73Casanueva


Volume 11, No. 2. Special Issue:
“Corporate Governance and Ethics”
Guest Editors: Vincent Dessain, Olivier Meier and Vicente Salas

� Vincent Dessain,
Olivier Meier and Vicente Salas 2008
Corporate Governance and Ethics: Shareholder
Reality, Social Responsibility or Institutional
Necessity?, M@n@gement, 11: 2, 65-79.

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M@n@gement, Vol. 11, No. 2, 2008, 65-79
Special Issue: Corporate Governance and Ethics

65

Vincent Dessain . Olivier Meier . Vicente Salas Harvard Business SchoolHBS European Research Center
eMail: vdessain@hbs.edu
Université Paris XII
Institut de recherche en gestion
eMail: omeier@club-internet.fr
Universidad de Zaragoza
Dpto Economía y Dirección de Empresas
eMail: vsalas@unizar.es

Corporate Governance and Ethics:
Shareholder Reality, Social Responsibility
or Institutional Necessity?

This introduction to the special issue on governance and ethics situates the question in
existing theoretical frameworks, highlights stakes and implications, and discusses the
different ways in which companies are perceived. New approaches give rise to a more
fundamental reflection on a new stakeholder type of governance and the development
of ethical conduct. Ethics has thus become one of the reference values upon which a
new pact should be built between the various actors of the organization concerning gov-
ernance. Ethical behaviour in governance is defined as the way in which a companyʼs
stakeholders try to manage collective action from the perspective, and in the interest, of
the majority, thus avoiding damaging behaviours, and through a better control of the
power and responsibilities of the companyʼs managers. In the area of governance, there-
fore, ethics aims at raising awareness of the othersʼ rights and common needs, by
imposing some principles of minimum requirement. From this point of view, ethical gov-
ernance must be seen as a system of shared and transparent governance which seeks
to establish the general frameworks and guidelines for managers of large companies, by
enforcing the values of transparency, responsibility and professionalism. For this reason,
a stronger link between ethics and governance has to contribute to help the companyʼs
stakeholders to behave, in their decisions and actions, in a way which is acceptable, rea-
sonable and in conformity with given values of reference. Nevertheless, notwithstanding
these positive actions, it should be stressed that a company forms part of the business
world, and as such has to create value and generate profits. Indeed, other reasons
should be highlighted, such as the capacity to generate value for the client and all other
stakeholders in an equitable and responsible way, thanks to a better and continuous
adaptation of its products and services to new needs and market expectations. Contri-
butions to the special issues are also introduced.

At the start of the new millennium, a series of corporate scandals on
both sides of the Atlantic revived public interest in debates on gover-
nance and ethics within organisations. The corporate landscape of the
United States was rocked by a number of financial scandals as senior
executives at Enron, Andersen and WorldCom were found guilty of
accounting fraud and corruption. Europe, too, witnessed a number of
governance malpractices. In 2002, for example, Jean-Marie Messier,
the former chairman and CEO of Vivendi-Universal, was fined €1 mil-
lion by Franceʼs market regulators for inaccurate financial reporting. As
a result of these accounting irregularities, Messier also received a
€1million fine from the US Securities and Exchange Commission and
was barred from holding the position of officer or director of a public US

mailto:vdessain@hbs.edu
mailto:omeier@club-internet.fr
mailto:vsalas@unizar.es


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Vincent Dessain, Olivier Meier and Vicente Salas

company for 10 years. Across the Alps in Italy, it emerged in 2003 that
the food and diary giant Parmalat had for years falsified its financial
records and concealed holes in excess of €14 billion. The companyʼs
former CEO Calisto Tanzi was subsequently jailed following the dis-
covery by Italian procurators of a network of shell companies set up to
generate fake profits for Parmalat and its subsidiaries. Meanwhile, in
Germany, public prosecutors in 2007 handed Peter Hartz, a Volkswa-
gen board member, a two yearsʼ suspended sentence and a fine of
€576,000 for his part in a fraud and corruption scandal involving front
companies that the German car manufacturer had used to finance
brides to suppliers and members of the companyʼs works council.
Existing knowledge of and rules on governance were unable to pre-
vent these operational and managerial malpractices, which generated
real tensions between economic actors and destroyed value for the
many involved parties. Several factors can explain these governance
deficiencies, including flaws in decision-making processes, inappropri-
ate monitoring and supervision, insufficient training of board members
or inadequate auditing of documentation and financial reports. These
recent developments have incited a number of actors to react and
modify their forms of decision making and conduct, through both the
adoption of new laws and regulations (such as the Sarbanes Oxley Act
in the USA) and through the improvement of the governance of their
organisation (including the clarification of roles and responsibilities,
consolidation of monitoring and evaluation processes, accountability of
decisions, transparency of results and better training of board mem-
bers, endorsing codes of good governance practices).
This special issue of M@n@gement seeks to enhance existing under-
standings of governance and ethics, as applied to organisations. Its
understanding of governance draws inspiration from the OECDʼs defi-
nition of corporate governance (KPMG, 2002: 6) as «the system by
which business corporations are directed and controlled. The corpo-
rate governance structure specifies the distribution of rights and
responsibilities among different participants in the corporation (…) and
spells out the rules and procedure for making decisions on corporate
affairs. By doing this, it provides the structure through which the com-
pany objectives are set, and the means of attaining those objectives
and monitoring performance».
Accordingly, Guillén and OʼSullivan (2004) define corporate gover-
nance as the answers to three specific questions, chiefly: Who exer-
cises control over corporate activity? What do they do with their
power? Who benefits from the way they exercise their power. As such,
corporate governance is influenced by a number of different legal, eco-
nomic, societal, political and historical factors. The quest for good
practice is thus complex.
Against a background of key economic sectors, the articles presented
here take a specific interest in issues surrounding not only trans-
parency, equity, sense of responsibilities but also the obligation of
organisations to be accountable to stakeholders and ensure the level
of profitability that determines the survival and sustainability of the
structures. Drawing on existing literature and field studies, they seek to



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Corporate Governance and Ethics

determine the extent to which governance systems can evaluate and
supervise managers, and support their decision making in an uncer-
tain, complex, and sometimes hostile environment. These issues are
especially pertinent to academics who, to date, have devoted little
attention to the problems of defining and implementing corporate
strategies that integrate ethics into firmsʼ internal practices and activi-
ties. This is particularly the case in Europe where scholars have tend-
ed to overlook the link between ethics and management research. The
purpose of this special issue, therefore, is to gain a better understand-
ing of the evolution of governance systems in organizations and to
appreciate the importance of ethics in decision making and manage-
ment.
Today, the issues of corporate governance, ethics, sustainable devel-
opment and social and corporate responsibility are practically unavoid-
able. But how can management academics and practitioners think
about these notions in a context of globalization and increasing inter-
national competition where firms have to compete with their rivals
whilst simultaneously taking into account the numerous stakeholders
that directly or indirectly influence the development of their activities?
Responding to this question is one of the principal objectives of this
collection of articles, in which researchers from different national, cul-
tural and disciplinary backgrounds bring to bear their own unique anal-
yses and reflections. Before presenting each contribution, it appears
important to situate the question of governance and ethics in existing
theoretical frameworks, highlight the stakes and implications and dis-
cuss the different ways in which companies are perceived.

DEVELOPMENTS
IN CORPORATE-GOVERNANCE THEORY

Since the works of Berle and Means (1932) on the modern corporation
and private property, the term ʻcorporate governanceʼ has been used
to describe the general system governing the ownership and manage-
ment of firms. This traditional definition of corporate governance,
based on the separation of ownership and control of organizations,
has given rise to two dominant models: the shareholder model and the
stakeholder model.

THE SHAREHOLDER MODEL OF CORPORATE GOVERNANCE

The different theories on governance were first built around works
relating to the separation of functions of management and control
(Berle and Means, 1932) and the contractual analysis of the firm,
particularly the theory of transaction costs (Coase, 1937) and agen-
cy theory (Jensen and Meckling, 1976). The dominant trajectory of
governance literature is therefore essentially contractual. It is pri-
marily focused on resolving conflicts of interest and in particular on
minimizing agency costs between shareholders and company man-
agers.



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According to the shareholder model, the role of (formal and informal)
governance mechanisms is to reduce conflicts of interests, notably
between shareholders and managers. Specifically, it involves minimiz-
ing the agency costs resulting from asymmetrical information between
managers and shareholders and from the existence of opportunistic
behaviour and diverging interests. Governance is limited to disciplining
and supervising managersʼ behaviour, the objective being to align their
behaviour to the interests of shareholders. The performance indicator
is that of shareholder value. A governance system is therefore consid-
ered efficient when it limits the possibility of managers appropriating
value and when it prevents managerial behaviour departing from max-
imization of shareholdersʼ value. In this perspective of monitoring man-
agerial discretion, shareholders are obliged to establish organisational
structures and an institutional system of governance capable of secur-
ing the earnings performance of financial investments (Shleifer and
Vishny, 1997).
As a result, the shareholder model of corporate governance rests on a
judicious combination of internal and external mechanisms, aimed at
monitoring the behaviour of company managers (Charreaux, 2004).
The internal mechanisms of the company are intentionally developed
by the parties or the legislator. Amongst these organisational mecha-
nisms, shareholder voting rights, boards of directors, mutual manager
oversight, managersʼ remuneration systems, internal trade-union
associations or audits are favoured as alternative modes to disciplinary
mechanisms of corporate governance. For their part, external mecha-
nisms stem from market forces. In this context, several markets can be
identified: the market for company executives (where the value of
executives rises or falls in relation to their performance), the market for
acquisitions (including public take-over offers, public offers of
exchange, contractual guarantees, legal procedures or judicial regula-
tion) and the market for financial information (like the market for acqui-
sitions, this market reduces agency costs and resolves conflicts of
interest from the perspective of maximizing the creation of sharehold-
er value).
Faced with the difficulty of distinguishing clearly between the internal
and external disciplinary mechanisms, it is also possible to draw on
two classification criteria initially developed by Williamson (1985) in the
theory of transaction costs: specificity and intentionality. According to
this vision, the specificity of assets (meaning the impossibility of alter-
natively redeploying an asset without incurring an additional cost)
becomes central to the analysis of the coordination tools of the princi-
pal-agent relationship. These specific mechanisms are the legal and
regulatory environment, national-level trade unions and consumer
associations. The criterion of intentionality can be added to that of
specificity. This expresses the will to establish, from an institutional
perspective, regulations aimed at orientating and therefore monitoring
the behaviour of managers. From this viewpoint, corporate culture,
networks of informal confidence and reputation amongst employees
constitute institutional mechanisms. It should be noted, however, that
certain mechanisms can be simultaneously specific and intentional,



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including for example shareholdersʼ voting rights, company-level trade
unions, boards of directors or even remuneration systems. Although all
these mechanisms are useful for shareholder-oriented governance,
the fact remains that other tools are more frequently used. Indeed, it is
possible to identify other management instruments that characterise
shareholder governance, such as the different indicators that con-
tribute to shareholder monitoring: free cash flow (Jensen, 1986), the
creation of stock market value (Caby and Hirigoyen, 2005), fair value
(Bignon, Biondi and Ragot, 2004), the distribution of stock options and
the market of corporate control (Jensen and Ruback, 1983).
In summary, the shareholder model of corporate governance propos-
es an attractive framework for explaining the emergence of efficient
organisational forms, the behaviour of owners and managers of listed
companies and more generally the way of resolving potential conflicts
in situations of cooperation. It legitimises the vision of a company
belonging exclusively to its shareholders, without any other considera-
tion. Following the considerable growth of stock markets since the
1980s, Guillén and OʼSullivan (2004) recognise that a number of sig-
nificant factors appeared to be moving global corporate governance in
the direction of the ʻshareholder valueʼ model long adopted in Anglo-
American markets. For example, empirical evidence from France
(Boyer, 1996; Maclean, 2001; Goyer, 2003; Schmidt, 2003; Clift, 2004)
and Germany (Vitols, 2001; Jürgens, Naumann and Rupp, 2000;
Beyer and Höpner, 2003; Lütz, 2005) suggested that both countries
had since the late 1980s undergone deep-seated stock-market
reforms which encouraged business leaders increasingly to focus on
maximizing shareholder value.
However, according to Wirtz (2005), a critical analysis of the theoreti-
cal presuppositions underpinning the shareholder approach reveals a
relatively poor representation of the concept of value, which empha-
sises the plundering by financial investors and the economy of costs.
In addition, the explanatory power of the shareholder model appears
weak. Indeed, the studies by Baghat and Black (1999) and Larcker,
Richardson and Tuna (2004) call into question the link between the
mechanisms of shareholder governance and the financial performance
of firms. The sound functioning of the shareholder model of corporate
governance is also limited by the rise over recent years of sharehold-
er activism, whereby often rebellious shareholders apply pressure on
a companyʼs management, through proxy battles, publicity campaigns
or litigation, to pursue a particular strategic course. The role played by
TCI hedge fund in scuppering the planned takeover by Deutsche
Börse of the London Stock Exchange in 2004 and 2005 provides a
case in point (Crane and Stachowiak-Joulain, 2006). Vehemently
opposed to the conditions of Deutsche Börseʼs planned acquisition,
the fundʼs creator Christopher Hohn systematically acquired shares in
Deutsche Börse and requested the replacement of the entire supervi-
sory board. Following sustained opposition from TCI, the chairman of
the board, Dr. Rolf Breuer, and the Chief Executive Officer, Dr. Wern-
er Seifert, finally stepped down from their positions. Finally, the share-
holder model is criticised for not taking into consideration the relation-



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Vincent Dessain, Olivier Meier and Vicente Salas

ships between all company stakeholders, which restricts its ability to
claim to be the dominant approach to understanding the governance
of companies. It is precisely on the second critical point that attempts
to extend the positive theory of agency are concentrated. The positive
theory of agency aims to make up for insufficiencies by exploring the
stakeholder model of governance.

THE STAKEHOLDER MODEL OF CORPORATE GOVERNANCE

In the stakeholder model of corporate governance, the company is a
social construction, a container of expectations, objectives and inter-
ests of multiple stakeholders. Stakeholders include not only managers
and shareholders of a firm, but also its employees, customers, suppli-
ers and any other individual or group that could influence or, if a broad
definition of stakeholder is adopted, be influenced by the decisions of
the company (Freeman and Reed, 1983). According to this perception
of corporate governance, aligning decisions solely to the interests of
shareholders is counterproductive since it does not guarantee the sus-
tainable development of the organization, which can only result from
the convergence of all stakeholdersʼ interests (Donaldson and Preston,
1995). The stakeholder conception of corporate governance has many
concrete effects. It encourages us to reconsider the composition of
monitoring and management bodies and questions the representation
of stakeholders (Jones and Wicks, 1999) and the formal and informal
mechanisms for taking their expectations into consideration. In addi-
tion, the stakeholder model of governance questions the issue of arbi-
trage between opposed interests and, as a consequence, also calls
into question the legitimacies with the company and the forms of con-
flict resolution (Clarkson, 1995).
In the stakeholder model of corporate governance, the stakeholders
represent families of economic agents who have legitimate rights and
obligations in the company. For instance, while shareholders run the
risk of losing financial capital invested, other stakeholders are equally
likely to suffer more or less significant losses: for example, employees
risk losing their jobs, or subcontractors risk losing earnings or liquid
funds in the case of unrecoverable debt (Pérez, 2003). Further, stake-
holders provide critical resources and expect in return that their inter-
ests are satisfied. For example, shareholders provide equity capital:
they expect that the company maximizes their return of investment in
order to reward them for their determining behaviour. For their part,
managers and employees invest time, competences and more broad-
ly human capital. In return, they expect to be offered comfortable
salaries and working conditions.
Overall, stakeholder-orientated perceptions of corporate governance
recognise the multiple objectives of the company, much more than
solely the maximization of shareholder wealth. In a relational model of
the organization, the connection between shareholders and managers
is nothing more than an existing contract between productive entities.
The company is considered to be a specific set of contracts applicable
to customers, suppliers, employees, unions, investors and so on. In



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Corporate Governance and Ethics

this regard, changes turn out to be particularly significant concerning
consumers that would like to consume products manufactured under
conditions corresponding to principles of sustainable development, or
for investors that would like to invest in companies that position them-
selves on this objective. On the basis of this, the desire for an equilib-
rium between the interests of the various stakeholders of the company
and the investors manifests itself in a way that the value is appreciat-
ed more broadly across a multi-stakeholder vision of the company and
its governance. This new conception is supposed to result in a better
distribution of the income freed up for the benefit of all the participants
if shareholders are not the true ʻresidual claimantsʼ (Garvey and Swan,
1994). It is in this perspective that Blair (1995) clearly shows the will to
proceed to a realignment of property rights in favour of employees in
recognition of the specific knowledge and competences that they
invest in their companies.
As such, gaps in the unilateral conception of the agency relation favour
the emergence of integrated conceptual frameworks, such as the
stakeholder-agency theory (Hill and Jones, 1992) or the vision of the
company as a multi-contract organisation developed by Laffont and
Martimort (1997). This work remains within the framework of the posi-
tive agency theory but shifts the emphasis from a simple model, com-
prising one principal (the shareholder) and one agent (the manager),
to a more sophisticated model incorporating several principals (stake-
holders) and an agent (the manager). According to this perspective,
new monitoring and incentive mechanisms should be implemented to
protect the interests of all partners and to optimize shareholder value
(Charreaux and Desbrières, 1998). These governance mechanisms
are inspired by the perception of the company as a coalition with a
common objective, chiefly the viability and the continued existence of
the company. They involve shifting from a system of governance
based on agency to one based on stakeholders to achieve an equilib-
rium between financial investors and industrial actors (Hirigoyen,
1997). However, this approach has its limitations insomuch as it can-
not satisfy the conflicting interests of all the participants and is inca-
pable of identifying those that really count. Thus, these company mod-
els, together with the set of implicit and explicit multilateral contracts,
emerge from the contradiction between the positive agency theory and
the existence of transaction costs. They propose a representation of
the governance system resting on a dynamic game between man-
agers and other stakeholders in order to create and share income.
Since then, several control mechanisms have been advocated. The
notion of contractual costs substitute the notion of agency costs, tak-
ing into consideration the total amount of utility reductions supported
by stakeholders to make disciplinary mechanisms work. Likewise, the
concept of institutional structure replaces Williamsonʼs term gover-
nance structure by simultaneously exercising the traditional disci-
plinary function and guaranteeing the execution of implicit contracts
between the various stakeholders.
Other proposals, each differing slightly from the dominating concep-
tion, have also emerged. For example, Cornell and Shapiro (1987) pro-



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Vincent Dessain, Olivier Meier and Vicente Salas

pose the concept of organisational capital developed by implicit con-
tracts formed with different stakeholders, which allows them to extend
considerably the traditional approach of the financing structure. In
addition, Barton and Gordon (1988) espouse a more enriched con-
ception of the financing structure by integrating a strategic perspective.
For their part, Charreaux and Desbrières (1998), by placing them-
selves within the framework of the contractual approaches to the com-
pany and broadening the thus far dominant concept of shareholder
value to multiple stakeholders, studied and evaluated the governance
system by virtue of its capacity to produce stakeholder value. They
claim that the latter is created by reducing the loss of value which aris-
es from conflicts based on the redistribution of the income between
stakeholders. Hoarau and Teller (2001) drew inspiration from the
revival of the theory of the firm which corresponds to the resource-
based approach to propose a substantial value going beyond simple
financial value. Finally, the practical implications of this stakeholder
conception of the firm and governance are increasingly being recog-
nised. Certain companies have decided to go beyond legal rules, to
engage by the intermediary of code of good practice, to take all stake-
holders into account.
For example, IKEA feels that corporate social responsibility is part of
its daily business (Bartlett, Dessain and Sjöman, 2006). In the words
of Marianne Barner (2007: 59), the companyʼs Director of Corporate
Communications, IKEA has « a list of key performance indicators to
measure its progress on CSR issues, such as the environment ». Fur-
thermore, Anders Dahlvig, IKEAʼs CEO, decided in 2005 that the com-
pany should take more responsibility for its suppliers, co-workers and
the environment through a dedicated code of conduct known as the
IKEA Way of Purchasing Home Furniture Products, redefining IKEAʼs
relationship with its suppliers worldwide.
By means of these codes, the firm attempts to reconcile the imperative
of competitiveness with a conduct concerned with the interests of all
stakeholders that contribute to a companyʼs activities. Additionally,
numerous ʻethical fundsʼ have been created over recent years which
favour investments in companies that show consideration for specific
criteria, such as respect for the environment. For example, the UK-
based investment management fund Generation Investment Manage-
ment has built a global research platform to integrate sustainability
research into fundamental equity analysis and focuses on economic,
environmental, social, and governance risks and opportunities that
materially affect a companyʼs ability to sustain profitability and deliver
returns. Nobel Peace Prize winner Al Gore is the Chairman of the Advi-
sory Board and helps set the long-term thematic research agenda into
global sustainability issues, including climate change, poverty and
development, ecosystem services and biodiversity, water scarcity,
pandemics, demographics and migration, and urbanization (Genera-
tion Investment Management, www.generationim.com, accessed Jan-
uary 2008).
In conclusion, the relation between the various stakeholders of a firm
raises questions about the process of value creation. As long as stake-



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Corporate Governance and Ethics

holders have specific expectations regarding the firms in which they
evolve and require specific information on the conditions of those
firms, each stakeholder participates in the creation of value. Questions
are also being raised regarding the measurement of each stakehold-
erʼs contribution and the incentive methods coordinated by the firm to
encourage stakeholders to adopt efficient and responsible conduct,
with a common objective of maximizing value for all partners.
These new approaches give rise to a more fundamental reflection on
a new stakeholder type of governance and the development of ethical
conduct. Ethics has thus become one of the reference values upon
which a new pact should be built between the various actors of the
organization concerning company governance.

ETHICS: A FUNDAMENTAL CONCEPT
FOR NEW ECONOMIC GOVERNANCE

In the field of corporate governance, awareness of ethical issues
ensures that managers avoid abusing their power or undertaking
improper actions that could result in questionable behaviours and
practices within organisations (Mercier, 2004). From this point of view,
sharing power amongst the different actors that make up a companyʼs
structure and environment becomes a crucial issue in corporate gov-
ernance. In this way, the relationship between ethics and corporate
governance humanizes the exercise of power and renders it more
transparent and credible not only to the shareholders, but also to
stakeholders in general (employees, clients, suppliers, trade unions,
NGOs, public opinion). As Miller, Dessain and Sjöman (2006) argue,
an ever increasing number of retail and institutional investors are look-
ing to incorporate social and environmental criteria into their invest-
ment decisions. Simply making money is not enough for these social
or ethical investors—they want to do good whilst doing well.
For the purposes of this special issue, ethical behaviour in governance
is defined as the way in which a companyʼs stakeholders try to man-
age collective action from the perspective and in the interest of the
majority, thus avoiding damaging behaviour (such as fraud, personal
enrichment, insider trading, corruption, deviances, dubious behaviour)
and through a better control of the power and responsibilities of the
companyʼs managers. In the area of governance, therefore, ethics
aims at raising awareness of the othersʼ rights and common needs, by
imposing some principles of minimum requirement. From this point of
view, ethical governance must be seen as a system of shared and
transparent governance which seeks to establish the general frame-
works and guidelines for managers of large companies, by enforcing
the values of transparency, responsibility and professionalism.
For this reason, a stronger link between ethics and governance has to
contribute to help the companyʼs stakeholders to behave, in their deci-
sions and actions, in a way which is acceptable, reasonable and in
conformity with given values of reference. Defining these values
should determine what is good in terms of respecting and bettering the



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Vincent Dessain, Olivier Meier and Vicente Salas

conditions of the different stakeholders who work with the company, or
the institution. It is then necessary to translate these values into moral
rules, laws, regulations, rules of behaviour or company charters. This
notably involves knowing how to exercise oneʼs responsibilities, know-
ing what the essential values are, knowing which ones should be pro-
tected and defended and knowing which rights and responsibilities
should be shared; it also involves knowing, when needed, what the
best practices are and knowing which sanctions to have in place in the
event of non compliance. Such questions should open the way to
power sharing, that is, to a way of working together in which stake-
holders feel responsible not only for their work, but also for the sound
functioning of the organisation. In this way, they can estimate and mon-
itor whether the objectives and the important stakes of the organization
are pursued.
Nevertheless, this ethical orientation is not spontaneous and requires
different stakeholders to transform profoundly not only their mindsets
but also their behaviour and actions. In this regard, Enriquez (1993)
identifies four main ethical challenges. The first is the ethics of convic-
tion (lʼéthique de la conviction), which entails the courage of affirming
and defending oneʼs own opinions and principles. Secondly, he defines
the ethics of responsibility (lʼéthique de la responsabilité), which
emphasises autonomy and free will and asks individuals to reflect on
the context and consequences of their decisions or actions. For this
reason, this kind of ethics brings about tensions between organisa-
tional and personal responsibilities. Thirdly, Enriquez identifies the
ethics of discussion (lʼéthique de la discussion), based on sharing
information and on defining interests around the issue of reciprocity.
Last but not least, the author calls to mind the ethics of purposefulness
(lʼéthique de la finitude), focused on the goals of an action, for which
ethical decisions take into consideration widely shared missions and
values. Specific to this last form of ethics is its attempt to integrate the
three others and thus change their principles to make them more com-
patible.
However, for these orientations to materialise, we should reflect on and
transform into operational guidelines the formalisation of an ethical
approach to corporate governance based on organisational values,
and which matches professionalism with citizenship and principles of
action (guidelines of behaviour) with rules of conduct (application of
values and principles).This ethical formalisation appears to respond to
a dual need: it allows the company to react to external pressures and
is a tool for establishing internal rules (Mercier, 2000). For this reason,
different monitoring and controlling systems should be established.
These systems should ensure that declared commitments are respect-
ed and should aim at establishing relationships of trust as well as con-
structive transactions between shareholders, managers and other
stakeholders (reinforcement of legitimacy). However, the creation of
codes of conduct or of ethical charters is just one aspect of the process
of ethical institutionalisation within companies. Companies would also
need other, additional procedures and institutions such as internal
ethics committee at the board level, the appointment of personnel in



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Corporate Governance and Ethics

charge of ethics, the organisation of periodical ethic audits, the elabo-
ration of corporate social responsibility practices/ sustainable develop-
ment reports (or evaluations) as well as the establishment of training
seminars focused on the ethics.
Nevertheless, notwithstanding these positive actions, it should be
stressed that a company forms part of the business world, and as such
has to create value and generate profits. The economic objectives of a
company should not be criticized in themselves, insofar as these
objectives are what distinguishes a company from a not-for-profit
organisation. A company should thus carefully select the social and
environmental issues it wants to address and select those more likely
to bring about benefits to both society and itself (Porter and Kramer,
2006). Indeed, it would be improper to think that a company has to
commit itself to sustainable development only to comply with the law
or because it is under pressure. Other reasons should be highlighted,
such as the capacity to generate value for the client and all other
stakeholders in an equitable and responsible way, thanks to a better
and continuous adaptation of its products and services to new needs
and market expectations. In the areas of sustainable development and
social responsibility, ethical needs have also to support the growth of
companiesʼ capacity to innovate through an anticipation of foreseeable
situations and a more rigorous and global management of the risks,
especially environmental and social ones. Respecting ethical princi-
ples is also at the core of companiesʼ efforts to preserve their reputa-
tions and valuations, especially with respect to their image vis-à-vis
public opinion and their clients.

INDIVIDUAL CONTRIBUTIONS

This special issue of M@n@gement contributes to and enriches the
analysis and current thinking on this trend towards a stakeholder
model of corporate governance that is open to all stakeholders. Along-
side highlighting what progress has been made in the field, identifying
what is at stake and discussing the means of actions, the articles also
point to possible difficulties of application and implementation.
The issue opens with an article by José Miguel Rodríguez Fernández
that contains a comprehensive approach to corporate social responsi-
bility, within the general framework of a stakeholder model of the firm.
The approach draws from standard economic analysis of the firm com-
plemented with ethic and socio-political considerations. The author
postulates that, on the basis of implicit and relational contracts, the
new property rights theory, cognitive approaches to management and
the firm as a sub-economy, it is possible to draw up a coherent model
of the pluralist or stakeholder corporation. One advantage of the
approach is that corporate social responsibility can be investigated
jointly with corporate governance and with the overall question on how
to asses the performance of firms. The paper also contains some prin-
ciples that can guide the implementation of the global approach to cor-
porate governance: a/effective participation in the corporate manage-



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Special Issue: Corporate Governance and Ethics

76

Vincent Dessain, Olivier Meier and Vicente Salas

ment on the part of the main stakeholders, choosing among a wide
portfolio of possible governance mechanisms; b/creation of total net
wealth in the long term, sustainable in the time and assessed from dif-
ferent stakeholdersʼ perspectives, which implies to calculate the cre-
ation of economic rents or quasi-rents; c/fair bargaining, equitable dis-
tribution and internalisation of externalitie; and d/accountability with
disclosure and independent external monitoring.
The second article, written by Sandra Charreire Petit and Joëlle Sur-
ply, covers an interesting interpretation of the American practice of
whistleblowing (a mechanism of internal control where an employee
exposes fraudulent behaviour inside a company) adapted to the spe-
cific French context. The research attempts to answer the question of
what happens when whistleblowing is used in French companies list-
ed in the United States or in France-based subsidiaries of American
companies. The article explores the various mechanisms and chal-
lenges of whistleblowing and discusses the development of three par-
ticular issues: The first point concerns the scope of whistleblowing; the
second discusses the place of whistleblowing alongside other internal
control tools within organizations; and finally, the third point concerns
the employee at the heart of this control mechanism who simultane-
ously possesses the power to monitor and report instances of miscon-
duct.
In their article, Nicola Postel and Sandrine Rousseau address the topic
of social and environmental responsibility from an ethical perspective
by stressing the increasing power that customers and other stakehold-
ers have over companies. The article advances an operational defini-
tion of ethics based on the concept of communicational rationality in an
institutionalist-pragmatic perspective (conventionalist approach). From
this vantage point, it identifies and assesses various contemporary
approaches that attempt to associate ethics and efficiency within cap-
italism. Its focus is trained specifically on paternalism, fordism and cor-
porate social responsibility. In this conceptual and historical light, the
article proposes an interpretation of corporate social responsibility as
a conventional form that is currently in a process of institutionalisation.
The success of this process depends primarily on consumer
behaviour. This relation is the indispensable condition for the existence
of an authentic ethical dimension within any corporate social responsi-
bility approach.
The article by Miguel Blanco and Santiago Guttierez uses a case study
to illustrate the relationship a widely used managerial model such as
Total Quality Management (TQM) and ethical and socially responsible
behaviour by business firms. The author argues that TQM implicitly
assumes a stakeholders view of the firm where the combined interests
of customers clients, employees, suppliers, society as a whole and
shareholders, are satisfied in an efficient way. The paper illustrates the
ethical and social components of TQM with a case study of Mer-
cadona, a Spanish firm in the retail industry that has made compatible
an extraordinary improvement in economic and financial performance
over time, with high levels of ethical behaviour that have been widely
recognized in Spain and internationally.



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Corporate Governance and Ethics

The article by Riadh Manita focuses on the quality of external auditing
and corporate governance: how should the auditing process be mea-
sured in terms of quality standards? How should members of a board
of directors critically evaluate external audits and not accept them at
face value? The main objective of this contribution is to establish an
analysis table to measure the quality of the auditing process for the
benefit of audit committees or any other corporate governance bodies
concerned with the quality of an audit. The analysis table was estab-
lished and tested using data gathered in Tunisia, as part of an experi-
mental project based on the Churchill approach (1979) and adapted to
the research context.
In the closing article, Mar Alonso and Eduardo Bueno build upon the
conflicts of interest between shareholders and directors in the recent
years, due to the proliferation of cases of abuses and opportunistic
behaviour by managers around the world, to justify the relevance of
trust for effective corporate governance. The paper acknowledges that
the lack of trust increases financial costs of capital and lowers the
value of the assets of firms, so to restore the trustworthiness of corpo-
rations is an urgent task in order to improve economic efficiency, which
has called the attention of public authorities and regulators. According
to the authors of the paper, information and communication technolo-
gies, especially internet, offer new opportunities to public corporations
to build and operate effective communication channels with investors
and small shareholders, improving the corporate governance mecha-
nisms and restoring trust. The article goes on in analysing internet as
a useful way to build up trust in the relationship between firms and
shareholders.

Note. The authors would like to thank Andrew Barron, Daniela Beyersdorfer, Ane
Damgaard Jensen, Elena Corsi and Gudrun Urfalino Kristinsdottir for their contribution
to this introduction.

Vincent Dessain is the Executive Director of Harvard Business Schoolʼs Europe
Research Center in Paris. Prior to his current position, he was Senior Director of Cor-
porate Relationships at INSEAD in Fontainebleau and has also been Advisor to the
President at the Collège dʼEurope in Bruges, Belgium. He is co-author of two books in
finance, a book chapter on intercultural management as well as of 52 case studies and
research notes (see www.hbsp.harvard.edu or http://www.hbs.edu/global/research/
europe/center/). He is a frequent guest speaker invited by academia, business and gov-
ernments to speak on topics in management and education. He holds a degree in Law
from Leuven University (Belgium) and is a 1987 MBA graduate of Harvard Business
School.

Olivier Meier is associate Professor at the University of Paris 12. He is member of the
Institut de Recherche en Gestion. He is the author of several books and articles on
strategic management.



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Vincent Dessain, Olivier Meier and Vicente Salas

Vicente Salas Fumás (Ph.D. in Management, Purdue University) is a professor of
Business Economics at the University of Zaragoza (Spain). Previously he has been a
professor at the Universidad Autonoma de Barcelona and Visiting Scholar at the Grad-
uate School of Business of Stanford University. His research interests are in the eco-
nomics of organizations and in empirical studies of firms and markets. Currently he is a
member of the Executive Committee of the Bank of Spain. In 1992 he was awarded the
Jaime I price for his academic contributions to Economics of the Firm.

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