Corporate Actions as Moral Issues: Unpacking the Public's Perception

In the realm of corporate finance, we often hear about maximizing shareholder value, optimizing financial performance, and achieving market dominance. But there is an undercurrent that is becoming impossible to ignore: the morality of corporate actions. Our latest research, "Corporate Actions as Moral Issues," sheds light on how Americans perceive the morality of various corporate decisions, revealing some important implications for both academics and practitioners.

The growing emphasis on ESG issues is reshaping corporate landscapes, yet the discussion either often stops at the financial impacts of these issues, or lacks empirical evidence on how important these issues are to the firm’s stakeholders from a moral perspective.

In our study, we surveyed 3,000 Americans to evaluate the morality of 11 different corporate actions, ranging from CEO pay and layoffs to renewable energy usage and workforce diversity. 

The findings were surprising: classic finance decisions, such as CEO pay and layoffs, are perceived as significantly more moral issues than many ESG concerns currently emphasized in executive pay contracts, such as renewable energy usage and workforce diversity. This challenges the traditional notion that these decisions are purely value-driven without moral implications.

One important aspect of our study is the willingness of shareholders to pay for morally desirable corporate actions. We randomly assigned survey participants into three stakeholder groups: they were asked to put themselves in the shoes of a customer, an employee, or a shareholder of the firm. Shareholders, often depicted as solely profit-driven, showed a greater willingness to bear monetary costs for the sake of moral actions compared to customers or employees. Importantly, the same was true for participants who reported to invest in the stock market in real life. This revelation flips the script on the stereotype of the profit-maximizing shareholder and suggests a deeper, moral motivation may also be at play.

Our data reveal significant demographic differences in how corporate actions are perceived. Older, white, Democrat, and female participants are more likely to view corporate actions as moral issues and to see them as morally wrong. However, despite observing sizable variation across participants in the absolute importance given to moral considerations, the relative ranking of the moral importance of different corporate actions is surprisingly stable across participants. For example, all subgroups (including both Democrats and Republicans) agree that CEO pay ranks among the two most important moral issues. Partisan differences are largest for renewable energy usage and workforce diversity. These insights are crucial for understanding the broader societal expectations placed on corporate behavior.

Our findings also inform finance education. Leading textbooks and curricula emphasize financial metrics while largely ignoring the moral dimensions of corporate decisions. This oversight risks leaving future managers ill-equipped to navigate the complex trade-offs between financial performance and moral responsibility. Our survey shows that stakeholders view many classic corporate finance decisions as moral issues and are willing to forego financial returns for the sake of ethical behavior.

Our research exposes a potential tension in society: corporate decision-makers, who focus exclusively on maximizing shareholder financial value, may find their actions perceived as amoral by the broader public. This disconnect could contribute to the distrust in corporate elites and underscores the need for a better understanding of how legal financial decisions can influence trust in the business environment. 

In sum, our research underscores the importance of understanding moral dimensions in corporate decision-making. By addressing stakeholders’ moral concerns, corporations can serve their stakeholders better and foster trust in the business environment.

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By Oliver Spalt (University of Mannheim) & Elisabeth Kempf (Harvard Business School)

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