However being ineffective or hard to operate or being

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Moral Issues in Business
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Chapter 5 / Exercise 1
Moral Issues in Business
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there is the possibility that organisations solidify around bad practices and cultures. However, being ineffective or hard to operate or being open to human error does not mean participation rights are useless. 106 People still tend to follow the interests of those to whom they owe their jobs. 103 cf Ashby v White (1703) 92 ER 126, Lord Holt CJ, 954, ‘It would look very strange, when the commons of England are so fond of their right of sending representatives to Parliament, that it should be in the power of a sheriff, or other officer, to deprive them of that right, and yet that they should have no remedy; it is a thing to be admired at by all mankind.’ 104 eg J Rawls, A Theory of Justice (OUP 1971) 233-234 105 See E McGaughey, ‘Behavioural economics and labour law’ (2014) LSE Working Paper Series 20/2014, pages 17-20 106 cf MA Eisenberg, ‘The Structure of Corporate Law’ (1989) 89 CLR 1461, 1479 and H Demsetz, ‘Information and Efficiency: Another Viewpoint’ (1969) 12 Journal of Law and Economics 1, on the nirvana fallacy. 33
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Moral Issues in Business
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Chapter 5 / Exercise 1
Moral Issues in Business
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No matter how many or few people participate, someone’s voice is heard. Comparing the different mechanisms of accountability, it seems clear that no single one leads to all the answers. It also is conceivable that a contribution is separated from the right to sell an asset (or that those rights are frustrated in any number of ways), or that a legal system would allow a contribution to be separated from any kind of legal duty. These possibilities create their own problems, and are also worthy of independent discussion. But like the relationship of control to ownership, participation has an independent, and unique relevance to protect contributions to enterprise. (4) Conclusions The separation of contribution and participation is among the most important problems in modern investment chains. While ‘ownership and control’ have been historically seen as important concepts, they do not necessarily capture the breadth of today’s issues. Whatever ownership structure a company has, there can be a similar functional outcome in who influences corporate governance, and a similar functional outcome in terms of agency costs of institutional shareholders. In developed countries, even those as diverse as the UK, Germany, and the US, financial intermediaries tend to dominate corporate governance. This potentially creates welfare damaging agency problems for non-adjusting investors. A functional understanding of the contribution that a non-adjusting investor makes to enterprise enables a more realistic conceptual analysis. It embraces the position of trust-based or contract-based pension beneficiaries, mutual fund or life insurance policyholders, whether or not they retain ownership rights. Like contribution is to ownership, so participation is to control, but this does not make participation the only accountability mechanism. It was conceded that rights on the market, and systems of legal duties, can complement and strengthen accountability in corporate governance. However, they cannot reasonably be seen as substitutes. Differences in

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