Institutional Impediments To Voluntary Ethics Measurement Systems: An International Perspective

Abstract

Despite numerous appeals in the business ethics literature for a multiple-stakeholder perspective to corporate governance, in practice the widespread adoption of voluntary ethics measurement systems that consider multiple stakeholders remains elusive.  In this paper, we employ an institutional economics framework to examine the legal environment in several English-speaking countries in order to determine potential constraints that might cause managers to avoid the adoption of such systems.  Our findings indicate that in British Commonwealth countries (1) the courts tend to view stockholders as the primary corporate constituency group and (2) there is a lack of documentary privilege.  Therefore, any internally generated metrics on ethics and corporate social responsibility matters could potentially be either trivialized or used against the corporation in court proceedings.  Before adopting a voluntary ethics measurement system, managers should be aware of these and other potential institutional constraints that may impede such efforts.