Over the last two decades, institutional investing has rocked the world of corporate governance in a transformation that has begun to be reflected in the finance, legal, and management literatures. Traditional players have seen their roles change and bases of power shift, and new actors have entered the governance equation. These transitions have entailed an ethical upheaval that is only beginning to be addressed in the business ethics literature.

This paper attempts to facilitate research in this area by integrating various literatures into an examination of a series of business ethics issues related to pension fund activism and portfolio management, fund staffing, and employee compensation. The primary intent of this project is to encourage increased business ethics research in the area of institutional investing in general and pension fund management in particular.

The economic and political arguments for the market principle over alternative forms of economic organization are to my mind irrefutable. It is on the moral level that the perplexing concerns about capitalism center, concerns that have been raised from the beginnings of the industrial era down to the present time. This essay focuses on one major aspect of the ongoing moral test of capitalism: the test of whether our major corporations can both succeed in their profit-making efforts and also serve as one of society’s chief mediating structures that stand, like family, church and community, between the individual and the state. Should the corporation serve not simply as a utilitarian arrangement for the efficient production of high quality goods and services, but also as a moral community that shapes human character and behavior? How can it do so in this age of brutal markets?

James Q. Wilson, professor of management at UCLA, has no doubt about the answer. In an article last year, he said: “The problem of imbuing large-scale enterprise with a decent moral life is fundamental.” Corporations “are systems of human action that cannot for long command the loyalty of their members if their standards of collective action are materially lower than those of their individual members.” Capitalists should recognize, he concluded, “that, while free markets will ruthlessly eliminate inefficient firms, the moral sentiments of man will only gradually and uncertainly penalize immoral ones. But, while the quick destruction of inefficient corporations threatens only individual firms, the slow anger at immoral ones threatens capitalism, and thus freedom itself.”

This special issue of BEQ presents diverse reflections on business practice from within Western patterns of theology and piety. Our goal is to help both academics and business practitioners understand the ultimate contexts in which religiously minded individuals construe their participation in business, and what these contexts then mean for moral reasoning. To keep the project manageable in scope, we have limited this foray to Western traditions, soliciting views from within representative denominations or viewpoints in Judaism, Roman Catholicism and Protestant Christianity. If this sampling is well-received, essays representing other traditions—Orthodox Christianity, Islam, Buddhism, Confucianism, Hinduism—will be sought for a later issue.

We solicited essays from nine distinct perspectives, so as to present a cross-section of religious views. One of the questions we asked our contributors was: If a person in business were to take your tradition seriously, what does it teach him or her about God’s will for how business ought to be conducted? Here we were amply rewarded in our search for diversity. The nine contributions express a wide variety of religious beliefs and dispositions: from the fervent piety of evangelicals to the moral passion of modern Judaism, from the strict rules of traditional Judaism for containing greed to the exuberant permissions to innovate afforded by Roman Catholic social teaching, from a Lutheran focus on anxiety about security to an African-American struggle with an onerous historical legacy. (An even greater diversity is represented in the enormous recent anthology, On Moral Business, reviewed at the end of this issue.) The essays forcefully point to the importance of the quest to relate faith to business practice. They provide direction for those seeking to reconnect with their traditions. And to interested observers, they provide copious data for imagining how persons adhering to these traditions might interpret the business environment in which they work.

A common moral argument is that shareholders have a special status because of risk when considering the duties of corporate management. The privileges of this status usually include the idea that management should adopt the goal of maximizing shareholder wealth. We argue that modern financial theory demonstrates that this argument should be modified by the recognition of a principle of desert, the shareholder desert principle (SDP). Financial theory can usefully circumscribe the duty owed to shareholders and the extent to which risk bearing justifies a claim on corporate value. When combined with the SDP, the result provides management with a guideline for what is owed to shareholders before other stakeholder non-contractual claims may be satisfied. As such, our approach provides management with some guidance through the thicket of competing stakeholder claims.

Having taught management ethics for several years, I have been repeatedly frustrated by the practical mismatch between management problems and moral philosophy…. Unless we can connect ethical theory more closely with management practice, we may be dressing our business curriculum windows with philosophical finery but failing to meet the urgent need for clarity of thought in management ethics.

Professor Ian Maitland advances a version of utilitarianism, constrained by Robert Nozick’s minimal state, that finds no connection between the pervasiveness of “market values,” which he gamely pursues, and the kind of problems that dominate our social scene. In his judgment, the prevailing tendency towards community or communitarian ends needlessly obstructs freedom, the overriding value of the libertarian-minimal state. When coupled with wrongheaded and perverse policies, communitarianism shackles the free market with crippling inefficiencies. This paper will interrogate Maitland’s characterization of communitarianism, challenge his view that traditional values can be instrumentalized without harming community, and paint a more plausible and complex picture of the communitarian tendency.

We combine prior research on ethical decision-making in organizations with a rational choice theory of corporate crime from criminology to develop a model of corporate offending that is tested with a sample of U.S. managers. Despite demands for increased sanctioning of corporate offenders, we find that the threat of legal action does not directly affect the likelihood of misconduct. Managers’ evaluations of the ethics of the act, measured using a multidimensional ethics scale, have a significant effect, as do outcome expectancies that result from being associated with the misconduct but not facing formal sanctions. The threat of formal sanctions appears to operate indirectly, influencing ethical evaluations and outcome expectancies. Obedience to authority also affects illegal intentions, with managers reporting higher prospective offending when they are ordered to engage in misconduct by a supervisor.

This article presents moral jurisprudence theory as a systematic approach to business ethics that analogizes core problems of the field to related problems in law. Adapting theoretical approaches from contemporary philosophy of law, the article develops a decision-making method for business ethics.

This response to Professor Hasnas recasts the apparent divergence between the legal and ethical obligations of managers in light of the rhetorical claims and counterclaims that accompany the interaction between regulators and the regulated. It is argued that this divergence is more apparent than real, and that the convincing but often empty rhetorical statements that accompany reforms should be seen in context and largely disregarded. This rhetoric is designed to claim integrity, and reclaim legitimacy with the hope that “burdensome” reforms will be minimized.