The ethical and theoretical context of corporate governance

Abstract

The paper investigates the foundations of corporate governance. It traces the current practical problems of corporate governance to the epistemological and ethical problems of the current mainstream management theory. Management theory has gradually been subverted by economism, an ideological and extreme version of mainstream economics. The paper isolates and discusses the three axioms of economism which are deemed to be especially problematic for management/corporate governance theory. The three axioms are: the assumptions that humans always follow the rational principle, that value-free research and application of management tools is possible, and that theory takes primacy over reality. These axioms plus what has been called the “gloomy vision” create a theory of management which is amoral and which in turns leads to immoral and dysfunctional corporate governance.