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Research

Katinka Quintelier

The microfoundations of stakeholder theory

Summary

Understanding individual behavior in a business context through the lens of moral psychology

In August 2019, 181 CEOs committed to lead their firms for the benefit of all stakeholders, and not just for the shareholders. They signed a well-sounding document, but what exactly does this commitment mean?

The purpose of the firm, said the CEOs, is to contribute value to its stakeholders - such as employees, customers, suppliers, investors and the community. In other words, firms should be stakeholder-oriented. This clearly departs from previous statements. Since 1997, these CEOs agreed every year that firms should maximize profit for shareholders. But from now on, all stakeholders are important. At least, that’s the idea, but will firms now really treat their environment differently, can we expect a minor system change at last?

Increasingly, CEOs are attracted to the idea of stakeholder-oriented firms. Perhaps this is because, according to business scholars, stakeholder-oriented firms create more value than profit-oriented firms. This value, in turn, is created because individuals are also attracted to, and even motivated by, stakeholder-oriented firms. Customers for instance would rather buy from stakeholder-oriented firms, and employees might want to work harder, or more cooperatively, for stakeholder-oriented than for profit-oriented firms. This motivates CEOs to serve their stakeholders. It sounds intuitive, but how accurate is this picture?

In this dissertation I investigate how individuals really react to stakeholder-oriented versus profit-oriented firms. For this I draw on moral psychology. In chapter 2 I argue that stakeholder-oriented firms elicit moral sentiments in stakeholders. These moral sentiments trigger cooperation, but they can also trigger moralistic punishment, such as boycotts. In chapter 3 I investigate if stakeholder-oriented firms are really more attractive. The data seem to support this hypothesis, but only if these firms are clearly willing to forego profit. In chapter 4 I discover that stakeholder-oriented firms seem to elicit moral sentiments. As a consequence, individuals will judge more strongly if the firm harms its stakeholders. But another consequence is that individuals will see stakeholder-oriented firms as more human than profit-oriented firms. In chapter 5 I conclude that stakeholder-oriented firms should learn how to deal with their stakeholders’ moral sentiments.

A system change, from profit-oriented to stakeholder-oriented, will only work if we understand the individuals in the system.