“Aristotle said that virtue is a habit, not an act,” Petropoulos explains, warming to his theme. “What is magical is that the change from an outward behavior of lack of esteem to one of esteem ends up actually creating mutual esteem. Here, for example, you are not allowed to interrupt people. I have a little wooden gun with a red rubber bullet. When I was still chairman, I would shoot it at anyone who interrupted. Well, people stopped interrupting – it became a habit. You develop the right habits and you become virtuous. Just like Aristotle predicted.”

In the context of business, the Stagirite’s teachings have led Petropoulos (a Harvard Business School alum) and his brother Yiannis – the current CEO, with whom he’s been running Petros Petropoulos since 1970 – to focus ardently on corporate governance. That’s the aspect of the firm that Brevan Howard’s people were most interested in, Costas Petropoulos tells me.

“The reason we placed such emphasis on it,” he explains with a half-smile, “is that my brother and I were lucky enough not to have any children. So 25 years ago we considered the issue of succession, of how the company would outlive us. That’s why we decided to become a publicly traded company – not because we needed the money, but because of the discipline of transparency that comes with it.”

Around that time, with the help of an outside adviser, and with staff participation in the deliberations, they began a process of fundamental restructuring of the company, in order to create clear structures of responsibility and accountability. The transition, he admits, was “not smooth.”

“We lost many good colleagues, because many people cannot take full responsibility and evaluation.” The fear of freedom, I observe. “Yes! Precisely… But despite the losses, we managed something incredible with this new system: complete meritocracy. Which is also reflected in executive pay.”

Crucial to the success of the overhaul, says Petropoulos, was the brothers’ willingness to submit themselves to the terms imposed by the new system of governance – including dropping for push-ups whenever they are late for meetings!

“We created a real board of directors – not for show – with people who are really knowledgeable about business. The board intervenes and often rejects the proposals made by management. No decision is taken arbitrarily by the owner. That was very important for the investors,” he notes.

This passion for corporate governance is rare in Greece. Some attribute that to the small size of most businesses, which leads to an absence of structure. Petropoulos disagrees: “You don’t have to be big to have structure. The logic of the jack of all trades, where one man does everything, only makes sense at the very beginning. Once a company becomes established, this approach is pathological. It is unnatural and unhealthy for key decisions to be made in the bedroom instead of the boardroom.”

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