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The Stakeholder Corporation and Social Welfare

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  • Marc Fleurbaey
  • Grégory Ponthière

Abstract

The stakeholder (or responsible) firm maximizes the (weighted or unweighted) sum of the surpluses of its customers and suppliers (including workers). Although this objective is hard to empirically measure, it can be pursued by simple management rules that rely on constrained profit maximization. Unconstrained profit maximization gives a competitive edge to ordinary firms, but stakeholder firms are better for social welfare and internalize several important effects of their activities on society. Long-term entry decisions should rely on profit modified by Pigouvian pricing of externalities, and this result provides a novel justification for the polluter-pays principle.

Suggested Citation

  • Marc Fleurbaey & Grégory Ponthière, 2023. "The Stakeholder Corporation and Social Welfare," Journal of Political Economy, University of Chicago Press, vol. 131(9), pages 2556-2594.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/724318
    DOI: 10.1086/724318
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    Cited by:

    1. Bejan, Camelia, 2024. "On the shareholders versus stakeholders debate," Journal of Economic Behavior & Organization, Elsevier, vol. 218(C), pages 68-88.
    2. Ponthiere, Gregory & Stevens, Nicolas, 2024. "The Morality of Markets. A Comment," GLO Discussion Paper Series 1433, Global Labor Organization (GLO).

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