New Books Network: Matteo Gatti on "Corporate Power and the Politics of Change"

Host: Stephen Pimpare
Guest: Matteo Gatti, Harvard Law School Professor, Author
Episode Date: January 25, 2026
Book Discussed: Corporate Power and the Politics of Change (Cambridge UP, 2025)

Episode Overview

This episode delves into Matteo Gatti’s new book, which explores how modern corporations have stepped into roles traditionally reserved for political institutions, especially amid governmental gridlock and societal shifts. Gatti examines the phenomenon of “corporate governing,” the motivations behind corporate activism, and the ramifications for business, society, and democracy. The conversation traverses historical trends, triggers for corporate engagement in social issues, employee and investor pressures, recent backlash and counter-backlash, and the complex relationship between corporate conduct and democratic health.

Key Discussion Points and Insights

1. Corporate Purpose: Evolution & Ambiguity

• Gatti traces the longstanding debate over corporate purpose—whether companies primarily exist to maximize shareholder value or have broader responsibilities (employees, environment, society).
• The 2010s saw companies pledging social commitments, but, as Gatti notes, "regardless of how we were debating this, corporations seemed actually largely free to pursue whichever goals they wanted" and "the law didn't seem to be doing much to sort of constrain or meaningfully guide that choice" ([02:54]).
• Gatti’s focus shifts beyond theoretical debates to analyze real-world corporate behaviors as “governing actors” ([03:38]).

2. Corporate Governing: Two Types ([04:13])

• Gatti distinguishes between:
  • Socioeconomic Advocacy (“talk”): Public stands, executive statements on issues like climate, Black Lives Matter, Me Too.
  • Government Substitution (“action”): Tangible interventions, such as extending benefits to same-sex partners before state recognition.
• Example: Lotus Software’s early 1990s decision to extend benefits in response to employee pressure, which “leads to momentous changes in the entire legal environment that started there” ([06:30]).

3. Sources of Pressure

• Internal: Employees demand change, especially in talent-driven sectors.
• External: Investors—particularly via ESG (Environmental, Social, Governance) investment trends—push companies to adopt broader social stances ([07:45]).
• Gatti identifies a pendulum effect wherein social gains provoke political backlash—often leveraged by right-wing media and political actors ([09:18]).

4. Backlash and Counter-Backlash ([11:08])

• Waves of reaction and counter-reaction, illustrated by the controversy over Target’s LGBTQ+ displays and subsequent boycotts from both political sides.
• Corporations, Gatti argues, must decide independently how to navigate these risks: “I do not have a background in PR…that’s their job…each of these companies is quite different and each of these companies should be deciding how to handle this” ([11:49]).

5. Risks and Outcomes: Corporate Calculus

• "Sometimes you succeed, sometimes you don't. Sometimes the risks are enormous….But hey, you succeed. When Apple launched the iPhone…people were laughing about it. And then look at what happened." ([12:45])
• Societally, these cycles represent a political market correction—excessive activism begets retrenchment, which may ultimately settle into a new equilibrium ([13:59]).

6. Corporate Silence and Retrenchment ([15:26])

• Recent trends show corporations pulling back from public stances due to intensified retaliation and enforcement threats from political actors.
• "There’s too much silence right now. You see the likes of Bob Rubin or Paul Krugman saying, why are executives silent?…Maybe corporations are not the best fit to enter this." ([15:59])
• Draws a sharp comparison: after the Trump administration’s “Muslim ban,” “corporate America reacted so fiercely,” but now, “we are dealing with quite the opposite moment” ([16:22]).

7. Threats to Democracy and Corporate Substitution ([17:08])

• Gatti argues that corporate governing in moderation can be beneficial, but chronic reliance poses risks to democratic health:
  • The distinction between public and private functions is often impractical—corporations have historically played quasi-governmental roles (e.g., providing health benefits, pensions).
  • The greater risk: Privatising functions traditionally associated with the state (politics, social support) can erode civic participation and government accountability ([19:49]):

    "If we sort of privatize also this function...if we just really learn to rely on corporations to do this job, you know, we lose it." ([21:25])

    • Instead, alliances with corporations may be pragmatic, but citizens should strive for direct political solutions.

8. Multinational Considerations and Hypocrisy ([22:52])

• Multinational corporations like Apple present unique challenges due to their scale and ability to “arbitrage”—appearing virtuous in one market while acting differently elsewhere ([23:28]).
• The risk of customer backlash is higher if companies are seen as inauthentic:

  "If you're not perceived as authentic, you're gonna have problems. Think about some big debacles...the Pepsi commercial that backfired…trying to show that with a can of soda you could stop racism. Which is crazy, right?" ([25:11])

Notable Quotes & Memorable Moments

• On the ambiguity of corporate commitments:

  "Corporations seemed actually largely free to pursue whichever goals they wanted… the law didn't seem to be doing much to constrain or meaningfully guide that choice." – Matteo Gatti ([02:38])

• On internal corporate change:

  "This leads to really momentous changes in the entire legal environment that started there." – Matteo Gatti, about extending domestic partner benefits ([06:30])

• On the backlash dynamic:

  "Culture wars make extremely good ratings. They make better ratings than talking about the actual economy." – Matteo Gatti ([09:36])

• On the difficulty of expectations of companies:

  "They should each be running their business and figure it out…each of these companies should be deciding how to handle this." – Matteo Gatti ([11:49])

• On activism, risk, and hindsight:

  "You and I can debate…with hindsight…they were wrong. What did they think? But then ultimately…that’s the nature of the business." ([12:16])

• On the risk of outsourcing democracy:

  "If we just really learn to rely on corporations to do this job, you know, we lose it…if we use AI tools too much, our brain stops working well, and this can be true for politics." ([21:25])

• On corporate hypocrisy and consumer response:

  "If you're not perceived as authentic, you're gonna have problems. Think…the Pepsi commercial that backfired... trying to show that with a can of soda you could stop racism." ([25:11])

Timestamps for Key Segments

• Gatti's background & interest in corporate power ([01:30]–[03:38])
• Defining 'corporate governing' and its two types ([04:13])
• The rise of internal & investor pressures ([07:36])
• Backlash: Political & social media dynamics ([09:18])
• Case study: Target’s Pride backlash & business strategy ([11:08]–[12:45])
• Corporate silence and political calculus ([15:26]–[16:22])
• Discussion: Democracy & privatization of politics ([17:08]–[21:25])
• Multinational implications & corporate hypocrisy ([22:52]–[25:11])

Conclusion

Gatti’s core message is a caution against overreliance on corporations to fill the gaps of an ailing political system. While corporations can and do effect social change, their actions are volatile and often driven by market, public, and political pressure. For sustainable and principled progress, Gatti urges a recommitment to democratic processes, warning: “If we just really learn to rely on corporations…we lose it.”