Survey: Investors, Non-Investors Alike View Corporations Through Moral Lenses

Financial issues are not the only drivers of American views of business, according to this recent survey.

Moral Views Shape Investment Decisions Beyond Money
Layoffs, Corporate Pay Are Flash Points

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Financial decision-making that incorporates only pecuniary (financial) utility may miss important drivers of stakeholder behavior, including investor actions. Aligning corporate behavior with stakeholder values can help build trust in firms and markets.

That’s the key finding of this new paper Corporate Actions as Moral Issues by Zwetelina Iliewa, University of Bonn - Department of Economics; Elisabeth Kempf, Harvard University - Business School (HBS), and Oliver G. Spalt, University of Mannheim - Business School.

Moral Views Shape Investment Decisions Beyond Money

The study set out to determine which corporate actions people care most about from a moral perspective, and why? It uses a representative sample of more than 2,000 Americans to examine how respondents evaluate a broad set of corporate actions, ranging from CEO pay to fossil fuel usage, while holding constant the financial value created by these decisions.

The professors examined “nonpecuniary preferences across a broad set of corporate actions using a representative sample of the US population." The core findings, based on large-scale online surveys, are that:

Self-reported nonpecuniary concerns are large both for stock market investors and non-investors; concerns about the treatment of workers and CEO pay rank highest—higher than concerns about workforce diversity and fossil energy usage.
Moral universalism emerges as an important driver of nonpecuniary preferences.
Combined, the authors conclude that the “findings provide new evidence on the importance of moral concerns as a key determinant of nonpecuniary preferences over corporate actions.”

They say their “findings provide robust evidence that many corporate actions are viewed through a moral lens, and that these moral views are strongly shaped by individual differences in moral universalism—the tendency to extend concern equally to others, regardless of social or geographic distance.”

Layoffs, Corporate Pay Are Flash Points

Moral universalism is the view that there are ethical principles and values that apply to all around the world not dependent on individual or societal attitudes, such as the commandment that one shall not kill or the Golden Rule. Other findings include:

Layoffs and CEO pay are seen as most objectionable: The study finds that layoffs and CEO pay increases are viewed as the most morally objectionable corporate actions. Over 85% of participants believe that firms should not lay off employees, even when doing so generates financial gains. Similar views apply to increases in CEO compensation.
People put their money where their mouths are: The study used a real-stakes donation task to test the validity of responses. “Participants who expressed strong moral opposition to a given corporate action were significantly more likely to donate real money to a related cause, suggesting that their preferences reflect genuine values.”
Moral Universalism Helps Explain Why People Care: The study found that moral judgments about corporate actions are guided by moral intuitions, which are shaped by how individuals perceive the consequences of corporate actions for stakeholders other than shareholders. Moral universalism, the tendency to extend concern equally to others regardless of social or geographic distance, emerged as the strongest single predictor of nonpecuniary preferences.

They find that individual views of morality shape which corporate actions people view as most objectionable.

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