Why 'Best' Corporate Governance Practices are Unethical and Less Competitive
BUSINESS ETHICS: DECISION-MAKING FOR PERSONAL INTEGRITY & SOCIAL RESPONSIBILITY, 2E, L. Hartman, J. DesJardins, eds., Burr Ridge, IL: McGraw-Hill, 2011
12 Pages Posted: 29 Aug 2008 Last revised: 18 Nov 2009
Date Written: November 2, 2009
This reading identifies how the law, regulators and corporate governance codes have introduced and/or have facilitated unethical practices that jeopardize corporate performance of publicly traded firms. The reading argues that the need for corporate governance codes arises because lawmakers, regulators and stock exchanges have been irresponsible in allowing directors to obtain excessive and inappropriate governance powers that can corrupt both themselves and the business to harm stakeholders. Amendments in corporate constitutions for eliminating and/or mitigating unethical practices that would also further the interest of shareholders and other stakeholders are described that in many jurisdictions would not require changes in the law. The amendments would separate governance powers of directors from those required to manage the business. The division of power creates checks and balances similar to that found in the US constitution or in the lending covenants used by bankers or in the shareholder agreements of venture capitalist.
Keywords: Competitiveness, Conflicts, Corporate constitution, Governance, Ethics, Regulation, Separation of powers, Stakeholder voice, Venture Capitalists
JEL Classification: D34, G34, G38, K22
Suggested Citation: Suggested Citation