Business ethics is often understood as a variety of professional ethics, and thus distinct from ordinary morality in an important way. This article seeks to challenge two ways of defending this claim: first, from the nature of business practice, and second, from the contribution of business. The former argument fails because it undermines our ability to rule out a professional-ethics approach to a number of disreputable practices. The latter argument fails because the contribution of business is extrinsic to business in (...) a way that distinguishes from the established professions. The article ultimately suggests we adopt a more aspirational approach to business ethics, which retains an appeal even in the face of charges of anti-capitalist irrelevance. (shrink)

Scholars who favor shareholder primacy usually claim either that managers should not fulfill corporate duties of beneficence or that, if they are required to fulfill them, they do so by going against their obligations to shareholders. Distinguishing between structurally different types of duties of beneficence and recognizing the full force of the normative demands imposed on managers reveal that this view needs to be qualified. Although it is correct to think that managers, when acting on behalf of shareholders, are not (...) required to fulfill wide duties of charity, they are nevertheless required to fulfill a variety of narrow duties of beneficence. What is more, the obligation to fulfill these duties arises precisely because they are acting on behalf of shareholders. As such, this article 1) refines our understanding of the duties of corporate beneficence and 2) helps to identify which duties of beneficence are imposed on managers when they are acting on behalf of shareholders. (shrink)

Strudler rejects shareholder primacy and argues that, once contractual obligations have been fulfilled and shareholders have received a reasonable return on investment, corporate executives may use corporate wealth for the general good. He seeks to establish this claim via an argument that, contrary to the received view, shareholders do not own corporations. After raising some questions about the latter argument, this commentary goes on to argue that the question of corporate ownership is a red herring. The argument for shareholder primacy (...) that Strudler wants to reject does not rely on the premise that shareholders own the firm. (shrink)

Markets, corporations, shareholding, management, law, and ethics are all human constructs. A human element seems essential to their existence. Yet, the predominant conception of shareholders as used in academia as well as the business world is thin, generic, and inanimate. This article argues that a thick conception of shareholders as human beings is needed to legitimize and improve managerial decision making under value pluralism, accurately reflect empirical reality of capital markets, and meet moral demands to respect the dignity of the (...) human person. Drawing on the philosophical idea of thick evaluative concepts, the article explores how this idea can be applied to shareholders and begins to examine some of the implications of considering shareholders’ humanity for the responsibilities of and relationships between managers and shareholders. (shrink)

ABSTRACT:The distinction between what I call nonelective obligations and discretionary obligations, a distinction that focuses on one particular thread of the distinction between perfect and imperfect duties, helps us to identify the obligations that carry over from principals to agents. Clarity on this issue is necessary to identify the moral obligations within “shareholder primacy”, which conceives of managers as agents of shareholders. My main claim is that the principal-agent relation requires agents to fulfill nonelective obligations, but it does not always (...) require discharging discretionary obligations. I show that the requirement to fulfill nonelective obligations is more far-reaching than has been acknowledged by most defenders and critics of shareholder primacy. But I also show that managers are not bound by certain discretionary obligations like charity, showing that their moral obligations are more circumscribed than the obligations that apply to human beings in general. (shrink)

By considering what we identify as a problem inherent in the ‘nature of the firm’—the risk of abuse of authority—we propound the conception of a social contract theory of the firm which is truly Rawlsian in its inspiration. Hence, we link the social contract theory of the firm with the general theory of justice. Through this path, we enter the debate about whether firms can be part of Rawlsian theory of justice showing that corporate governance principles enter the “basic structure.” (...) Finally, we concur with Sen’s aim to broaden the realm of social justice beyond what he calls the ‘transcendental institutional perfectionism’ of Rawls’ theory. We maintain the contractarian approach to justice but introduce Sen’s capability concept as an element of the constitutional and post-constitutional contract model of institutions with special reference to corporate governance. Accordingly, rights over primary goods and capabilities are granted by the basic institutions of society, but many capabilities have to be turned into the functionings of many stakeholders through the operation of firms understood as post-constitutional institutional domains. The constitutional contract on the distribution of primary goods and capabilities should then shape the principles of corporate governance so that at post-constitutional level anyone may achieve her/his functionings in the corporate domain by exercising such capabilities. In the absence of such a condition, post-constitutional contracts would distort the process that descends from constitutional rights and capabilities toward social outcomes. (shrink)

According to the Market Failures Approach to business ethics, beyond-compliance duties can be derived by employing the same rationale and arguments that justify state regulation of economic conduct. Very roughly the idea is that managers have a duty to behave as if they were complying with an ideal regulatory regime ensuring Pareto-optimal market outcomes. Proponents of the approach argue that managers have a professional duty not to undermine the institutional setting that defines their role, namely the competitive market. This answer (...) is inadequate, however, for it is the hierarchical firm, rather than the competitive market, that defines the role of corporate managers and shapes their professional obligations. Thus, if the obligations that the market failures approach generates are to apply to managers, they must do so in an indirect way. I suggest that the obligations the market failures approach generates directly apply to shareholders. Managers, in turn, inherit these obligations as part of their duties as loyal agents. (shrink)

Abstract:In this paper we develop a categorization scheme for stakeholder research based on differences in studies’ primary level of analysis (managerial agency, organizational, or societal) and use this scheme to review and critique genres of stakeholder-based accounting research. We draw three primary conclusions: 1) stakeholder research in accounting should more clearly incorporate the business ethics stakeholder literature, 2) ethical issues are much less likely to be considered in stakeholder-based accounting research when a managerial agency level of analysis is adopted, and (...) 3) the accounting discipline can learn from debates within the business ethics literature concerning shareholder dominance and stakeholder legitimacy. These conclusions, taken together, demonstrate the need for accounting researchers to become more focused on ethical considerations in the design of accounting information systems, performance measurement criteria, and financial reporting models. (shrink)

ABSTRACT:There is considerable overlap between the interests of business ethicists and those of political philosophers. Questions about the moral justifiability of the capitalist system, the basis of property rights, and the problem of inequality in the distribution of income have been of central importance in both fields. However, political philosophers have developed, especially over the past four decades, a set of tools and concepts for addressing these questions that are in many ways quite distinctive. Most business ethicists, on the other (...) hand, consider their field to be primarily a domain of applied ethics, and so adopt methods and conceptual frameworks developed by moral philosophers. In this paper, we discuss some of the salient differences between these two approaches, and suggest some ways in which business ethicists could benefit from taking a more “political philosophy” approach to these questions. Throughout, we underline the importance of seeking greater compatibility among the principles used in normative theorizing about markets, regulations, corporate governance, and business practices. (shrink)

ABSTRACT:I here advance a critical research agenda for the political perspective of corporate social responsibility (Political CSR). I argue that whilst the ‘Political’ CSR literature is notable for both its conceptual novelty and practical importance, its development has been hamstrung by four ambiguities, conflations and/or oversights. More positively, I argue that ‘Political’ CSR should be conceived as one potentialformof globalization, and not as aconsequenceof ‘globalization’; that contemporary Western MNCs should be presumed to engage in CSR for instrumental reasons; that ‘Political’ (...) CSR should be associated with a corresponding ‘political’ model of corporate governance; and that both a ‘Rawlsian’ and ‘Habermasian’ perspective of Political CSR are different from ‘Political’ CSR. In concluding, I use these four critiques to identify a number of areas within which increasingly robust and sophisticated positive and normative theories of Political CSR are required. (shrink)

While much has been written on specificity (e.g., in texts on new institutional economics, agency theory, and team production theory), there are still some insights to be learnt by business ethicists. This article approaches the issue from the perspective of team production, and will propose a new form of corporate governance: enlightened corporate governance, which takes into consideration the specific investments of employees. The article argues that, in addition to shareholders, employees also bear a residual risk which arises due to (...) their specific investments. This residual risk presents a valid and legitimate basis for residual claims. In this way, employees can be seen as residual claimants due to the fact that their income depends upon a hazardous quasi rent. Therefore, this article will call on the fiduciary duty of board members to protect those employees who are exposed to such residual risks and may thus be vulnerable as a result. This leads to a fundamental change of perspective on the “theory of the firm” – a change which will adopt the theories of new institutional economics, agency theory, and team production theory in order to promote business ethics research. Against this background, enlightened corporate governance aims to follow the criterion of specific investments as a legitimate basis for residual claims. Furthermore, it seeks to understand the consequences for board members, and to promote the sharing of control and ownership. The article will close with some discussion of the implications and future prospects for business ethics. (shrink)

This article examines the relation between policies concerning Corporate Social Responsibility and philosophical moral theories. The objective is to determine which moral theories form the basis for CSR policies. Are they based on ethical egoism, libertarianism, utilitarianism or some kind of common-sense morality? In order to address this issue, I conducted an empirical investigation examining the relation between moral theories and CSR policies, in companies engaged in CSR. Based on the empirical data I collected, I start by suggesting some normative (...) arguments used by the respondents. Secondly, I suggest that these moral arguments implicitly rely on some specific moral principles, which I characterise. Thirdly, on the basis of these moral principles, I suggest the moral theories upon which the CSR policies are built. Previous empirical studies examining the relation between philosophical moral theories and the ethical content of business activities have mainly concentrated on the ethical decision-making of managers. Some of the most prominent investigations in that regard propose that managers mainly act in accordance with utilitarian moral theory, 166–175; Premeaux, S. and W. Mony: 1993, Journal of Business Ethics12, 349–357; Premeaux, S.: 2004, Journal of Business Ethics52, 269–278). I conclude that CSR policies are not based on utilitarian thinking, but instead, on some kind of common-sense morality. The ethical foundation of companies engaged in CSR, thus, does not mirror the ethical foundation of managers. (shrink)

The popularity of the stakeholder model has been achieved thanks to its powerful visual scheme and its very simplicity. Stakeholder management has become an important tool to transfer ethics to management practice and strategy. Nevertheless, legitimate criticism continues to insist on clarification and emphasises on the perfectible nature of the model. Here, rather than building on the discussion from a philosophical or theoretical point of view, a different and innovative approach has been chosen: the analysis will return to the origin (...) of stakeholder theory and will keep the graphical framework firmly in perspective. It will confront the stakeholder model’s graphical representation to the discussion on stakeholder definition, stakeholder identification and categorisation, to re-centre the debate to the strategic origin of the stakeholder model. The ambiguity and the vagueness of the stakeholder concept are discussed from managerial and legal approaches. The impacts of two major shortcomings of the popular stakeholder framework are examined: the boundaries and the level of the firm’s environment, and the ambivalent position of pressure groups and regulators. Working pragmatically, with a focus on the managerial and organisational perspective, an attempt is made to clarify the categorisations and classifications by introducing new terminology with a distinction between stakeholders, stakewatchers and stakekeepers. The analysis will finally lead to a proposed upgraded and refined version of the stakeholder model, with incremental ameliorations close to Freeman’s original model and a return of focus to its essence, the managerial implications in a strategic approach. (shrink)

The mainstream literature on corporate governance is based on the premise of conflicts of interest in a competitive game played by variously defined stakeholders and thus builds explicitly and/or implicitly on masculinist ethical theories. This article argues that insights from feminist ethics, and in particular ethics of care, can provide a different, yet relevant, lens through which to study corporate governance. Based on feminist ethical theories, the article conceptualises a governance model that is different from the current normative orthodoxy.

This article argues that shareholder primacy cannot be defended on the grounds that there is something special about the position of shareholders that grounds a right to preferential treatment on part of management. The notions of property and contract, traditionally thought to ground such a right, are now widely recognized as incapable of playing that role. This leaves shareholder theorists with two options. They can either abandon the project of arguing for their view on broadly deontological grounds and try to (...) advance consequentialist arguments instead, or they can search for other morally relevant properties that could ground shareholder rights. The most sustained argument in the latter vein is Marcoux’s attempt to show that the vulnerability of shareholders mandates that managers are their fiduciaries. I show that this argument leads to the unacceptable conclusion that it would be unethical for corporations to make incomplete contracts with nonshareholding stakeholders. (shrink)

Stakeholder theory is widely accepted but elementary aspects remain indeterminate as the term ‘stakeholder’ is an essentially contested concept, being variously describable, internally complex and open in character. Such contestability is highly problematic for theory development and empirical testing. The extent of essential contestability, previously unknown, is demonstrated in this paper through a bounded systematic review of 593 different stakeholder theory definitions. As an essentially contested concept, the solution does not lie in a universal stakeholder definition, but in debating the (...) boundaries of stakeholder identification. To this end, this paper presents the first major attempt at sorting, filtering and ordering stakeholder theory and stakeholder definitions to produce a comprehensive, multi-dimensional classification of stakeholder theory. The constructs of the classification model juxtapose existing stakeholder theories and contributions from across the multi-contextual applications of stakeholder theory, thereby providing an invaluable overview of what we know about stakeholder theory in one model. The classification model is then tested with positive results. The paper concludes with a comprehensive discussion of the implications of classification stakeholder theory definitions, which has for future research. (shrink)

ABSTRACT:We explore the impact on employee attitudes of their perceptions of how others outside the organization are treated above and beyond the impact of how employees are directly treated by the organization. Results of a study of 827 employees in eighteen organizations show that employee perceptions of corporate social responsibility are positively related to organizational commitment with the relationship being partially mediated by work meaningfulness and perceived organizational support and job satisfaction with work meaningfulness partially mediating the relationship but not (...) POS. Moreover, in order to address limited micro-level research in CSR, we develop a measure of employee perceptions of CSR through four pilot studies. Employing a bifactor model, we find that social responsibility has an additional effect on employee attitudes beyond environmental responsibility, which we posit is due to the relational component of social responsibility. (shrink)

A quick look at what is happening in the corporate world makes it clear that the stakeholder idea is alive, well, and flourishing; and the question now is not “if ” but “how” stakeholder theory will meet the challenges of its success. Does stakeholder theory’s “arrival” mean continued dynamism, refinement, and relevance, or stasis? How will superior stakeholder theory continue to develop? In light of these and related questions, the authors of these essays conducted an ongoing dialogue on the current (...) state and future of stakeholder thinking. Beginning with a review of research and theory that has developed since the major stakeholder theorizing efforts of the 1990s, the authors individually offer their perspectives on the key issues relevant today to stakeholder thinking, and to suggest possible approaches that might lead toward and enable the continuing development of superior stakeholder theory. (shrink)

Theories of business ethics or corporate responsibility tend to focus on justifying obligations that go above and beyond what is required by law. This article examines the curious fact that most business ethics scholars use concepts, principles, and normative methods for identifying and justifying these beyond-compliance obligations that are very different from the ones that are used to set the levels of regulations themselves. Its modest proposal—a plea for a research agenda, really—is that we could reduce this normative asymmetry by (...) borrowing from the normative framework of “regulation” to identify and justify an important range of beyond-compliance obligations. In short, we might think of “self-regulation” as a language and a normative framework with some distinct advantages over other frameworks like stakeholder theory, corporate social responsibility, corporate citizenship, and the like. These other frameworks have been under attack in the business ethics literature of late, primarily for their vagueness and their disappointing inability to distinguish clearly between genuine beyond-compliance moral obligations, on the one hand, and charitable acts that are laudable but not morally obligatory, on the other. (shrink)

Henry Hansmann has claimed we have reached the “end of history” in corporate law, organized around the “widespread normative consensus that corporate managers should act exclusively in the economic interests of shareholders.” In this paper, I examine Hansmann’s own argument in support of this view, in order to draw out its implications for some of the traditional concerns of business ethicists about corporate social responsibility. The centerpiece of Hansmann’s argument is the claim that ownership of the firm is most naturally (...) exercised by the group able to achieve the lowest agency costs, and that homogeneity of interest within the ownership group is the most important factor in achieving lower costs. He defends this claim through a study of cooperatives, attempting to show that homogeneity is the source of the competitive advantage most often enjoyed by shareholders over other constituency groups, such as workers, suppliers and customers, when it comes to exercising control over the firm. Some business ethicists, impressed by this argument, have taken it to be a vindication of Milton Friedman’s claim that profit-maximization is the only “social responsibility” of management. I would like to suggest that this conclusion does not follow, and that the “Hansmann argument” lends itself to a less minimalist view, what I refer to as a “market failures” approach to business ethics. (shrink)

Fortis, the leading Benelux financial group, had been a success story of successive mergers of bank and insurance companies, with leadership in corporate social responsibility (CSR). One year after the acquisition of the major Dutch financial conglomerate ABN AMRO, the global financial crisis caused the collapse of the Fortis group. The purpose of this article is to use the case study of Fortis’s recent fall as a basis for reflective considerations on the financial crisis, from stakeholder and ethical perspectives. A (...) selected number of key events of the history of the dramatic crisis at Fortis will be analysed from different ethical frameworks. Special consideration will be given to fairness of communication, shareholder activism and conflicts of interests of CEO’s mergers opportunities. A confrontation between the CSR policy and the reality raises the fundamental questions why the powerful CSR guidelines and ethical principles did not help in the assessment of the risks. (shrink)

Managers have a unique fiduciary responsibility to shareholders of a firm that implies a set of ethical obligations. At a minimum, managers are required to protect shareholder’s interests when other stakeholders are unaffected by their decision. This ethical imperative has been established in the literature. In cases of conflicts of interest between managers and shareholders, the board of directors of the firm has an ethical obligation to shareholders. The structure of the board can affect its ability to fulfill this obligation. (...) Two specific cases where managerial actions have been argued to be unethical are the adoption of classified boards and poison pills. In this study, we empirically analyze the role of board structure in protecting shareholder rights in the specific case of antitakeover provisions. We test this question on a sample of firms whose shareholders have voted to remove antitakeover provisions and find that independent, focused boards are more likely to accede to shareholder resolutions than are less independent boards. Board size is also important and related to other board structures. We draw implications of this finding for future research on the ethics of board governance.What’s really needed is a change in mindset—one that fosters not only a culture of compliance but also a company-wide environment that fosters ethical behavior and decision-making.—William H. Donaldson, SEC Chairman (2004). (shrink)

The use of agency theory remains highly controversial among business ethicists. While some regard it as an essential tool for analyzing and understanding the recent spate of corporate ethics scandals, others argue that these scandals might not even have occurred had it not been for the widespread teaching of agency theory in business schools. This paper presents a qualified defense of agency theory against these charges, first by identifying the theoretical commitments that are essential to the theory (in order to (...) distinguish between agency theory itself and certain incorrect interpretations that have been widely promulgated), and second, by specifying more clearly the different ways that agency theory can be used to analyze relations within the firm. The recommendation that follows from this analysis is that agency theory be used as a critical-diagnostic tool, to identify the points at which both firms and markets will be vulnerable to breakdown in the absence of moral constraint. (shrink)

One of the most influential ideas in the field of business ethics has been the suggestion that ethical conduct in a business context should be analyzed in terms of a set of fiduciary obligations toward various “stakeholder” groups. Moral problems, according to this view, involve reconciling such obligations in cases where stakeholder groups have conflicting interests. The question posed in this paper is whether the stakeholder paradigm represents the most fruitful way of articulating the moral problems that arise in business. (...) By way of contrast, I outline two other possible approaches to business ethics: one, a more minimal conception, anchored in the notion of a fiduciary obligation toward shareholders; and the other, a broader conception, focused on the concept of market failure. I then argue that the latter offers a more satisfactory framework for the articulation of the social responsibilities of business. (shrink)

A longitudinal study of 308 white -collar U.S. employees revealed that feelings of hope and gratitude increase concern for corporate social responsibility. In particular, employees with stronger hope and gratitude were found to have a greater sense of responsibility toward employee and societal issues; interestingly, employee hope and gratitude did not affect sense of responsibility toward economic and safety/quality issues. These findings offer an extension of research by Giacalone, Paul, and Jurkiewicz.

“Ethical investing” is interpreted in the following paper to be the use of non-financial normative criteria by investors in the choice ofsecurities for their portfolios.Ethical investors may aim at fulfilling duties they feel they have, possibly including increasing the amount of good in society through theconsequences of their buying and selling behavior. The main duties are those of not-profiting from bad corporate behavior and of punishing bad (or rewarding good) firms. The main consequence desired is that managers manage corporations in (...) a more ethical manner. But ethical investors (as opposed to some other kinds of investors who are also interested in normative issues) also aim at receiving returns based on the market risk of their investments.If the aim of managers is to maximize shareholder wealth, then ethical investors can fulfill their duties or achieve their desired consequences only if their trading activities affect shareholder wealth, i.e., share price. A theoretical argument is presented to show that this trading activity will not affect share price or return. In addition, reference is made to results of empirical studies which show that ethical stocks yield market returns, i.e., that the share price of ethical firms is unaffected by the actions of ethical investors.If the trading activity of ethical investors fails to affect share price and return, then these investors fail to fulfill any of their goals or to achieve their ends. (shrink)

The paper aims at investigating external factors influencing organizational corporate social responsibility -related decision making. Two theoretical perspectives—stakeholder theory and institutional theory—have been applied to compile a list of external factors that might affect a company's CSR choices. As a result, a framework built on the government-related, society-related, and business-related groups of external factors is being suggested. This framework is used in the paper to answer to what extent do different external factors influence CSR-related decisions in large Danish companies and (...) how has that influence changed over the years. The research takes a qualitative approach and is designed as a multiple-case study. Empirically, the paper relies on data collected from semi-structured interviews with CSR specialists and managers and presents a dynamic perspective on the pressure exercised by the external factors on CSR decisions and choices. (shrink)

Corporate governance and finance are dynamic academic fields that offer myriad opportunities for business ethics analysis. Within the corporate governance triad in recent years, shareholders have increased their power over boards of directors and executives through both regulation and movements to change corporate by-laws. The impact of board characteristics on firm performance has proven elusive, leading to questions concerning board processes and individual director beliefs and behaviors. At the same time, CEOs have lost considerable power, leaving many struggling to regain (...) their control and maintain their compensation levels, while others adopt a stewardship approach to their posts. In the field of finance, the recent financial debacle has led to a reexamination of financial regulation and of the fundamental nature and purpose of the industry. All of these issues provide business ethicists fodder for investigation and analysis. (shrink)

This paper examines the shareholder primacy norm as a widely acknowledged impediment to corporate social responsibility and explores the role of business schools in promoting the SPN but also potentially as an avenue for change by addressing misconceptions about shareholder primacy and the purpose of business. We start by explaining the SPN and then review its status under US and UK laws and show that it is not a likely legal requirement, at least under the guise of shareholder value maximization. (...) This is in contrast to the common assertion that managers are legally constrained from addressing CSR issues if doing so is inconsistent with the economic interests of shareholders. Nonetheless, while the SPN might be muted as a legal norm, we show that it is certainly evident as a social norm among managers and in business schools—reflective, in part, of the sole voting rights of shareholders on corporate boards and of the dominance of shareholder theory—and justifiably so in the view of many managers and business academics. We argue that this view is misguided, not least when associated with claims of a purported legally enforceable requirement to maximize shareholder value. We propose two ways by which the influence of the SPN among managers might be attenuated: extending fiduciary duties of executives to non-shareholder stakeholders and changes in business school teaching such that it covers a plurality of conceptions of the purpose of the corporation. (shrink)

ABSTRACT:We focus on the core institution of the capital market and the institutional work of professional service firms that provide ratings on corporate issuers, initially in a bid to maintain this institution, which suffered when those involved relied solely on information from the issuers themselves. Through our analysis we identify a new type of decoupling—complicit decoupling. Complicit decoupling evolves over time, beginning with the creation of a new practice, here corporate ratings as a form of policing work, which emerges to (...) help to maintain a core institution. This practice is then adopted, implemented and later becomes decoupled. Exposure does not undermine the legitimacy of the practice because external actors collude in the ‘window dressing’ and, because it has become normalized, only partial repairs are enacted. It is by nature field-level institutional work, benefiting the majority of the field and inherently involves a violation of promise keeping. We conclude with implications for managers and behavioral ethics researchers. (shrink)

Must CEOs Be Saints? Contra Moriarty on CEO Abstemiousness by Robert KolbIn this journal, Jeffrey Moriarty argued that CEOs must refuse to accept compensation above the minimum compensation that will induce them to accept and per­form their jobs. Acting otherwise, he maintains, violates the CEO’s fiduciary duty, even for a CEO new to the firm. I argue that Moriarty’s conclusion rests on a failure to adequately distinguish when a person acts as a fiduciary from when she acts on her own (...) account as a person. Further, Moriarty’s argument assumes that the CEO knows this minimum level of compensation. However, we learn the suitability of compensation only through the market process of wage negotiation, not through some process of introspection. I conclude that a CEO who abstains from interfering with the board of directors and its compensation com­mittee is morally free to negotiate for the highest wage available. (shrink)

The normative foundations of the investor centered model of corporate governance, represented in mainstream economics by the nexus-of-contracts view of the firm, have come under attack, mainly by proponents of normative stakeholder theory. We argue that the nexusof- contracts view is static and limited due to its assumption of price-output certainty. We attempt a synthesis of the nexus-of-contracts and the Knightian views, which provides novel insights into the normative adequacy of the investor-centered firm. Implications for scholarship and management practice follow (...) from our discussion. (shrink)

ABSTRACTEntrepreneurs should act as stewards of entrepreneurial rent. Entrepreneurial rent is the difference between the ex post value of a venture and its ex ante costs. It is the result of competition among buyers and sellers within the market process rather than the sole efforts of the entrepreneur. As a result, entrepreneurs should allocate entrepreneurial rent for the benefit of other market participants rather than consuming it for themselves. The moral obligation to steward entrepreneurial rent is consistent with traditional bases (...) of property rights and the norm of social welfare maximization, and it applies to corporations and their shareholders, as well as individual entrepreneurs. (shrink)

Research on positive psychology demonstrates that specific individual dispositions are associated with more desirable outcomes. The relationship of positive psychological constructs, however, has not been applied to the areas of business ethics and social responsibility. Using four constructs in two independent studies (hope and gratitude in Study 1, spirituality and generativity in Study 2), the relationship of these constructs to sensitivity to corporate social performance (CSCSP) were assessed. Results indicate that all four constructs significantly predicted CSCSP, though only hope and (...) gratitude interacted to impact CSCSP. Discussion focuses upon these findings, limitations of the study, and future avenues for research. (shrink)

In the wake of corporate governance scandals, questions arise about the effectiveness and intent of corporate ethical codes: Are they genuine governance mechanisms to enhance corporate responsibility, or are they mere shields against legal risks? This study delves into the linguistic choices within ethical codes, positing that these choices serve as communication devices that articulate a firm’s institutional logic. We use stakeholder theory to differentiate between code language that is governed by instrumental (legal-oriented) or normative (behavior-oriented) logic. Upon analyzing the (...) lexicon of Fortune 500 corporate codes, our findings reveal that behavior-oriented codes are associated with a decrease in the number of environmental, social, and governance (ESG) issues. Yet, they correspond to an increase in class action lawsuits. By contrast, legal-oriented codes are linked to an increase in ESG issues but to reduced legal litigation. Notably, firms that blend approaches from both logics experience lower litigation rates. These findings enrich the discourse on stakeholder theory and provide practical guidance for organizations aiming to refine their ethical codes. This refinement seeks to enhance ethical behavior and mitigate corporate risks. (shrink)

Socially responsible investing identifies the fiduciary duty and liability for financial advisors serving individual and institutional clients when consulting in the SRI space. This article first discusses the role of a fiduciary emerging from both a legal and an ethical basis. Further, the special aspects of maintaining fiduciary duty and minimizing fiduciary liability are described as they relate to SRI. A number of recommendations are discussed: legal, ethical, and practice. This study argues that prudence focuses more on the process of (...) decisions rather than their outcomes, as measured exclusively by rate of return. (shrink)

The success of the stakeholder theory in management literature as well as in current business practices is largely due to the inherent simplicity of the stakeholder model-and to the clarity of Freeman's powerful synthesised visual conceptualisation. However, over the years, critics have attacked the vagueness and ambiguity of stakeholder theory. In this article, rather than building on the discussion from a theoretical point of view, a radically different and innovative approach is chosen: the graphical framework is used as the central (...) perspective. The major shortcomings of the popular stakeholder framework are systematically confronted with the graphical scheme to illustrate their visual impact. The graphical illustrations of the imperfections help explain the sometimes-oversimplified generalisation inherent to every graphical model. They also make some interrelationships easier to understand. The analysis demonstrates that, with the tacit but implicit acceptance of simplification of the discussed explanatory elements, Freeman's framework remains a rather good approximation of reality. Only a few minor changes to the stakeholder model are consequently proposed. (shrink)

In spite of a renewed interest in the relationship between spirituality and managerial thinking, the literature covering the link between Islam and management has been sparse – especially in the area of ethics. One potential reason may be the cultural diversity of nearly 1.3 billion Muslims globally. Yet, one common element binding Muslim individuals and countries is normative Islam. Using all four sources of this religion’s teachings, we outline the parameters of an Islamic model of normative business ethics. We explain (...) how this ethics model seeks to balance the needs of multiple stakeholders, and discuss its enforcement mechanisms. This Islamic approach to business ethics is centered around criteria that are in common with stakeholder theory such as justice and balance, and includes unique additional criteria such as trust and benevolence. (shrink)

Managers in ethnic businesses are confronted with ethical dilemmas when taking action based on ethnic ties; and often as a result, they increase the already vulnerable positions of these businesses and their stakeholders. Many of these dilemmas concern the capital that is generated through variations in the use of ethnic stakeholder social ties. The purpose of this paper is to suggest a stakeholder-based model of social capital formation, mediated by various forms of ethnic ties, to explore the duality of ethnicity: (...) it can aid and hinder an ethnic business. Drawing upon the social capital/economic development, stakeholder salience, ethnic businesses literatures, and on social identity theory, we develop a cyclical model of relationships among ethnic business stakeholder attributes and social capital, as mediated by three-way Simmelian bonding and bridging ties, which then, in turn, affects the ethnic stakeholder attributes. We argue that the development of bridging yet strong ties through this cyclical process is relevant for the improvement of the positions of ethnic businesses in terms of both economic success and social responsibility. Specifically, we suggest that, given the duality of ethnicity in business, managers can prioritize stakeholder relationships based upon how these stakeholder ties affect social capital. (shrink)

Stockholder and stakeholder perspectives have been positioned in the literature as being in tension, and thus a potential source of innovation and change. However, researchers have overlooked a systematic examination of this presumption in theory and in practice. This study explores the ways that stockholder and stakeholder assumptions are presented by theorists and compares these with expressions of stockholder and stakeholder perspectives used by firms in practice. We argue that theoretical entrenchment dichotomizing these perspectives has disrupted the ability of researchers (...) to leverage this tension. While scholarship remains trapped in a vicious cycle, we also argue that firms in practice express only the acceptance dimension of a virtuous cycle. Our empirical research demonstrates that firms accept and accommodate the paradoxical tension between managing for stockholders versus balancing the interests of stakeholders. This is evidenced by strategies we identify as book‐ending, cadence, continuous and simultaneous co‐mingling, and hybridization. We find that in practice these tensions are more integrated whereas in theory they are treated as more distinct and, often, in conflict. We suggest ways in which both scholarship and practice can better leverage tension as paradoxical opportunity. (shrink)

Leaders in a variety of organizations are beset by challenges that test their commitments to ethical behavior in interactions with stakeholders who make up their working environments. Situations that present themselves include complex management of expectations, people, and resources, which require novel solutions that also test the boundaries between right and wrong. Such conditions arose after the 9/11 terrorist attacks on the World Trade Center Twin Towers. President Bush asked the Central Intelligence Agency to round up persons who represented a (...) continuing threat of harm to U.S. interests. What followed was a series of decisions and actions by a number of internal and external constituencies based on inaccurate reporting of treatment of and information gleaned from detainees. Lessons for understanding and avoiding resulting leadership ethical dilemmas and a novel stakeholder perspective are provided in the close. (shrink)

Drawing on ethical principles of fairness and integrative social contracts theory, moral obligations of fair dealing exist between the firm and all shareholders. This study investigates empirically whether privileged investors of publicly traded firms engage in legal, but morally questionable, trading that at the expense of non-privileged institutional or atomistic investors. In this context, we define privilege as the access to material, nonpublic earnings surprise information. Our results show that the opportunity for procedural unfairness increases with the presence of privileged (...) investors. However, this procedural unfairness does not appear to lead to distributive unfairness even though the level of abnormal trading also increases with the presence of privileged investors. That is, our findings suggest that other shareholders are in fact better off from an outcome perspective given that the abnormal stock price returns upon the announcement of an earnings surprise are either more positive or less negative when the firm has a high proportion of privileged investors. We extract the important implications of our study for future research on the fairness of capital markets and information asymmetry amongst classes of investors, as well as for public policy. (shrink)

This paper examines the role of vulnerability in the basis of business ethics by criticizing its role in giving a moral substantial character to fiduciary duties to shareholders. The target is Marcoux’s (Bus Ethics Q 13(1):1–24, 2003) argument for morally substantial fiduciary duties vis-à-vis the multifiduciary stakeholder theory. Rather than proceed to support the stakeholder paradigm, a conception of vulnerability is combined with Heath’s 2004) “market failure” view of the ethical obligations of managers as falling out of their roles as (...) professionals involved in the institution of the market. The result is the core of a theoretically defensible and managerially motivating and deployable ethic. (shrink)

Corporations wield power in today’s economies, and political theories of the corporation argue about the legitimacy conditions of corporate power. This paper argues in favour of a double-fiduciary theory for corporations. Based on a concession theory of markets, it sees all markets as authorized by states (in the name of society), for the purpose of creating economic value, or wealth. Hence corporations, as much as non-incorporated firms, have a fiduciary duty to the state/society to create wealth, in the competitive structure (...) of the market. However, their pursuit of wealth often creates unbalanced relations of power between corporations and their stakeholders, which can at some point be classified as instances of domination. Therefore, corporations need to be subjected to a second fiduciary duty, i.e. not to dominate others in the economy. This duty is also, in the final instance, owed to the state/society. In an era when everyone can incorporate their business, states/societies can be interpreted as having, through corporate law, mandated shareholders as ‘proximate beneficiaries’, to incentivize corporations to create wealth. Now states/societies need to think about how to prevent corporations from dominating others. New mechanisms of accountability towards stakeholders and/or citizens as proximate beneficiaries are needed. Only in this way can corporations be effectively held to account for both of the fiduciary duties which characterize their normative status. (shrink)

This essay bridges together social network and institutional perspectives to examine how women on boards, by breaking up directors’ homophilous networks, contribute to board effectiveness. It proposes that through real and symbolic representations, women enhance perceptions of the board’s instrumental, relational, and moral legitimacy, leading to increased perceptions of the board’s trustworthiness which in turn fosters shareholders’ trust in the firm. Envisioning the gender diversification of boards as an event of institutional change, this article considers the critical role of shareholder (...) activists and legislative support from the SEC in the deinstitutionalization of old boys’ networks and the reinstitutionalization of gender diverse boards. This work is substantiated with evidence obtained through 34 semi-structured interviews, archival and documentary evidence. (shrink)

A quick look at what is happening in the corporate world makes it clear that the stakeholder idea is alive, well, and flourishing; and the question now is not “if ” but “how” stakeholder theory will meet the challenges of its success. Does stakeholder theory’s “arrival” mean continued dynamism, refinement, and relevance, or stasis? How will superior stakeholder theory continue to develop? In light of these and related questions, the authors of these essays conducted an ongoing dialogue on the current (...) state and future of stakeholder thinking. Beginning with a review of research and theory that has developed since the major stakeholder theorizing efforts of the 1990s, the authors individually offer their perspectives on the key issues relevant today to stakeholder thinking, and to suggest possible approaches that might lead toward and enable the continuing development of superior stakeholder theory. (shrink)

Are corporations ever morally obligated to engage in counterspeech—that is, in speech that aims to counter hate speech and misinformation? While existing arguments in moral and political philosophy show that individuals and states have such obligations, it is an open question whether those arguments apply to corporations as well. In this essay, I show how two such arguments—one based on avoiding complicity, and one based on duties of rescue—can plausibly be extended to corporations. I also respond to several objections to (...) corporate counterspeech. (shrink)

This article examines the work of professional service firms (PSFs) in their relationships with public corporations; work that is designed to ensure that investors and potential investors have information that will enable them to participate in the capital markets. Using an institutional theory lens, we view these efforts by PSFs as institutional maintenance work and specifically analyze their work related to policing (i.e., rating), enabling (i.e., tutoring), and embedding and routinizing (i.e., collaborating) that helps to support the capital market as (...) a core institution in society. We illustrate how there is a “dark” side to each of these forms of institutional work that exists because of ongoing conflicts of interest within and between their work practices. This dark side has the unintended consequence of producing often biased information or information unavailable to many. When a crisis brings this bias to light, some repair is introduced but often not enough to alleviate the distortion. Our contribution is, therefore, to shed light on the dark side of institutional maintenance work and to explore why repair is increasingly necessary, but often only partially effective. (shrink)

This article draws on the moral philosophy of Immanuel Kant to explore whether a corporate ‘duty of beneficence’ to non-shareholders is consistent with the orthodox ‘shareholder theory’ of the firm. It examines the ethical framework of Milton Friedman’s argument and asks whether it necessarily rules out the well-being of non-shareholders as a corporate objective. The article examines Kant’s distinction between ‘duties of right’ and ‘duties of virtue’ (the latter including the duty of beneficence) and investigates their consistency with the shareholder (...) theory. The article concludes that it is possible within the ethical framework of shareholder theory for managers to pursue directly the happiness of non-shareholders. Furthermore, shareholders have a duty to hold management to account for the moral consequences of the firm’s activities on non-shareholding stakeholders. (shrink)