Despite emerging insights into stakeholder theory, we lack insights into how stakeholders observe, interpret, and respond to a firm’s treatment of other stakeholders. Extant research has only just begun to consider the inherent heterogeneity in values and instrumental considerations between stakeholder groups. This study explores the behavioral responses of stakeholder groups to a firm’s receptivity to the interests of other stakeholders, particularly focusing on employees’ reactions to wealth-oriented shareholder proposals. We argue that employees are likely to evaluate their firm negatively when the firm adopts a receptive stance toward wealth-oriented shareholder proposals, as such actions may signal a misalignment with employee values and threaten their instrumental benefits. Such a negative reaction is stronger in the presence of labor unions but weakened by a firm’s favorable treatment of employees. We also find that high-level employees are less affected by shareholder primacy signals compared to rank-and-file employees. We test our ideas on a sample of S&P 1500 firms with online employee ratings.
