Corporate virtue strategies are more likely to cause good governance than stricter compliance and control regimes
- Corporate virtue strategies do cause 'good governance'.
What is ?good corporate governance?? And how an enterprise can achieve to have it? A number of writers and researchers gave their contribution to this subject. Nevertheless, some disagreements and conflicting points of view appeared among them. Indeed, some suggested that corporate virtue strategies are the main factor explaining a ?good governance?, while others preferred underlining the benefits of compliance and control regimes.
First of all, let's define both expressions ?corporate virtue strategy? and ?compliance and control?. The first refers to the way of acting and deciding according to its beliefs, values, and to its own definition of goodness and righteousness; while the second ones deals with the state of being in accordance with the wish, requirements, demand of authorities and implementing systems to control this compliance. In 2002, Roger L. Martin created a virtue Matrix, a tool which can helps us to set up the basis of the two different factors influencing a corporate decision. In this matrix, he argued that corporate governance take its decision within a civil foundation, composed by customs, norms, laws, and regulations. Companies engage in its practices either by choice (by favouring norms, customs) or in compliance with regulations and law. According to us, we could add to this Virtue Matrix, corporate culture, values and beliefs in the decision making process which is done by choice.
[...] Three main points were emphasized, in order to get back the public confidence lost with those various scandals: - Infusion of ethical principles and values into corporate cultures - Appointment of ?Chief Ethics officers? - Adoption of stricter ethical guidelines and codes of conducts Implementing a new ethical way of thinking was necessary to increase stakeholders' trust toward companies; so for example the companies carried out internal ethics programs to ensure the integrity of financial reporting, to give more detailed reports to investors, to emphasize the internal and external communication, to ensure the ethical role-modelling of senior management etc. [...]
[...] The apparent remedy raises the incentives by managers and other employees to take advantage of the firm they are supposed to care about.? Social dilemmas appear when the actions of individuals not lead to socially desirable outcomes?. The existence of a social dilemma is causing self-interested individuals to neglect the common good of the firm. ?Corporate virtue is one of the most important common goods in firms.? Osterloh and Frey suggest putting more emphasis on employees' intrinsic motivation to contribute to the common good of the firm in order to solve these social dilemmas. [...]