It's Turtles (and Shareholders) all the Way Down

 Stephen Hawking's starts A Brief History of Time with a metaphor wrapped in an anecdote: 

   ”A well-known scientist (some say it was Bertrand Russell) once gave a public lecture on astronomy. He described how the earth orbits around the sun and how the sun, in turn, orbits around the center of a vast collection of stars called our galaxy. At the end of the lecture, a little old lady at the back of the room got up and said: "What you have told us is rubbish. The world is really a flat plate supported on the back of a giant tortoise." The scientist gave a superior smile before replying, "What is the tortoise standing on?" "You're very clever, young man, very clever", said the old lady. "But it's turtles all the way down!”

A similar tale could be told in the context of Australian corporate law:

A young lawyer walks into a boardroom and explains that a director's duty is to act in the best interest of the corporation - a distinct legal entity that exists independently of it shareholders.  The old Chairman says " You may have been to law school, but as a matter of practice we all know that the corporation is nothing more than its shareholders"  he continued "Corporations don't have interests. Only shareholders have interests".  The lawyer, not wanting to contradict the Chair asks "But what if the shareholder is a corporation.  In whose interest will you then act?".  "You're a very clever, young man, very clever", said the Chairman.  " But it's shareholders all the way down!"

Both stories demonstrate the problem of infinite regression - where the validity of one proposition depends on the validity of the proposition which follows and/or proceeds it.   The old lady and the Chair rely on a series of an infinitely cascading propositions to make their argument.  holder, 

Consider that according to one survey, only 3.3% of the shares in the world's very large companies were held by Individuals or families.   The remaining balance is held by a very small number of corporations through a vast network of interposed corporations.  

Under the standard assumption that the corporation is nothing more than the shareholder, if all these corporations are "owned" by other corporations who is the shareholder?   This leaves the directors with a practical problem - if the corporation is a fiction, then each shareholder that is also a corporation must logically be a fiction too.  If that's the case in whose best interest is the board supposed to act?


Revisiting the Bainbridge Hypothetical : Corporate Purpose in Australia

At the heart of the Bainbridge Hypothetical is a simple question - by what standard should company directors make their decisions?

Devised by Stephen Bainbridge, a law professor from UCLA*,  his thought experiment asks what the ends of corporate governance should be.    This post revisits the question from the perspective of an Australian director (changes to the original are in bold and are mine):

Acme's Limited board of directors is considering closing an obsolete plant. The board is advised that closing the plant will cost many long-time workers their job and be devastating for the local community. On the other hand, the board's advisors confirm that closing the existing plant will benefit Acme's shareholders through a planned share buy back, new employees hired to work at a more modern plant to which the work previously performed at the old plant will be transferred, and the local communities around the modern plant. 

 Assume that:

  • Acme Limited is an Australian Public Company
  • The long- time workers are research scientists from leading universities;
  • obsolete means sustainably profitable but less profitable than the new plant; and
  • the latter groups cannot gain except at the former groups' expense.

 By what standard should the board make the decision in Australia. 

For the past months I've been figuring out how to get to an answer.  How could an either/or be so tough?

In response to his original hypothetical, the Professor says:

Shareholder wealth maximization provides a clear answer -- close the plant.

And, from what I can gather from recent comments from the Chief Justice of the Delaware Supreme Court, there's little doubt the Professor is right - in Delaware.

But, corporations being creatures of statute, what passes for the ends of governance in one place may be beside the point in another.  Put simply, corporations aren't corporations and their purpose reflect the varieties of the world's legislatures.

In Australia, we have an entity statute which makes the shareholder versus stakeholder debate, implicit in the Professor's answer,  a false dilemma.   Again, in his hometown, and in response to the original hypothetical,  his either/or framing is unquestioned by me.   But, where I practice law, there's a third choice and it's mandatory.

Entity statutes impose duties on company directors to exercise their powers and discharge their duties in the interests of the corporation.  As one eminent Australian lawyer explained, under the Australian Corporations Act this duty refers to the interests of the corporation:

 “as a distinct legal and commercial entity, not the interests of shareholders, and conforms to the basic tenet that the duties of directors under these provisions are owed to corporation”

My question is therefore not whether the directors should or can advantage one group over another.  The issue I'm struggling with is whether it's in the interest of Acme Limited, as a distinct legal and commercial entity, to be more profitable?

But surely that's a "duh" question.   

If monkeys could vote for bananas or the welfare of the plant it's self evident what they'll vote for. 

Perhaps in Delaware, where the Chief Justice recently described corporate governance as little more than the advantage to the stronger - "power is purpose" in their system of corporate governance.  In a jurisdiction with an entity statute, it not as obvious as the answer to this riddle - if an 800 pound gorilla wants more bananas what do you do?

Not, that I think my answer matters that much. 

Absent the rigor of academic method or proving my worthiness by first running the hypothetical across the dusty ruler of agency theory and every other theory that has set sail to an armada of doctorates, luck would have better odds than my answer, when it comes to changing anyone's mind.  That's not a criticism.  We can all share the scholar's spirit.  But what elevates advocacy to good knowledge is precisely the rigor and the absence of bias, real or perceived.

For a practically minded sole practitioner, I suspect my best chance lies in more modest ambitions and an appeal to reason.  With that in mind, and with thanks to the Professor for devising the original, I thought I'd share my plans and outline my argument for getting to an answer:  

  1. The shareholder versus stakeholder debate is irrelevant to my answer because Australia has an entity statute.
  2. The law of purpose in Australia requires a company director to unquestionably act in the interests of the corporation as a distinct legal and commercial entity.
  3. The purpose of a corporation under an entity statute is to maintain its indefinite existence.  All other purposes are necessarily contingent upon the survival of the corporation.
  4. To survive the corporation must receive and store more useful energy from its business activities than it expends on those activities.   A corporation is analogous to (if not) a thermodynamic entity that must convert value internally and exchange value externally to survive. 
  5. Useful energy is stored in a variety of capitals (financial, social, intellectual etc).
  6. The quality of energy stored in each capital ranges from low (manufactured capital) to high (social capital). 
  7. Financial capital is generally a low quality capital due to factors that include (a) it exhausted fully by use(b) "loses" useful energy without use ie. inflation; and (c) in the absence of appropriate defenses, excess financial capitals makes the corporation vulnerable ie. activist attack. 
  8. To survive the corporation must efficiently convert low quality/low productive capital into high quality/high productive capital while maintaining requisite financial capital to fund its business model and activities. 
  9. The priority of stakeholders is therefore determined by the quality of capital available to be exchanged with the corporation.   In other words, priority is determined by the self interest of the corporation and its own survival rather than a duty or responsibility to any other person or group.
  10. If the the corporation systematically converts high quality capitals into low quality capitals, the corporations is more likely to end its existence.   I describe this process as a state of "decapitalism" because the net energy outcome is negative. 
  11. If the corporation systematically converts low quality capitals into higher quality capitals, the corporation is more likely to maintain its existence and grow.  I call this process a state of "recapitalism" because the net energy outcome is positive.

In essence, I propose that the corporation under an entity statute is devised as a way to convert useful energy more efficiently, than the alternative.  The more efficient and positive the process of conversion, the more likely the corporation is to achieve the grail of perpetual and indefinite existence.  

An approach with tacit approval from Peter Drucker:

“profit maximization” is the wrong concept, whether it be interpreted to mean short-range or long-range profits or a balance of the two. The relevant question is, “What minimum does the business need?” – not “What maximum can it make?” This “survival minimum” will, incidentally, be found to exceed present maxima in many cases.”

Based on these propositions, I've started to reformulate the question (again) and turned it into a working equation.  In short, when asking whether to close or keep the plant open, the director needs to account and evaluate, in respect of each option,  the value returned on value invested ("VronVi").   As a general, and even perhaps novel, proposition the answer to the hypothetical becomes relatively simple in an entity jurisdiction.  As absurd, naive and unthinkable as it sounds in other parts of the world, if opening a new plant results in more profit to the corporation but less overall useful and productive energy being available to the corporation to sustain its existence - don't close the plant.  

The equation looks something like this:

Mindful of easy criticism, I'm aware of the rough and bold nature of my propositions.  But, they are just first steps.  And there are benefits to working with propositions as opposed to conclusions.  There seems far less competition.  That doesn't mean I won't try to back up the propositions and come up with an answer.  I'll keep working at it and share my advice to the board of Acme Limited in the coming months.  

In the meantime, for those who sailed their professional careers on these turbulent seas in the past decades, I understand that my propositions might not appear on your maps or, if some do, as nothing more than legends and myths.   But long before economists like Friedman and Jensen erased the corporation from the ends of corporate governance, accountants and scholars like Li, Raby and Eells were theorising the corporation into existence and hypothisizing its goals.  For those of us who live under the rule of an entity statute, these academics, like our Southern Cross, point the way.   

And, for those company directors who, like the monkeys would vote for more bananas, you might think twice before relying on a simple profit heuristic to make your decision.  If the profit comes at the cost of higher quality productive capital, and the math shows it, you might wish you voted for the same amount of bananas and a viable plant.

Of course, it's all conjecture and bit of fun - If an 800 pound gorilla wants more bananas it obvious what you do - ask the elephant in the room.  

Seriously, can any one imagine a board resolving to close a sustainable and profitable research division, whose bygone discoveries and inventions underpinned the companies success, to buy back the one thing that the company has virtually an unlimited supply?  

* Stephen Bainbridge is the William D. Warren Distinguished Professor of Law at UCLA School of Law, with a seriously intimidating intellect.  His biography is here and his blog can be found here 


Five Ways To Fix Adam Smith's Big Mistake

Since the 1970’s corporate governance academics have arguably had more success in creating problems than solving them. 

It started with the agency problem and the challenge to align managers and shareholders. But no sooner had CEO’s received their lucrative options than the next problem arose. CEO’s salaries kept rising and short-termism had become rife. The solution seemed obvious. Boards had become captured by management and what was needed were independent directors. But, being outsiders, many did not recognize that excessive risk was taking capitalism to the edge in 2008. You get the idea. Don't be surprised if the next crisis is blamed on gender quotas.

For students of history, a familiar pattern was emerging.  In the time before Copernicus:

“Astronomy’s complexity was increasing far more rapidly than its accuracy and that a discrepancy corrected in one place was likely to show up in another.”

Kuhn was commenting on the crisis in Astronomy in 1543, but his description equally applies to the crisis in corporate governance in 2017.

Copernicus would of course break the cycle of failure in astronomy by replacing the Earth with the sun in the center of his universe.  This paper argues that corporate governance is on a similar path, and that only by replacing the shareholder can we begin to fix the problems with capitalism.

Lesson One: Beware Copernican Monsters

In the preface to the Revolutions of the Heavenly Spheres, Copernicus comments of his contemporaries:

“Nor have they been able thereby to discern or deduce the principal thing – namely the shape of the universe, and the unchangeable symmetry of its parts. Within them it is though an artist were to gather the hands and feet head and other members for his images from diverse models, each part excellently drawn, but not related to a single body, and since they in no way match each other, the result would be a monster and not a man”.

According to Kuhn, Copernicus thought that an appraisal of astronomy in his time showed that the Earth centric approach to the problem of the planets was hopeless. Traditional techniques had and would never solve the puzzle, instead they had produced a monster. 

It takes little imagination to see a Copernican Monster lurking within corporate governance codes and guidelines that share no common theoretical foundation other than to persist with a shareholder centric approach to the problem of corporate purpose.  Little has changed since I first wrote:

“Corporate governance still has no broadly held theoretical base (Tricker, 2009) Instead, it is overwhelmed by multiple and polarizing theories (Letza and Sun, 2002) and though a number of broad or even global theories have been proposed (e.g.Hilb, 2006; Hillman and Dalzeil 2003; Nicholson and Kiel, 2004) none have gained acceptance. Most importantly, agency theory, widely recognized as the dominant theoretical perspective of corporate governance (Durisin and Puzone, 2009) continues to suffer from empirical research unable to validate its claims or accurately predict outcomes (Daily, Dalton and Cannella, 2003). “ *

In much the same way as students of Ptolemy could not accurately predict the movement of the planets, today’s students of the corporation confront the same challenge – a monstrous discipline unable to explain or predict anything other than crisis.  

 Lesson Two : Avoid Blind Spots

Johannes Kepler, who perfected the laws of planetary motion, understood his discipline's greatest weakness. When questioning why Copernicus had not seen that the planets moved in ellipses rather than circles he responded:

Copernicus did not know how rich he was, and tried more to interpret Ptolemy than nature”.  

Again, corporate governance suffers a similar blind spot.

Scholars are more likely to interpret Isaac Berle or Merrick Dodd than look up and observe how corporations function in practice.

Since the debate between these two law professors began in the1930’s, the question of corporate purpose has divided into two camps. The first led by Berle argues that corporations have a responsibility to maximize shareholder value. The second led by Dodd argues that corporations have a responsibility to balance the interests of all stakeholders. These two approaches pull in different directions and compete to be the central blurred focus of corporate governance.

As much as 16th Century astronomers could not see the role of the Sun for an ancient astronomer, many modern scholars of governance can’t see the role for anything else for the Berle and Dodd debate. Captured by the shareholder versus stakeholder dichotomy academics cannot break the cycle of failure because they can't see beyond these false opposites.

Lesson Three : Understand the Power of Attraction

If pre-Copernican astronomy is a metaphor for the problems of corporate governance, does astronomy after after Copernicus offer a solution?

Adam Smith thought so. Quite literally.

Smith was not an economist but a philosopher and, you guessed it, a student of astronomy.  Not only did Smith write on the history of astronomy, but one of his greatest influence is the man who discovered the laws of planetary motion.

According to Smith, the laws of nature discovered by Isaac Newton could be found in the natural laws of commerce. Smith's concept of the invisible hand was a metaphor for the gravitational force of self-interest:

Is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. [...] Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.

Whereas Newton connected the movements of the planets by “so familiar a principle connection” as gravity, Smith had discovered the equivalent principle of mutual attraction in commerce.

To Adam Smith, the Merchant was to capitalism what the sun was to gravity. In a commercial society “everyman is a merchant” with its own invisible power of attraction. And, according to Smith, the merchant's self- interest and freedom dictate the natural order of commercial society:

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.

Now compare this explanation to the deontological theories of Berle and Dodd. Neither are founded in self-interest. Instead,they are based in rights and responsibilities owed by the corporation to shareholders and stakeholders. A careful analysis shows that both are anti-Newtonian and have more in common with biblical justifications of geo- centrism than anything argued by Smith. 

In much the same way as gravity draws the Earth and the sun together, the ethical principle of self-interest drew the merchant and the customer together. 

Lesson Four : Don't Believe Everything that Adam Smith Wrote

If Smith was right and capitalism was powered by self interest, why is the study of corporate governance so broken and confidence in capitalism collapsing?

The answer is that Smith sabotaged his own incredible idea by claiming that joint stock companies were managing other people's money:

The directors of such [joint-stock] companies, however, being the managers rather of other people's money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private company frequently watch over their own.... Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company.

Smith had inadvertently put the shareholder at the center of capitalism, unaware that he had fundamentally corrupted his own idea. There were now two types of merchant. Those who could act in their own best interest and play by the rules of the invisible hand, and those bound to act out of a duty to others.

It was as if Newton, having derived his laws of gravitation from the laws of planetary motion, thought it logical that some planets revolved around the sun and others the earth.

A mistake picked up by Milton Friedman and all those who stood on his shoulders who argue that duty to shareholders comes before the self interest of the corporation. Put another way, unincorporated merchants are free to act in their own self interest but incorporated merchants are under a duty to act in the interests of their shareholders. This is not the free market and it is this flaw that is at the heart of modern "good" corporate governance systems that are destroying capitalism.

Which brings me the point where the parallel paths of corporate governance and astronomy cross

Lesson Five: Progress Loves a Revolution

In May 2015, the European Parliament’s Committee on Legal Affairs approved a revision to the 2007 Shareholder Rights Directive that is as revolutionary as it is heretical. Paige Morrow explains:

“(the amendment) explicitly acknowledge(s) that shareholders do not own corporations - a first in EU law. Contrary to the popular understanding, public companies have legal personhood and are not owned by their investors. The position of shareholders is similar to that of bondholders, creditors and employees, all of whom have contractual relationships with companies, but do not own them.

Though the change was omitted from the final version of the Directive, Smith's error had been acknowledged and corrected.

By openly recognising that corporations are sovereign, distinct and independent entities, EU lawmakers joined with a growing number of corporate lawyers to invite us to end the futile Berle-Dodd debate and consider a third model of governance. A model not based on corporations revolving around the interests of shareholders or stakeholders, but in which those interests are served if they help to secure the corporations indefinite existence.

Each corporation is a merchant at the centre of their own universe encircled by all shareholders and stakeholders.  All held in an elliptical orbit by the ever changing gravitational pull of the corporation's self- interest rightly understood. An invisible force that draws shareholders and stakeholders in and determines the proximity of their interests to those of the corporation.

After decades of legal practice, this hypothesis fits with my observations and the law. Smith's vision of capitalism realised through the sovereign corporation.

My proposition is that the central object in capitalism is the concept of personhood biological and corporate. Each a Smithian merchant in their own right having an innate inclination to continue to exist and enhance itself by aligning its self interest with the self interest of other merchants.

But what does a corporation's interest look like?

In the case of a corporation, an interest is one of the capitals. - human, intellectual, environmental, social, produced and financial. Commonly associated with Integrated Reporting <IR>, the capitals can equally be flipped to provided a complimentary accounting to explain how corporations maintain their existence.

Flipping the capitals results in the corporation becoming the first person and the capitals are thereby directed toward its interests.  The symbol is >i< .

>i< Accounting is based on the proposition that a corporation must store and convert each of the capitals to maintain and enhance itself. Please note, >i< Accounting is based on the intrinsic interests of the corporation and not the extrinsic interests of shareholders or stakeholders. It is derived from a non teleological understanding of the corporation.

The basic proposition underlying >i< Accounting is that excess and lower value capitals (typically financial capital) must be converted by a corporation into rarer and higher non financial forms of capital (human, intellectual, social capital etc). The purpose of this is to enable the production of lower forms of capital (produced capital) which in turn must then be converted into financial capital which is then converted into rarer and higher forms of capital and on it goes. In the >i< model cost equals capitalization and properly understood is a virtue.

Theoretically this cycle of capital creation can continue into perpetuity provided the corporation does not exploit the sources of capital or do something stupid. And by so doing, the corporation obliquely serves the interest of all those who hold capitals. [A paper and model that explains the concept of >i< Accounting will be published soon].

To continue the astronomical metaphor and explain the mischief caused by Smith conflating the shareholder for the corporation, excessive shareholder influence causes a corporation to exhaust its energy and become a dying star.

Under the influence of shareholder primacy the corporation begins to convert its higher capitals human capital, intellectual capital, social capital etc into one of lowest forms of capital - financial capital. It's called "efficiency" and "costing out". The resulting financial capital is then transferred for limited or no capital return in the form of buy backs, dividends etc. If there is any doubt about this process consider that total payout to shareholders in the US as a percentage of net income of the corporation stands at unprecedented levels. You might call it short-termism. Drucker called it suicide:

“Everyone who has worked with American management can testify that the need to satisfy the pension fund manager’s quest for higher earnings next quarter, together with the panicky fear of the raider, constantly pushes top managements toward decisions they know to be costly, if not suicidal, mistakes,”

If the cost out process is allowed to continue, the corporation's value previously stored across all the capitals eventually becomes exhausted. Ultimately making the corporation less able to maintain its very existence. This process is the corporate equivalent of Cotard's syndrome. And, if the decline in the number of public companies and confidence in capitalism are any measures, its become a pandemic.

One day, the sovereign corporation will be no less obvious to corporate governance as the sun became to astronomy. And while ignoring the sun could only hurt the pride of the scholar, ignoring the corporation and its interests will continue to hurt the wealth of all nations. For this was Smith's promise. The interests of all stakeholders will be met but only if corporations reject the call to act in the interests of shareholders and embrace Smith's enduring call to action.


Getting the Balance Right Between Value Protection and Value Creation

Grant Thornton's latest report The Board: creating and protecting value, considers how for purpose and profit organisations in the UK are finding the balance using my work into DLMA Analysis.*

According to the report, DLMA Analysis:

"is a simple yet powerful tool which provides a framework with which to evaluate how well an organisation is performing regarding the balance of skills, understanding of roles and responsibilities between the executive and Board and the alignment between the balance of energies between risk (value protection) and opportunity (value creation) and the overarching strategy and purpose."

To understand the key concepts, follow my presentation to the 2016 Better Boards Conference:

Applying my model to a survey of company directors, company secretaries, and executivesGrant Thornton found:

  • 27% of respondents thought there was Directorship role for non executives when it came to designing, debating and deciding the organisation's future.
  • 14% of respondents questioned whether the non executive directors were exercising oversight in their Assurance role.
  • 88% of respondents in all sectors thought their organisation's dominant control function was Leadership.

Most surprisingly, the Report found that only 18% of respondents thought that company directors were not guiding and inspiring executives.   I haven't seen the survey, but I wouldn't be surprised if the figure of 18% represented the total number of executives who participated in the survey.  A feeling confirmed from this finding:

"There was also a strongly held view that non executives do not inspire and guide the executive to realise the organisation's purpose, and that this shouldn't be expected ."

But as one CFO in Local Government explained non executives "make it difficult, rather than inspire". 

For the observant, you may have noticed this sentiment in my slides.  There's an expression for a certain type of director in Australia (and I expect the world). They're called "seagulls" - They fly in. Drop their contribution on the executive from a great height. Then fly out.

If your interested in DLMA Analysis I encourage you to read the Report and get in touch with me.

*Though Grant Thornton utilize my work I was not involved in the preparation and in no way is this post endorsed by them.


An Open Letter to Corporate Governance Scholars

Should governance researchers be required to disclose the sources of their funding?

Economists do.  Consider this resolution passed by the Stanford Economics Department

"It is expected that all members of the Stanford Economics Department will publicly disclose any financial or other significant interest that may be perceived to affect the conduct of their research. If a reasonable person would infer that a faculty member’s research conclusions or opinions might be biased by his or her financial or other interests, it is appropriate that the faculty member reveal those interests. Such interests, even if not related to the funding of the research, should be disclosed when appropriate in working papers and publications along with other acknowledgments of financial support and assistance from editors, reviewers, colleagues and seminar participants...."

My open letter published in the January edition of the International Corporate Governance Society newsletter calls on the society to consider a code of ethics for its Members.

The ICGS was founded in 2014 with a mission:

to provide a forum for corporate governance scholars throughout the world to interact with each other so that they can produce rigorous and relevant research, teaching and consulting that enhances corporate governance practices and systems within the global economy.

Though not a governance scholar, I joined up and attended their second annual conference in Boston in September last year.    My open letter follows a brief discussion with ICGS President, Bill Judge, during which I questioned the need for a code of ethics for corporate governance scholars.   You can learn more about the ICGS here.

The Ethics of Corporate Governance Scholarship: Does the ICGS Need a Code of Ethics?

In recent years, the integrity of knowledge produced by our universities and the credibility of the scholars who create it has been the source of much debate.    At issue is whether industry influence is compromising the ethics of scholarship.  

The life sciences are well advanced in this debate.  For example, in response to numerous studies, codes and guidelines have been developed to assist medical researchers to stay on the path of truth and avoid falling into the abys of advocacy for “big pharma”.

Less advanced is the connection between corporate governance scholarship and industry.  Arguably, the finance industry is to corporate governance what the pharmaceutical industry is to medicine.  And though the latter has been studied exhaustively, the relationship between corporate governance scholarship and the finance industry is still largely unknown.  That said, it would be wishful thinking to believe that corporate governance scholarship is immune from public perception that undisclosed commercial forces could be at play.  

In light of this, I encourage the ICGS to play a leadership role in maintaining and promoting the integrity of corporate governance scholarship by establishing a working group to formulate a code of ethics.  

Though the scope of such a code is beyond this letter, these questions provide a start:

  • Should members avoid "advocating" on behalf of any class of industry participant such as "share owners"?
  • Should members not accept industry funding tied to favorable research findings?
  • Should members disclose the source of their research funding?
  • should members be encouraged to disclose all their research data for peer review?
  • should members commit to the scholars duties?

Sadly, this last issue has all but been reduced to a duty to avoid plagiarism.   It is worth remembering that exactly one hundred years before the ICGS held its inaugural conference in Copenhagen, the American Association of University Professors (‘AAUP’) set down the duties of the scholar:

Since there are no rights without corresponding duties, the considerations heretofore set down with respect to the freedom of the academic teacher entail certain correlative obligations. [...] The liberty of the scholar within the university to set forth his conclusions, be they what they may, is conditioned by their being conclusions gained by a scholar's method and held in a scholar's spirit that is to say, they must be the fruits of competent and patient and sincere inquiry, and they should be set forth with dignity, courtesy, and temperateness of language.

Critically, the AAUP Principles state that the duty is owed to the public.  The scholar’s “duty is to the wider public to which the institution itself is morally amenable”.  

Corporate governance scholars are well known for reminding company directors and officers of their duties and ethics.   In my view, the ICGS will do a great service by reminding its members of their duty and ethics.