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From Profit Maximization to Relational Value Creation: Governance, Objective Functions and Stakeholder well-being in Contemporary Organizational Forms
Purpose – Over recent decades, profit maximization as the firm’s dominant objective function has been increasingly questioned in both economic scholarship and empirical evidence, considering rising social inequalities, environmental degradation, and declining workers’ well-being. In response, a variety of organizational forms-such as cooperatives, social enterprises, benefit corporations, and hybrid organizations-have emerged, experimenting with stakeholder-oriented governance models and broader objective functions. This paper aims to rethink the firm’s objective function by developing a relational perspective on value creation capable of explaining how these organizations generate economic, social, and ecological value in a coherent way.
Methodology – The study adopts a conceptual and theory-building approach. Drawing on stakeholder theory (Freeman, 1984), institutional economics, and the economics of well-being (Sen, 1999), it develops an integrative theoretical framework that links inclusive and participatory governance arrangements, other-regarding preferences and prosocial motivations of economic actors, and multidimensional outcomes related to workers’ well-being, stakeholder value, and community development.
Findings – The paper advances three main theoretical findings. First, it reconceptualizes the firm’s objective function as plural and relational, where profit represents a condition for economic sustainability rather than the sole measure of success. Second, it shows that different stakeholder-oriented organizational forms can be understood as alternative institutional configurations through which relational value is created, depending on governance structures and incentive alignment. Third, it highlights how economic value emerges as an outcome of intentionally structured economic, social, and institutional relationships, rather than as a residual result of profit maximization.
Managerial implications – The proposed framework suggests that managers and organizational designers should move beyond a narrow focus on financial performance and explicitly integrate stakeholder relationships, worker well-being, and social and environmental impacts into governance and strategic decision-making. Inclusive governance mechanisms can enhance organizational resilience, reduce negative externalities, and support sustainable value creation over the long term.
Research limitations – As a conceptual study, the paper does not provide direct empirical validation of the proposed framework. Future research is needed to test the model across different organizational forms and institutional contexts, as well as to develop operational measures of relational value.
Originality – The originality of the paper lies in its integration of behavioral micro-foundations, governance structures, and socio-economic outcomes within a unified relational framework. By repositioning value creation as an emergent and relational process, the study contributes to the ongoing debate on the Renaissance in Economics and offers a novel theoretical perspective on stakeholder-oriented organizations beyond profit maximization.