Abstract
In English and American finance literature, the “good governance” question basically comes down to the discipline of “market of corporate control” (external control). In that perspective, it is the threat of international market competition and takeovers (whether hostile or friendly) that primarily disciplines the management of a company. The European approach clearly has a more institutional character. In that model, which can be classified as a network model, the historical and sociological ownership structure dominates the empirical landscape. Germany, France, Italy and the Netherlands, for example, clearly have specific corporate governance structures where internal control is more important than external control. Corporate democracy and stakeholder values are key paradigms in these corporate structures. The problem, however, is that the stakeholder society is hindered by three key problems: dearth of pledgeable income, deadlocks in decision-making, and lack of clear mission for management (Tirole 2001). Departing from the need for governance and sustainability (Petschow, Rosenau and Weizsäcker 2005) and stewardship-based economics (Wy Kao 2007), this paper will elaborate on corporate governance as a key element in corporate democracy, stakeholder politics and sustainable development.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
It is not surprising therefore that in these approaches debt is an optimal security due to its relative low verification cost.
- 2.
Because the individual consumption preferences can freely be satisfied in the consumption markets (assuming market efficiency).
- 3.
This is where, theoretically, ethics come in. The negative perception of human nature is the starting point of the entire agency theory.
- 4.
On the other side of the probability distribution, the stockholder fully earns the upward potential that comes with ownership.
- 5.
To describe this study at length would be to go beyond the scope of this study, but basically it is based on the arguments as described in previous paragraphs of this section.
- 6.
Dobson uses the Starkist Tuna case and the Shell Brent Spar case as empirical evidence for his conclusion on the interrelation between financial decisions and business ethics.
- 7.
In addition to the market oriented systems, there are also network oriented corporate governance systems such as the ones existing in, for example, Germany and Japan. These systems can be typified by cross shareholdings in industrial groups such as, for example, the Keiretsu in Japan or the role of the Aufsichtsrat (i.e., supervisory board) in Germany. In the latter system there is almost always a representative of a German bank on the board of commissioners of a company. In these countries, the role of the stock market in providing capital is much less dominant than it is in Anglo American markets, as a result of institutional factors in the past.
- 8.
See Maljers, F.A., opening speech by the Chairman at the symposium: Corporate Governance & Corporate Finance: A European Perspective, on 15 March 2007, held at the RSM Erasmus University (for the printed version cf. Maljers 2008).
- 9.
Behavioural theory is used in this context as a collective noun. There are many different models in which human behaviour is explicitly incorporated into the economic and management processes of the firm. For example, Bouckaert and Vandenhove (1994) extensively discuss four different models on social responsibility of the firm.
- 10.
In other words, the value depends on the relevant perception of cultural and ethical values by the society in question.
- 11.
See Soppe (2008) for the difference between pure shareholders and dual shareholders. Dual shareholders are defined as stakeholders (employees, NGOs, suppliers) holding shares in a company and who as such acquire a dual interest in the company.
- 12.
See for example Wirtenberg et al. (2009).
References
Alchian, A.A. 1982. Property rights, specialization, and the firm. In Corporate enterprise in a new environment, ed. J.F. Weston and M.E. Granfield, 11–36. New York, NY: KCG Productions.
Bakas, A., and R. Peverelli. 2008. The future of finance. Schiedam: Scriptum Publishers.
Benn, S., and D. Dunphy. 2007. Corporate governance and sustainability: Challenges for theory and practice. New York, NY; London: Routledge.
Blair, M.M. 1995. Ownership and control: Rethinking corporate governance for the twenty-first century. Washington, DC: Brookings Institution Press.
Boatright, J.R. 1999. Ethics in finance. Malden, MA: Blackwell.
Bouckaert, L., and J. Vandenhove. 1994. Meer dan strategie? Sociale verantwoordelijkheid als bedrijfsfilosofie. Leuven: ACCO, Centre for Economics and Ethics.
Boutilier, R. 2009. Stakeholder politics: Social capital, sustainable development, and the corporation. Stanford, CA: Stanford University Press.
Bowie, N.E., and R.E. Freeman. 1992. Ethics and agency theory: An introduction. Oxford et al.: Oxford University Press.
Cornell, B., and A. Shapiro. 1987. Corporate stakeholders and corporate finance. Financial Management 16: 5–14.
Crane, A., A. McWilliams, D. Matten, J. Moon, and D.S. Siegel, eds. 2008. The Oxford handbook of corporate social responsibility. Oxford et al.: Oxford University Press.
Cyert, R.M., and J.G. March. 1963. A behavioral theory of the firm. Englewoods Cliffs, NJ: Prentice-Hall.
Davis, J.H., F.D. Schoorman, and L. Donaldson. 1997. Toward a stewardship theory of management. Academy of Management Review 22: 20–47.
Diamond, D.W. 1984. Financial intermediation and delegated monitoring. Review of Economic Studies 51: 393–414.
Dobson, J. 1999. Defending the stockholder model: A comment on Hasnas, and on Dunfee’s MOM. Business Ethics Quarterly 9: 337–345.
Donaldson, L., and J.H. Davis. 1991. Stewardship theory or agency theory: CEO governance and shareholder returns. Australian Journal of Management 16: 49–64.
Dunfee, T.W. 1998. The marketplace of morality: First steps toward a theory of moral choice. Business Ethics Quarterly 8: 127–145.
Dyer, B., S. Jordan, S.A. Rochlin, and S. Shah. 2005. State of corporate citizenship in the U.S.: Business perspectives in 2005. Research report, Boston College, Center for corporate citizenship.
Elkington, J. 1997. Cannibals with forks: The triple bottom line of 21st century business. Oxford: Capstone.
Engelen, E. 2002. Corporate governance, property and democracy: A conceptual critique of shareholder ideology. Economy and Society 31: 391–413.
Fama, E.F., and M.C. Jensen. 1983. Agency problems and residual claims. Journal of Law and Economics 26: 327–349.
Fergus, A.H.T., and J.I.A. Rowney. 2005. Sustainable development: Epistemological frameworks & an ethic of choice. Journal of Business Ethics 57: 197–207.
Freeman, R.E. 1984. Strategic management: A stakeholder approach. Boston, MA: Pitman.
Freeman, R.E., A.C. Wicks, and B. Parmar. 2004. Stakeholder theory and ‘The corporate objective revisited’. Organization Science 15: 364–369.
Habisch, A., J. Jonker, M. Wegner, and R. Schmidpeter, eds. 2005. Corporate social responsibility across Europe. Berlin et al.: Springer.
Hasnas, J. 1998. The normative theories of business ethics: A guide for the perplexed. Business Ethics Quarterly 8: 19–42.
Idowu, S.O., and B.A. Towler. 2004. A comparative study of the contents of corporate social responsibility reports of UK companies. Management of Environmental Quality: An International Journal 15: 420–437.
Jensen, M.C. 1986. Agency costs of free cash flow, corporate finance, and Takeovers, American Economic Review, Papers and Proceedings of the 98 th Annual Meeting of the American Economic Association, 76, 323–329.
Jensen, M.C., and W.H. Meckling. 1976. Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics 3: 305–360.
Johnson, E.W. 1997. Corporate soulcraft in the age of brutal markets. Business Ethics Quarterly 7: 109–124.
Kao, R.W.Y. 2007. Stewardship-based economics. Singapore: World Scientific Publishing.
Kaptein, M., and J. Wempe. 2002. The balanced company: A theory of corporate integrity. Oxford et al.: Oxford University Press.
Keasey, K., S. Thompson, and M. Wright. eds. 2005. Corporate governance: Accountability, enterprise and international comparisons. Chichester: Wiley.
Klein, S. 1998. Don Quixote and the problem of idealism and realism in business ethics. Business Ethics Quarterly 8: 43–63.
Lélé, S.M. 1991. Sustainable development: A critical review. World Development 19: 607–621.
Lozano, J.M., L. Albareda, and T. Ysa. 2008. Governments and corporate social responsibility: Public policies beyond regulation and voluntary compliance. Basingstoke: Palgrave Macmillan.
Maljers, F.A. 2008. Preface by Floris Maljers. In Corporate governance and corporate finance. A European perspective, ed. R.A.I. van Frederikslust, J.S. Ang, and P.S. Sudarsanam, xviii-ixx. Abingdon: Routledge.
Matten, D., and J. Moon. 2008. ‘Implicit’ and ‘Explicit’ CSR: A conceptual framework for a comparative understanding of corporate social responsibility. Academy of Management Review 33: 404–424.
Perego, P.M. 2005. Environmental management control. An empirical study on the use of environmental performance measures in management control systems. Dissertation: Radboud University Nijmegen.
Petschow, U., J. Rosenau, and E.U. von Weizsäcker, eds. 2005. Governance and sustainability: New challenges for states, companies and civil society. Sheffield: Greenleaf Publishing.
Shefrin, H., and M. Statman. 1993. Ethics, fairness and efficiency in financial markets. Financial Analysts Journal 49: 21–29.
Shleifer, A., and R.W. Vishny. 1997. A survey of corporate governance. Journal of Finance 52: 737–783.
Simon, H.A. 1982. Models of bounded rationality, Vol. 1 and 2. Cambridge, MA: MIT Press.
Soppe, A.B.M. 2008. Sustainable finance and the stakeholder equity model. In Trends in business and economic ethics, ed. C.J. Cowton and M. Haase. Berlin, Heidelberg: Springer. (= Studies in economic ethics and philosophy).
Stern, N.H. 2007. The economics of climate change: The stern review. Cambridge et al.: Cambridge University Press.
Stout, L.A. 2002. Bad and not-so-bad arguments for shareholder primacy. Southern California Law Review 75: 1189–1209.
Stout, L.A. 2007. The mythical benefit of shareholder control. Virginia Law Review 93: 789–810.
Tempelaar, F.M. 1991. Theorie van de ondernemingsfinanciering. Maandblad voor Accountancy en Bedrijfseconomie (MAB), June 284–298.
Tirole, J. 2001. Corporate governance. Econometrica 69: 1–35.
Townsend, R.M. 1979. Optimal contracts and competitive markets with costly state verification. Journal of Economic Theory 21: 265–293.
Welzer, H. 2008. Klimakriege. Wofür im 21. Jahrhundert getötet wird. Frankfurt a. M.: S. Fischer.
Williamson, O.E. 1988. Corporate finance and corporate governance. Journal of Finance 43: 567–591.
Wirtenberg, J., W.G. Russell, and D. Lipsky, eds. 2009. The sustainable enterprise fieldbook: When it all comes together. New York, NY: Greenleaf Publishing.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2011 Springer Science+Business Media B.V.
About this chapter
Cite this chapter
Soppe, A. (2011). Corporate Governance, Ethics and Sustainable Development. In: Brink, A. (eds) Corporate Governance and Business Ethics. Studies in Economic Ethics and Philosophy, vol 39. Springer, Dordrecht. https://doi.org/10.1007/978-94-007-1588-2_11
Download citation
DOI: https://doi.org/10.1007/978-94-007-1588-2_11
Published:
Publisher Name: Springer, Dordrecht
Print ISBN: 978-94-007-1587-5
Online ISBN: 978-94-007-1588-2
eBook Packages: Humanities, Social Sciences and LawPhilosophy and Religion (R0)