Corporate Governance and Ethics

Corporate Governance and Ethics

An Aristotelian Perspective

New Horizons in Leadership Studies series

Alejo José G. Sison

Corporate Governance and Ethics is an illuminating and practical reading of Aristotle’s Politics for today’s corporate directors. With a deft synthesis of ethics, economics and politics, Alejo Sison elevates the discussion of corporate governance out of the realm of abstract rules and structures into a more effective form of Aristotelian politics. He argues that corporate governance is a human practice where subjective, ethical conditions outweigh the mastery of techniques, since the firm is not a mere production function but, above all, a community of workers. Corporate governance issues are discussed in a holistic fashion, using international case studies to embed the discussion in environments defined by their economic, legal and cultural systems. One of the author’s key messages is that reform starts with the ethical and political education of directors.

Chapter 1: Changing Conventional Wisdom: The Firm is not a Money-making Machine

Alejo José G. Sison

Subjects: business and management, business leadership, corporate governance, economics and finance, corporate governance, financial economics and regulation, politics and public policy, leadership


1. Changing conventional wisdom: the firm is not a money-making machine I BUSINESS ‘COMMON SENSE’ There are a few simple things that anyone who comes in contact with a firm – and past a certain age, that makes almost everybody – should know: in a firm there are people or groups of people called ‘owners’. They are the ones who put in the money, thanks to which the firm is able to operate and, in exchange, the rest of society recognizes their right to call the shots. In other words, despite the boss’s self-sufficient airs and penchant for ordering everyone else around, he’s a mere stand-in for his own boss, the real boss, that is, the owners. Next is that owners put their money in the firm expecting some rewards. They do not do so out of selflessness, love of neighbour or some other lofty ideal. They just expect to earn more money after a given time, hopefully, not too long. That is the logic of investment. Owners are entitled to the surplus money the firm generates for having parted with their money in the first place and allowing other people (managers and workers) to use that capital productively. Of course there are several ways of investing money and, generally, the risk each one entails is directly proportional to the possible gains. Nonetheless, a keen investor is precisely the one who is able to choose from among the different options that which yields maximum returns. In principle, therefore, business...

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