Ethics in the boardroom is fraught with complexity. Whose interests do directors protect? Whose causes do they advance? On what basis – what ethical considerations – do they make those determinations? And how do they come to consensus about what is the right thing to do, or the right way to do it? These issues are aired in a collection of essays complied by Till Talaulicar in a new Research Handbook on Corporate Governance and Ethics, published by Edward Elgar.
My contribution to it is called “A pragmatist case for thoughtfulness and experimentation in corporate governance.” It conducts a series of thought experiments and considers how directors – you and I – might reason our way to a decision. The chapter builds a case for act-based ethics, rather than following rules, especially when the situations are novel and directors are divided over which type of ethical consideration apply.
“Despite decades of theorising and empirical research, the problems of corporate governance seem intractable, particularly the relationships between investors and companies. The thought experiment in this paper asks us to look at the problem through a fresh lens. It draws on the quaint British legal custom of calling shareholders “members”, and then uses the political philosopher Michael Walzer’s idea of membership in states, clubs, neighbourhoods, and families to draw lessons for the corporate world. This paper suggests that seeing how Walzer conceives “strangers” in a polity, with fewer rights but a path to membership, lets us rethink shareholder rights as something to be earned, through engagement and commitment, that is, through stewardship. Rethinking what membership of a company might mean points to a pragmatic escape from short-termism without institutional reform.”
As part of its podcast series, Dorset Growth Hub invited me to discuss the role that boards – and corporate governance more generally – can play in smaller businesses. Theorists often talk about how boards play two contradictory roles: “service” – providing insights and access to key resources – and “control” – stopping a runaway executive.
But from my own board experience, I’ve seen how hard it is to separate the two. Let’s think about how serving on a board is like driving a car, I suggested, and then asked: “Why do they put brakes on cars?” Here’s the answer!
Philosophy of Management seems to think so. My somewhat unconventional article will be appearing in the journal.
Nordberg, D. (2020). Art in corporate governance: A Deweyan perspective on board experience. Philosophy of Management, doi: 10.1007/s40926-020-00152-y. (See manuscript version at SSRN.)
It uses the pragmatist philosopher John Dewey’s 1934 treatise on aesthetics to examine the motivation of company directors, reinterpreting empirical studies and examining the lived experience of the author. It also raises the question of what ugly corporate governance might consist in.Its starting point is the artwork displayed on the walls of two boardrooms, one a FTSE100 corporation, the other a social care charity…
Rebecca Booth and I have collaborated on a paper just published by the International Journal of Disclosure and Governance, about how corporate directors feel about an important policy direction in corporate governance. Board evaluation has been around for quite a while, and since 2010 in the UK, the code has recommended that large listed companies use external evaluators at least one year in three. Rebecca and I found out what directors who had been through the process thought about how well the process of external evaluation worked, and indeed how it worked. The results point to a need to professionalise the practice as it spreads from large listed companies to smaller firms, non-profits, and other organisation types.
Charities don’t have “owners”. Nor do corporations, if you consider how limited shareholder rights are, compared with owning a car or a pair of shoes. Yet the experience of board work at charities has left me with a sense of ownership – psychological ownership – that arose before I was even invited to join the board. In a new article at Management Research Review, I explore this feeling of attachment, and how it differs profoundly from the sort of “stewardship” now expected of institutional investors in listed companies. See also https://ssrn.com/abstract=3699330