The papers by Mele, Randels, and Schrag call attention to the proper work that the concept of loyalty can perform. All three authors argue that loyalty is not taken seriously enough in modern corporations. As Mele, Randels, and Schrag independently ascribe special status to the concept of loyalty, their analyses converge along numerous conceptual margins. Along these margins, a singular conception of loyalty comes into focus. Along these margins, we can see simultaneously why each author assigns extraordinary status to loyalty and why, ironically, each turns the special concept of loyalty over to the service of conventional management thinking. Mele, Randels, and Schrag leave it for us to ponder whether this ironic twist is unique to the concept of loyalty.

Loyalty within the firm, though praised by some, is criticized by others. An analysis of the historical and current significance of the concept of loyalty can aid in both understanding its critics and responding to them. Loyalty in the business world is generally understood in three ways: i) transactional retention, ii) sentimental attraction, and iii) willingness to commit oneself. In the third type, the commitment to adhere to a person, cause, or institution may contribute to human flourishing and therefore generate the human virtue of loyalty. The human virtue of loyalty is as far from fanaticism as it is from the betrayal of legitimate commitments freely undertaken. As with all virtues, its content must be rationally determined. Loyalty thus understood enhances the humanity of both persons and business firms and contributes to heightened cohesion and cooperation within the firm. Moreover, according to some recent research, managing a business on the basis of loyalty can enhance economic results.

Some recent discussions of corporate loyalty have found it misguided, while others see it as crucial for financial success. There is also disagreement over the nature of loyalty. This article analyzes the concept of loyalty, arguing that it is neither a duty nor a virtue (although it has overlaps with those categories), but a passion related to various virtues (and vices). Contrary to standard accounts of capitalism, loyalty does not necessarily oppose self-interest. Furthermore, corporations can and should be communities, and insofar as they are, they are proper objects for loyalty. If corporations are not communities, then loyalty to them cannot exist.

Expectations and possibilities for employee loyalty are shifting rapidly, particularly in the for-profit sector. I explore the nature of employee loyalty to the organization, in particular, those elements of loyalty beyond the notion of the ethical demands of employee loyalty. I consider the moral significance of loyalty for the employee and whether the development of ties of loyalty to the work organization is in fact a good thing for the employee or for the employer. I argue that employees have a natural inclination to extend loyalty to the organization and that organizations consequently have an obligation to make clear to employees the degree to which the organization will recognize and reward employee loyalty.

Corporate governance is a complex and contested issue, and its ambiguities become even more problematic when ethical considerations are taken into account. This introduction attempts to address these complexities, to illuminate their ethical aspects, and to situate the eight papers presented here within what we believe to be an integrative heuristic framework.

The dominant theoretical perspective on governance relationships and their associated problems is to be found within economics, and in particular within agency theory. With the separation of ownership from control (Berle and Means 1932) a potential problem arises in the context of what is now constituted as a relationship between the owners (principals) and directors (their agents). How can the principals ensure that the agents are serving the owners’ interests rather than their own? Against the backdrop of the assumption of an essentially self-seeking, opportunistic human nature only market discipline, monitoring, and incentives can be used to align agent behavior with the interests of the distant and/or absent shareholder understood as the owner.

In recent years there has developed a perspective that runs counter to this theorization of the key governance relationship and its problem. The elaboration of so-called stakeholder views of the corporation (Freeman 1993, Blair 1995) argues both empirically and normatively that there is a wider range of relevant relationships, and thus a greater number of interests at stake in the governance of the corporation. It is not only shareholders who have made firm-specific investments in the organization, but also employees, suppliers, and customers, and their interests must therefore also be taken account of in the constitution and conduct of corporate governance. Associated with this view is a very different conception of the director as steward (Davis et al. 1997) or trustee of the corporation (Kay 1996), where the corporation is conceived, not as a set of ownership rights accruing to those who assume the residual risk of a business, but as a social institution. From this perspective the duties of directors lie in aligning and balancing a wide variety of potentially competitive interests within the corporation.

This article addresses the issue of whether and to what extent moral values can be attributed to collective actors. The paper starts from the premise that business ethics as the ethics of an organization is to be distinguished from the virtues of its members. This point is elaborated in both economic- and organization-theoretic terms within the framework of the New Economics of Organization. The result is the development of a concept of governance ethics. The ethics of governance is about the incorporation of moral conditions and requirements in the management, governance, and control structures of a firm. This is the contextual precondition for the long-lasting and beneficial effects of the virtues of individuals within the organizations.

While many aspects of stock and option based compensation for corporate officers remain controversial, we suggest that the growing trend for similar practices in favor of boards of directors will prove to be even more contentious. High-ranking corporate managers do not set their own salaries nor authorize their own stock options. By contrast, boards of directors do, in fact, set their own compensation packages. Other potential conflicts of interest include setting option performance targets, stock buybacks, stock option resets and reloads, consolidations (mergers and acquisitions), and service on multiple boards. As trust is the most valuable commodity in a capitalist society, we suggest that these potential conflicts of interest and related outcomes may ultimately serve to erode any anticipated benefits of director stock compensation.

This paper offers an extended critique of the proliferation of talk and writing of business ethics in recent years. Following Levinas, it is argued that the ground of ethics lies in our corporeal sensibility to proximate others. Such moral sensibility, however, is readily blunted by a narcissistic preoccupation with self and securing the perception of self in the eyes of powerful others. Drawing upon a Lacanian account of the formation of the subject, and a Foucaultian account of the workings of disciplinary power, it is then argued that the governance of the corporation is effected precisely through encouraging such a narcissistic preoccupation with the self. For the most part our narcissistic concerns are bound to ethically indifferent financial interests. But in recent years they have also been harnessed to the demand for environmental, social and ethical responsibility by the corporation. It is argued, however, that the desire to be seen to be ethical—the ethics of narcissus—is the obverse of “being responsible for.”

Can we achieve greater fairness by reforming the corporation? Some recent progressive critics of the corporation argue that we can achieve greater social justice both inside and outside the corporation by simply rewriting or reinterpreting corporate rules to favor non-stockholders over stockholders. But the progressive program for reforming the corporation rests on a critical assumption, which I challenge in this essay, namely that the rules of the corporation matter, so that changing them can effect a lasting redistribution of wealth from stockholders to non-stockholders. This essay uses a critique of the progressive reform program to argue that the rules of the corporation are distributively neutral. The corporation isn’t rigged against non-stockholders, and changing its rules will not improve the bargaining power of non-stockholders. However, while the rules may be epiphenomenal from the standpoint of distributive justice, they can have substantial impacts on the corporation’s efficiency. As a result, the proposed reforms may hurt the corporation’s capacity to generate benefits for all the parties concerned.

To achieve ethical corporate governance, directors’ first priority must be to examine their own structure and operation. If the board is vulnerable to charges of unethical conduct, it will have little credibility in its oversight role over the corporate culture of the organization. An examination of a positive model of corporate governance in the mutual fund industry provides an effective illustration of several ways to add ethics to corporate governance: 1) legislation; 2) jawboning; 3) peer pressure; 4) regulation; 5) training and reflection. While peer pressure and training are more effective than the others, all those methods taken together cannot solve every ethical lapse. Only individual board members, working together, can influence the conduct of the board and propel themselves and the organization towards a standard of continuing ethical excellence.

After a decade of intensive debate, stakeholder ideas have come to exert a significant influence on academic management thinking, but normative stakeholder theory itself appears to be in considerable disarray. This paper attempts to untangle the confusion and to prepare the ground for a more productive approach to the normative stakeholder problem. The paper identifies three distinct kinds of normative stakeholder theory and three different levels of claim that can be made by such theories, and uses this classification to argue that stakeholder theorists have consistently pitched their sights either too high or too low to engage effectively with the rival shareholder theory. To the extent that they have their sights too high they have also undermined their own position by sacrificing credibility and introducing major problems of derivation.

Shareholders’ relationship to the firm is a central theme in corporate governance, yet the investors’ perspective has been virtually ignored in governance research. This paper attempts to explain the previously unexplored role of trust in the investor decision-making process. The proposed model suggests that trust acts as the antecedent of the risk variable in existing investor decision-making models. Stock ownership involves both financial and ethical risk, which by definition requires some level of implicit trust in management and the market.

This article surveys arguments for the claim that employees have a right to strong forms of decision-making participation. It considers objections to employee participation based on shareholders’ property rights and it claims that those objections are flawed. In particular, it argues the employee participation rights are grounded on the same values as are property rights. The article suggests that the conflict between these two competing rights claims is best resolved by limiting the scope of corporate property rights and by recognizing a strong employee right to co-determine corporate decisions.