Corporate Greed: Formalizing the Construct and Explicating its Organizational Consequences

Abstract

Our conceptual paper explores the merits of stakeholder versus shareholder capitalism through the concept of corporate greed. We define and set boundary conditions for the construct, summarize its precursors, and theorize about its organizational consequences. We posit corporate greed incorporates the simple rule, or shared heuristic, of shareholder primacy, which leads to mutually opposing effects on firm performance: it benefits performance in the short term through a focus on short term horizons and exploitation strategies but hurts performance in the long term as it develops an instrumental ethical climate that decreases organizational commitment. A discussion of the implications follows.