The Political Role of the Business Firm

Self-Perfection and the Basic Game of Social Interaction

Interpreted from an ordonomic perspective, the basic game of the Aristotelian polis is about the day-to-day social interactions of individual citizens. In this game, each individual tries to realize his personal goals within the given setting of the polis. How does Aristotle’s perspective of virtue ethics relate to this level of the basic game?

According to many philosophers, the fundamental question of ethics is “What shall I do?” Yet the answer to this question is far from a one-size-fits-all one because people have very different notions of what is true, what is good, what is beautiful. It is against this backdrop that Aristotle suggests a different strategy. He tries to find a starting point for his argument that basically anybody could agree on (EN Book I, Chapters 3, 4, 6, and 7). To this end, he does not ask “what shall I do,” but “what do you want to be?” What is the ultimate end of our actions? Is there a “highest of all goods achievable by action” (EN 1095a) that we can all agree on? Aristotle’s answer to this question is straightforward. He argues that this final good is eudaimonia—happiness. He takes for granted that we all wish to be happy. Therefore, for Aristotle, “happiness is something final and self-sufficient, and is the end of action” (EN 1097b).

But how do you achieve happiness? Here, Aristotle’s answer is closely linked to the teleology that characterizes his thinking. His theory builds on the idea that all things and beings are designed for or directed toward a telos—an inherent purpose for all that exists. As Aristotle puts it in his Politics (Pol 1253a), “Nature, as we often say, makes nothing in vain.” Aristotle’s teleology thus assumes that all things and beings have an inherent potentiality that can be realized through self-perfection. For people, this self-perfection is important because it holds the key to happiness: one is happy if one realizes one’s potentiality as a person through a process of self-perfection.

So what does it mean to become a perfect person? Aristotle’s (cf. EN 1098a) answer sounds simple: to be virtuous. For him, virtue (aretê) is necessary if happiness is to be possible. In Aristotle’s view (EN 1101a), “he is happy who is active in accordance with complete virtue.” Note the importance of the adjective “complete” in this sentence. According to Aristotle, true happiness depends on one’s self-perfection as a person of perfect virtue. Aristotle (Pol 1332a) explicitly claims that “happiness is the realization and perfect exercise of virtue, and this is not conditional, but absolute.” ³

Aristotle’s virtue ethics thus rests on a theory of self-perfection. Yet how is self-perfection possible? How do people become virtuous? At this point, Aristotle makes it absolutely clear that virtue does not arise by “some divine providence” (EN 1099b), nor is any one “just or temperate by or through chance” (Pol 1323b). Self-perfection is not a process that happens automatically or “by nature” (EN 1103a); rather, self-perfection requires action on the part of the individual. More specifically, according to Aristotle, habit is the key to self-perfection. For him (EN 1103a), “moral virtue comes about as a result of habit.” According to Aristotle (EN 1103a), “We are made perfect by habit.”

Following this idea, virtue—and, for that matter, happiness—is not a given, but something actively acquired through habituation (EN 1099b). From an ordonomic perspective, Aristotle thus puts forward a stunningly modern theory of human capital. Take the case of the virtue of temperance. Aristotle (EN1104a) argues that “by abstaining from pleasure we become temperate.” At first sight, acting virtuously may then seem to amount to something like a sacrifice of self-interest. Yet, in our ordonomic interpretation of Aristotle, acting as if one were virtuous is not a sacrifice but can be understood as an investment in the acquisition of virtue. As Aristotle (EN 1103a) argues, “we become just by doing just acts, temperate by doing temperate acts, brave by doing brave acts.” Put in the rational-choice language of ordonomics, the habit of virtue builds “virtue capital” as a kind of human capital. For Aristotle, the habit of virtue is, in effect, an active learning process. He (EN 1103a) maintains that “the things we have to learn before we can do them, we learn by doing them.”

In short, while not all habits are virtuous, all virtues are habits. And self-perfection requires active self-management. At first sight, Aristotle’s virtue ethics thus seems to focus exclusively on the individual and to ignore the polis in which the person lives. Yet, in fact, the self-perfection of the individual is only possible as part of a social process:

First, basically all moral virtues an individual wants to acquire for his happiness have a social dimension. Consequently, the habituation of these moral virtues is only possible through social interaction with other members of the polis. Take the case of justice. As Aristotle (EN 1103b) points out, “by doing the acts that we do in our transactions with other men we become just or unjust.” As a solitary actor outside the community, it would be simply impossible to be just, temperate, or generous toward others—and thus impossible to pursue one’s self-perfection.

Second, following Aristotle’s possibly most well-known idea (Pol 1253a), “man is by nature a zoon politikon—a political animal.” Note how this idea mirrors again Aristotle’s teleology. Given that “man is a political creature . . . whose nature is to live with others” (EN 1196b), Aristotle concludes that the individual’s self-perfection is only possible within the community of the polis. By this logic, Aristotle (Pol 1253a) argues that “he who is unable to live in society, or who has no need because he is sufficient for himself, must be either a beast or a god.” Put differently, only creatures who either have no potential for perfection (beasts) or who are already perfect (gods) can live outside society. In contrast, human beings who are intent on self-perfection need to practice it as members of a community. To put it pointedly, the individualization of the person is a social process that requires interaction with other polis members.

Third, as self-perfection requires becoming a respected member of the polis, happiness depends on the social recognition of others. Aristotle emphasizes this idea in his reflections about the importance of friendship. For him (EN 1155a), “without friends no one would choose to live, though he had all other goods.” This is why he contends (EN 1169b) that “the happy man needs friends.” One reason friendship is so crucial is that friends are important for one’s self-perfection. Aristotle (EN 1155a) holds that friendship “stimulates” excellence “for with friends men are more able both to think and to act.” Cooperation and social recognition thus foster and reward the individual process of self-perfection.

Summarized from an ordonomic perspective, the process of self-perfection through the acquisition of virtue systematically links the interests of the individual with the interests of the polis in two ways.

On one hand, the individual achievement of happiness requires a process of habitual self-perfection that is only possible in the repeated day-to-day interaction with others. In this basic game of the polis, social recognition and cooperation both stimulate and reward the acquisition of virtue, thus making the community indispensable for individual self-perfection.

On the other hand, this pursuit of individual self-perfection is of vital importance for the community of the polis. For the polis, the virtues of individuals fulfill critical functions. Take the virtue of courage. Given the historical situation of the Aristotelian polis, courage and athletic skills were virtues needed to defend the interests of the polis against foreign enemies. Similarly, justice, temperance, or generosity created conditions that allowed others in the polis to thrive and to pursue their own self-perfection. In a way, the “self-perfection” of the polis as a community requires the virtuous self-perfection of its citizens, and vice versa.

There is an important lesson to be learned here. In light of the functional interdependence between the individual and the polis, we interpret Aristotle’s theory of self-perfection to mean that there can be a win-win logic in the basic game of social interaction. Just as John Rawls (1971, p. 4) characterizes society as “a cooperative venture for mutual advantage,” the ordonomic interpretation of Aristotle points out that the polis rests on and enables mutually advantageous cooperation. Along these lines, Aristotle (EN 1160a) remarks that

it is for the sake of advantage that the political community . . . seems to have come together originally and to endure, for this is what legislators aim at, and they call just that which is to the common advantage.

Interpreted from an ordonomic perspective, both Aristotle and Rawls thus take the potentiality of win-win cooperation as the starting point or even as the standard point of reference for their analysis. What is important from an ordonomic perspective is that the ideas of self-perfection and of win-win cooperation are thus complementary: my own personal self-perfection is only possible if I interact cooperatively with others, thus helping them realize their own self-perfection: do ut des (“I give that you might give”).

Self-Perfection and Political Governance in the Aristotelian Polis

The principal arena for the self-perfection of the individual is the basic game of the polis. It is in these everyday interactions that citizens acquire happiness through the repeated habituation of virtue as they move within the game. Viewed from the perspective of ordonomics, however, Aristotle makes it very clear that this is only possible if the basic game is guided by adequate rules of the game. He even maintains that in the absence of adequate rules, human beings become beasts. As he puts it (Pol 1253a), “man, when perfected, is the best of animals, but when separated from law and justice, he is the worst of all.” Consequently, individual self-perfection necessitates functional social institutions.

Aristotle’s focus on the importance of an adequate institutional order of the state thus adds a new dimension to his idea that man is a zoon politikon (“political animal”). Put in ordonomic terms, man needs the polis not only on the level of the basic game for his social interactions but, to perfect himself by playing this basic game, man also needs the polis as an arena that creates functional rules, law, and justice. This order is what the meta game of political governance is about. This meta game sets the rules and incentives that govern how the individual citizens interact in the polis.

Interpreted within the three-tiered ordonomic framework, Aristotle leaves no doubt that virtuous self-perfection in the basic game is not possible without this rule-setting function of the polis. With regard to the virtue of justice, for example, Aristotle (EN 1134a) maintains that “justice exists only between men whose mutual relations are governed by law.” Adequate rules enable, reward, and help the individual to know what is virtuous, to practice virtue through actions, and thus to become virtuous by repeated habituation. For Aristotle, this logic establishes the importance of the rule-setting process of law and legislation. He maintains (EN 1103b) that “legislators make the citizens good by forming habits in them.”

Following this idea that man cannot perfect himself without adequate rules (and thus without functional meta games), Aristotle has a clear definition of the raison d’être of the polis. For him (Pol 1280b), the polis “is a community . . . for the sake of perfect and self-sufficing life.” It exists “not only for the sake of living but rather primarily for the sake of living well” (Pol 1280b). Happiness is thus the ultimate end of the state. By this logic, Aristotle (Pol 1324a) maintains that “the form of government is best in which every man, whoever he is, can act best and live happily.” In light of Aristotle’s theory of virtue, this means that the ultimate end of the state is to facilitate the self-perfection of the citizen. Note, however, that the polis does not fulfill this function automatically. On the contrary, Aristotle underlines that not all forms of government are equally able to facilitate the happiness of their citizens. In fact, just as individual virtue does not come about by chance or by nature, good rules of the game are not automatically given; they need to be created in a social process.

Since for Aristotle (Pol 1326a) “law is order, and good law is good order,” the meta game of political governance thus aims at a continuous improvement of the rules of the basic game of everyday social interaction. In other words, just as the individual needs to perfect himself, the polis as a rule-integrated community needs to perfect itself so as to achieve its potential and to enable the good life. Viewed from an ordonomic perspective, Aristotle thus argues that the self-perfection of the individual requires the self-perfection of the polis. We suggest that our ordonomic interpretation of Aristotle’s concept of self-perfection provides a systematic link between the role of the citizen in the basic game and his political role in the meta games of rule-setting and rule-finding.

In the basic game, the pursuit of self-perfection is a matter of individual self-management. Here, the acquisition of virtue through habit requires individual self-commitment. These individual self-commitments, however, are only possible if they go hand in hand with collective self-commitments of the community. In a way, the meta game of political governance can be understood as a process of collective self-management.

Self-Perfection and Public Discourse in the Aristotelian Polis

The three-tiered ordonomic framework highlights that, to perfect itself, society must be able to play functional meta games of rule-setting and functional meta-meta games of rule-finding. One reason it is particularly interesting to apply this perspective to the Aristotelian polis lies in the historical background of the time. When he wrote, Aristotle was seeing a society in the midst of great change. Above all, the ancient myth that had provided guidance for much of social life in the polis was fading away. In his writings on metaphysics, Aristotle (Met 1074b) characterizes this myth as ancient tradition: “Our forefathers in the most remote ages have handed down to their posterity a tradition, in the form of a myth.” Like many other thinkers of this time, Aristotle points out that the myth is clearly a social construction created by man himself, for the “rest of the tradition has been added later in mythical form” (Met 1074b). At the same time, however, he also understands that the mythical tradition played a functional role in society. Aristotle (Met 1074b) notes that the tradition of the myth was formed “with view to the persuasion of the multitude and to its legal and political expediency.” Put differently, tradition was an important focal point for the community and spelled out the rules according to which society should operate.

In the polis of Aristotle’s time, however, the myth was losing its authority and no longer provided the polis with a shared view of the world or with implicit rules for social conduct. Thus the polis faced a radically new situation. The citizens could no longer take the implicit rules and moral foundations of their social order for granted. Instead, as “the state is a community of freemen” (Pol 1279a), the citizens themselves needed to develop the legal and normative framework of their community.

Against this background, our ordonomic reading of Aristotle highlights that political citizenship in the polis does not mean only participating in the meta game of rule-setting governance processes but it also means engaging in the meta-meta game of political rule-finding discourse.

As the myth no longer provided a broadly accepted normative framework, public discourse was necessary to clarify which principles and goals should be implemented by the rules and how they should be administered in the meta game. It is against this background that Aristotle, when describing in his treatise on politics the features of an ideal state, claims that in the polis there “should be established an agora” from which “all trade should be excluded” (Pol 1331a) so that it provides a public space reserved for political deliberation. Such discourse is needed to foster the self-perfection of the polis and, consequently, to enable the self-perfection of the individual.

Following Aristotle, the idea that the polis should enable the self-perfection and happiness of all citizens provides a systematic focal point for public discourse. Since the polis aims at enabling all citizens (excluding, of course, women and slaves) to pursue self-perfection, only those principles and rules should be adopted that can be considered just. In effect, for Aristotle, justice is the highest good of the political sphere. Note how Aristotle defines the concept of justice for the polis: justice is that which is for “the common interest” (Pol 1282b). Put differently, the polis can only perfect itself (and thus the individual) by finding, organizing, and realizing the benefits of mutually advantageous cooperation. Interpreted from an ordonomic perspective, Aristotle thus endows the meta-meta game of discourse with a powerful potential for a win-win orientation.

Lessons to Be Learnt for the Political Role of the Citizen in the Aristotelian Polis

In light of our interpretation, the defining quality of Aristotle’s concept of political citizenship refers to the ability to participate in rule-setting processes and rule-finding discourses. In his political theory, Aristotle dedicates much attention to the question of who can be considered a citizen of the state (Pol, Book III, Chapters 1-2). He rejects the idea of defining a citizen as someone who simply lives within the geographic boundaries of the state (Pol 1275a) or whose parents had been citizens (Pol 1275b). Instead, Aristotle takes a different strategy. He proposes a functional definition of citizenship that looks at the roles of the individual in society. Aristotle (Pol 1275b) argues that “he who has the power to take part in the deliberative or judicial administration of any state is said by us to be a citizen of that state.” For Aristotle (Pol 1275b), citizenship is connected with “the right of deliberating” and conferred on a person who “legislates and judges.” From the ordonomic perspective, the functional definition of citizenship thus means to participate as an individual not only in the basic game of social interaction but also in the meta game of rule-setting (legislation and judicial administration) as well as in the meta-meta game of rule-finding (deliberation).

The authors argue that this ordonomic reading of Aristotle can help to formulate a precise answer to the two questions raised at the beginning of this article.

With regard to the first question, the ordonomic three-tiered framework allows clarifying what is meant by the “political” role of a citizen. Our analysis suggests that citizens of the polis interact at all three levels: they participate in the basic game of everyday social interaction, in the meta game of collective rule-setting, and in the meta-meta game of public discourse. There is, however, a fundamental difference between the basic game and the meta games. We argue that this difference illustrates the distinction between the nonpolitical “economic” role and the political role of the citizen. Drawing on a semantic distinction put forward by Rousseau (1762/1797, p. 32), we claim that the basic game is the social arena in which the citizens interact in their role as bourgeois. The basic game thus focuses on the daily interactions of private citizens who cooperate with each other so as to realize their individual self-perfection. As bourgeois, they are apolitical because they pursue their individual private interests within the given game of social cooperation. In contrast, citizens who interact in the social arenas of political governance or public discourse are playing the role of citoyen. Such a participation in the societal meta games aims at playing a better game as a group. By analogy with Aristotle, we propose a functional definition of political citizenship that focuses on the ability of an actor to participate in rule-setting processes and rule-finding discourses. Consequently, that action is political that contributes to developing the shared ideational and institutional order of the polis.

This distinction between the citizen as a bourgeois and as a citoyen is not new. However, the ordonomic framework not only provides an alternative perspective for distinguishing between these two roles but also offers a conceptual perspective on the interdependent relationship between the role of the bourgeois and the role of the citoyen. With regard to the second question raised at the beginning of this article, we maintain that our ordonomic interpretation of the Aristotelian concept of self-perfection reveals that the role of the bourgeois and that of the citoyen do not contradict each other, but are complementary.

In his political theory, Aristotle argues that the ideal state should have two central places, the “agora from [which] all trade should be excluded” (Pol 1331a) and the “traders’ agora, distinct and apart from the other” (Pol 1331b). Interpreted from an ordonomic perspective, Aristotle’s description of the ideal polis means that the economic basic game and the political meta games take place in two fundamentally different social arenas. However, the people who interact in these arenas are the same citizens. People are equally bourgeois and citoyen. ⁴ More importantly, our ordonomic interpretation suggests that in both arenas, they can follow the same win-win logic of individual self-perfection through social cooperation. In the basic game, the individual pursues self-perfection through day-to-day social interactions. In the meta games, the citizens can create the collective conditions that are needed to pursue individual self-perfection. When switching from the role as a bourgeois in the basic game to the political role as a citoyen in the meta games, the citizen can continue to pursue his own interest in happiness and self-perfection. Just as the acquisition of virtue through habit is an investment in fruitful cooperation and self-perfection, participating in rule-setting processes can be an investment in mutually advantageous cooperation and collective self-perfection in the polis. Our ordonomic interpretation of Aristotle’s theory of self-perfection thus provides a comprehensive concept of economic and political citizenship that builds on the potential of an integrative win-win logic. Going from the basic game to the arena of the meta games of deliberative or judicial administration does not disrupt this potential win-win logic: it can extend that logic.

Self-Perfection of the Business Firm as a Societal Agent for Value Creation

How can the idea of self-perfection be applied to the business firm? For Aristotle, self-perfection meant realizing one’s potential, to fulfill one’s role or purpose. But what then, by analogy, is this telos of the business firm in a community? What is the purpose of corporate citizens in society?

With a nod to Milton Friedman (1970), a first answer to this question would be that the purpose of the business firm is to make a profit. From the perspective of ordonomics, however, such an argument misses the point of the question. Profit is important. But profit is a goal only from the viewpoint of the individual business firm. ⁵ Just as, according to Aristotle, every natural person wishes to be happy, a corporate citizen wants to make a profit. For Aristotle, however, happiness is not the same as the self-perfection of the individual in his community. Rather, happiness is a gratification, a reward, or a signal that one has successfully achieved perfection of oneself and has become a virtuous zoon politikon—for happiness is the “prize and end of virtue” (EN 1099b).

By analogy, the ordonomic perspective argues that profits are important because they can signal that a company has attained self-perfection of fulfilling its social purpose—and reward it for doing so. For a corporate citizen, the societal purpose to be achieved by virtue of individual self-perfection is the creation of value. From an ordonomic perspective, companies have a societal mandate to create value. This idea is, of course, not new. Ludwig von Mises (1949/1996, p. 217) made the case that “the owners of the material factors of production and the entrepreneurs are virtually mandataries or trustees of the consumers, revocably appointed by an election daily repeated.” In ordonomic terms, the self-perfection of a business firm means realizing its potential as a societal agent for value creation not only for consumers but, in a substantial extension of von Mises’s position, for other stakeholders, too.

There is a strong analogy between happiness and self-perfection as a virtuous citizen and profits and self-perfection as a societal agent for value creation. For Aristotle, happiness is an individual goal that can be achieved only indirectly. According to Aristotle’s argument, happiness is the epiphenomenon of successful self-perfection as a virtuous citizen (EN 1099b “Happiness . . . comes as a result of virtue”). The same is true for profits. In a competitive market system with functional institutions, companies can realize profits only as an epiphenomenon of successful value creation. Here, a business firm can make a profit only if customers are voluntarily willing to pay more for its product than it costs to produce that product (cf. Jensen, 2002, p. 239; Mises, 1951/2008, pp. 7 ff.). Just as Aristotle sees happiness as a signal that someone has perfected himself as a virtuous citizen, making a profit can be evidence that a company is giving more to society than it is taking from it. ⁶

How does a company perfect itself as a societal agent for value creation? For Aristotle, no one becomes virtuous by chance or nature; to become virtuous requires a process of active self-management. The same goes for the self-perfection of a corporation as an agent for value creation. To create value, a company first needs to actively constitute itself as a moral actor of integrity. This moral integrity is necessary because the formal institutions and private contracts in the marketplace are necessarily incomplete (Hart & Moore, 1996; Sacconi, 2007; Tirole, 1999). In an ideal world of costless, complete, and perfectly enforceable contracts, even anonymous players could cooperatively interact to create value. Yet in the “real” world, no stakeholder in the marketplace—including customers, employees, suppliers, creditors, and debtors—will cooperate with a company unless the stakeholder has reason to believe that the firm is trustworthy and reliable (Erhard, Jensen, & Zaffron, 2010; Hart, 2002; Schelling, 1960/1980, p. 43). In this sense, any company needs to be viewed as a “moral actor” to successfully perfect itself as a societal agent for mutually advantageous value creation.

From an ordonomic perspective, organizational integrity of a firm is what virtue is to the individual in the Aristotelian polis. So how do firms build up their integrity? Aristotle argues that individuals become virtuous by habit; we claim that organizations constitute themselves as actors of integrity by virtue of “moral commitments” (cf. Pies et al., 2009). Such commitments can be made credible via “specific investments” (Williamson, 1985) or guarantees, codes of conduct, informal rules, and thus through a strong “corporate culture” (Kreps, 1990). Such commitments can be prudent investments with a strong moral dimension. A self-commitment voluntarily restrains one’s own freedom. Such a constraint, however, can serve as a valuable factor of production by convincing a company’s stakeholders of its reliability, thus inducing the stakeholders into productive cooperation that would be impossible in the absence of such trust. In this sense, a functional commitment can be qualified as moral if it furthers mutually beneficial interactions which make other players better off, thus contributing to moral objectives such as fighting poverty, raising living standards, improving the environmental quality, fostering productive innovations or providing attractive jobs. Just like the acquisition of virtues can link the individual and the community, moral commitments can create win-win opportunities. And just as forming one’s “character” by habit builds up valuable human capital in the Aristotelian citizen, moral commitments can start learning experiences that establish a corporate “character” of integrity, thus creating valuable social capital.

Value Creation, Self-Perfection, and the Need for Functional Governance

The idea of self-perfection offers a fresh way of looking at the economic role of the business firm in the basic game of the marketplace. In competitive markets, companies can realize their potential as corporate citizens if they fulfill their societal mandate to create value. However, just as Aristotle argues that the individual cannot perfect himself without adequate institutional rules, the same is true for the self-perfection of a company. In competitive markets, functional rules are needed to enable companies to create value by their profit-seeking activities. Such rules, however, are far from self-evident. In fact, companies often operate within a context where the institutional framework is deficient.

To illustrate, take the example of business firms that are stuck in a quagmire of corruption. If due to a deficient institutional framework corruption is endemic, companies are collectively trapped in a social dilemma. In this situation of collective self-damage, the individual company faces perverse incentives that make it hard, if not impossible to uphold individual corporate integrity. If a single company decides to fight against endemic corruption in its industry sector, it runs the risk of suffering severe competitive disadvantage without even coming close to solving the social dilemma of corruption at the group level. In other words, perverse incentives erode a company’s integrity and render self-perfection impossible. In the absence of adequate rules, companies will fall short of realizing their self-perfection as societal agents for value creation (cf. Baumol, 1975).

The self-perfection of a company thus critically hinges on the perfection of the institutional order. According to the traditional nation-state paradigm, this task is the exclusive domain of the government (Friedman, 1970; Henderson, 2001, 2005; Jensen, 2002). In the age of globalization, however, the conventional nation-state paradigm is increasingly challenged. Note the strong analogy to the historic background of Aristotle’s analysis. Just as the traditional myth lost its ability to provide regulatory guidance for the social interactions in the polis, the traditional mode of nation-state governance no longer provides enough regulatory guidance to maintain an encompassing functional institutional framework for a globalizing economy.

In this situation, companies can realize self-perfection as societal agents for value creation only if they contribute to perfecting the shared institutional order. Put differently, if companies want to truly fulfill their economic role as bourgeois in the basic game of economic value creation, they need to be willing and capable of taking a political role as citoyen in the relevant meta game of governance. To illustrate, take again the case of corruption. If dysfunctional incentives drive a race-to-the-bottom competition in the basic game, companies can overcome this situation of collective self-damage and fulfill their societal mandate of value creation only by taking “ordo-responsibility” (cf. Beckmann & Pies, 2008), by contributing to reforming the rules of the game. This reformation is exactly what the Oslo, Norway-based Extractive Industries Transparency Initiative (EITI) is about. EITI aims to strengthen governance by improving transparency and accountability in the extractives sector. Acting as citoyens and collaborating with civil society groups, governments, and international organizations, corporate citizens have made an active contribution to setting a global standard under which companies publish what they pay and governments disclose what they receive, thus creating better rules for preventing corruption (Eigen, 2006; www.eiti.org).

Self-Perfection and Global Public Discourse

Companies can contribute to creating institutional conditions that foster their individual self-perfection if they learn to initiate or participate in constructive political meta games. Such collective rule-setting processes, however, are anything but easy. For example, mutually advantageous meta games often require that all actors share a constructive understanding of the situation. A shared awareness of common interests that will provide a mutual point of departure for institutional reform is needed.

Such awareness of common interests is often absent because perceived conflicts of interest in the basic games induce the players to perceive their relationship with each other as a zero-sum game. What results is a kind of tradeoff thinking which assumes that not only the basic game but also the higher meta games are characterized by an invariably given distributional conflict. As a consequence, any political activity of business firms in rule-setting processes appears to be illegitimate lobbying via rent-seeking to privilege the firm at the cost of the larger public. Consequently, corporate contributions to societal governance are viewed with suspicion and opposed.

As long as such tradeoff thinking persists, a company will find it impossible to foster its self-perfection by constructively participating in collective rule-setting processes. This kind of zero-sum thinking is by no means limited to, say, civil society organizations (CSOs), which define themselves as being the watchdogs of business. Often, this tradeoff thinking is also found within companies themselves. Many business firms have therefore difficulty seeing, for example, that when it comes to overcoming dilemmatic problems in the basic game, they share a common interest with their rivals. Similarly, companies often fail to perceive CSOs not only as critical watchdogs but also as potential—and necessary—partners for overcoming unproductive conflicts.

In this environment, companies can pursue self-perfection only if they learn to participate as citoyens in processes of deliberation that help create a shared awareness of the common interest. The critical relevance of such rule-finding discourse can again be underlined by analogy with Aristotle. Just as the citizens of the polis can no longer take the normative guidance of the traditional myth as a given consensus, the modern society is characterized by what Rawls (1993, p. xvii) calls the “fact of pluralism.” Today, there is a plurality of worldviews and conceptions of the good. This plurality is particularly true of the global arena. Multinational corporations operate in overlapping ethnic, cultural, and religious contexts. In this situation, shared perceptions cannot be taken for granted; discursive processes are needed for mutual learning.

To pursue self-perfection, business firms not only have a special need for such learning processes but they also have a special capacity to contribute to rule-finding discourse in the global arena. First, with regard to many very complex problems, companies can share their specific expertise and how-to knowledge. Second, many problems in the global arena are by nature highly international. Multinational companies are among the few actors that have internationalized to a similar extent. Third, a key challenge for collective action lies in prohibitively high transaction costs. Multinational corporations and business networks provide options for reducing these transaction costs. Fourth, business firms can sometimes be held accountable more easily than, for example, government actors in corrupt or nondemocratic states. Consequently, a transparent involvement of corporate citizens in political discourse that is responsive to criticism could improve what Scharpf (1999) has termed the “output legitimacy” of governance.

In sum, corporations can contribute to creating institutional conditions that favor their individual self-perfection if they participate as citoyens in the meta-meta game of (global) public discourse. Increasingly, corporate actors play an important political role in discursive processes. The ancient Greek agora was an assembly of persons—that is, natural citizens; the global agora will be, to a large extent, an assembly of organizations—that is, corporate citizens—including companies as well as civil society actors.

Two Ordonomic Answers to the Open Questions

The ordonomic perspective provides an interpretative framework for reading Aristotle in such a way that we can establish fruitful analogies between the idea of individual citizenship in the Greek polis and the idea of corporate citizenship in the age of globalization. Our interpretation of Aristotle illustrates an ordonomic concept of corporate citizenship that allows addressing and answering the two questions currently under debate in the literature. First, what is actually meant by a “political” role of the company and by the idea of “corporate citizenship?” Second, how does the political role of a corporate citizen relate to its economic role as a business actor?

With regard to the first question, we argue that there is an important lesson to be learned from Aristotle’s functional definition of citizenship. From an ordonomic point of view, Aristotle’s concept of political citizenship focuses on the ability of an actor to play a constructive role in rule-setting processes and in rule-finding discourse. Accordingly, we claim that companies can and do take a political role as soon as they not only act as bourgeois in the given basic game of business but also participate as citoyens in discursive and regulatory new-governance processes.

With regard to the second question, we claim that the Aristotelian idea of self-perfection holds the key to linking the economic and political roles of the business firm. By analogy with Aristotle’s argument, companies operating in functioning markets can make a profit only if they successfully pursue self-perfection as societal agents for value creation. In their capacity as economic actors, this self-perfection is what companies do as bourgeois in their everyday cooperation with stakeholders in the basic game of business. If, however, a company cannot realize self-perfection within a given game, it needs to move to the next higher level of the meta game. In other words, if the institutional rules in the basic game of business fail to enable a company to create value, it can foster its self-perfection as an agent for value creation by contributing as a citoyen to the meta game of political governance and, if necessary, by joining in the meta-meta game of political deliberation. When changing from the basic game of business to the level of political new-governance processes in the meta games, a business firm follows the same logic. Both as a bourgeois and as a citoyen, it pursues its individual interests in processes of social interaction. In light of deficient institutional rules, companies need to take a political role if they wish to pursue self-perfection as economic agents for value creation. According to this logic, by taking on a political role, the firm is not expected to abstain from or restrict its economic interests. On the contrary, in processes of new governance, the economic role and the political role of the business firm can follow the same win-win logic of self-perfection through cooperative social interactions. As a consequence, the ordonomic perspective suggests that a “political theory of the firm” does not need to be developed as a corrective or even substitute of the economic theory of the firm. Rather, a political theory of the firm can be understood as an extension of the economic theory of the firm under the conditions of new-governance processes in a globalized world.

Lessons (to Be) Learned: The Potential of Corporate Citizenship

The basic idea of this article is to clarify the societal role of companies in modern political processes. A key claim of our concept is that citizens do not follow different logics or rationalities when acting in varying social arenas or, in ordonomic terms, in different social “games.” According to the rational-choice perspective employed here, individual as well as corporate citizens acting as bourgeois in the basic game of the economy do not follow a specific “strategic rationality” that they have to give up for some sort of “communicative rationality” when acting as citoyens in the political meta games of societal governance (Palazzo & Scherer, 2006). To the contrary, our ordonomic perspective models all citizens as acting according to their self-interest—whether as bourgeois or as citoyen.

The authors see a number of benefits in conceptualizing corporate citizenship within such a rational-choice paradigm. First, our model introduces the political role of the business firm as a concept that is not alien to or even incommensurable with existing economic theories of the firm. Second, our approach does not put forward the normative request that companies should take a political role but instead explains corporate citizenship as a rational strategy of self-interested companies. It thus addresses the criticism of the corporate citizenship concept put forward by van Oosterhout (2005, p. 678). Instead of taking recourse to a normative duty, we identify a spectrum of constructive actions that are prudent both from the actor’s as well as from society’s point of view. Third, and arguably most important, the framework developed here is useful for prompting more constructive research questions. As Heinz von Foerster (1971/2003, p. 215) put it, “The way in which a question is asked determines the way in which an answer may be found.” To illustrate: a common perspective in business ethics models strategic rationality as different from communicative rationality and then asks whether a company’s strategic self-interest is weak or strong. If the self-interest is perceived as too strong, this perspective suggests taming or curbing it. In sharp contrast, the ordonomic perspective does not ask whether self-interest is weak or strong; rather, the concept prompts the question of whether the self-interest of an actor is in accord with or at the expense of the public interest. Putting the question this way shifts the focus to the institutional framework that determines whether the intentional behavior of actors leads to desirable or undesirable results on the social level, where “desirable” is to be understood in terms of societal “consensus” (Brennan & Buchanan, 1985/2000). In this sense, we employ a concept of weak normativity. Fourth, in contrast to other rational-choice approaches such as public choice, which focus primarily on analyzing the social structure and thus the incentive properties of institutional arrangements, the ordonomic perspective put forward here also looks at the otherwise neglected aspect of semantics: the ideas, thought categories, and mental models as well as the metaphorical language that frame the public perception of social interactions and, in particular, social conflicts and their possible solutions. That aspect is why theories and conceptual clarifications are so important: a clear notion of corporate citizenship can help accelerate societal learning processes and rationalize business practice. Fifth, orthodox rational-choice approaches such as public choice have a blind spot in that they do not see that business firms can play a constructive role in politics. A typical tendency is to assume that firms enter politics only to search privileges at the expense of the common good (i.e., rent-seeking). Although this assumption has a long tradition dating back to Adam Smith (1776/1991, p. 137), such a perspective is one-sided in that it tends to overlook the potential of solving societal problems through corporate citizenship. Sixth, the ordonomic perspective leads to an important insight: just as the economic behavior of firms requires a functional institutional framework of competition, the same is true with regard to the political behavior of firms.

Put differently, the ordonomic perspective calls attention to the fact that—given a functional definition—both the “economic” and the “political” role of the business firm are as a matter of principle ambivalent. The business firm’s role when acting in the basic game of the economy is ambivalent. Given a functional institutional framework of competition, profit-maximizing companies act in favor of the public interest if they strive to serve the needs of their customers, thus following the “mutualistic” (Hazlitt, 1964/1994, Chapter 13) cooperative logic of win-win interaction. Yet in the opposite case, characterized by the absence of functional rules, the same profit-maximizing behavior may operate at the expense of the public interests if, for example, business firms pollute the environment and externalize the social cost of their production, thus leading to a “tragedy of the commons” (Hardin, 1968) or a social dilemma (Bowles, 2004, Chapter 1). Given such a dysfunctional institutional framework, it is of vital importance to improve the rules of the game to protect moral actors against competitive disadvantage. Such improved rules can be brought about by government or civil society organizations, but corporate actors may also play an active part here.

By analogy, the political role of companies is also highly ambivalent. Companies that participate in political processes can do so in a way that is either at the expense of the public interest or in a way that furthers it. With regard to the former, dubious lobbying is a case point. Companies may try to influence political rule-setting processes with the intent of creating cartels or monopolies, thereby destroying societal rents (Baumol, 1990, 2010; Bhagwati, 1982; Tullock, 1989). With regard to the latter, however, companies can cooperate with state actors and other civil society organizations to organize collective action among diverse industry members and other market players. For example, such collective political action may be the only feasible way of overcoming endemic corruption. In this case, companies engage in a type of lobbying that aims not at destroying, but instead creating, societal rents. Therefore, the question of whether the political activity of corporate citizens operates in accord with or at the expense of the public interest can be answered in strict analogy to the firms’ profit-maximizing activities in the economy: it depends on the institutional framework for political activity.

Understanding the ambivalence of both the economic and the political role of companies is important because it directs the research focus toward analyzing the institutional conditions that channel this ambivalence for better or for worse. We hold that this field is important for future research. From a normative perspective, understanding these institutional conditions is important because they are not invariably given but can be changed. This change potential is true for the economic basic game as well as for the political meta games. As a consequence, it is not only an important task for all societal actors to provide a functional competitive order for economic activity (Baumol, 1975) but also to contribute to the establishment of a functional competitive order for political activity (Pies, von Winning, Sardison, & Girlich, 2010). Here, the basic idea is to provide corporate citizens and other civil society actors with open and transparent (i.e., not privilege-driven) access to the competitive process of political rule-setting to turn the political activity of corporate actors into a productive undertaking for society (Albareda, 2008).