Luk Van Wassenhove
Emeritus Professor of Technology and Operations Management
N. Craig Smith
Affiliate Professor of Ethics and Social Responsibility
Runner-up in the Business Ethics Quarterly Best Article award
Stakeholder Value; Normative Business Ethics; Stakeholder Theory; Prospect Theory; Reference States; Stakeholder Judgments; Corporate Governance; Investors, Stakeholders and Accountability
Although central to stakeholder theory, stakeholder value is surprisingly neglected in the literature. The authors draw upon prospect theory to show how stakeholder judgments of value depend crucially on the reference state, how there are several alternative reference states that may be operative when stakeholders judge value, how the choice of reference state for stakeholders’ value judgments can occur intuitively or deliberately, and how the level of the operant reference state may change with time and may also be incorrectly perceived by stakeholders or managers.Their theorizing results in a fundamentally different way of perceiving the value of corporate actions to stakeholders and shifts understanding of the avenues available for companies and others to influence stakeholder judgments of value. This novel perspective has implications both for theory and management practice, and not least for normative business ethics, if business is about stakeholder value creation.