What Corporate Governance Can Learn from Catholic Social Teaching
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This reflection focuses on what insights Catholic Social Teaching (CST) can provide for corporate governance. I argue that the ‘standard’ agency theory is overly reductionist and insufficiently incorporates important economic limitations (such as asymmetric information, incomplete contracts, and the need for coordination) as well as human frailty. As a result, such agency theory insufficiently distinguishes firms from markets, which can easily relativize how we treat others and facilitate rationalization of unethical behavior. I then explore how three pillars of CST—human dignity, solidarity, and subsidiarity—can help overcome these limitations. CST proposes a vision of the business corporation as a community of persons, working together in cooperative business relationships toward the shared purpose of contributing to human flourishing.
KeywordsCorporate governance Catholic Social Teaching Human flourishing Solidarity Subsidiarity
I am indebted to many people for insightful conversations, feedback, and helpful reading recommendations, especially to two anonymous reviewers, David Lutz, Domènec Mele (the editor), Lloyd Sandelands, Martin Schlag, and seminar participants at IESE Business School, the University of Notre Dame, Ave Maria University, Arizona State, Villanova, and Northwestern University School of Law. I remain solely responsible for any errors.
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