The compliance-based approach and the integrity approach have been the mainstream responses to corporate scandals. This paper proposes that, despite each approach comprising necessary elements, neither offers a comprehensive solution. Compliance and integrity, far from being mutually exclusive, reinforce each other. Working together, in a correct relationship, they build a harmonized system that yields positive synergies and which also advocates prudence. It enables the generation of a culture of compliance that tends to minimize the technical and ethical errors in decision (...) making. In order to explore an applied harmonized approach, we analyze the audit committee, a specific and broadly accepted regulatory instrument. Formed by non-executive members, regulation requires these members to be dedicated, qualified, and independent as a guarantee of efficiency. We show how the compound of those elements produces positive effects in a context of solid governance. We conclude that it is the strong relationship between efficiency and prudence, in the creation of a culture of compliance, which enables the minimization of errors. (shrink)

Manuscript type Empirical. Research question/issue This paper aims to contribute to an improved theoretical and empirical understanding of the role that corporation has to play in anticorruption efforts. Research findings/insights Using cross-country data from three databases (Bribe Payers Index, Corruption Perceptions Index, and Doing Business) we found that pro-bribery Investment Climate conditions in host countries are not related to the payments of bribes by multinational companies when these corporations operate abroad. Theoretical/academic implications After describing the conceptual and policy framework that (...) surrounds the discussion on the role played by firms in anticorruption, we present the current debate regarding the effectiveness of international bribery control instruments, with the World Bank-GAC (2006-2008) report as a basis. Both literature and policy seem to be divided into two main, although not mutually exclusive, positions: one demands improvements in Investment Climate conditions from a joint public-private consensus led by international agencies; the other one supports the effectiveness of self-regulation by firms, independent of Investment Climate improvements. The study provides empirical support to the idea that a better Investment Climate is not enough for reducing corrup tion. Practitioner/policy implications This study offers insights to policy makers interested in promoting the involvement of corporations in the fight against corruption. (shrink)

The aim of this paper is to explore the ethical dimension of hawala, an ancient informal financial practice rooted in Islamic moral traditions. Widely used in countries with an Islamic background and their diasporas, hawala is considered an important vehicle for the financial and economic development of some less developed countries. Nevertheless, in Western countries, hawala is regarded with suspicion due its controversial ethical nature. Unlike other Islamic financial institutions, the controversial questions are not the legitimacy of profit sources or (...) the interest charged, but rather the lack of transparency that surrounds hawala transactions. Yet, the literature on hawala has neglected its ethical perspective. Our study delves into this dimension with a critical approach, using the Triple Font Theory, grounded on virtue ethics. We conclude that if hawala transactions are carried out with honesty, and fairness, this practice deserves a positive ethical appraisal. However, it is necessary to implement efficient regulatory measures to guarantee that the system is not abused by money launders and criminals. In practice, it becomes imperative to bring over a change in the regulatory approach to hawala toward a more ethically, culturally, and economically sensitive strategy. Thus, future research should focus on how “hyper-norms” or fundamental principles inherent to humanity, which are common to both “formal” and “informal,” “Western” and “non-Western” financial practices, could run the new AML/ctf regulation agenda. (shrink)

The combined effect of coercion (public and private pressure), self-interest (competitive advantage) and conviction (intrinsically motivated or genuine) explain why environmental issues have become a key priority for companies. While research has explored coercion and competitive advantage, the role of conviction has received little attention. This paper aims to address this gap. Conviction, which has been correlated with institutional and individual drivers, offers more stable results and a potential multiplier effect as good examples are disseminated by imitation throughout an industry. (...) While the role of imitation has drawn increasing attention of business management studies, it has received scant attention in research on sustainability. This is the second gap this paper aims to address, contributing to the literature on sustainability in two ways: firstly, we will further explore the role of conviction in environmental sustainability; secondly, employing a compartmental model of epidemic propagation, used for other social phenomena, we model the role genuine examples by leaders can play within an industry and the dissemination of good behavior by imitation. Defining genuine conviction as the voluntary mitigation of the externalities of a firm's operations beyond that required by law or the market, substantiated in the responsible behavior of its leaders, our model discovers patterns that policymakers could use to create a “sustainability epidemic”. We suggest mathematical models of epidemics can be applied to sustainability, offering a fresh perspective on the phenomenon of imitation, allowing us to discover how some cultural and social habits can be used. (shrink)

On August Business Roundtable, the Business Roundtable redefined the purpose and social responsibility of the corporation. Yet, this statement must be followed by substantial changes in the business models of corporations for it to avoid becoming empty rhetoric. We believe that the figure of the independent director may be one of the catalysts needed for this change of paradigm for corporations. In spite of the positive correlation between Corporate Social Responsibility and board independence, the development of the independence of boards (...) during the last decade has not lead to the expected CSR results. Academics and regulators point to a weak definition and the non-standardized measurement of both independence and board independence as one possible explanation, and agree that a broader definition is needed. This paper aims to contribute to this debate. We develop a second-generation definition of independence based on a positive approximation to the concept by integrating an Aristotelian perspective of virtue ethics with the best practices of corporate governance. Thus, we define independence as a virtue guided by practical wisdom, that implies autonomy and autarky and which enables a person to act with integrity, fairness and truthfulness. In the context of corporate governance, independence is associated with an honest disposition to serve. Our proposal has political implications for supervisors that make decisions relating to the suitability of board members. (shrink)