Journal
BUSINESS ETHICS QUARTERLY
Volume 28, Issue 2, Pages 153-173Publisher
CAMBRIDGE UNIV PRESS
DOI: 10.1017/beq.2017.54
Keywords
theory of the firm; hierarchy; autonomy; law and economics; corporate governance
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An influential set of economic theories argue that the firm is a nexus of contracts that institute a hierarchy to overcome the problems of incomplete contracting in the market. However, the economic theory of the firm as a hierarchy violates the moral requirement to respect the autonomy of those who contract into the firm. The internal logic of the theory depends on a morally unacceptable abdication of a part of the employee's capacity to set her own ends in the future. So a different theory is needed to understand the nature and purpose of the firm. The development of such a theory can benefit from business ethicists engaging with existing economic theories of the firm to explore concepts like contracts, agency, and property.
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