Questioning the Theory of the Firm: The Challenge of Hybrid, Social and Faith-Based Businesses

In light of the diversity of hybrid, social, and faith-based enterprises, the paper aims to deepen and widen the descriptive and normative reach of the theory of the firm. Higher ends of business are core philosophical components for an expanded normative theory of the firm. To regard shareholders, managers, and all stakeholders of a business firm in a fully moral light means expanding one’s view of such roles beyond merely economic and legal conceptions to encompass their full humanity and associated moral obligations and social responsibilities. Any adequate normative theory of the firm will cast business participants not just as economic actors and as legal agents but as flesh-and-blood moral persons with ethical responsibilities. When the theory of the firm is normativized – not privileging moral rights and obligations of stockholders or stakeholders in advance of consideration of balance of reasons -- the false dichotomy of shareholder primacy versus stakeholder primacy falls away, ceasing to provide a basis for giving categorically incompatible accounts of prima facie moral obligations of business participants.