Abstract
The nexus of imperfect managerial-duty is defined as management’s collection of volitional attitudes and actions in pursuit of a moral purpose, but that have practical limits. This describes business behavior towards building affable and virtuous relations, maintaining reasoned social- discourse, and performing the due diligence necessary for making knowledgeable business decisions. A theory of the development and extent of the limits of these imperfect managerial duties is presented here, a theory that in part explains the activities and personnel included under the firm’s umbrella. As a result, the nexus of imperfect duty is shown to complement the perfect duty-based nexus-of-contracts theory of the firm. The existence of flexible tradeoffs involving these imperfect duties, tradeoffs not easily amenable in contractual arrangements whether explicit or implicit, is shown to be one of the advantages of imperfect duty for developing business relations. As a result, the pursuit of shareholder wealth is not subject to contracting, i.e. it is not a perfect duty. Shareholder wealth pursuit emerges from the nexus of imperfect duty.
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Notes
- 1.
The terms positive and negative duties, the former being identified with imperfect and the latter with perfect, are not utilized here due to the confusions this terminology generates, e.g. we have a positive duty to pay our taxes, but this could be interpreted as a negative duty to avoid being a tax cheat. The Kantian distinction of perfect and imperfect, as defined above, avoids this confusion; i.e. the former is absolute, the latter is open ended.
- 2.
Annas (1993) emphasizes this development requirement of virtue ethics throughout her treatise.
- 3.
For example, Ohreen and Petry (2012) explore the imperfect duty of business strictly in the context of corporate philanthropy. Mansell (2013) also explores this duty-of- beneficence in order to extend corporate moral obligations to wider stakeholder groups than only shareholders, but does not venture into the categories explored here. Buchanan (1996) also explores the imperfect duties of business benevolence, but in the context of the collective action of moral suasion. Each of these efforts does not explicitly extend the use of the notion of imperfect duty into the realm of what is typically envisioned as managerial efforts.
- 4.
See Boatright (2002).
- 5.
See Williamson and Winter (1993) for reviews of this “extensive development.”
- 6.
Some contracts may be open-ended, for which some degree of imperfect duty applies. For example, consider commodity futures (or forward contracts) where some range of grades of the good to be delivered is acceptable. The purchaser must rely on the supplier to not try and game-the-system by providing a poor grade, or by exploiting other manipulative methods for delivery. See Duffie (1989, section 2.5), and Fackler (1993) for explorations of these manipulations.
- 7.
See Kant (1797, 6: 445–449).
- 8.
For illustration purposes, Kant (1785) derived a set of five maxims from the formula of universal law.
- 9.
This is a Kantian passage that fully expresses the second formula’s foundation for duty. For duty of virtue based upon respect, further see Kant (1797, 6:462).
- 10.
In this context, beneficence means “doing or producing good.”
- 11.
- 12.
See Robinson (2018) for a similar statement. The only instance of “business interaction” that would violate this norm would be a tort or similar action to seek recompense for perceived previous offense.
- 13.
See Kant (1797, 6: 454).
- 14.
- 15.
Williamson (1985) presents extensive positive-observations of the contractual institutions of business, but it also explains the role of these institutions in addressing the moral-hazard problems of market interactions.
- 16.
See Hart (1993).
- 17.
This process is consistent with the Aristotelian view of virtue ethics. See Annas (1993) for a full exploration of the virtue process of development.
- 18.
The reasons for this being the goal are cited in Chapter 9: “Due Diligence and the Profit Motive: Perfect or Imperfect Duty?”. Also see Copeland and Weston (1983, pp. 21–25) for an explanation of SWM.
- 19.
See Robinson (2018).
- 20.
Consider bond indentures that restrict the potential activities of the issuing firm unless approved by a legal representative of the bond holders. These indentures inhibit the firm’s flexibility to exploit new opportunities, and these indentures are often associated with the securities issued by less-credit-worthy firms. Highly rated firms do not generally face these indenture restrictions. See Smith and Warner (1979, section 2, especially 2.1.6).
- 21.
The principle “trust building device” explored by Wang et al. (2009) was a grant of shares to employees. Robinson (2018), however, emphasizes the development of longer-term relations of virtue for trust building as in Aristotle’s (1984) Nicomachean Ethics. Cooper (1980) reviews this Aristotelian philosophy.
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Supplemental Readings
Robinson (2019a), (2019b) and (2018) present the complete analysis of “The Nexus of Imperfect Managerial Duty.”
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Robinson, R.M. (2022). Chapter 6: The Nexus of Managerial Imperfect Duty: Relations of Virtue, Discourse, and Due Diligence. In: Business Ethics: Kant, Virtue, and the Nexus of Duty. Springer Texts in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-85997-8_6
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