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Article
Publication date: 31 August 2010

Xavier Duran and Patrick McNutt

The purpose of this paper is twofold: first to add to the debate on trust and opportunism within transaction cost economics (TCE) and second to describe a partial…

Abstract

Purpose

The purpose of this paper is twofold: first to add to the debate on trust and opportunism within transaction cost economics (TCE) and second to describe a partial solution, a code of ethical practice (CoEP) originating in Kant's moral philosophy.

Design/methodology/approach

The methodology has centred on ethical values of right and wrong within an organisation in terms of fulfilling one's duty.

Findings

The contracting or exchange objective in any transaction is to arrive at a mutually satisfactory outcome, an equilibrium point. With opportunism, a free rider problem may well arise; if so, a partial solution emerges. This has to be avoided. In this paper, the authors focus on simple contracts as a solution, that is, an agreement‐as‐bargain in a CoEP not made in deed but made in reason, so that each party to the arrangement, has “dignity”. The avoidance of an ethical dilemma in not fulfilling one's duty is linked to the role of trust in TCE.

Practical implications

It is argued that the decision not to engage in opportunistic behaviour, for example, by any one individual, may be rooted in a personal sense of duty or influenced by the ethical values and beliefs embedded within the culture of the organisation or the firm. Management may therefore decide not to abuse their discretionary power; workers may opt not to shirk.

Originality/value

The paper builds on a new approach to understand governance and ethics insofar as a firm teaches people morality. This CoEP supports the role of trust in modern companies and links across to the literature on TCE. The paper should be of value to shareholders, workers and management, trade unions and commentators on the theory of the firm.

Details

International Journal of Social Economics, vol. 37 no. 10
Type: Research Article
ISSN: 0306-8293

Keywords

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Article
Publication date: 31 August 2010

Patrick A. McNutt

The purpose of this paper is to address the debate on an ethical foundation underpinning modern corporate governance and to argue that an ethical foundation is absent in…

Abstract

Purpose

The purpose of this paper is to address the debate on an ethical foundation underpinning modern corporate governance and to argue that an ethical foundation is absent in the definition of corporate governance. The paper recommends an applied Kantian philosophy.

Design/methodology/approach

The objective is achieved by introducing a Kantian morality and considering the distinction between accountability and responsibility in terms of fulfilling one's duty.

Findings

Individuals do have a sense of duty and sense of what is right and what is wrong from an ethical perspective. There is a need for a code of ethical practice (CoEP) in business to encourage individuals to apply their sense of duty at employees or management.

Research limitations/implications

The research ideas are limited to an ethical perspective that is based on a Kantian morality and the implementation of a code.

Practical implications

Some practical implications from the theory addressed in the paper include a CoEP and the introduction of a K‐profiling template at interview stage to assess the moral compass of a potential employee.

Originality/value

The paper opens the debate on the need for an ethical foundation or “moral metric” in corporate governance that goes beyond a public relations exercise.

Details

International Journal of Social Economics, vol. 37 no. 10
Type: Research Article
ISSN: 0306-8293

Keywords

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Article
Publication date: 1 January 1993

Patrick A. McNutt

Addresses the characteristics of an ideal society. In particular afair decision is defined as the indexed subset of liberty, justice andrights: if a decision is right…

Abstract

Addresses the characteristics of an ideal society. In particular a fair decision is defined as the indexed subset of liberty, justice and rights: if a decision is right, then it is fair, and, if it is fair, the decision is just. This line of reasoning is arrived at by introducing the new concepts of ethical asymmetry, altruism, dual disadvantage, preference criteria, moral complements and pairwise rights. Respect for individual rights is an important characteristic of the reasoning presented. The Samaritan regards the individual′s right as a claim right, justified by reference to a moral theory or to law. The Samaritan′s dilemma arises when, in resolving an individual right issue, cognizance must be taken of the public preference on the issue. The resolution of the issue can be attained with the presence of altruistic individuals.

Details

International Journal of Social Economics, vol. 20 no. 1
Type: Research Article
ISSN: 0306-8293

Keywords

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Article
Publication date: 1 August 2005

Patrick A. McNutt and Charlie A. Batho

The purpose of this paper is twofold: first, to add to the debate on governance and, second, to describe a value set theory of the firm.

Abstract

Purpose

The purpose of this paper is twofold: first, to add to the debate on governance and, second, to describe a value set theory of the firm.

Design/methodology/approach

The methodology has centred on good governance amongst employees – management and workers alike.

Findings

It is noted that committees are appointed in firms to ensure that good governance is practised across a range of issues to do with audit, remuneration and appointment. However, the debate on governance has largely overlooked the importance of good governance amongst all employees. It was found that governance at the employee level requires a code of ethics that is not just about right and wrong, but emphasises a contractual sense of duty to fellow employees as stakeholders in the firm. This defines the essence of obligation and duty within the stakeholder firm, the s‐firm.

Practical implications/limitations

One practical implication of the paper is that the practice of good governance at the employee level should begin by asking whether the employees as rational individuals in a state of nature would freely have agreed to the contract or work arrangement within the firm that obligates them to do X. A value set theory of the firm could assist employees by allocating responsibilities among all employees in such a way as to maximise joint effort.

Originality/value

The paper proffers a new approach to understanding governance and it concludes that every rational being is in the state of being an end in itself – a firm should teach people morality. An s‐firm teaches people morality. This is the quintessence of employee governance. The paper should be of value to shareholders, workers, management, trade unions and commentators on the theory of the firm.

Details

International Journal of Social Economics, vol. 32 no. 8
Type: Research Article
ISSN: 0306-8293

Keywords

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Article
Publication date: 31 August 2010

Elena Demidenko and Patrick McNutt

The purpose of this paper is twofold: first to add to the debate on good governance and ethics of enterprise risk management (ERM) and second to describe an ethical…

Abstract

Purpose

The purpose of this paper is twofold: first to add to the debate on good governance and ethics of enterprise risk management (ERM) and second to describe an ethical maturity scale based on duty and responsibility for practical implementation to ensure better governance.

Design/methodology/approach

The methodology has centred on risk governance as a way for many organisations to improve their risk management (RM) practices from an ethical perspective based on responsibility and on fulfilling one's duty within the organisation.

Findings

While companies in Australia, for example, are more mature than those in Russia in terms of governance systems life cycle, there are a number of common international challenges in risk governance implementation. These relate to a link between risk framework, enterprise value model and strategic planning; to a definition of risk appetite, the embodiment of RM in organisational culture, internal audit and ERM function, the evolving role of a chief risk officer (CRO) and senior management buy‐in and sponsorship of the integrated ethical RM from a chief executive officer.

Practical implications

ERM – a way for many organisations to improve their RM practices – is a key component of the applied ethics of corporate governance. It has developed into a philosophy to assist organisations with the process of protecting shareholders' value while also increasing the bottom‐line profitability. Effective ERM is based on ethical risk governance. Internal audit needs to be involved in the process of integrating RM and compliance. It should maintain a degree of independence when assisting with ERM establishment. CRO is most effective when reporting to the board.

Originality/value

Global companies are becoming more accountable to multiple stakeholders. It is the adoption of an ethical code to arrest the lack of clarity of roles ascribed to the audit committee and risk committee and management's accountability or lack thereof that remains the challenge across different jurisdictions. In attempting to implement good governance and meet the challenges, the paper introduces an ethical maturity scale as an internal measure that could be embedded in an organisation's strategy.

Details

International Journal of Social Economics, vol. 37 no. 10
Type: Research Article
ISSN: 0306-8293

Keywords

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Article
Publication date: 1 September 1988

Patrick A. McNutt

This article is occasioned by the emerging literature on economics and ethics, and seeks to illustrate from a children's story one question, the answer to which is…

Abstract

This article is occasioned by the emerging literature on economics and ethics, and seeks to illustrate from a children's story one question, the answer to which is fundamental in resolving some issues in the literature. Central to our thesis are the twin concepts of altruism and fairness.

Details

International Journal of Social Economics, vol. 15 no. 9
Type: Research Article
ISSN: 0306-8293

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Article
Publication date: 31 August 2010

Fulong‐Daniel Feng

The purpose of this short paper is to re‐examine corporate social responsibility (CSR) in terms of the ethical criterion of “greenness” through an assessment of one…

Abstract

Purpose

The purpose of this short paper is to re‐examine corporate social responsibility (CSR) in terms of the ethical criterion of “greenness” through an assessment of one company's response to green consumers during the past number of years.

Design/methodology/approach

The ethical evaluation proceeds along the lines of a case study analysis of the significance of “green” as a value and the likely implications for a company.

Findings

There is a need for all companies to shift to Kantian responsibility with the appointment of a chief ethical officer and creation of an ethics department in an attempt to balance the short‐term profit‐oriented pursuit and the long‐term pursuit of fulfilling one's duty.

Research limitations/implications

The paper addresses the ethical issue of “greenness” from a Kantian perspective of fulfilling one's duty.

Practical implications

Public companies should adopt full transparency on CSR so that the public can be assured that the company is ethical and acting in an ethical manner.

Originality/value

The paper provides a brief application of a Kantian time‐variant responsibility in terms of fulfilment of one's duty now to be a green company. It asks: how can a company best achieve “greenness” as a time‐invariant ethical standard?

Details

International Journal of Social Economics, vol. 37 no. 10
Type: Research Article
ISSN: 0306-8293

Keywords

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Article
Publication date: 31 August 2010

Emanuela Todeva

The paper seeks to explore Kant's formulations on universal good will, perfect moral order, and universal peace, and the notion that the world's citizenship should be…

Abstract

Purpose

The paper seeks to explore Kant's formulations on universal good will, perfect moral order, and universal peace, and the notion that the world's citizenship should be organised in a federated system of states, free to choose their own universal laws.

Design/methodology/approach

This theoretical discussion is pursued in two separate sections. The first section reviews leading regulation theories that explain how governments in their decision‐making capacity engage in regulation at macro‐level of the entire socio‐economic system. The second section follows from this argument and discusses the governance theory and alternative governance mechanisms designed and employed by governments to manage the strategic behaviour of the individual economic actors at mezzo‐ and micro‐level of contract relationships.

Findings

The paper discusses some of the current theories that underpin the analysis and interpretation of public administration practice, or public governance in different socio‐economic systems. The paper looks at some of the dominant postulates of regulation and governance, and question to what extent they can be accepted as universal principles in line with Kant's argumentation. Different types of governance mechanisms are compared and contrasted in the context of strategic actors such as: the public government as a regulating authority and the firms as regulated economic actors.

Originality/value

The argument in this paper is that governments as regulators of national socio‐economic systems are strategic actors in their capacity to actively shape the regulatory environment, implementing various coordination mechanisms that facilitate the functioning of the economy and the society. The paper attempts to make some ethical judgements on market imperfections and government imperfections in line with Kant's concept of universal moral order.

Details

International Journal of Social Economics, vol. 37 no. 10
Type: Research Article
ISSN: 0306-8293

Keywords

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Article
Publication date: 31 August 2010

Clelia L. Rossi

The purpose of this paper is to discuss the merits of self‐regulation and the art of embedding it within an organisation, not as a secondary activity but as a core and…

Abstract

Purpose

The purpose of this paper is to discuss the merits of self‐regulation and the art of embedding it within an organisation, not as a secondary activity but as a core and fundamental business skill that ensures the survival of a business entity in the long term.

Design/methodology/approach

The objective is achieved by considering compliance leadership as a strategy within a modern company. If the highest layer of stewardship of the firm (directors) explicitly accepts a conventional definition of business ethics (the law, best practice, a set of values in a specific hierarchy), then the author can measure this agreement and benchmark it against the highest known standards of corporate governance.

Findings

Rational shareholders and managers will behave morally and find acceptable categorical imperatives to govern their behaviour. The delivery and preservation of long‐term value demand that firms build capabilities to self‐regulate and co‐shape their environment, particularly if highly regulated. The paper suggests a way to organise the compliance leadership within some well‐known business structures and present the idea that the chief executive officer of a firm who operates in a complex regulatory environment must make compliance a significant part if not the core element of his or her overall strategy.

Research limitations/implications

Some arguments highlighting weaknesses in the Kantian arguments have not been fully discussed. A global initiative that measures the relationship between ethical maturity and share price has not been undertaken in the writing of this paper.

Practical implications

Twenty‐first century management must ensure the health and resilience of their company's culture to successfully manage and overcome the daily ethical questions that arise across all levels and layers of the organisation as a first priority and that whole business models can be built around this mission. Regulators should be accountable for recognising cultural crisis within the firms they regulate in order to balance the reliance on quantitative measurements of success and to navigate the complexity of the largest players in the market.

Originality/value

The paper builds on earlier research by the author that rational norms of behaviour are core business capabilities that will produce industry leaders that can change the risk landscape of the industries wherein these firms operate. This new leadership will be demanded by the rational shareholder and will transform firms into stakeholder firms capable of interacting with their environment and creating and sustaining value over the longest term.

Details

International Journal of Social Economics, vol. 37 no. 10
Type: Research Article
ISSN: 0306-8293

Keywords

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Article
Publication date: 31 August 2010

Masudul Alam Choudhury

The paper aims to offer a new perspective casting original light on the foundational socio‐scientific argumentation premised on the application of the epistemology of…

Abstract

Purpose

The paper aims to offer a new perspective casting original light on the foundational socio‐scientific argumentation premised on the application of the epistemology of unity of knowledge across contrasting shades of reasoning, to the problem of religion, science and society. Kantian epistemological reasoning is questioned within this argumentation. The specific case of money, finance and real economy is treated in the context of the epistemology of unity of knowledge contra Kantian problem of heteronomy.

Design/methodology/approach

The comparative study of received literature in the history of epistemological thinking is applied to the issue of universality and uniqueness of theory and its application in the learning dynamics between organically complementary relations, called circular causation, to the ethical interdependence between money, finance and the real economy. The goal is to attain social and economic sustainability.

Findings

A new epistemological outlook in occidental sciences is needed to repair its intrinsic dualism. Kantian thinking is instrumental in this structural flaw. Unity of divine knowledge as comprehended by functional ontological formalism in the deepest of scientific terms compromises the universal and unique alternative in “everything”. This claim has been formalised.

Research limitations/implications

This is a theoretical exploration.

Practical implications

Important global implications of the need for a new outlook of unity between monetary, financial and real economic variables are presented within the contrasting epistemological argumentations. The direction of such money‐real economy reform in the light of Islamic economics and finance is pointed out.

Originality/value

This is an original conceptual paper, whose content argued out in rigorous scientific language of topological mathematics aims at showing the link between the epistemology of unity of knowledge and the world‐systems. The same is impossible in the Kantian worldview.

Details

International Journal of Social Economics, vol. 37 no. 10
Type: Research Article
ISSN: 0306-8293

Keywords

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