About the Conference
In two previous conferences1 and in a sequence of papers,2 we have suggested that there is a “crisis” in the neoclassical theory of the firm. We read the theory as suggesting that managers are positively required to invest in political activity—including political activity that weakens institutions on which the free market relies – if such investments are likely to increase shareholder value of individual firms. Indeed, an extensive body of research suggests that firms routinely engage in the political process with the aim of shaping the rules of the game to their own advantage.
To be sure, there may be circumstances when such political activity is not welfare reducing (e.g., in cases in which public institutions are sufficiently robust or when political markets are themselves sufficiently competitive). Under less favorable conditions, however, such political activity can plausibly be expected to reduce social welfare by distorting the institutions of the free market. Since the primary justification of the pursuit of shareholder value is the belief that it maximizes social welfare in the presence of the free market, suggesting that this pursuit justifies firms actively distorting the market through political activity would seem to present a fundamental contradiction.
Notably, Milton Friedman argued that firms should maximize profits “while con¬forming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.” He did not argue that firms should maximize profits through investments designed to change the basic rules of the game to their advantage. Yet this is exactly what seems to be required under the prevailing theory of the firm.
Call for Papers
The Corporate Political Engagement conference calls for papers that explore potential solutions to this problem, focusing particularly on the degree to which it has been handled differently in Europe and the United States. We seek papers that explore the lessons that can be learned from the study of the private sector and the state, in either the US or Europe, that might give us insight into this set of issues. We are particularly interested in the nature of the institutions that allow states to contain corporate political pressure, even in “thin” political markets, but we welcome papers that can plausibly throw light on any aspect of this topic.
We are particularly interested in questions such as:
- What kinds of institutional mechanisms are effective at containing corporate political pressure? To what extent are they country specific?
- Do differences in corporate law across jurisdictions shape corporate political engagement?
- Do norms of corporate behavior with respect to these issues differ across countries, and if so, why?
- What role does the media play in constraining corporate behavior?
- How have states approached the problem of informing policy makers in those cases in which firms have privileged access to information, and how successful have these mechanisms proved to be?
To address these questions, the Blavatnik School of Government at Oxford University, the Stigler Center at the University of Chicago Booth School of Business, and Harvard Business School will organize a conference in Oxford on June 9-10, 2018. Our hope is that the conference will spur a lively conversation about these issues in ways that will yield insight into how best to sustain the appropriate level and types of engagement between firms and governments.
Please submit preliminary papers for possible inclusion by January 31, 2018, through our online submission form. Authors whose papers have been accepted will be notified by the end of February.
The conference will be by invitation only. Researchers interested in receiving an invitation, please submit your CV to email@example.com.
- Professor Rebecca Henderson, Harvard Business School
- Professor David Moss, Harvard Business School
- Professor Karthik Ramanna, University of Oxford Blavatnik School of Government
- Professor Luigi Zingales, University of Chicago Booth School of Business
1At Harvard, November 20-21, 2015; at Chicago, March 3-4, 2017.
2See, for example, https://www.brookings.edu/research/do-managers-have-a-role-to-play-in-sustaining-the-institutions-of-capitalism/ and http://www.hbs.edu/faculty/conferences/2015-crisis-in-theory-of-firm/Documents/Crisis%20in%20the%20Theory%20November%202015.pdf and https://www.aeaweb.org/articles?id=10.1257/jep.31.3.113.