Ethics and corporate governance : a model for understanding competing ethical frameworks in the boardroom

This paper addresses concerns with ethical decision making within corporate boards of directors. Building on extant models for ethical decision making, I use a contractarian approach to highlight how agency theory is flawed as a basis for understanding ethical decision making in the boardroom. Instead, I develop a theoretical framework based on team production theory that highlights the roles of stakeholders, shareholders and corporate transparency in a company’s ethical framework. I present a model containing four propositions and argue that a corporation’s ethical framework is subject to exploitation in two key circumstances: when directors are self-interested and/or when special interest groups can exploit their position in a corporation’s means of production. I conclude with a discussion of the implications of the model for theory and practice.