SHAREHOLDER VALUE MODEL AND COMPLIANCE RISKS: THE EFFECT OF CORPORATE STRATEGY ON BUSINESS ETHICS

Abstract

The purpose of this article is to assess whether shareholder primacy reflected on corporate strategies can have negatives influences on compliance programs by employing the corporate crime research in criminological literature. The research will be carried out through a literature review on the subject, based on the deductive method. The article seeks to understand how cultural, social, and psychological factors interfere in the decision-making process of businessmen and company managers who engage with corporate crime. The rational choice model of corporate crime is contested to fully comprehend why firms and its managers have committed crimes because the simple explanation based on the structure of costs and incentives arising from the illegal conduct is incomplete. This article assumes that social interest shapes corporate governance and compliance, because it is the compass for business decisions and the formation of culture. This correlation implies that corporate governance based on shareholder primacy model can lead the organization into contradictory actions with the standards of ethical behavior, due to lack of consideration of social goals and stakeholder’s interests.