How Much Should Values Guide Business Decisions? The Price Of Moral Leadership

Forbes

9 hours ago

While individuals express continued support for ethical causes, their willingness to bear personal ... More costs for these causes varies significantly.
In today's interconnected world, leaders frequently encounter dilemmas where moral convictions intersect with economic realities. Just how can they best manage this intricate balance and negotiate the costs associated with upholding their values? Our book, The Price of Our Values: The Economic Limits of Moral Life argues that our moral decisions cannot be dissociated from economic considerations.
We conducted surveys across France, Germany and the United States which reveal that while individuals express continued support for ethical causes, their willingness to bear personal costs for these causes varies significantly. For instance, many support human rights initiatives but hesitate when such support entails higher consumer prices.
We try to highlight scenarios where ethical choices meet everyday decisions. For example, during energy crises, individuals may be urged to reduce consumption to support broader geopolitical goals. However, the willingness to make such sacrifices often depends on the perceived personal cost. Our moral commitments are often fragile when tested against the realities of personal cost. We show that individuals who strongly endorse moral causes in principle - such as defending human rights or promoting sustainability - often back down when asked to make large concrete sacrifices, whether as voters, consumers, or investors.
This isn't a cynical observation. It's a necessary one, especially for leaders. If we want to build purpose-driven organizations that are more than rhetorical facades, we need to understand the real trade-offs that govern moral decision-making - and how to lead through them.
Morality Has A Cost
Our core finding is that moral ideals come with a price tag - and for most people, the price they are willing to pay to meet moral ideals is limited. Even when individuals say they care about a cause, their actual willingness to make trade-offs (to spend more, to accept inconvenience, to reduce personal or collective gain) drops off sharply once the cost crosses a certain threshold.
This 'bounded morality' doesn't imply people are hypocrites. Rather, it reveals the economic conditions under which their values are activated - or suspended. Someone may strongly support fair labor practices but still choose fast fashion when the ethical alternative costs $25 more. Or they may demand that a firm divest from polluting industries but oppose a pension fund strategy that slightly reduces financial returns to do so. Consider the case of energy consumption during the winter of 2022–2023. European governments urged citizens to reduce usage in solidarity with Ukraine and to limit dependence on Russian gas. But public response was mixed - not because citizens were indifferent to the war, but because the moral cost (cold homes, higher bills) became real. Sacrifice works when it is realistic.
Leaders must not ignore this behavioral reality. Appeals to values are effective, but they have limits. Overlooking the economic boundaries of moral engagement leads to failed initiatives, employee frustration, and reputational risk.Leadership Means Transparency About Trade-offs
This research offers warnings - and remedies. We believe that understanding the price of values can help leaders better design policies, strategies, and communications that account for the real preferences of their teams, customers, and investors.
In practice, we see two leadership traps that arise from moral overreach:
What does effective moral leadership entail? It is not about moral heroism but rather transparency regarding trade-offs. Ethical choices are rarely costless; leaders must openly acknowledge this fact. When advocating for moral decisions—such as cutting ties with a supplier accused of labor violations—leaders should clearly outline the associated financial and operational consequences. Inviting stakeholders to explicitly express their priorities and to deliberate about who should bear these costs fosters genuine dialogue.
One practical method is using surveys. Our research shows that when people understand the concrete costs tied to moral decisions, they move away from moral absolutism, candidly revealing how much they are prepared to sacrifice financially to uphold their values. Surveying stakeholders about these trade-offs is especially valuable for corporate and political leaders, as it helps anticipate realistic public reactions. Such surveys also facilitate collective deliberation, making stakeholders co-owners of ethical decisions. Transparency about these trade-offs ultimately builds trust, maturity, and active engagement.
We wrote The Price of Our Values not to diminish the role of ethics in leadership, but to ground it in economic and psychological realism. Too often, leaders are stuck between moral maximalism and cynical cost-cutting. There is a better way - one that acknowledges the limits of human motivation and enables people to act decently without demanding sainthood. For leaders, the key takeaway is the importance of aligning moral aspirations with practical strategies, ensuring that value-driven initiatives are both principled and sustainable.Augustin Landier is Professor of Finance at HEC Paris
David Thesmar is Professor of Finance at MIT Sloan School of Management
Daniel Brown is Head of HEC Research Communications at HEC Paris.