Making corporate governance count: the fusion of ethics and economic rationality
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Making corporate governance count: the fusion of ethics and economic rationality Alnoor Bhimani
Published online: 10 June 2008 Springer Science+Business Media, LLC. 2008
Abstract Corporate governance codes extensively appeal to ethical standards of conduct. Rather than being articulated alongside economic axioms, ethical and moral precepts are intertwined within neo-classical economic argumentation across corporate governance standards. This paper explores the fusion between ethics and modern economic rationality and reflects on the scientisation of economics and ethics in academic discourse. The argument is then made that the enlistment of ethics within the epistemologically privileged posture of economics characterises corporate governance codes. The UK Combined Corporate Governance Code of 2006 is analysed to draw out the paper’s contention. Keywords Corporate governance Cross-National convergence Economic rationality Ethics
1 Introduction Neo-classical economic rationalism has a near-constant axiomatic presence across business knowledge domains. Ethical issues are increasingly also taken to be central to management discourse in the normative literature. Both ‘‘soft’’ and ‘‘hard’’ (Brunsson and Jacobsson 2000; Dore 2000) regulatory measures affecting the governance of enterprises show signs of integrating what are seen as economic functional requisites with moral imperatives. Engendering ethical aspirations as part of management thinking has a long history. But standardising the co-mingling of ethics and economic rationalism does not. The question posed by Friedman (1962) several decades ago: ‘‘If businessmen do have a social responsibility other than making maximum profits for stockholders, how are they to know what it is?’’ could perhaps today be rephrased: If A. Bhimani (&) London School of Economics, London, UK e-mail: [email protected]
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businesspeople do have a social responsibility in seeking to maximise profits for stockholders, how are they to know that this should be? Exploring the manner in which corporate governance (CG) codes extensively couple particular ethical ideals with neo-classical economic rationale offers insights into this question. The resolution of conflicts of interest within organisations has generally been addressed by making certain demands obligatory or by the creation of incentives to alter behaviour (Rubin 2005). Adherence to CG standards has in many contexts been mobilised by economic incentives. In other cases, it has been brought about by legal requirements seeking to regulate corporate action. The intertwining of economic argumentation and moral precepts as part of the growing institutionalisation of standardised CG principles is a particularly recent phenomenon. This paper’s contention is that the interpenetration of economic rationalism and behavioural ideals affords a particularly significant posture in the codification of CG practices. It addresses the manner in which CG standards which integrate economic rationalism and ethics are being in
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