In this chapter, I analyse the main trade-offs between the economic value of the firm and its social value, exploring how they are solved through corporate governance and regulatory constraints. To begin with, I show how firms generate social value while also increasing their long-term value under the enlightened shareholder value approach. Thanks to organizational and technological innovation, firms are led to change their business models and organization to enhance environmental and social sustainability and increase long-term profitability. In addition, managers promote their firms’ sustainability in compliance with ethical standards which are part of corporate culture. In similar situations, generating social value may determine pure costs to the enterprise. I argue therefore that the perspective of instrumental stakeholderism appears too narrow, for situations exist where non-economic values are also relevant to the firm. The importance of ethics is especially underlined by CSR and stakeholder theory. Moreover, management studies emphasize the role of corporate governance and organizational theory in the promotion of social value. The board of directors should identify the ethical and cultural values of the firm and monitor their application at all levels. In addition, organizational purpose plays a fundamental role for the ‘intrinsic’ motivation of people in corporations. The international soft law on corporate due diligence further contributes to the design of corporate purpose and to the motivation of managers and employees. Once corporate due diligence is recognized by European hard law through the proposed Directive, specific obligations will arise for companies which will impact their governance and could become a source of civil liability. As a result, the corporate purpose orientation to sustainability will be reinforced by the regulation of environmental and human rights externalities and by the due diligence obligations deriving from it.

This chapter explains the process that determines wages paid to sweatshop workers. It explains the consequences of imposing minimum wage laws and boycotting sweatshops. The chapter articulates the basic economic reasoning that leads many of the demands of anti-sweatshop activists to harm worker welfare. It then considers objections made to this basically economic case that include the necessity of competitive markets; efficiency wages; passing costs on to consumers; cost cutting in other areas; accepting a lower rate of return; and how elasticity impacts overall worker welfare. An appendix to the chapter considers philosophical aspects of how to think about worker welfare. This core chapter outlines the main lesson of the book.

This chapter argues that it is ethical to buy sweatshop products. It explains why arguments to the contrary made in the business ethics literature fail, why sweatshops are not wrongfully exploitative, and why it is better to benefit workers a little bit rather than not at all. It also considers how background injustices impact the ethics of sweatshop employment, and finally reviews issues of worker autonomy and goals other than the welfare of sweatshop workers.

This chapter opens with a brief discussion of the nature of business ethics, its significance for corporations and the ethical dimensions of a corporation’s stakeholder relationships. The next section is focused on the causes of ethical problems: bad apples, bad cases and bad barrels. In order to examine these it presents the theory related to each before drawing on three case studies: the HIH failure, the LIBOR case and the destruction of Juukan Gorge. The extent to which we attempt to encourage ethical conduct is discussed in the following section. In particular, that section examines corporate accountability, individual accountability and organisation-level approaches that seek to shape the ethical conduct of corporations. The final section is devoted to some concluding remarks.

This chapter starts by discussing the changing overall context in which business, nature and society operate. It is important to understand this context, because it shapes the problems that corporate sustainability aims to address, and it influences how firms can cope with these problems. We then introduce the concept of corporate sustainability. We discuss similarities and differences to related concepts such as corporate social responsibility and business ethics. Next, we review some of the main environmental, social and governance (ESG) issues that firms are asked to address as part of their corporate sustainability commitments. Finally, the chapter reviews four key motivations (instrumental, ethical, stakeholder-based and political) that underpin firms’ corporate sustainability commitments.

This chapter discusses the role of ethical reflection in the context of corporate sustainability. It starts by reviewing the relevance of four normative ethical theories (utilitarian ethics, duty-based ethics, virtue ethics and posthuman ethics) for corporate sustainability. Next, the chapter discusses how people in organisations make ethical decisions and which cognitive biases impact our decision-making. In the following section, the chapter asks two essential questions: Why do we need ethics when discussing corporate sustainability? and Can corporations engage in ethical reflection or is this something that only individuals can do? The final section discusses how firms can manage ethics, and we distinguish two orientations that can guide such management: compliance and integrity.

Shareholder value maximization is the law. It ought to be the law. This is, in part, because the chief alternative available in liberal democratic societies – stakeholder capitalism – is fundamentally flawed. If executives such as those who signed the Business Roundtable’s 2019 statement on corporate purpose really tried to run their companies according to the altruistic principles laid out therein, they would find it an impossible task. Developing the set of objective and quantifiable metrics necessary to operationalize stakeholder capitalism will prove an intractable problem. Even if the requisite set of metrics could be designed, boundedly rational managers cannot reasonably be expected to balance the huge number of competing factors necessary to account for the varied interests of the firm’s many constituencies.

Defines the terms corporation, corporate purpose, shareholder value maximization, stakeholders, stakeholder capitalism, corporate social responsibility, and ESG (environmental, social, and governance). Provides the plan of the work.

Stakeholder capitalism results in a loss of accountability, as executives who are responsible to everyone are responsible to no one. Stakeholder capitalism would be extremely difficult to implement. Proposed means of doing so – such as constituency boards, codetermination, and team production – are all unworkable. Stakeholder capitalism is inconsistent with democratic capitalism. Shareholder value maximization is the result that would emerge if shareholder and stakeholders could bargain (the so-called hypothetical bargain). Shareholder capitalism is pro-social. The profit motive results in socially efficient resource allocation. The profit motive is an essential motivational spark for innovation. The profit motive promotes freedom.

The ethics of both corporate and government lawyers are critically important to the proper functioning of democratic societies. Both groups advise and act for powerful clients: corporations are amongst the most powerful actors in our society because of the potentially far-reaching impact of their activities; governments have ‘powers and obligations that far exceed those of the normal citizen’. In this chapter, we discuss the ethical responsibilities and challenges facing lawyers who act for these clients. We focus predominantly on corporate lawyers, but then turn our attention to lawyers working in government. While government legal work may seem a far cry from the work of corporate lawyers, in fact in-house corporate and in-house government lawyers face some similar challenges and opportunities.

Chapter 4 analyses corporate culture in East Asia with a view to understanding how Confucian cultural norms can inform efforts to promote compliance with competition law. It suggests that practices to secure compliance among commercial operators can usefully be tailored to takes account of cultural characteristics. This implies a need to consider the legacy of Confucian ethics, which has had a profound influence on the organizational psychology and behaviour of commercial entities in the region. The importance of that legacy suggests that compliance will not be achieved within firms solely on the basis of the external legal environment, an environment in which deterrence-oriented factors such as sanctions and the threat of detection play a central role. Beyond traditional tools, more attention should be given to the internal moral and social environment, and to shaping the logic of appropriateness within a given firm. A compliance culture can thus be constructed on the basis of elements such as moral commitment, Eastern-style education, the cultivation of virtue, and the constructive convergence of the interests of the enterprise and those of its employees.