Speaker:
Jill Fisch
University of Pennsylvania Law School and ECGI
Discussant:
Matteo Gatti
Rutgers Law School and
ECGI
Abstract
Paper Authors: Jill Fisch, Jeff Schwartz
Corporations have always been involved in politics, but today is different. They are publicly taking positions, either directly or indirectly, on contested political and social issues unrelated to their businesses. In contrast to the conventional wisdom, we argue that this practice, which we term “corporate political posturing,” is problematic. First, it is of dubious value to the corporation and its stakeholders. Corporate political posturing often backfires, it does so unpredictably and potentially catastrophically, and it is particularly susceptible to agency costs. Second, it is harmful to society. The fundamental problem is that corporations are institutionally ill-equipped to take centerstage in policy debates. They are inherently self-interested economic actors with goals that often conflict with those of society. This manifests in statements that tend to polarize rather than enlighten and actions that undermine the positions they publicly back. We surmise that corporations themselves are ambivalent about taking policy positions, but are caught in a feedback loop in which customers, employees, and investors demand political involvement, corporations supply it in response to competitive pressure, which normalizes the conduct and leads to further expectations for corporate engagement. We see several ways to inhibit this cycle. One possibility, which we consider and reject, is that courts or corporations subject political posturing to distinctive governance rules. Alternatively, corporations could voluntarily sign a pledge, akin to the Business Roundtable Statement on Corporate Purpose, in which they publicly commit to refrain from political posturing. Transparency is another countermeasure. If corporations voluntarily disclosed, or were required to disclose, the extent to which their actions are consistent with their public positions, fewer corporations would engage in posturing and those that do would back their statements with conduct that matches.
