I'm pleased to advise that my paper "Duty Before Virtue: The Ethical Dilemma Confronting Corporate Governance" has been accepted for the AAPAE annual conference to held in Adelaide, South Australia on 15–17 June.
The theme of the conference is Responsible leadership and ethical decision-making:
There is an emerging consensus that a key challenge for responsible leaders is to build and cultivate sustainable relationships with stakeholders, whether in business, politics or other parts of society. Rather than a preconceived construct or predefined remedy to leadership failure and organizational ills, responsible leadership is seen emerging as a multilevel theory that connects individual, organizational and institutional factors, including values, virtues and ethical decision-making on the individual level; the interplay of social responsibility, stakeholder theory and leadership on the organizational level; as well as contextual factors such as power distance, collectivism and humane orientation that indicate the extent to which social concerns are part of cultural practices.
My paper (abstract below) considers the notion that self interest rightly understood provides an alternative ethical decision making framework for company directors.
At the core of modern business practice is an unspoken ethical dilemma.
DuPont’ dismantles its research team that for a century has provided its competitive advantage. Woolworths extends supplier payments by a month undermining the viability of those upon whom it relies. Apple assumes a billion dollar liability to tear up its own shares through a buy back.
Company directors are torn between a duty to maximise shareholder wealth and the virtue of acting in the self-interest of the corporation rightly understood.
When Milton Friedman declared in his New York Times article that "the social responsibility of business is to increase its profits" he wasn't changeling the ethics of Adam Smith, but the 10 commandments.
His was a duty ethic. For the Nobel prize winner, a corporation acted ethically when it maximizes shareholder value within the constraints of the law. From then on, Adam Smith's most famous quote would read:
It is not from the self-interest of the butcher, the brewer, or the baker that shareholders expect their dinner, but from their regard to their duty and responsibility.
This is a reformulation of the most basic organising principle of capitalism.
For Adam Smith, the invisible hand was a virtue ethic because a person’s actions are not motivated by obligations or duties, but by an internal motivation directed at realizing a person's self-interest rightly understood.
Drawing on developments in corporate law and governance, this paper will examine:
- the tension between the deontological ethics of modern financial capitalism and the virtue ethics that was the defining feature of its predecessor;
- the application of virtue ethics to the corporation as sovereign legal entity;
- how pursuing the interests of a corporation rightly understood may produce better social outcomes than those associated with duty based ethical frameworks.