Corporate Governance as Moral Psychology

46 Pages Posted: 9 May 2017

See all articles by Alan R. Palmiter

Alan R. Palmiter

Wake Forest University - School of Law

Date Written: May 6, 2017


This essay — part of a Washington & Lee symposium on Corporate Law, Governance, and Purpose — advances a simple thesis: corporate governance is best seen not as a subset of economics or even law, but instead as a subset of moral psychology.

Recent research in the nascent field of moral psychology suggests that we humans are not rational beings, particularly when we act in social and political settings. Our decisions (moral judgments) arise instantly and instinctively in our subconscious, out of conscious view. We rationalize our moral decisions — whether to feel compassion toward another who is harmed, to desire freedom in the face of coercion, or to honor those matters we consider sacred — after we have made the decision. We layer on a veneer of rationality, to reassure ourselves of our own moral integrity and to signal our moral values to like-minded others in our group. This is particularly so when we operate in the “super-organism” that is the corporation, where specialized roles have led to almost unparalleled human cooperation.

Thus, the decision-making and actions that arise from the shareholder-management relationship are best understood as the product not of rational economic incentives or prescriptive legal norms, but instead moral values. On questions of right and wrong in the corporation, the decisions by shareholders and managers, like those of other human actors, are essentially emotive and instinctive. The justifications offered for their choices — whether resting on shareholder primacy, team production, board primacy, or even corporate social responsibility — are after-the-fact rationalizations, not reasoned thinking.

In the spirit of the symposium honoring the work of David Millon and Lyman Johnson, the Essay seeks to apply these insights to a stylized corporate morality tale — namely, whether corporate directors should move a company’s possibly unhealthful manufacturing offshore. The story exposes a full range of moral values: compassion, fairness, freedom, loyalty, order, and sanctity. And, extrapolating the moral vectors implicit in their recent writings on corporate governance, the Essay identifies David as a “progressive corporate scholar” (with some libertarian leanings) and Lyman as a “conservative corporate scholar.”

Keywords: Corporate Governance, Moral Psychology, Progressive Corporate Law, Law and Economics

JEL Classification: A12, G02, G34, K22, L21

Suggested Citation

Palmiter, Alan R., Corporate Governance as Moral Psychology (May 6, 2017). Washington and Lee Law Review, Forthcoming, Wake Forest Univ. Legal Studies Paper, Available at SSRN:

Alan R. Palmiter (Contact Author)

Wake Forest University - School of Law ( email )

P.O. Box 7206
Winston-Salem, NC 27109
United States
336-758-5711 (Phone)
336-758-4496 (Fax)

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