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 3: Governance and Government from an Aristotelian Perspective

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

Extract

Whenever one hears the word ‘govern’ and its cognates, such as ‘governance’ and ‘government’, the notions of ‘authority’ and the exercise of power and control immediately come to mind. Normally, one also thinks of a political unit such as the state in its dual role as both the subject and the object of the act of governing. The state governs the lives of those found under its authority, although at the same time – and in the best of cases – those who live under the state’s authority are precisely the ones who determine how the state should go about this task. In other words, the state is ideally an instrument through which the very same people who are subject to its authority do in fact govern themselves. It is indeed surprising that none of these associations takes place upon a simple reading of the definition of a corporate governance system: the complex set of constraints that shape the ex-post bargaining over the quasirents in the course of a relationship (Williamson, 1985). Not even after it is explained that the definition refers to a contractual relationship of an incomplete kind, such that no previous agreement on how to divide the spoils (so to speak) arising from the relationship can be made. A governance system seems to indicate rules of bargaining over contigent future goods that escape contractual agreements. This distance between the common understanding of what it means to govern and the formula afforded us by a corporate governance...

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