25. Apr, 2018

The Impact of Corporate Sustainability on Organizational Processes and Performance

Neoclassical economics and several management theories assume that the corporation’s objective is profit maximization subject to capacity (or other) constraints. The key agent in such models is the shareholder, acting as the ultimate residual claimant who provides the necessary financial resources for the firm’s operations (Jensen and Meckling, 1976; Zingales, 2000). However, there is substantial variation in the way corporations actually compete and pursue profit maximization. Different corporations place more or less emphasis on the long-term versus the short-term (Brochet et al., 2011); care more or less about the impact of externalities from their operations on other stakeholders (Paine, 2004); focus more or less on the ethical grounds of their decisions (Paine, 2004); and assign relatively more or less importance on shareholders compared to other stakeholders (Freeman et al., 2007). 

by Robert G. Eccles, Ioannis Ioannou, and George Serafeim