AAP2010 Abstracts
Use the form below to search abstracts by Author, Institue or Keyword.
| Title | Dr. |
| First Name | David |
| Surname | Lea |
| Institution | American University of Sharjah |
| Title of Paper | Ethical Hierarchies and Corporate Governance |
| Select a Stream | Applied Ethics |
| Abstract | It has been recently argued that critical use of agency theory using the principal agent analysis provides not so much a model as to how firms actually work, but instruction as to how the world of business would be without business ethics. Accordingly, it is argued one will see that the alternative to ethical business practice is not unethical business practice but the absence of business enterprise altogether. I argue that although this approach might impress upon us the necessity for ethical restraint to complement self interest, I believe one has to go further and emphasize the hierarchical structure of commercial organization and the fact that moral dysfunction that accompanies organizational dysfunction can best be understood through failure to fulfill distinct functional roles associated with this hierarchical structure. Within this hierarchical arrangement, the CEO as the principal representative of management is responsible for stewardship that goes beyond promoting the monetary interests of the shareholders. I argue that this points to the fallacy of attempting to compel performance by inducing management to identify with shareholder interests through stock options and other forms of equity compensation. Appropriating a shareholder mentality blurs the focus of management, and the sustained wellbeing of the firm is in jeopardy as management may be induced to take on the values and interests associated with financial speculation. As management increasingly comes to identify its interests with increasing the value of shareholder equity we have seen an increased reliance on short term goals aimed at inflating quarterly returns to pump up the value of company shares. Unsavory practices are frequently employed to secure the desired results such as questionable accounting practices and even outright fraud or massive layoffs that drastically cut costs while endangering product quality, labor relations and firm specific human capital. |
