The Nexus of Managerial Imperfect Duty: Relations of Virtue, Discourse, and Due Diligence

The nexus of imperfect managerial duty is defined as management’s collection of volitional attitudes and actions in pursuit of a moral purpose, but with practical limits. This describes business behavior toward building affable and virtuous relations, maintaining reasoned social discourse, and performing the due diligence necessary for making knowledgeable business decisions. A theory of the development and extent of the limits of these imperfect managerial duties is presented here, a theory that in part explains the activities and personnel included under the firm’s umbrella. As a result, the nexus of imperfect duty is shown to complement the perfect-duty-based nexus of contracts theory of the firm. The existence of flexible trade-offs involving these imperfect duties, trade-offs not easily amenable in contractual arrangements whether explicit or implicit, is shown to be one of the advantages of imperfect duty for developing business relations. As a result, the pursuit of shareholder wealth is not easily subject to contracting, i.e., it is not a perfect duty. Shareholder wealth pursuit emerges from the nexus of imperfect duty as well as the development of proper stakeholder relations and the pursuit of due diligence.