Who cares? Ethics and ‘caring’ in the boardroom

This is a draft of a paper I plan to present to a conference in London in the coming weeks. I welcome comments, either here or privately. What do you think?

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Corporate boardrooms are the pinnacles of governance in the business world, but that doesn’t automatically make them paragons of the highest standards. The litany of corporate failures attests to that: In 2019, Wirecard, the fintech superstar in Germany, shot up to a place among the top 30 companies in Germany only to crash and burn, the next year, with its CEO sent to prison and its COO on the run. In 2018, Carillion, one day a constituent of the FTSE 100 index and a large government contractor; the next day ignominiously plunged into insolvency, without even enough cash to pay administrators to conduct a salvage operation. You may recall Satyam, its name the Sanskit word for “truth” and for India’s tech outsourcing miracle. It won the Golden Peacock award from the World Council on Corporate Governance in 2008. It was too good to be true. By the end of the year a many layered scandal made headlines.

We may never know what happened in the boardrooms of these companies and others that failed – some less spectacularly than these, other even more so. We know, however, that a lot of other companies persist in creating good returns for shareholders by making good products for customers. Some even provide considerable value for the societies in which they operate. But even there we don’t know much about what happens in their boardrooms, whether ethical issues every rise to the fore, whether any give serious consideration of the consequences of their decisions beyond the bottom-line version of utility, or whether director duties in law ever arise, let alone the broader conception of duty in ethics.

Let’s look at how a different view of ethics might help us to imagine a different basis for board decision-making. It’s an ethical framework derived from frontline staff in a very different field: hospitals and hospices, homes dealing with dementia and disability, childrearing. It’s called the “ethics of care”, but its proponents argue that it’s much more than another narrow branch of applied ethics. Instead, it’s an alternative way of thinking about any sort of decision, a way to overcome the unresolved conflict in philosophy between consequentialist approaches, like utilitarianism, and transcendent, duty-based approach, like the deontology of Kant’s categorical imperative.

A general framework

Before we start, however, let me introduce a way to think about the field of corporate governance in general. I’ll use this to frame all three talks I’ll give at this conference. A board of directors faces a problem they’ve never encountered before, say, a bid by a competitor to purchase one of the company’s divisions. How do they decide? They might look narrowly, for example, at return on investment, calculated as net present value. A director objects: NPV can’t measure the intangible factors association with gains or losses of tacit knowledge. This is a low-level dispute between two ways to consider consequences. Another director objects: The board must consider the welfare of employees, not just costs and benefits. We have a duty to them and their families. Yet another cites a religious reason to question the transaction. This is a boardroom debate over ethics: what’s the right thing to do?

Somehow, they decide – and announce it to shareholders, the market, and the public at large. Now the debate becomes one over who controls the resources of the company, who exercises power. It’s a political debate, not an ethical one.[1] This was a one-off decision, but it fits into a pattern of decisions. Who won the boardroom debate? Who won the public one? Whose interests win systematically? Is the system itself rigged? How can we unrig it, make it more nearly fair? Let’s devise a rule, a guideline, a principle, a code of conduct, of “best” or at least “good” practice. Let’s institutionalise it! The institution thus created – a rule, with enforcement and penalties – becomes a heuristic, a mental shortcut. We won’t need to think about ethics again, or at least not until some other, novel, unique situation arises.

The ethics, politics and institutions of corporate governance (© Donald Nordberg)

This talk focuses on the first of these phases.

Ethics – consequences, duties, care

The Enlightenment in Europe brought a philosophical controversy to the fore. The German thinker Immanuel Kant sought to identify a basis for moral judgement that could be universal but need not depend on any religious doctrine or even on a supreme being. His categorical imperative identifies a maxim of action – a duty – that is a more precise wording of the “Golden Rule” of Christianity: Do unto others as you would have them do unto you.[2] At roughly the same time, in England, Jeremy Bentham took a very different line, the principle of utility: Act in a way that brings the greatest happiness to the greatest number. The consequences of actions take priority. The two approaches sometimes give the same answer to the question, how should I act, but many times they don’t. The famous “trolley problem” in ethics is a good illustration (Foot, 1967; Thomson, 1985). It inspired many, increasingly complex thought experiments that illustrate just how knotted the problem is.

Into the breach comes the ethics of care, a relatively new branch, which started in the 1980s. Think of how we raise children or care for the elderly. What matters is how both parties – the person giving care and the one receiving – develop over time. In contrast to conventional ethics, the ethics of care considers the relationship as the focus of attention, not any specific action or any single individual. Because relationships develop, isolated setbacks – mistakes – can be corrected. Learning from them matters. Tolerance of differences is central. The ethics of care is thus 1) relational, 2) evolutionary, 3) fallible and 4) corrigible. But there’s more: It places less emphasis on rationality, and values 5) emotions, which develop through interaction.

In its usual settings – the caring professions, child rearing – the ethics of care deals with dyads in which one party is vulnerable; one cares for the other. It’s often called “feminist ethics” 1) because it starts with mothering, 2) because women typically undertake these occupational roles much more often than men, and 3) because it emphasises the relational over actions or individuals. But proponents of the ethics of care – think its principles can lead to resolving issues well beyond those settings, even including international affairs (Held, 2005; Tronto, 1993).

A caring boardroom

A board of directors is a special kind of work group, large, egalitarian by law and therefore, officially, non-hierarchical. The directors meet only every so often – episodically – to make the most important decisions about the company. They bring a range a skills and knowledge into the boardroom, though what’s important is how they use that knowledge, those skills. They will often disagree – sometimes called cognitive conflict – and it’s a good thing, provided they maintain the cohesiveness needed to come to stick together despite the disagreement during their deliberations, for the best interest of the company (Forbes & Milliken, 1999).

Because directors in general share power, they take collective responsibility for their decisions, and so they also share vulnerabilities. Their personal reputations can be damaged by the actions of others. They are joint and severally liable in law for their mistakes. Their ethical imperative is to care for each other. Their terms of office extend over several years, giving a temporal dimension to their interpersonal relationships. For these reasons, their circumstances point towards analysing their work through the lens of the theory of the ethics of care.

A research agenda for ‘caring’ boards and directors

The ethics of care has found its way into the literature of management studies (Adhariani, Sciulli, & Clift, 2017; Machold, Ahmed, & Farquhar, 2008) and boards (Boulouta, 2013; Luu, 2014), but not as far as I can tell into empirical studies of board dynamics. Even theoretical or normative writings on corporate governance and care ethics focus narrowly on the gender balance of corporate boards and its effects on practices like social responsibility, which resonate with the “feminist ethics” label (Boulouta, 2013; Briano-Turrent, 2022). But if scholars like Virginia Held and Joan Tronto are right, we should look at a wider scope of relationships and more deeply at the interactions between directors to understand both what care ethics can teach us about the work of boards, and what boards can tell us about the theoretical strengths and weaknesses of care ethics as a solution to problems beyond the caring professions.

Let me propose, therefore, a preliminary research agenda, focusing on what distinguishes the ethics of care from what conventional business ethics involves – relationality, rather than acts or individuals; and temporality, and with it, fallibility and corrigibility, starting with the lessons for corporate governance.

• RQ1:  How do boards induct new directors? How do they achieve the sense of belonging that is central to cohesiveness and both knowledge-based and identification-based trust  (Luu, 2014) without tamping down the differences for which those individuals were first selected?

• RQ2: In board evaluation exercises, what weight is placed on identifying and fostering the stewardship (with its cognitive and affective dimensions) towards each other, which is needed for a caring relationship. And how is progress towards that goal monitored over time?

• RQ3: What practices and the processes are used to ensure boards learn from poor decisions in terms of both the content of those decisions and the practices and processes that led to them?

• RQ4: How do directors respond to the failure of others to build relationships? Think here of model of Albert Hirschman (1978), where the choice is between voice and exit, and the ways in which exit is tempered by a sense of loyalty, to each other and to the company.

There are also questions for boards that might illuminate how well the ethics of care stands up to other ethical approaches to board work.

• RQ5: The highly effective chief financial officer, a member of the main board, is found not to have disclosed a conflict of interest concerning a supplier. What action does (empirical) or should (normative) a board take towards that director? The question needs to be addressed from deontological, consequential, and care ethics perspectives.

• RQ6: Two non-executive directors come to believe that the independence of the board chair has been compromised by his longstanding relationship with the chief executive. On what ethical basis (or bases) have they reached their conclusion? And which approach did they use in selecting which option to take? If they select a phased approach, on what basis was the phasing selected?

Some of these questions call out for qualitative methods that involve the work business elites unused to criticism or even critical examination of their motivations and processes. An alternative is to build hypothetical cases and work through them with executives on business school short courses or MBA programmes. Others call for thought experiments and desk research. As they deal with board dynamics, quantitative studies of inputs and outputs seeking to approximate cause and effect, might not prove particularly fertile.

Conclusions

My hunch is that empirical studies of such questions will illustrate that most board decisions rely upon conventional ethics – duty and utility – but mainly because those are the conventions of ethical conversations. Thought experiments and case studies might elicit a greater openness to questions of temporality, fallibility and corrigibility and where the boundaries lie between the exercise of voice and exit, and what role loyalty might play.

For the ethics of care, my hunch is that it is unlikely to find deep enough resonance to supplant duty and utility with the ethics of care approach. Instead, I suspect that it could add a useful third dimension, one that incorporates both the focus on relations and the temporality of care ethics to provide more nuanced decision-making.

What I haven’t discussed is how this approach squares with the interest shown in virtue ethics in the boardroom over the past thirty years. Some writers have described the ethics of care as a subset of a virtues approach, but scholars prominent in the ethics of care reject this comparison. Virtue ethics is deeply rooted in individuals and their traits. Care ethics is concerned with relationships and how they change over time.

If we see boardroom ethics as relational, developing over time, undergoing failings and corrections, and employing reason and emotion, we’re likely to worry less if something goes wrong, provided that the board finds ways to learn and adapt. Caring – for the business, the company and each other – may help us not rush to judgement about what right and wrong.

There’s more work to be done.

Adhariani, D., Sciulli, N., & Clift, R. (2017). Financial Management and Corporate Governance from the Feminist Ethics of Care Perspective. Cham, Switzerland: Palgrave Macmillan.

Boulouta, I. (2013). Hidden Connections: The Link Between Board Gender Diversity and Corporate Social Performance. Journal of Business Ethics, 113(2), 185-197.

Briano-Turrent, G. d. C. (2022). Female representation on boards and corporate ethical behavior in Latin American companies. Corporate Governance: An International Review, 30(1), 80-95. doi:https://doi.org/10.1111/corg.12416

Foot, P. (1967). The problem of abortion and the doctrine of double effect. Oxford Review, 5, 5-15.

Forbes, D. P., & Milliken, F. J. (1999). Cognition and corporate governance: Understanding boards of directors as strategic decision-making groups. Academy of Management Review, 24(3), 489-505. doi:10.5465/AMR.1999.2202133

Held, V. (2005). The Ethics of Care: Personal, Political, and Global. Oxford: Oxford University Press.

Hirschman, A. O. (1978). Exit, Voice, and the State. World Politics, 31(1), 90-107. doi:10.2307/2009968

Kant, I. (1785/1964). Groundwork of the Metaphysic of Morals (H. J. Paton, Trans. 3rd ed.). New York: Harper Torchbooks.

Luu, T. T. (2014). Corporate governance and brand performance. Management Research Review, 37(1), 45-68. doi:10.1108/MRR-08-2012-0183

Machold, S., Ahmed, P. K., & Farquhar, S. S. (2008). Corporate Governance and Ethics: A Feminist Perspective. Journal of Business Ethics, 81(3), 665-678. doi:https://doi.org/10.1007/s10551-007-9539-5

Nordberg, D. (2012). Rules of the game: whose value is served when the fires the owners? Business Ethics: A European Review, 21(3), 298-309. doi:10.1111/j.1467-8608.2012.01653.x

Thomson, J. J. (1985). The Trolley Problem. The Yale Law Journal, 94(6), 1395-1415. doi:10.2307/796133

Tronto, J. C. (1993). Moral Boundaries: A Political Argument for an Ethic of Care. New York: Routledge.

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[1] Power often seems to revolve around money and therefore consequences, but its motivation can be quite different. Witness the power struggle at Liverpool Football Club in 2010 (Nordberg, 2012).

[2] The full version of Kant’s first statement of the imperative is this: “I ought never to act except in such a way that I can also will that my maxim should become a universal law” (Kant, 1785/1964, p. 70)