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Authenticity and Corporate Governance

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“The shortest and surest way to live with honor in the world is to be in reality what we would appear to be.”—Socrates

Abstract

Although personal attributes have gained recognition as an important area of effective corporate governance, scholarship has largely overlooked the value and implications of individual virtue in governance practice. We explore how authenticity—a personal and morally significant virtue—affects the primary monitoring and strategy functions of the board of directors as well as core processes concerning director selection, cultivation, and enactment by the board. While the predominant focus in corporate governance research has been on structural factors that influence firm financial outcomes, this paper shifts attention to the role of authenticity and its relationship to individual board member qualities and collective board activities. We explore how authenticity has the potential to influence board dynamics and decision making and to enhance transparency and accountability.

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Notes

  1. In this paper we use the term virtue to describe authenticity as a positive personal moral attribute. Virtue ethicists use this term to explain how excellence, practical wisdom, and happiness are central to the notion of living a virtuous life (Solomon 1988). We agree it is important for a board member to intend to be a good person, try to develop oneself as such, and attempt to create an organizational context that supports ethical behavior—ideas reminiscent of certain aspects of virtue ethics (Weaver 2006).

  2. It bears noting that any number of directors could be committed to shareholder value maximization at the expense of other societal goods or to a stakeholder orientation of value for society at the expense of firm owners. To these extremes, we suggest that authenticity requires a board member to question any dominant social order (Varga and Guignon 2017) and involves making a shift from viewing these two theories of the firm as dichotomous (Freeman 2008; Jensen 2008; Porter and Kramer 2011). Empirical research demonstrates that firms accept and accommodate the paradoxical tension between managing for stockholders versus balancing the interests of stakeholders (Clark et al. 2016).

  3. We thank one of our reviewers for helping us with this insight.

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Steckler, E., Clark, C. Authenticity and Corporate Governance. J Bus Ethics 155, 951–963 (2019). https://doi.org/10.1007/s10551-018-3903-5

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