Epilogue to Volume I:

The 21st Century Legal, Ethical, Moral and Spiritual (LEMS)

Challenges of Corporate Governance

Executive Summary
There is a rising interest in ethical, moral, and spiritual challenges and imperatives, accountabilities and
responsibilities in the corporation. Governance issues arise whenever a corporate entity assumes a life of
its own, and the ownership of an enterprise is separated from its management. How could owners ensure
that “professional managers” hired and delegated to run their companies would run the venture to
protect owners’ interests? What is and should be the moral quality of the corporation that CEOs govern?
What types of corporate governance, ownership and control modes and models should CEOs adopt such
that they ensure long-term objectives of all stakeholders of the corporation? These ethical questions are
central issues in the world of corporations today battled as they are with various pressures from
governments, Wall Street analysts, credit ratings agencies, banks and promoters, private equity and
hedge funds, and hostile takeovers. Such questions will always be crucial when fiduciary rights and duties
attached to investment and ownership cannot be applied directly. This is the context of today’s corporate
governance that this Epilogue to Volume I explores.

The 19th century saw the foundations laid for modern corporations – that was the century of the
entrepreneur. The 20th century was the century of the modern corporations, their growth in number,
power, impact, employment and unemployment, geographic spread, and their contribution to massive
production, distribution and consumption. The 21st century promises to be a century of corporate
governance – the focus is swinging from production and profits to legitimacy and effectiveness of
wielding power over corporate and government bodies, nationwide and worldwide.

Governance issues arise whenever a corporate entity assumes a life of its own, and the ownership of
an enterprise is separated from its management. When this happens, several legal, ethical, moral and
spiritual (LEMS) questions surface such as:

 How could owners ensure that professional managers (CEOs, MDs, and other vice presidents) hired
and delegated to run their companies would run the venture to protect owners’ interests?
 What is and should be the moral quality of the corporation that CEOs govern with the Board of
Directors (BOD)?
 What types of corporate governance, ownership and control modes and models should BOD and
CEOs adopt such that they ensure long-term objectives of all stakeholders of the corporation?
 Does the American, European or Oriental capitalist free-market system with its geo-political
environment and corporate governance structure determine which virtues the BOD and CEOs
should value most?

In this concluding Epilogue, we address these perennial concerns of corporate ethics for turbulent
markets. The common theme connecting all eight Chapters of Volume One is corporate value ethics,
especially as challenged in the turbulent markets of today. Market turbulence gives rise to the large area
of grey of corporate ethics where dichotomous distinctions between right and wrong, good and evil, truth
and falsehood, fair and unfair, just and unjust begin to fade and the executive is often forced to choose
between different shades of good and evil, different levels of right and different levels of wrong in the
marketplace, and different theories of fairness and unfairness, and different approaches to justice and
injustice in dealing with people.

In any case, after due diligence and market scanning and research, corporates must choose between
different competitors and competing industries, different products and brands, different markets and

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opportunities, each loaded with legal, ethical, moral and spiritual dilemma. In this context, deliberation,
discernment, ethical and moral reasoning, differently supported moral judgment calls, choices, decisions,
strategies and actions become part of daily executive life. Each chosen action has its own good or bad,
right or wrong, true or false consequences and corresponding legal and moral responsibilities.

Chapter 01 briefed on the concept, structure, domain, extent and sources of market turbulence. In a
turbulent fast-moving market such as ours, long-term thinking and planning has either obsolesced or
become a luxury. When managers whose financial performance or allegiance to firms is measured in
weeks (short-termism), they are not striving to satisfy investors; they are pumping share prices in order to
maximize their own income packages and perks. Competition is becoming even more ferocious and yet
not fierce enough. Investors cannot see past their noses, and firms are reluctant to invest their profits in
business. Short-termism and myopic crony capitalism are rampant. In brief, this is the turbulent
battleground in which corporate executives function today and everyday, and corporate ethics and morals
are constantly being challenged.

Corporate Value Ethics

Chapter 02 dealt with the legal, ethical, moral and spiritual aspects of executive behavior in turbulent
markets. Value ethics is the theory and practice of good, good action, and good life. What we need, in
order to live well, is a proper appreciation of the way in which such goods as friendship, honor, promise,
commitment, virtue, wealth and pleasure fit together as a whole. In order to apply that general
understanding to particular cases, we must acquire, through proper upbringing and habits, the ability to
see, on each occasion, which course of action is best supported by reasons. Therefore, practical wisdom,
as Aristotle conceived it, cannot be acquired solely by learning general rules. i

We must also acquire, through practice, those deliberative, emotional, and social skills that enable us
to put our general understanding of well-being into practice in ways that are suitable to each occasion.
Value Ethics in the best sense, therefore, is practical wisdom – experiential and rational skills of
intellectual and moral virtues that help us to discern right from wrong, truth from falsehood, justice from
injustice, and give us the courageous skills of pursuing right and avoiding wrong, seeking truth while
rejecting falsehood, and striving for justice while combating against unjust structures and their harmful
consequences (Mascarenhas, 1995, 2008).

Operationally, if ethics is a principled action program of deriving and experiencing moral values, then
Organizational Value Ethics is a hierarchically or democratically or consensually derived and guided
action program in an institution that consistently seeks new values, new directions, new meanings and
imperatives, new visions and missions, new goals and objectives, and new ends and ideals.
Organizational Value Ethics seeks to serve humanity better through principled institutions such as the
family, the school, the college and the university, the company and the corporation, the venture and the
startup, the government and the NGOs, the media and the marketplace, the church, the temple, the
mosque and the synagogue. We study ethics in order to improve our lives, said Aristotle, and therefore,
its principal concern is the nature of human well-being. In this sense, wherever there are people, there is
behavior, and wherever there is behavior, it has moral and ethical content, challenges and implications.

Organizational Morality as Systems Thinking

Chapter 03 introduced the laws and archetypes of systems-thinking. Systems-thinking is one form of
holistic organizational learning. It is thinking for people who want to make their organization more
effective, more ethical, and more moral, while realizing their personal vision and mission. It seeks to
blend the individual development of every person in the organization with superior economic

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performance. It is for managers who are facing an array of problems that resist current ways of thinking.
It helps to deal with the problems and opportunities of today, and invest in our capacity to embrace
tomorrow, because people who do systems-thinking are continually focused on enhancing and expanding
their collective awareness and capabilities. This is organizational morality.

Systems-thinking creates an organization that learns. Change and learning may not be synonymous,
but they are inextricably linked. If there is one single thing that a learning organization should do well, it
is to help people to embrace change. This is organizational morality. People in learning organizations
react more quickly when their environment changes because they know how to anticipate changes that are
going to occur (which is different from trying to forecast or predict the future), and how to create the
kinds of changes they want.

Systems Thinking for Understanding Market Turbulence

More specifically, systems-thinking is a way of thinking about, and a language for describing and
understanding, the forces and interrelationships that shape the behavior of systems. The discipline helps
us to see how to change systems more effectively, and to act more in tune with the larger processes of the
natural and economic world.

Systems-thinking is a fundamental shift from linear thinking to circular thinking, from seeing things
as static structures or objects to viewing them as processes. A tree is not an object, but an expression of
process, such as photosynthesis, which connect the sun and the earth. A human being is not just a subject,
but also a dynamic process of inhaling and exhaling, metabolism and anabolism, growth and renewal.
The same is true of our bodies, our jobs, our families, our organizations and neighborhoods – they are
dynamic processes. Often order emerges from chaos, stability from turbulent environments, meaning
from confusion, and unity from diversity (Senge et al., 1994, p. 96-97).

The art of systems-thinking lies in seeing through complexity of market turbulence to the underlying
structures generating change. Systems-thinking does not ignore complexity; on the contrary, it organizes
complexity into a coherent story that empowers us to detect and distinguish between causes and effects of
problems, their separation in space and time, and how we can remedy them in enduring ways. The
greatest benefit of systems thinking is to distinguish between high-leverage from low-leverage changes in
highly complex situations. Corporate ethics in turbulent markets is the ability and goodwill to look for
high-leverage points for doing good, and of choosing, if we must, low-leverage points for doing less
good.

Capitalism and Economic Freedom

Chapter 04 dealt on the glorious achievements and potential of free enterprise capitalist systems
(FECS). Economic freedom was able to increase human prosperity and raise standards of living in
countless ways over the past 200 years, to levels never before achieved in the history of our world. The
American principle of equality is based almost entirely on the concept of God-given, natural rights. The
American ideal of equality does not apply to wealth or income. In fact, America has always celebrated the
great diversity of its citizenry: each person individually blessed with different levels of talents, virtues,
and creativity, and with each person encouraged to achieve as much success as one can.

Ideally, a competitive system harnesses the best interests of individuals so as to cooperate in creative
and voluntary ways to provide the most desired products and services at the most just price; in other
words, prosperity.  The principle – that all members of our society are free to work hard and to achieve
based on their own, individual dreams and abilities – is a core tenet of capitalism. With the freedom and

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incentive to put their creativity to work, individuals and businesses generate new ideas and foster
innovation, creating wealth and opportunities as well as an enhanced status of living for everyone.

Capitalism – or the free-enterprise system – is the engine that produces prosperity. Capitalism is
color blind in that it provides universal opportunity – rewards and risks – for anyone who chooses to
apply their individual creativity and talent to pursue excellence.

Ethics of Free Enterprise Competition: The Golden Rule

The Golden Rule is the foundation of the ethics of conduct between people. Buddhism, Islamism,
Confucianism, Hinduism, Judaism, and Christianity all include it in some form. Most common formula of
the Golden Rule is “Do onto others what you would like others to do unto you.” Philosophers from
Aristotle to Kant have agreed as well. Aristotle and Kant state that the basic rule of ethics is that all men
should be treated as ends-in-themselves and not as means to ends. The caring for all people as ends in
themselves is love in its purest form (called agapé in Greek). The Golden Rule is an ethic of transparency
in transactions: it calls for reciprocity, mutual satisfaction, and fairness; in short, it holds that each party
should treat the other as they themselves would like to be treated; or avoid doing to someone else what
they would not want done to them. Observance of the Golden Rule in a turbulent market economy will
both enhance equivalence in exchanges and increase contributive justice in the workplace. The Golden
Rule should be the Moral Rule of Capitalism.

Chapter 05 covers the dark side of capitalism when it is abused for self-aggrandizement at the
expense of others. All fraud, corruption, and bribery are a rejection of the Golden Rule. The Golden Rule
is the ethical standard and measure of competition. If and when observed, the Golden Rule can assure that
competition is more ethical and moral. Treat unto others the way you would like to be treated assures fair
mutuality in any transaction, be it competitive or for-profit. “Voluntary observance of the Golden Rule in
free enterprise transactions ensures the continuance of those highly valued freedoms usually associated
with market economies.ii George Gilder (1980) argues that entrepreneurs succeed only to the extent they
are sensitive to the needs of others, and to the extent that others succeed. Altruism is the essence of
capitalism. Capitalist production entails faith “in one's neighbors, in one's society, and in the
compensatory logic of the cosmos. Search and you shall find, give and you will be given unto, supply
creates its own demand." iii

The Golden Rule functions best when the transaction is freely undertaken. That is, neither party must
be so desperate as to feel forced to buy or sell at an unfair price. Since there are many examples of
coerced transactions, it is fortunate that the argument here does not require that all transactions be freely
joined, nor does it deny the absence of deceit, fraud, or manipulation. Lots of transactions do not follow
the Golden Rule. The point is that under conditions of free enterprise, economic transactions can and often
do represent a calculus of agapé, a way of adjusting the relationship between persons so that reciprocity
exists, so that each has the same opportunity to assign value to his actions. The principle of equivalence
states that parties to a transaction are obligated to exchange things of equal value and impose equal
burdens on one another. This cannot be achieved unless parties to a transaction are given the same
opportunity to assign value to what they bring to the transaction. When we do unto others as we would
have them do unto us, we treat all persons by the same rule; namely, that each should be free and pleased
to enter into the transaction.

A buyer-seller business relationship that during its entire course can be considered by both parties to
be fair and rewarding in this sense has nobility. It follows the Golden Rule. The free enterprise system
has often used invisible manipulations to deal unjustly, to strike a win-lose deal. This violates the Golden
Rule. A healthy market economy also requires that participants strive for contributive justice, particularly

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in group situations such as the exchange of labor, and the production of a good or service. Insofar as the
member of a group receives benefits from a group, that individual has an obligation to support and
maintain that group. This cooperation requires a moderation of self-interest. Employees must strive to get
to work on time, limit absenteeism, and meet the employer half way to avoid strikes. Employers must
provide a safe work environment and fair compensation. Quality circles, participatory management, and
profit-sharing have promoted cooperation and thus exemplify contributive justice in the workplace.
Obligations to groups are fulfilled when we adhere to the principle of contributive justice, which follows
from the observance of the Golden Rule in workplace transactions. iv

Market Turbulence and Market Disruption

Chapter 06 analyzed a specific instance of market turbulence when corporations begin to be
dominated by gigantic investor corporations. Looking into the long-term economic effects of this share
concentration within top promoters in investment banking firms, and its ill-effects on the thinking,
ethicality and morality of the firm’s managers, the thinking process of the employees will turn more
short-term and their decision making may turn myopic with long-term benefits taking a severe backlash.
Other unfortunate consequence of this phenomenon can be that there will be scarcity of visionaries in the
corporate world. The growth of the corporates will become directionless due to the lack of visionaries and
there will be a downfall in the valuation of the corporates. And once the devaluation starts for the
corporates, there will be a high probability of attrition among the employees as they would be unsure
about the future perspectives of their career. This will lead to further degradation of the firm’s reputation,
which, in turn, will lead to further devaluation of the share prices.

Chapter 07 featured the relatively modern phenomenon of artificial intelligence and its tremendous
potential to cause or remedy market turbulence. All the advantages and disadvantages of artificial
intelligence are disruptive. Creative disruption is an essential fact about capitalism, said Joseph
Schumpeter, an early 20th century Austrian economist and political scientist. Schumpeter observed that
unfettered capitalism mimics Darwin’s endless struggle of evolutionary biology: survival of the fittest. So
if a better, faster or cheaper service arises, it will likely eventually overtake the incumbent (Chandy &
Tellis, 1998, 2000). Thus, when Google Search arose as a better and faster and almost free alternative to
knowledge and information, eventually it not only won the day, but has a unique position to accrue
immense market power and consumer value.

Disruptive innovation, as defined most articulately by Clayton Christensen and his associates (2000,
2002), represents a new product or service that enters at the low end of the market and gradually moves
up-market, displacing existing, established products. The change driving this disruption may, in itself, be
a minor or incremental technological innovation. It is also something created that changes its
environment. Example: Amazon, Google and Netflix transform retail, advertising and media. Disruptive
innovation creates a new market to unsettle the way an existing market functions. This is noticeable with
new payment technologies emerging within the financial industry, displacing many existing systems.
Technology adoption has resulted in higher mobile phone and Internet penetration, changing the way
consumers behave while buying products. Digital payments are becoming significant with clear evidence
that disruptive innovation is mounting in the financial industry.

Radical innovation represents a major technological breakthrough. Discontinuous innovation is a new

technology applied to solve an existing need in a new way. The HP Inkjet printer is the classic example
here, having displaced earlier impact printhead technologies with a new and better way to put ink on
paper. Breakthrough innovation is an “out-of-the-blue” solution that cannot be compared to an existing
solution. Sterolithography, or 3-dimensional printing, applied to model creation (as opposed to the old
bench-tech, hand-crafted approach) or the microwave when it appeared in the early 1950s would be a
good example here. Disruptive Innovation- Radical Innovation - Involves harnessing new technology

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and a new business model simultaneously and as such, is very rare – only about 10% of innovations fall
into this category. Examples: Uber, Airnib, or Ola. v

Chapter 08, the last Chapter of Volume One, addresses the consequences of market turbulence
analyzed in all the previous Chapters: the combined consequences of endangering the modern
corporation. We have listed numerous reasons thus far for the premature struggle and departure of listed
companies. This might be a permanent or temporary trend. The new age firms like Google or Apple have
little need of public capital. Their intangible assets outnumber tangible ones. Their tangible assets mostly
include offices and electronics and they need not own explicitly. According to many leading economists,
companies are using the markets not to raise capital but as a measure for success using the share price.
With the war to maximize share value, the main purpose behind a public company is lost. Their value to
society and shareholders is getting lost.

Concluding Remarks
The future of the world in general and of the corporate world in particular, is hinged on our
collective journey from the legal, to the ethical, moral and spiritual in all that we think, do, become and
thus, choose to be. The future of good life is also grounded on how imaginative, intuitive, insightful, and
creative, innovative we are and strive to be. We must subject every major disruptive decision (e.g.,
radical and catalytic innovation, especially related to artificial intelligence) and undertaking from this
fourfold LEMS leans. Doing not only the legal thing, but the right thing rightly and for the right reasons
and intentions, challenging as each step is, will purify and cleanse us, heal and strengthen us, disengage
us from the wanton and wasteful, and focus our scarce resources on transforming this planet into a place
our posterity can live with peace and harmony, self-actualization and happiness. This is a positive
response to Melvin Lerner’s (1980) hypothesis of a just society. A future just society is not a delusion but
a reality that all of us can strive for by being legal, ethical, moral and spiritual in all that we are and can
become. vi

We end this Volume One where we began: the four-dimensional call and duty of legality, ethicality,
morality and spirituality (LEMS) should be used for testing the quality of corporate deliberation,
reasoning, explanation, choices, discernment, judgments, decisions and actions, strategies and
justification of consequences. Every step of this long corporate value-adding decision-making chain is
fraught with legal, ethical, moral and spiritual ramifications that a seasoned executive will quickly
identify and act upon. We need to revisit salient rows of Table 2.3 (Chapter 02) in this regard.

My humble closing appeal is that if each of us follows this fourfold LEMS check on our behavior,
we will never go wrong, but will not only do good, but also enjoy the difficulty of being good (Das,
2012).

End Notes:

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i
Aristotle follows Socrates and Plato in taking the virtues to be central to a well-lived life. Like Plato, he regards the ethical virtues
(justice, courage, temperance and so on) as complex rational, emotional and social skills. But he rejects Plato's idea that training in the
sciences and metaphysics is a necessary prerequisite for a full understanding of the good or human well-being. The good of human beings
cannot be answered with the exactitude of a mathematical problem since mathematics starts with general principles and argues to
conclusions. Aristotle conceptualized ethical theory as a field distinct from the theoretical sciences.

ii
Barach, J. A. & Elstrott, J. B. (1988). The Transactional Ethic: The Ethical Foundations of Free Enterprise Reconsidered. Journal of
Business Ethics, 7(7), 545-551, 548.
iii

Gilder, G. (1980). The Moral Sources of Capitalism. Imprimis, 9(12), p. 4 (Hillsdale, Michigan: Hillsdale College).
iv

Barach, J. A. & Elstrott, J. B. (1988). The Transactional Ethic: The Ethical Foundations of Free Enterprise Reconsidered. Journal of
Business Ethics, 7(7), 549-50.

v
For more information on these models or types of innovation, most of them dependent upon AI, see Chandy, R. K. & Tellis, G. J.
(1998). Organizing for Radical Product Innovation: The Overlooked Role of Willingness to Cannibalize. Journal of Marketing Research,
35 (November), 474-87; Chandy, R. K. & Tellis, G. J. (2000). The Incumbent’s Curse? Incumbency, Size, and Radical Product
Innovation. Journal of Marketing, 64(July), 1-17; Chandy, R. K., Prabhu, J. C. & Anita, K. D. (2003). What will the Future Bring?
Dominance, Technology Expectations, and Radical Innovation. Journal of Marketing, 67(3), 1-18; Christensen, C. M. & Overdorf, M.
(2000). Meeting the Challenge of Disruptive Change. Harvard Business Review, (March-April), 66-76; Christensen, C. M., Johnson, M.
W., & Rigby, D. K. (2002). Foundations for Growth: How to Identify and Build Disruptive New Businesses. Sloan Management Review,
MIT, 43(3), 22-31; Govindarajan, V., & Trimble, C. (2005). Building Breakthrough Businesses within Established Organizations.
Harvard Business Review, (May), 58-70; Kim, W. C., & Mauborgne, R. (2004). Blue Ocean Strategy. Harvard Business Review,
(October), 76-85.

vi
Melvin J. Lerner theorized that there was a prevalent belief in a just world. A just world is one in which actions and conditions have
predictable, appropriate consequences. These actions and conditions are typically individuals' behaviors or attributes. The specific
conditions that correspond to certain consequences are socially determined by a society's norms and ideologies. Lerner presents the belief
in a just world as functional: it maintains the idea that one can influence the world in a predictable way. Belief in a just world functions as
a sort of "contract" with the world regarding the consequences of behavior. This allows people to plan for the future and engage in
effective, goal-driven behavior. Lerner summarized his findings and his theoretical work in his 1980 monograph  The Belief in a Just
World: A Fundamental Delusion, Plenum: New York. Lerner, M. J., & Miller, D. T. (1978), “Just world research and the attribution
process: Looking back and ahead,” Psychological Bulletin, 85(5), 1030–1051; Jost, J. T., Hawkins, C. B., Nosek, B. A., Hennes, E. P.,
Stern, C., Gosling, S. D., & Graham, J. (2014), “Belief in a just God (and a just society): A system justification perspective on religious
ideology,” Journal of Theoretical and Philosophical Psychology, 34(1), 56-81.