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The stakeholder corporation and social welfare

Author

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  • Marc Fleurbaey

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Grégory Ponthière

    (UCL - Université Catholique de Louvain = Catholic University of Louvain)

Abstract

The stakeholder (or responsible) firm is defined in this paper as one that maximizes the (weighted or unweighted) sum of the surpluses of its customers and suppliers (including workers). We show that, although this objective is hard to empirically measure, it can be pursued by simple management rules that rely on constrained profit maximization. We find that unconstrained profit maximization gives a competitive edge to ordinary firms, but that stakeholder firms are better for social welfare and internalize several important effects of their activities on society. We also show that long term entry decisions should rely on profit modied by Pigouvian pricing of externalities, incidentally providing a novel justication for the polluter-pays principle.

Suggested Citation

  • Marc Fleurbaey & Grégory Ponthière, 2023. "The stakeholder corporation and social welfare," Post-Print hal-03426120, HAL.
    • Handle: RePEc:hal:journl:hal-03426120
    DOI: 10.1086/724318
    Note: View the original document on HAL open archive server: https://hal.science/hal-03426120v2
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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. Issam Samiri & Yunus Aksoy & Arup Daripa, 2024. "Firm Ownership and the Macroeconomics of Incentive Leakages," National Institute of Economic and Social Research (NIESR) Discussion Papers 563, National Institute of Economic and Social Research.
    3. Ponthiere, Gregory & Stevens, Nicolas, 2024. "The Morality of Markets. A Comment," GLO Discussion Paper Series 1433, Global Labor Organization (GLO).
    4. Schoenmaker, Dirk & Schramade, Willem, 2024. "Shareholder primacy or stakeholder governance?," Finance Research Letters, Elsevier, vol. 69(PB).
    5. Francesco Del Prato & Marc Fleurbaey, 2024. "Workers as Partners: a Theory of Responsible Firms in Labor Markets," Papers 2411.05567, arXiv.org, revised Nov 2024.
    6. Francesco Del Prato & Marc Fleurbaey, 2024. "Workers as Partners: a Theory of Responsible Firms in Labor Markets," PSE Working Papers halshs-04788058, HAL.
    7. Iñigo González-Ricoy & Pablo Magaña, 2024. "The Demos of the democratic firm," Politics, Philosophy & Economics, , vol. 23(4), pages 346-367, November.

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