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Journal of Business Ethics
Published in: Journal of Business Ethics 3/2013

01-12-2013

Towards a More ‘Ethically Correct’ Governance for Economic Sustainability

Author: Christos N. Pitelis

Published in: Journal of Business Ethics | Issue 3/2013

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Abstract

In this paper, we propose that economic sustainability is seen in terms of (inter-temporal and inter-national) value creation. We claim that value appropriation (or capture), can become a constraint to economic sustainability. We propose that for sustainable value creation to be fostered, corporate governance needs to be aligned to public and supra-national governance. In order to achieve this, a hierarchically layered set of ‘agencies’, needs to be diagnosed and the issue of incentive alignment addressed. Enlightened self-interest, pluralism and diversity, as well as a representative supra-national organisation for world-wide economic sustainability can serve as a new, more ‘ethically correct’ governance for economic sustainability, but not a panacea.
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Footnotes
1
If we assume that ‘needs’ remain the same across generations (which is rather heroic), then allowance should be made for projected increases in populations. This should involve the current generations also factoring into their needs and actions, the projected impact of anticipated population changes. This is a challenge.
 
2
For example, the Concise Oxford Dictionary defines ‘sustainable’ as “able to be sustained”, “sustain” as “keep (something) going over time or continuously”. This is generic and useful in emphasizing inter-temporal and continuity dimensions. On the other hand, it does not serve the purpose of tractability and operationalisability—two useful properties when conducting scholarly analysis.
 
3
Even more complex is the situation that allows for differing objectives by economic agents. For example an agribusiness corporation is interested in expanding its activities, in an area where the inhabitants would rather keep ‘undeveloped’, but more ‘habitable’. In order to avoid making the issue intractable, one would need to at the very least refer to ‘legal’ and/or ‘legitimate’ objectives. This would raise the question of who is to judge this. Limiting one’s focus to ‘legal’ only can helpful, in that in most modern economies, there exists a body of law and a legal system that aims to define and enforce property and other rights. Recent complaints against ‘cleptocratic’ political elites, would point to limitations here too, one, however, needs to draw the line, so as the analysis can proceed. Our line here is to focus ‘legal’ objectives, see Clegg and Haugaard (2009) for more.
 
4
Economic sustainability relates to the concept of economic resilience, see Simmie and Martin (2010), for a critical account. Resilience usually focuses on the ability to withstand shocks, usually external ones, and/or rebound. Economic sustainability instead is more interested in the endogenous to an economy factors that can help foster, or hinder, its capability to satisfy its objectives inter-temporally. In this paper we focus on economic sustainability.
 
5
Put differently, a genuine firm-level SCA should be defined as one that is taking into account all static and inter-temporal externalities of the firm’s activities. SCA in this definition would be equivalent to a firm’s net value added, or, differently put, the Net Present Value of its value added throughout its existence, calculated to have internalized all potentially negative externalities. This is not easy to calculate not least because the issue of externalities is far too vexed (see Dahlman 1979), and we do not, and cannot possess in advance all requisite knowledge. However, this should not stop us from addressing the problem.
 
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Metadata
Title
Towards a More ‘Ethically Correct’ Governance for Economic Sustainability
Author
Christos N. Pitelis
Publication date
01-12-2013
Publisher
Springer Netherlands
Published in
Journal of Business Ethics / Issue 3/2013
Print ISSN: 0167-4544
Electronic ISSN: 1573-0697
DOI
https://doi.org/10.1007/s10551-012-1616-8

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