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Weeding Out Flawed Versions of Shareholder Primacy: A Reflection on the Moral Obligations That Carry Over from Principals to Agents

Published online by Cambridge University Press:  27 August 2019

Santiago Mejia Open the ORCID record for Santiago Mejia [Opens in a new window]
Santiago Mejia*
Affiliation:
Fordham University
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Abstract:

The distinction between what I call nonelective obligations and discretionary obligations, a distinction that focuses on one particular thread of the distinction between perfect and imperfect duties, helps us to identify the obligations that carry over from principals to agents. Clarity on this issue is necessary to identify the moral obligations within “shareholder primacy” (i.e., “shareholder theory”), which conceives of managers as agents of shareholders. My main claim is that the principal-agent relation requires agents to fulfill nonelective obligations, but it does not always require (and sometimes actually prohibits) discharging discretionary obligations. I show that the requirement to fulfill nonelective obligations is more far-reaching than has been acknowledged by most defenders and critics of shareholder primacy. But I also show that managers are not bound by certain discretionary obligations like charity, showing that their moral obligations are more circumscribed than the obligations that apply to human beings in general.

Keywords

shareholder primacyshareholder theoryagency ethicsperfect dutiesimperfect dutiescorporate governance

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Article
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Business Ethics Quarterly , Volume 29 , Issue 4 , October 2019 , pp. 519 - 544
Copyright
Copyright © Society for Business Ethics 2019 

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