Abstract
In the wake of corporate governance scandals, questions arise about the effectiveness and intent of corporate ethical codes: Are they genuine governance mechanisms to enhance corporate responsibility, or are they mere shields against legal risks? This study delves into the linguistic choices within ethical codes, positing that these choices serve as communication devices that articulate a firm’s institutional logic. We use stakeholder theory to differentiate between code language that is governed by instrumental (legal-oriented) or normative (behavior-oriented) logic. Upon analyzing the lexicon of Fortune 500 corporate codes, our findings reveal that behavior-oriented codes are associated with a decrease in the number of environmental, social, and governance (ESG) issues. Yet, they correspond to an increase in class action lawsuits. By contrast, legal-oriented codes are linked to an increase in ESG issues but to reduced legal litigation. Notably, firms that blend approaches from both logics experience lower litigation rates. These findings enrich the discourse on stakeholder theory and provide practical guidance for organizations aiming to refine their ethical codes. This refinement seeks to enhance ethical behavior and mitigate corporate risks.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
