Evaluating corporate purposes by the psychological contracts they produce

Abstract

The topic of psychological contracts has been shielded from moral scrutiny by the belief that they are an inevitable response to a firm's environment. By showing that they are heavily influenced by something chosen — the corporate purpose — they and the corporate purposes that shape them become amenable to moral examination. Three moral tests were derived from Roycean philosophy and showed that a core purpose of delivering value to customers may create the highest levels of moral value. In contrast, a purpose of balancing the needs of all stakeholders risks complacency while one of maximizing shareholder value appears not to engender loyalty or commitment, may result in undue distress and potentially degrade the trustworthiness and integrity of senior managers. These latter findings are serious enough to warrant local studies of shareholder-value firms. The wider implications for management training, people in business and researchers are discussed. Copyright © 2005 John Wiley & Sons, Ltd.

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