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The ethics of corporate governance

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Abstract

The failure of the critics of corporate governance to agree on what should be done to improve the governance process can, in most cases, be traced to a different understanding of the role of corporate directors in that process. This article analyzes and contrasts the obligations of directors under two legal theories, the fictional person theory and the organic theory, of the corporation. A comparison of the director's obligations under each theory indicates that the organic theory provides a better basis for assessing the performance of directors and initiating reform.

Among the boards of directors of Fortune 500 companies, I estimate that 95% are not fully doing what they are legally, morally, and ethically supposed to do. And they couldn't, even if they wanted to.

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Authors and Affiliations

  1. School of Management, Rockhurst College, 5225 Troost, 64110, Kansas City, MO, USA

    E. Eugene Arthur

Authors
  1. E. Eugene Arthur
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Additional information

E. Eugene Arthur, S.J., is Associate Professor of Management and Economics at Rockhurst College. He is a Visiting Fellow at Trinity Center for Ethics and Corporate Policy.

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Arthur, E.E. The ethics of corporate governance. J Bus Ethics 6, 59–70 (1987). https://doi.org/10.1007/BF00382949

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  • DOI: https://doi.org/10.1007/BF00382949

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