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Abstract
Henry Hansmann has claimed we have reached the “end of history” in corporate law, organized around the “widespread normative
consensus that corporate managers should act exclusively in the economic interests of shareholders.” In this paper, I examine
Hansmann’s own argument in support of this view, in order to draw out its implications for some of the traditional concerns
of business ethicists about corporate social responsibility. The centerpiece of Hansmann’s argument is the claim that ownership
of the firm is most naturally exercised by the group able to achieve the lowest agency costs, and that homogeneity of interest
within the ownership group is the most important factor in achieving lower costs. He defends this claim through a study of
cooperatives, attempting to show that homogeneity is the source of the competitive advantage most often enjoyed by shareholders
over other constituency groups, such as workers, suppliers and customers, when it comes to exercising control over the firm.
Some business ethicists, impressed by this argument, have taken it to be a vindication of Milton Friedman’s claim that profit-maximization
is the only “social responsibility” of management. I would like to suggest that this conclusion does not follow, and that
the “Hansmann argument” lends itself to a less minimalist view, what I refer to as a “market failures” approach to business
ethics.
- Content Type Journal Article
- Pages 1-16
- DOI 10.1007/s10551-011-1192-3
- Authors
- Joseph Heath, Department of Philosophy and School of Public Policy and Governance, University of Toronto, Toronto, ON, Canada
- Journal Journal of Business Ethics
- Online ISSN 1573-0697
- Print ISSN 0167-4544