The ethics of corporate governance

Abstract

If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -The 1990s brought a strong dominance of the US model of corporate governance, setting the continental European model at a disadvantage. Due to the financial crisis, the shareholder dominated Anglo-American model has lost much of its evidence. The purpose of this paper is to try to come to terms with this development. Design/methodology/approach -The paper compares the American model of corporate governance shaped by the idea of the capital market as the market for corporate control and the Continental European model shaped by the idea of consensual decisions and co-determination of stakeholder groups. The paper uses as the main parameters the dominant features of both models, the capital market orientation in the case of the American and the consensus orientation in the case of the Continental European model and demonstrates the strengths and shortcomings of both models. It analyses the idea of the purpose of the firm and its impact on the formation of the legal and ethical rules of the corporation. Findings -The paper finds that different concepts of the firm's purpose lead to different concepts of the firm, to a shareholder or a stakeholder concept of the firm. Basic models of philosophical theory like purpose, agency and consensus are used to describe foundational ideas of the theory of the firm. Originality/value -The philosophical foundational concepts of the firm discussed in the paper add new insight to the discussion about corporate governance and allow a better understanding of the underlying models of corporate governance. They make the differences and the common features of the American and European models visible.

Juxtaposing the “shareholder” and “stakeholder” views of corporate governance: a pedagogical structure for classroom discussion

“…To promote understanding of two competing views on the "role of the corporation," it is first necessary for students to understand the theoretical and practical bases for the two perspectives of corporate governance, given that each one represents a fundamentally different view. On one hand, the Friedman-based shareholder primacy perspective primarily reflects the Anglo-American model of governance that states that the Boards of Directors (BODs) and senior managers of a corporation have a fiduciary responsibility to protect and promote the financial interests of shareholders (Koslowski, 2009). Specifically, contemporary corporate governance for USA-based companies is traditionally centered on this concept (Brandt and Georgiou, 2016).…”

“…In this sense, strategic initiatives and expenditures that detract from profits, regardless of their "social worthiness" would be inimical to the stated corporate purpose. On the other hand, the stakeholder-based approach (also referred to as the European-Co-determination model of corporate governance) prescribes that a publicly traded company's BOD and senior managers have an obligation to take into account the effects of their strategic actions on a broader set of stakeholders including employees, the natural environment and global societies at large (Koslowski, 2009). It is important to note that both corporate governance perspectives lead to conscious strategic choices (decisions, actions, initiatives) by business and the distinct perspectives on corporate governance can lead to conspicuously different strategic choices (Koslowski, 2009).…”

“…Companies in Europe and throughout most of the industrialized world follow a “co-determination” model of corporate governance, whereby the effects on the interests of stakeholders must be taken into account in the strategic decision-making by management (Koslowski, 2009). In contrast, in the USA, as we noted previously, the shareholder primacy model is dominant, with stakeholder interests generally and traditionally taking a backseat to the interests of shareholders.…”