Investors with standard monetary preferences will give a fund manager incentives to increase firm profits, which can be achieved through a share in profits via carried interest. When investors have social preferences, it is not clear which incentives the manager should receive. We explore this puzzle by applying an agency theory perspective to impact investing, a practice where investors seek both financial returns and a measurable social or environmental impact. Using an inductive, qualitative approach, we identify and describe the ethical (...) tensions and challenges faced by fund managers to structure and implement impact-based variable compensation schemes. Our results indicate that economic incentives tied to non-financial objectives are useful to alleviate goal incongruity between principals and agents during fund creation but have the potential to lead to perverse effects during the fund lifecycle, where managers may exploit subjective non-financial metrics to maximize personal wealth. We introduce the concept of impact fidelity, a conceptual equivalent of fiduciary duty, to ensure that investment decisions reflect the asset owner’s impact preferences. (shrink)

Despite the omnipresence of the fiduciary in business organisations, there is an omission of theorisations of this legal concept within business ethics literature. This is surprising considering its widespread and embedded use, but even more so given that the presence of ethics within the fiduciary is increasingly contested ground. This article addresses both issues by theorising the fiduciary using an ontological analysis—one which subsequently helps identify a suitable ethical framework. The article argues on two grounds that the ontology of the (...) fiduciary is inherently relational; it renders the fiduciary’s implicit ontology explicit. Firstly, the fiduciary is shown to be process-oriented, indicating an open, emergent, and relational ontology at work. Secondly, historical investigation of the development of the fiduciary highlights its core relationship structure, and the interdependency and power dynamic embedded in the fiduciary are revealed. The argument is advanced that by bringing this inherent relational ontology to the fore, we can see how a relational ethical framework—the Ethics of Care—is best placed to explicate the ethics at work in the fiduciary. The article concludes with a discussion outlining how this ontological theorisation offers utility in steering future practice of the fiduciary. (shrink)

This study examines the effects of individual ethical values and organizational factors on the professional ethics of PR practitioners in Korea by considering a person–situation interactionist model. Individual ethical values are used as individual factors, and organizational factors consist of an organization’s reward and punishment for ethical/unethical behavior, the behavior of peers, and the ethical integrity of the chief ethics officer. The professional ethics of PR practitioners (the dependent variable) are classified into the following three dimensions: professional ethics for the (...) public, the client, and the PR industry. The results indicate that agency practitioners were more likely to be committed to their profession than to their organization, whereas in-house practitioners were more likely to be committed to their organization than to their profession. That is, in-house practitioners showed weak professional commitment, indicating that they perceived themselves as employees, not as PR professionals. Organizational factors such as reward, punishment, and peers’ ethical behavior had considerable influence on the professional ethics of in-house practitioners, whereas they had little influence on agency practitioners. Organizational factors as well as individual ethical values were more likely to influence the professional ethics of in-house practitioners than that of agency practitioners. Thus, to foster in-house practitioners’ professional ethics and commitment, professional associations in the PR industry should make efforts to provide in-house practitioners with more information on the PR industry and more opportunities for interacting and maintaining communication with their colleagues in the industry. (shrink)

What are the ethical obligations of the sellers of financial products to their customers? Stockbrokers in the U.S. have a legal and ethical requirement to recommend only “suitable” investments to their customers. This is a fairly weak standard. Currently, there are proposals to raise the standard to a fiduciary one in which the recommendations would have to be in the best interests of the clients. Brokers sell solutions to financial problems. Similar to an auto mechanic or a doctor, the product (...) often consists of both the professional advice and its implementation. There are numerous conflicts of interest between brokerage firms and their customers in that the products that pay the highest commissions may not be the best ones for the customers. The societal perspective adds complications, however. Society depends on modern financial markets to raise capital for productive enterprises and to spread risk. Issuers of financial products need distribution channels for their products just like the producers of any other products. Commissions create powerful incentives for the distribution channels, but at the same time produce conflicts of interest—a type of ethical pollution. Just as our society tolerates some pollution as a byproduct of other useful activities, it may be useful to tolerate some of these financial conflicts of interest. The nature of the relationship should govern the ethical standard. Those selling advice, regardless of how they label themselves, should adhere to a best-interest fiduciary standard. More limited relationships should be limited to the mandate involved in the relationship. (shrink)