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 4: Shareholders, Stakeholders and Citizens

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


Having studied in the previous chapter the ends proper to states and to firms, the next step in developing the analogy between the two institutions consists in examining the different kinds of people that comprise each of them. This will provide us with a better understanding of the various parties involved in corporate governance and the role that each one is supposed to play. I WHO CONSTITUTES THE FIRM? FROM SHAREHOLDERS TO CORPORATE CITIZENS To the question of who constitutes the corporation, many would find ‘shareholders’ a fitting initial response. After all, without their money or financial capital, the funds necessary to support any economic activity would be sorely lacking. Although there will always be firms managed by shareholder-owners – think of IKEA with Ingvar Kamprad, Virgin with Richard Branson and Benetton with Luciano Benetton, for example – among bigger corporations, however, this is more of an exception than the rule. The sheer size of the corporation requires that other people work for it, apart from the owner and the members of the owner’s family. And these people normally work in exchange for a salary or a wage. Hence, while shareholders receive interest on their capital, workers receive salaries for their labour. All those who work for a corporation without owning shares in it may be said to belong (broadly) to the professional or managerial class. The division between shareholders and managers has also been provoked, apart from company size, by the necessary specialization of tasks (Berle and Means, 1932). Increased...

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