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Chaplin & Zucker: The Iron Fist in the Velvet Glove

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David Chaplin (Northwest Nazarene University) and Mike Zucker (Northwest Nazarene University) have posted: The Iron Fist in the Velvet Glove: Complementing Legal Oversight of Corporate Governance with Training in Virtue.The abstract is as follows:

The litany of firms engaged in unethical business practices which ultimately triggered the 1999 “Principles of Corporate Governance” by the Organisation for Economic Co-operation and Development (OECD) and Sarbanes-Oxley Act (hereon SOX) of 2002 is seemingly endless. While SOX was a reasonable response to unethical corporate practices, it raises the following questions: 1). “How could these unethical practices have been prevented in the first place?” and 2). “Is there a better way to insure corporate governance than simply increasing governmental oversight and punishment for offenders?” An appealing response to these questions is “Yes – by enhancing training in virtue for all members of a corporate enterprise.” That is, while the “iron fist” of legislation such as SOX is important for both detecting (through greater oversight, whistleblower protection, et cetera) and deterring (by both increasing the probability one will be caught and enacting harsher penalties) white-collar crimes is necessary, it is not sufficient. Further change must be initiated from within. Such change, it will be argued, is best actuated through the velvet glove of training in virtue. That is, while the iron fist of laws which align with conduct-based ethical theories dealing with consequences (teleological) and duties (deontological) are critical, they can only take us so far. Virtue-based theories focus on character (Arjoon, 2005; Northouse, 2013) and could be summarized as “Doing the right thing when no one else is looking.” Due to the practical limitations of greater detection/deterrence resulting from limited government resources for increasing oversight as well as the high costs of prosecuting/incarcerating wrongdoers, it is argued hereon that training in virtue has the potential to improve both the effectiveness (through fewer incidents) and efficiency (through lower costs of implementation) of corporate governance.

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