RT Article
T1 Striking a Balance Between Rules and Principles-based Approaches for Effective Governance: A Risks-based Approach
JF Journal of business ethics
VO 68
IS 1
SP 53
OP 82
A1 Arjoon, Surendra
LA English
PB Springer Science + Business Media B. V
YR 2006
UL https://ixtheo.de/Record/1785626345
AB Several recent studies and initiatives have emphasized the importance of a strong ethical organizational DNA (ODNA) to create and promote an effective corporate governance culture of trust, integrity and intellectual honesty. This paper highlights the drawbacks of an excessively heavy reliance on rules-based approaches that increase the cost of doing business, overshadow essential elements of good corporate governance, create a culture of dependency, and can result in legal absolutism. The paper makes the case that the way forward for effective corporate governance is to strike an optimal balance between rules-based and principles-based approaches. The recent corporate scandals have demonstrated that the ethical ODNA is critical to the driving force and basis of legal and regulatory requirements. Effective governance means adhering to ethical principles, not merely complying with rules, and is a crucial guardian of a firm’s reputation and integrity. It is through an effective corporate governance program (that is, one that optimally captures and integrates the appropriate aspects of rules-based and principles-based approaches, and identifies and assesses the related risks) that an organization can reconfigure its ODNA for improved performance. Focusing on the ethical ODNA as the basis of new governance measures provides an opportunity to develop a competitive advantage as it represents a potential source of differentiation, strengthens the relationship with all stakeholders of the organization by building a culture of trust and integrity, and re-instills investor confidence. This paper employs dialectical reasoning that links the ODNA through principles-driven rules in developing a risks-based approach. A comparison from a risk assessment perspective between rules-based and principles-based approaches is presented. Although there have been few applications employing dialectical reasoning in business research, this methodology can be extremely useful in isolating ethical issues and integrating them into the business process. The risks-based approach captures the benefits of both rules-based and principles-based approaches, and incorporates trust-based principles such␣as solidarity, subsidiarity and covenantal relationships.
K1 Compliance
K1 dialectical reasoning
K1 Subsidiarity
K1 Solidarity
K1 trust-based
K1 risks-based
K1 Principles-based
K1 Rules-based
K1 Ethics
K1 organizational DNA
K1 effective corporate governance
DO 10.1007/s10551-006-9040-6