A new study by Zwetelina Iliewa, Elisabeth Kempf and Oliver G. Spalt finds that Americans often prioritize moral values over financial gains when evaluating corporate decisions. The research highlights how moral universalism influences views on issues like CEO pay, layoffs, and environmental impact, challenging the traditional focus on shareholder value.
Corporate finance has long been dominated by the principle that firms should maximize shareholder value, a perspective famously articulated by Milton Friedman. However, a growing body of research suggests that stakeholders—including investors, employees, and consumers—also care about factors unrelated to financial gain when evaluating corporate decisions. Even though the academic literature has made important progress in modeling and understanding non-financial preferences, many questions remain open: What kinds of corporate decisions give rise to non-financial concerns? What drives non-financial considerations?
Our study seeks to address these gaps, with a particular focus on moral universalism as a key explanatory factor. Moral universalism refers to a person’s tendency to care equally for those socially or geographically close to them, like family, and those further away. In the context of corporate decision-making, this matters because the decisions by large corporations often impact stakeholders who are, to varying degrees, removed from the average American, such as workers in other cities, global consumers, or the people impacted by climate change.
Key findings
Using large-scale online surveys conducted with a representative sample of over 2,000 United States respondents, we examine a broad range of corporate actions frequently studied in corporate finance, such as decisions related to CEO pay, layoffs, financial leverage, and payout policy. In addition to these classic corporate finance decisions, we also cover actions prominently featured in the recent ESG debate, such as the use of fossil fuels and workforce diversity.
Participants were presented with a series of hypothetical corporate decisions and asked to evaluate them independently of their financial impact. By informing participants that all decisions have the same financial implications for the firm, and are all legal, our survey is able to isolate respondents’ non-financial, or nonpecuniary, preferences. Our study documents three main findings:
- Nonpecuniary concerns are widespread. Americans often place nonpecuniary considerations above financial-value maximization—a fact that holds also among individuals who are typically associated with more profit-oriented behavior, such as stock market investors and individuals with economics or business-related degrees.
- Treatment of workers and CEO pay dominate public concern. Layoffs and CEO pay increases rank as the most morally objectionable actions, more so than environmental impact or workforce diversity policies.
- Moral universalism strongly predicts nonpecuniary preferences. Respondents who score high on moral universalism —measured by how broadly they extend their prosocial concerns—are notably more likely to prioritize nonpecuniary values over financial gains. The economic magnitude of the effect of moral universalism is high: it explains 85% of the partisan gap and 40% of the gender gap—the two characteristics that have the strongest predictive power for individuals’ tendency to prioritize financial over nonfinancial concern.
To deepen our understanding of how moral universalism shapes people’s views on corporate actions, we conduct two additional tests. In one, we explore how people react to layoffs of workers who are either close to or far away from them geographically. When the layoffs affect distant workers, opposition to the layoffs decreases significantly.
However, for people with high moral universalism, the geographic distance makes less of a difference—they are more likely to oppose layoffs, regardless of how close or distant the workers are.
Moreover, we find that respondents’ evaluation of a corporate action is strongly correlated with how connected they feel to the stakeholders that are affected by a given corporate action, with moral universalists on average feeling more connected to the affected stakeholders. Moral universalism thus helps explain why people have different views on corporate actions—not just between individuals, but also between different corporate actions.
To ensure that our survey responses reflect true preferences, we include a charitable donation task where participants can allocate up to $50 to charities with missions linked to the issues in the survey (e.g., fuel energy usage and a charity dedicated to environmental conservation). We observe that individuals who express strong nonpecuniary preferences for a given corporate action are also more likely to donate to a related cause, supporting the conclusion that these preferences are genuine, not merely hypothetical.
Implications for investors, corporate managers, and policymakers
Our findings carry implications for both academia and industry. For finance scholars, our results suggest that nonpecuniary concerns are relevant for a much broader set of corporate decisions than previously thought. More broadly, the insights from our paper challenge the traditional finance doctrine that corporate managers should solely maximize shareholder value and instead suggest that models accounting for both financial and nonfinancial preferences, such as those proposed by Oliver Hart and Luigi Zingales, better capture the public’s expectations.
For corporate managers, our study underscores the potential importance of aligning corporate actions with non-financial concerns. A large gap between financially optimal and morally acceptable behavior can have significant implications for a company’s reputation and trustworthiness in the eyes of the public.
For example, participants in our study report that they would have more confidence in corporate America if firms committed to avoiding actions such as layoffs and CEO pay hikes. This suggests that reputational costs are relevant not only for illegal or extreme cases of morally questionable corporate behavior but also for more routine business decisions that violate stakeholders’ perceptions of how corporations should behave.
While completely avoiding such actions may be infeasible or undesirable, a greater focus on incorporating moral concerns into corporate policies may help to strengthen public trust in American businesses.
The role of moral universalism in corporate decision-making
Our study contributes to a growing literature on the role of moral values in economic behavior. We find that individuals who score high on moral universalism are significantly more likely to prioritize moral concerns over financial gains. Interestingly, once moral universalism is accounted for, traditional predictors such as political affiliation lose much of their explanatory power.
This suggests that deep-seated moral values, rather than partisan identity, drive attitudes toward corporate behavior. Moreover, moral universalism offers a potential framework for understanding why certain corporate actions elicit stronger reactions—because they may affect stakeholders who are perceived as socially or geographically closer by the average respondent.
Our research provides strong evidence that many corporate decisions are viewed through a moral lens by the general public. Most importantly, our findings highlight moral universalism as a critical factor shaping nonpecuniary concerns, offering a deeper understanding of why people care about corporate actions and how these preferences might evolve over time.
Author Disclosure: The authors report no conflicts of interest. You can read our disclosure policy here.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
