Ethics of the good: an Aristotelian-Thomistic approach to corporate governance and ethical ...

325 Pages·2012·4.55 MB·English

This full text version, available on TeesRep, is the final version of this PhD Thesis:

Arjoon, S. (2012) Ethics of the good: an Aristotelian-Thomistic approach to corporate governance
and ethical decision-making. Unpublished PhD thesis. Teesside University.

This document was downloaded from http://tees.openrepository.com/tees/handle/10149/251433

All items in TeesRep are protected by copyright, with all rights reserved, unless otherwise indicated.

TeesRep: Teesside University's Research Repository http://tees.openrepository.com/tees/
ETHICS OF THE GOOD: AN ARISTOTELIAN-THOMISTIC
APPROACH TO ETHICAL DECISION-MAKING AND
CORPORATE GOVERNANCE

SURENDRA ARJOON

A thesis submitted in partial fulfilment of the
requirements of the University of Teesside
for the degree of Doctor of Philosophy by Completed Work

May 2012
ACKNOWLEDGEMENTS

I am grateful to my Adviser, Professor Michael Macaulay, for his insightful comments
and encouragement in process of developing this integrative essay. I am indebted to those
anonymous referees who patiently and professionally provided constructive criticisms that
have improved my understanding of the material presented for examination. Many thanks to
Thomas, Gabriel, Paul, Mariano, Alvaro and Tulio, for their continued support and
encouragement. The author accepts full responsibility for any errors, omission or oversights.

Permission is granted by Springer (Copyright Clearance Center) for the following
articles to be included in this submission:
(1) Virtue Theory as a Dynamic Theory of Business. Journal of Business Ethics, 28(2):
159-178 (Arjoon, 2000).
(2) Corporate Governance: An Ethical Perspective, Journal of Business Ethics, 61(4): 343-
352 (Arjoon, 2005b).
(3) Striking a Balance between Rules and Principles-Based Approaches for Effective
Governance. Journal of Business Ethics, 68(1): 52-83 (Arjoon, 2006).
(4) Ethical Decision-Making: A Case for the Triple Font Theory. Journal of Business
Ethics, 71(4): 395-410 (Arjoon, 2007).
(5) Reconciling Situational Social Psychology with Virtue Ethics. International
Management Reviews, 10(3): 221-243 (Arjoon, 2008a).

Permission is granted by the publishers of the Journal of Markets & Morality for the
following articles to be included in this submission:
(1) A Communitarian Model of Business: A Natural Law Perspective. Journal of Markets
& Morality, 8(2): 455-479 (Arjoon, 2005a).
(2) Slippery when Wet: The Real Risk in Business. Journal of Markets and Morality,
11(1): 77-92 (Arjoon, 2008b).

Permission is granted by Libri Publishing Press for the following article to be included
in this submission:
(1) An Aristotelian-Thomistic Approach to Management Practice. Philosophy of
Management, 9(2): 47-64 (Arjoon, 2010a).
2
ABSTRACT

This integrating essay is based on an Aristotelian-Thomism in exploring ethical decision-
making and corporate governance mechanisms to address issues of corporate deviant behaviour, and
ultimately, human flourishing. Eight (8) peer-reviewed journal articles analyse the causes of moral
failings of corporate governance and ethical decision-making mechanisms, and propose to address
these ethical deficits: (1) Virtue Theory as a Dynamic Theory of Business proposes a meta-theory of
business that links the concepts of virtues, the common good, and the dynamic economy, (2) A
Communitarian Model of Business: A Natural Law Perspective offers a communitarian view of
business in defining the business organisation as one that incorporates its social purpose that
acknowledges the primacy of people over profits, (3) Corporate Governance: An Ethical Perspective
makes the distinction between ethical and legal compliance approaches to corporate governance in
arguing the necessity and importance of the former approach as a basis for an effective legal
compliance culture, (4) Striking a Balance between Rules and Principles-Based Approaches for
Effective Governance: A Risks-Based Approach highlights the drawbacks of an excessively heavy
reliance on rules-based approaches to corporate governance, (5) Ethical Decision-Making: A Case for
the Triple Font Theory offers a comprehensive, systematic, practical approach to ethical decision-
making that attempts to integrate virtue ethics into act-oriented normative ethical theories, (6)
Reconciling Situational Social Psychology with Virtue Ethics attempts to reconcile the virtue ethics-
situational social psychology debate, (7) Slippery when Wet: The Real Risk in Business identifies
factors that contribute to corporate deviant behaviour from both an individual and organisational
perspectives, and (8) An Aristotelian-Thomistic Approach to Management Practice argues that an
Aristotelian-Thomistic humanism better promotes human dignity as it corrects the dysfunctional
aspects and ethical deficits than its utilitarian naturalistic humanism counterpart. The failure to
integrate an Aristotelian-Thomistic understanding of the virtues and natural law ethical principles of
subsidiarity, solidarity, human dignity, and the common good into business practice threatens the
stability and survival of the firm since they are required to correct the dysfunctional aspects and ethical
deficits of certain aspects of market behaviour.

3
TABLE OF CONTENTS
Page
Acknowledgements 2
Abstract 3
Table of Contents 4
List of Figures and Tables 5
Chapter 1: The Aristotelian-Thomistic Framework 6
Overview of Research Publications 6
Aristotelian-Thomistic Humanism 9
Aristotelian-Thomistic Notion of Freedom 11
Aristotelian-Thomistic Natural Law/Virtue Ethics 12
Natural Law 14
Virtue Ethics 17
Theory of the Good 22
Chapter 2: Development and Scholarly Contributions of the Publications 25
Contemporary Relevance and Scholarly Contribution of Publications 28
Chapter 3: Methodological Approaches 55
Chapter 4: Social Principles and the Role of Practical Judgment 61
The Role of Practical Judgment 66
Chapter 5: The Virtue Ethics/Situationism Debate 69
Aristotelian-Thomistic Natural Law-Virtue Ethics: Regulative Ideals 78
Chapter 6: Corporate Governance and Ethical Decision-Making 80
Analysis of Causes of Failure 81
Corporate Governance and Ethical Decision-Making 88
Chapter 7: Research Findings 92
Chapter 8: Conclusion 107
Future Research 109
References 111
Glossary of Terms 127
Appendix A - Citations on Publications submitted for Examination 145
Appendix B - Journal Articles submitted for Examination 162
(1) Virtue Theory as a Dynamic Theory of Business.
Journal of Business Ethics, 28(2): 159-178 (Arjoon, 2000)
(2) A Communitarian Model of Business: A Natural Law Perspective.
Journal of Markets and Morality, 8(2): 455-479 (Arjoon, 2005a)
(3) Corporate Governance: An Ethical Perspective.
Journal of Business Ethics, 61(4): 343-352 (Arjoon, 2005b)
(4) Striking a Balance between Rules and Principles-Based Approaches
for Effective Governance: A Risks-Based Approach.
Journal of Business Ethics, 68(1): 52-83 (Arjoon, 2006)
(5) Ethical Decision-Making: A Case for the Triple Font Theory.
Journal of Business Ethics, 71(4): 395-410 (Arjoon, 2007)
(6) Reconciling Situational Social Psychology with Virtue Ethics.
International Management Reviews, 10(3): 221-243 Arjoon, (2008a)
(7) Slippery when Wet: The Real Risk in Business.
Journal of Markets and Morality, 11(1): 77-92 (Arjoon, 2008b)
(8) An Aristotelian-Thomistic Approach to Management Practice.
Philosophy of Management, 9(2): 47-64 (Arjoon, 2010a)
4
LIST OF FIGURES AND TABLES

Page
Figure 1 Thematic Overview
Ethics of the Good: An Aristotelian-Thomistic Approach to
Decision-Making and Corporate Governance 7

Table 1 Role of Virtue 27

Figure 2 Relationship among Principles: Centrality of the Human Person 62

Table 2 Relationship of Publications with Causes 81

Figure 3 Analysis of Causes of Failure 83

Table 3 Analysis of Causes of Failure: Categories 86

Table 4 Analysis of Causes of Failure: Proposed Solutions 87

Figure 4 Corporate Governance Arrangements 90

Figure 5 Role of Applied Ethics 110

5
CHAPTER 1
The Aristotelian-Thomistic Framework

Overview of the Research Publications

Eight (8) articles (Appendix B), which comprise this integrative essay, are based on an
Aristotelian-Thomistic approach that incorporate natural law and virtue ethics in analysing the causes
of moral failings of corporate governance and ethical decision-making mechanisms (Figure 1): (1)
Virtue Theory as a Dynamic Theory of Business (Journal of Business Ethics) proposes a meta-theory of
business that links the concepts of virtues (identified as core competencies), the common good
(identified as the mission of business), and the dynamic economy (grounded in the assumptions about
the business environment); specifically, its main contribution lies in providing a comprehensive
framework for understanding the role of virtues (as core competencies in institutionalising corporate
ethical principles) and virtuousness (the proactive pursuit of aspirations to avoid wrongdoings and
enhance organisational effectiveness and societal benefits) in promoting the common good (resulting
in increased likelihood of a sustainable competitive advantage and creation of wealth) as a basis for
ethical leadership and corporate social responsibility; (2) A Communitarian Model of Business: A
Natural Law Perspective (Journal of Markets & Morality) offers a communitarian view of business
(which represents a balance and order between the claims of the liberalist and socialist business
models) in defining the business organisation as one that incorporates its social purpose that
acknowledges the primacy of people over profits; specifically, its main contribution lies in supporting a
socially-conscious business model that avoids the extremes of liberal capitalism (which some have
argued bear much of the blame for the recent global financial crisis) and centrally-controlled model of
social responsibility; (3) Corporate Governance: An Ethical Perspective (Journal of Business Ethics)
makes the distinction between ethical and legal compliance approaches to corporate governance in
arguing the necessity and importance of the former approach as a basis for an effective legal
compliance culture; specifically, it promotes the development of trust and credible reputation in
building investors’ and consumers’ confidence, employees’ loyalty, and stakeholders’ relationship; (4)
Striking a Balance between Rules and Principles-Based Approaches for Effective Governance: A
Risks-Based Approach (Journal of Business Ethics) highlights the drawbacks of an excessively heavy
reliance on rules-based approaches to corporate governance such as Sarbanes Oxley; specifically, it
promotes a risks-based approach that captures the benefits of both rules-based and principles-based
approaches which emphasises the importance of strong ethical organisational cultures for leadership
practices and personal behaviour in promoting regulatory compliance and social responsibility; (5)
Ethical Decision-Making: A Case for the Triple Font Theory (Journal of Business Ethics) offers a
comprehensive, systematic, practical approach to ethical decision-making that attempts to integrate
virtue ethics into tradition act-oriented normative ethical theories; specifically, it highlights the role and
understanding of practical wisdom in the proper application of the Principle of Double Effect;
6
Figure 1
Thematic Overview
Ethics of the Good: An Aristotelian-Thomistic Approach to Ethical Decision-
Making and Corporate Governance

A Communitarian Virtue Theory as a
Model of Business: A Dynamic Theory of
Natural Law Business
Perspective

Natural Virtue
Law Ethics

Decision Corporate
Making Governance

Ethical Decision-Making: Corporate Governance: An
A Case for the Triple Font Ethical Perspective
Theory

Striking a Balance between
An Aristotelian-Thomistic Rules and Principles- based
Approach to Management Approaches for Effective
Practice Governance: A Risks-based
Approach

Reconciling Situational Slippery when Wet: The

Social Psychology with Real Risk in Business
Virtue Ethics

7
(6) Reconciling Situational Social Psychology with Virtue Ethics (International Journal of
Management Reviews) attempts to reconcile the virtue ethics-situational social psychology debate
through an Aristotelian-Thomism framework in overcoming the problems associated with inter-goal
conflicts/imprecision and inadequate regulatory ideals; specifically, it provides a balanced view of the
interaction between environmental influences and inner characteristics ; (7) Slippery when Wet: The
Real Risk in Business (Journal of Markets & Morality) identifies factors that contribute to corporate
deviant behaviour from both an individual and organisational perspectives within the framework of the
Continuum of Compromise which recognises the different risk-attitude profiles associated with the
potential for radical deterioration of socio-moral inhibitions and a perceived sense of permissibility for
deviant conduct; specifically, it emphasises the importance of a strong ethical organisational culture
developed through the practice of the virtues, and (8) An Aristotelian-Thomistic Approach to
Management Practice (Philosophy of Management) argues that an Aristotelian-Thomistic humanism
better promotes human dignity as it corrects the dysfunctional aspects and ethical deficits than its
utilitarian naturalistic humanism counterpart; specifically, it elaborates the organisational policies and
management practices under both humanism in arguing the importance of integrating Aristotelian-
Thomism principles to provide stability and survival of the firm. These articles are grounded in an
Aristotelian-Thomistic framework which is presented below.

The Aristotelian-Thomistic Framework

Ethics can be broadly classified into three (3) areas (Audi, 1997; Fisher & Lovell,
2009): normative (claims about what ought to be morally right or wrong), descriptive (claims
about what is believed to be right and wrong), and philosophical or meta-ethics (claims about
the nature of what is morally right or wrong). Within the normative framework, an
Aristotelian-Thomistic approach can be referred to as the Ethics of the Good since its telos or
goal is one’s quest for the good (that promotes human flourishing). In this view, ethics can be
considered a normative science (science as understood to be certain knowledge of things in
their causes) of the oughtness (rightness or wrongness) of human conduct as known by reason
which discovers, explains, and demonstrates the rules of right conduct. It is also a practical
science since one must not only know and understand the norms for right living, but practice
the art of right living.

The philosophical method of enquiry of journal articles submitted for examination
which form this integrating essay is based on Aristotelian-Thomistic realism. This realism
attempts to address the question of whether one can know the existence of a world outside the
mind (that is, whether there exists anything outside the knowing subject), and if so, whether
8
there can be true knowledge of these things. Aristotelian-Thomistic realism is grounded in the
idea that knowledge of things can be perceived by the mind which acquires data supplied by
the senses that are in contact with reality1. Such realism is based on notion of the act of being
(that is, things have a specific way of being which also entails a concrete way of acting).
Realism is often criticised because it is argued that it is not possible to get to know objective
truth. This integrating essay proposes an Aristotelian-Thomism (which is presented below and
includes the view of human nature it proposes, the account of natural law/virtue ethics, and the
theory of the good) that provides the theoretical framework which forms the basis of the
approach used in the journal articles submitted for examination, specifically, they provide a
plausible basis for ethical decision-making and corporate governance in addressing and
correcting dysfunctional aspects and ethical deficits of human and market behaviour. de Torre
(1980) and Cessario (2001) provide more comprehensive views and insights into Aristotelian-
Thomistic realism2.

Aristotelian-Thomistic Humanism
Ultimately, every science and every attempt to evaluate human action have their roots
in some philosophical basis, which itself depends ultimately on the view of human nature it
proposes or specifies. Arjoon (2010a) presents the Aristotelian-Thomistic view of human
nature3 (Figure 1, p. 55) which identifies the appetites (the word ‘appetite’ is derived from the
Latin appetere which means to seek or desire) that are the source of the passions or emotions,
the intellectual (the intellect whose object is reality) and the rational (the will whose object is
the good) orders, and the role of the intellectual and moral virtues. Arjoon (2010b, p. 7-10)
gives a more in-depth explanation of the nature and relationship among the various appetites

1 The external senses (seeing, hearing, tasting, touching, and smelling) are in direct contact with material reality
which supply data to the internal senses (consciousness, memory, imagination, and instinct) which produces
phantasm (the sensible experience composed of sensations, perceptions, images, and recollections) which in turn
actuates the intellect: this process by which the senses elaborate and communicate with the intellect is
apprehension which is the first step in the process of understanding (de Torre, 1980, p. 164/165). In this view,
ideas are the result of contact with reality (this presupposes union of body and soul) and not from innate or inborn
ideas as maintained in a rationalist’s view.
2 de Torre (1980) also critically evaluates other approaches to understanding reality which includes: formalism
(the tendency to think of reality in terms of forms), idealism (the idea that reality depends on the human mind),
nominalism (considers concepts in the mind as “names” without any real concept), and voluntarism (views the
primacy of the will over the intellect and so emphasises subjectivity over objectivity).
3 In this view, the spiritual dimension of human nature is referred to as the soul (animating principle: that which
gives life) which is the form of the body (matter); the soul animates the configuration of the powers and capacity
of the body. The form makes the matter what it is (a cat, a dog, etc.), that is, it configures the powers of the body
so that it can operate as this sort of thing (the form refers to much more than shape). Aristotle’s De Anima (which
provides the philosophical sources for Aquinas) ends with a discussion of the intellect and will, the importance of
self-knowledge (who we are) which leads to ethics and politics with their goal of happiness (accomplished by the
set of human activities that is in line with reason).
9