Toward a Nexus of Virtue

Abstract

Corporate law, like all law, should be directed toward the common good. The common good requires that corporate activity be restrained, if not actively directed, by human virtue. An analysis of the corporate enterprise suggests that those corporate actors with the greatest stake in the exercise of virtue, and best positioned to influence corporate activity via the exercise of virtuous judgment, are the corporation’s officers. Thus, one of the primary objectives of corporate law should be the promotion of virtue among corporate officers. Contrary to what some might assume, the promotion of virtue among corporate officers need not entail a promulgation of “thou shalls” and “thou shall nots.” Indeed, the suggestions put forth in this Article would serve to broaden, rather than narrow, the liberty of corporate officers. This is because corporate law, as currently constituted and interpreted, works to inhibit the exercise of virtue. The need for virtue-directed corporate decision-making has been demonstrated repeatedly over the course of history, most recently by the recent financial crisis. Instead of focusing on virtue, however, the response of most policymakers and commentators has been on regulatory reform. This is unfortunate. Although regulatory reform certainly has its place, it holds limited promise of success, for a variety of important reasons. A wiser approach would focus more seriously on virtue - the force most capable of preventing a repeat of the fraud and dereliction of duty that marked the recent financial crisis (and most predecessor crises as well).