Why Stakeholders Ignore Firm Misconduct

This article explains inconsistency in stakeholder punishment for firm misconduct. It does so by developing a cognitive view of the process by which stakeholders allocate their limited attention. This cognitive view outlines individual and situational factors that produce variation in a stakeholder’s likelihood of noticing that an act of misconduct has occurred, in how the stakeholder will assess misconduct if he or she does notice it, and in the stakeholder’s decision to punish a firm if he or she judges it to have engaged in misconduct. In sum, this process suggests that as stakeholder attention varies across each step of this process, misconduct often will not result in punishment. This suggests limits on the ability to deter firm misconduct through social control.