Misery Loves Companies: Rethinking Social Initiatives by Business

TLDR

Companies are increasingly expected to tackle human misery, yet economic theory insists on maximizing shareholder wealth, prompting scholars to reconcile social initiatives with economic logic. This study evaluates how organizational theory and empirical research have addressed the tension between corporate social initiatives and shareholder value, and proposes a new framework that embraces this tension to guide future inquiry. The authors examine the dominance of economic reasoning in defining firm–society relations, review the 30‑year empirical quest linking social initiatives to financial performance and stakeholder theory, and then outline a pragmatic research agenda that treats the economic–social tension as a starting point for systematic study.

Abstract

Companies are increasingly asked to provide innovative solutions to deep-seated problems of human misery, even as economic theory instructs managers to focus on maximizing their shareholders' wealth. In this paper, we assess how organization theory and empirical research have thus far responded to this tension over corporate involvement in wider social life. Organizational scholarship has typically sought to reconcile corporate social initiatives with seemingly inhospitable economic logic. Depicting the hold that economics has had on how the relationship between the firm and society is conceived, we examine the consequences for organizational research and theory by appraising both the 30-year quest for an empirical relationship between a corporation's social initiatives and its financial performance, as well as the development of stakeholder theory. We propose an alternative approach, embracing the tension between economic and broader social objectives as a starting point for systematic organizational inquiry. Adopting a pragmatic stance, we introduce a series of research questions whose answers will reveal the descriptive and normative dimensions of organizational responses to misery.