Once organisations achieve their profitability and market performance targets, they frequently focus on additional objectives that may stretch beyond mere financial gains. Yet, these supplementary goals do not always align neatly; they can sometimes be in direct opposition. A prime example of this tension is the trade-off between prioritising shareholder returns and investing in social causes. Such divergence prompts a pivotal question: how do companies decide where to direct their surplus resources and which goals to prioritise when faced with these competing demands?
A recent study, published online in the Journal of Business Ethics on 9 May 2025, delves into this question by shedding light on the inner workings of the boardroom. Conducted by Professor Toru Yoshikawa of Waseda University’s School of Social Sciences, alongside Associate Professor Cyndi Man Zhang from Singapore Management University and Professor Helen Wei Hu of the University of Melbourne, the research investigates how internal political dynamics within corporate boards shape the distribution of resources between shareholder payouts and contributions to societal causes.
Professor Yoshikawa highlights the underlying curiosity driving their research: “We were intrigued by the notion that, although for-profit firms must prioritise financial goals to remain viable, there is still a measure of flexibility in how they allocate their resources once these goals are met. Boardrooms can function as political arenas, where different subgroups vie for influence. We sought to understand how these internal power struggles impact the way resources are allocated.”
To untangle this complex web of corporate decision-making, the study advances a theoretical framework that identifies two dominant coalitions within corporate boards. The first, termed the shareholder-value coalition, is usually composed of CEOs and directors with expertise in finance or accounting. This coalition champions the maximisation of shareholder value through measures like dividend payments. By contrast, the state-endorsement coalition is typically comprised of board members with prior experience in government or public policy who are more inclined to advocate for corporate donations and socially responsible initiatives.
The researchers applied this framework to an extensive dataset covering 2,071 Chinese firms listed on the Shanghai and Shenzhen Stock Exchanges from 2008 to 2013. This period was especially significant, as these firms represented more than 84% of China’s GDP. By scrutinising financial performance, dividend payments, philanthropic contributions, and the professional backgrounds of board members, the team could determine which coalition held greater sway within each company.
Given the distinctive governance model in China—a system that interweaves market-driven capitalism with pronounced state involvement—these firms offered a unique vantage point. Many firms exhibited a dual boardroom structure, with shareholder-value and state-endorsement coalitions actively influencing decision-making. The shareholder-value coalition aimed squarely at boosting returns to investors, while the state-endorsement coalition lent its weight towards initiatives aligned with social welfare and public harmony.
The study’s findings reveal a nuanced picture. Once firms met their financial performance targets, they typically pursued both goals: satisfying shareholders and supporting social causes. However, the balance between these two objectives depended on which coalition held the upper hand. Firms dominated by the state-endorsement coalition allocated more funds towards corporate donations, yet this increased spending on social causes did not diminish dividend payments to shareholders. In firms with a more powerful shareholder-value alliance, dividends took centre stage. Notably, after achieving their primary objective, coalitions often became more receptive to the other goal. These insights offer a rare window into the internal boardroom politics that ultimately shape how companies distribute resources and navigate competing priorities. Professor Yoshikawa underscores the significance of these dynamics: “Shareholders should pay close attention to their invested firm’s board composition because there may be factions within the board, and each faction might champion distinct goals that do not always align perfectly with shareholders’ interests.”
More information: Cyndi Man Zhang et al, Shareholder Satisfaction or Societal Benefit? Coalition Support and Goal Prioritization, Journal of Business Ethics. DOI: 10.1007/s10551-025-06018-5
Journal information: Journal of Business Ethics Provided by Waseda University