The Stakeholder Corporation and Social Welfare

Marc Fleurbaey and Gregory Ponthiere

Journal of Political Economy, 2023, vol. 131, issue 9, 2556 - 2594

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.

Date: 2023
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Working Paper: The stakeholder corporation and social welfare (2023)
Working Paper: The stakeholder corporation and social welfare (2023)
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