Ethos is Destiny: Organizational Values and Compliance in Corporate Governance
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ORIGINAL PAPER
Ethos is Destiny: Organizational Values and Compliance in Corporate Governance Maria Fotaki1 · Spyros Lioukas1 · Irini Voudouris1 Received: 15 June 2018 / Accepted: 4 February 2019 © Springer Nature B.V. 2019
Abstract This paper investigates the effect of enacted ethical and instrumental values on corporate governance effectiveness. It further considers whether and how compliance with formal corporate governance codes influences the effect of these organizational values on governance effectiveness. Empirical evidence based on a sample of firms listed in the Athens Stock Exchange shows that strong ethical values are the key element for effective corporate governance, while instrumental values play a significant role only in the presence of compliance. Compliance, although not sufficient by itself, serves as a complementary mechanism strengthening the effects of ethical values and creating the conditions by which instrumental values can act in favor of corporate governance. The results highlight that governance benefits can emanate from maintaining high ethical standards as well as from synergies between compliance and a focus on organizational values. Overall, our findings provide important implications for managers regarding how to utilize behavioral along with structural governance mechanisms to enhance corporate governance. The findings add to the behavioral perspective of corporate governance bringing aspects of the social fabric into the corporate governance puzzle. Keywords Corporate governance · Enacted organizational values · Ethical values · Instrumental values · Compliance
Introduction Despite its vital role for corporate sustainability and financial markets’ stability, effective corporate governance (CG) still remains a puzzle for practice and research. It is more than 15 years since the high-profile scandals of Enron and WorldCom and a decade after the 2008 global financial crisis, and governance failures consistently rock the corporate landscape leading to negative results for a wide range of stakeholders. In an attempt to better understand the conditions and factors that foster effective CG, scholars in the field have started moving away from the traditional agency perspective and the tick box mentality with codes of good * Maria Fotaki [email protected] Spyros Lioukas [email protected] Irini Voudouris [email protected] 1
Department of Management Science and Technology, Athens University of Economics and Business, Patission 76, 10434 Athens, Greece
governance practices. Adopting a more socialized view and alternative theorizing, several scholars as well as international institutions have begun to take steps towards recognizing the human side of governance considering several factors pertaining to the behaviors of various actors in a listed firm. In this light, much scholarly attention has focused on several micro social factors, such as various forms of social and interpersonal interactions in and around the boardroom, between firm leaders as well as between firm leaders and other firm c
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