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Matteo Gatti, "Corporate Power and the Politics of Change" (Cambridge UP, 2025)
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- [00:00]
A
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B
Welcome to the New Books Network. I'm Stephen Pimpair, and we are joined today by Matteo Gotti, who is the author of Corporate Power and the Politics of Change from Cambridge University Press. Matteo, welcome. Thank you for joining us today.
- [01:21]
C
Thank you, Stephen. Thank you so much for having me here.
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B
So I wonder if we might begin by asking you to tell folks a little bit about who you are and what you do and what brought you to this book project.
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C
I'm a law professor. I teach at Harvard Law School. I teach business and financial subjects, and I'm a scholar. And I wrote this book because at some point I became aware of a growing expectation that corporations should step in and solve problems that politics, for whatever reason, isn't handling anymore. And for a long time, there's been a debate, just mostly among lawyers and economists, about what corporations are for. And are they mainly here to generate returns for shareholders, or do they also have responsibilities towards broader set of constituencies such as employees, customers, the environment, society, et cetera, et cetera? And that debate, to be sure, dates back more than a century. But it took on a new life in the late 2010s when companies themselves began publicly embracing broader responsibilities. And so I was drawn into that conversation, wrote about it. But over time, I realized that there was something missing and that was that regardless of how we were debating this, regardless of how the debate played out, corporations seemed actually largely free to pursue whichever goals they wanted. So they would emphasize shareholder value sometimes, but they would emphasize broader social commitments at others. And so the law didn't seem to be doing much to sort of constrain or meaningfully guide that choice. All the while, corporations, and this is what got me into writing this, were increasingly stepping into spaces that we traditionally consider those should be for politics, for the government. So think about climate, civil rights, public health, and even democracy itself. Corporations weren't necessarily lobbying there. They were actually filling gaps left by political dysfunction. So that's what led me to write the book. Not about theory, not about what corporate purpose does in theory, but more about what happens when these actors, corporations start acting as governing actors and what that means for their business, what that means for society, and ultimately democracy itself.
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B
Terrific. So as you just noted, you refer to this as corporate governing, and you put that into two categories, two buckets. I wonder if you might tell us a little bit about what it is that you are paying attention to and then maybe work your way toward telling us maybe some of that history, the kinds of issues, how they emerge, why they emerge, et cetera.
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C
Fantastic. So I call this corporate governing and sort of like I split in two parts. One I call socioeconomic advocacy, and the other one, I call it government subsidies, institution. And you know, to, to simplify, one is stock, the other one is action. And so the debate about corporate purpose was always focusing about the action, right? What initiatives corporations are entertaining to the benefit of shareholders or to the benefit others, what they should be benefited, et cetera, et cetera. Then we are in the 2010s, you know, social media, you know, social movement out there, social movements out there, and, and corporations executives start to be speaking about issues, started to some big public stands on a variety of things from, you know, climate to, you know, Black Lives Matter to, you know, hashtag me too. So corporations began being some sort of, you know, pulpits out there that where executives will say, oh, we disagree with this particular state for having introduced a bathroom bill. We disagree with Florida when they passed Don say gay. We are disagreeing with the Trump administration withdrawing from the Paris agreement to disagree with changes to DACA and so on and so forth. And so I see these two things as two flips of the same thing, which is there's the action part that needs to somewhat corroborated with the talk part and corporations doing both things, and they're doing both things because their talk can be powerful because these are, you know, important actors in, in society. You know, they have a megaphone that, you know, we, the regular citizens do not have. And whenever they tweet something, whenever they issue a press release that has implications. And so I started to investigate that.
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B
So on some of that action side is external, but some of it is internal as well. Right. I'm thinking of say, companies that made the decision to extend benefits to domestic part same sex domestic partners before any state recognized those as legal.
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C
Right? Correct. And so this was probably the spark that got me to really write about this, because you think about this is that to pursue the corporate interest. And if you think through it, it's like, yes, it is, because you have a whole bunch of extremely talented employees at your firm in Silicon Valley. This is the case of Lotus Software back in the 90s. And there were these bottom up demands to, to extend these benefits. And so that's what they got. And ultimately these became the law. So you know, it's one example where these leads to really momentous changes in the entire legal environment that started there. Right. And that's not necessarily extended. Right. Because your employees are working for you and if you keep and hire all the talents, you're a better, you know, you're going to be doing so much better for all your shareholders as well. So that's how the, the story can be told from, from an angle. That's why these can make sense.
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B
So say a little bit more about that. So you talked about some of that employee pressure that causes them to engage in these ways. Where are other spaces where those pressures are coming from?
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C
I mean, over the last 15, 20 years there've been pressures coming also from investors. Of course, the ESG movement has been an important proposal over, you know, in the late 2000s, early 2010s, asset managers started to actively market products aimed at improving the sort of the climate footprint of the portfolio companies that we're investing in. That extended also to other social issues that had to do with, with the employees. And so they were investors who were actually pushing for certain changes. And that had obvious implications on how executives were dealing with these. So there were some in their shareholder base who actually wanted corporations to steer towards a more sort of holistic capitalism, if you will. And now of course, all of this, you know, as sort of an historical flavor right now because we're in the midst of a deep backlash and sort of counter reform as opposed in the book that you know that it comes from, from the conservative war.
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B
What Else should we know about, about the backlash? Is it the same forces that are causing the backlash that caused the initial expansion into what I think we would identify as progressive?
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C
Well, politics works in sort of like in a pendulum. And so there were gains, or at least headlines made on one side. And then in the right, they realized that they could use the same media to sort of gain attention. And it turned out that these were topics that were rallying their supporters, right? Culture wars make extremely good ratings. They make better ratings than talking about the actual economy. And this is shown in recent studies. And so the political right sort of rode the moment and decided to go out and single out corporations for doing too much of what they deemed was to quote, unquote, work. And that, you know, that's how it started, right? And but then it snowballed because, you know, the likes of Elon Musk, the likes of governors in the red states and Attorney General and then, you know, the president himself, you know, they all went really after what was happening that was considered too progressive. And so, you know, ESG was singled out. Dei, of course, is singled out. And you know, several pieces of legislation at the state and federal level or executive orders have been passed to sort of counter this. And corporations have gone quiet and they've been quiet for the time being.
- [11:09]
B
And then of course, we get the backlash to the backlash, right? I'm thinking of, say, Target, right, Which had had at least a public facing set of very public priorities and you know, would, would, would install special displays around gay pride events, right? Backlash to that. And then now we are in the midst of a backlash to the backlash and a boycott from the left against Target, having surrendered to that backlash. So with that as lead in, how should we be thinking about what are companies doing here? Why are they doing it? Should we think of this as positive or negative? How the benefits and risks compare?
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C
So the sobering answer I gave in the book is that companies, they should each be running their business and figure it out. They hire people who should be good at their jobs to know how to navigate this. I personally do not as a law professor, I do not have a background and in PR and in communications and in strategy. You know, that's their job. You know, I might invest in some of these companies that I don't want them to screw up, but I give them discretion to run their business. And I think that the answer is that each of these companies is quite different and each of these companies is, should be deciding how to handle this. You know, we have examples of companies who've done pretty well with this. You know, the case in point is the Nike Colin Kaepernick campaign that attracted a lot of backlash, but did like so well because backlash was the actual point. And then you have other companies that had missteps. And again, you know, you and I can debate. It's like, oh, with hindsight we can say, well, they were wrong. What did they think? But then ultimately, you know, that's the nature of the business. You take risks sometimes. Sometimes you succeed, sometimes you don't. You know, sometimes the risks are enormous. But hey, you know, you succeed. You know, when Apple launched the iPhone, we all thought that it was crazy to, you know, to try to sell a phone that Everybody had at 50% over the then prevailing market price. And people were laughing about it. And then look at what happened. So, you know, businesses, you know, the reason why they're businesses and they do that for a living, is that they should know exactly what to do in this. Now, obviously, as a society, going back to your question, as a society, what is the net effect? And, you know, it depends. You know, look, in some way you can see this as the sort of counter reform, as sort of as a market adjustment, if you will, because this is the market we're in. Right. It's sort of like a political market. Right. Uses metaphor. Right. And so maybe, you know, there was too much activity there and now we're a little more pick and choose on, on the matters and got to be careful. And so maybe that was an adjustment that ultimately worked or maybe this was a good movement and it was something that was fostering some incremental gains and it's a pity that is not happening anymore. I believe that right now we're in the midst of the adjustment still, so it's premature to see what's happening. Of course, we all know that there's too much silence right now. You see the likes of Bob Rubin or Paul Krugman saying, why are executives silent? Obviously what's happening with the administration? Weren't they all talking a second ago? The answer is, yeah, of course there's sound, because maybe corporations are not the best fit to enter this. You know, in times where, like, everything is normal, you have a quieter presidency, sure, you can voice, you can say that you're displeased, that you can make certain actions. Right now we are at times of, you know, overt retaliation in enforcement. So, you know, we're in part of a sort of like a vendetta tour. And so it's prudent to stay Quiet. And maybe, maybe we don't know, but maybe there is some action in the background and there is somebody who's trying to dissuade certain positions. We don't know. But is taking a strong position against the presidency now a smart thing to do if you're an investor in that company? I'm not so sure. Now, look, one of the things that propelled this entire phenomenon was, ironically, the first presidency. The first presidency was considered weak. The first political action they took was the muslin ban. Right? And you remember that everybody, you know, all corporate America reacted so fiercely. In fact, those who were seen to sort of cooperate with the administration, and that's Uber, were punished. And, you know, the, the competitor LFT was sort of getting new customers just because of that. Right. Uh, and, you know, there are several examples. The, the. The aftermath of Charlottesville. I mentioned before a Paris agreement, January 6th. I mean, after January 6th, Trump got kicked out of Facebook, Twitter and all social media. Right.
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B
So.
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C
We had that moment, and now we're dealing with quite the opposite moment. So we'll see what it'll be doing.
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B
So you started the conversation by pointing out that one of the things that you are interested in writing about is the ways in which, with these kinds of activities, corporations are stepping into spaces that may have previously been where we would expect government to be acting. So how should we be thinking about that? Is that in and of itself a threat to democracy, or is it simply what happens when you have a democracy, give or take, lodged within a capitalist economy?
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C
I think it's a little bit of both. I think that if you abuse, and the book lands on this, if you abuse of this phenomenon, probably it's going to be a threat to democracy in the longer run and explain that in a bit. But the other thing he said is correct. It's unpractical to separate the two functions, really, in a neat way, because there's no such thing. You and I are both private and public citizens somehow, and so are businesses. You go back in time. You know, corporations themselves were formed as sort of a secondary function of the state back in colonial times. But, you know, even more recently, you know, we have the benefit system that we have, we have our pensions that we have, we have the health system that we have, because corporations really started, businesses started to offer it, especially in this country. And you go back, you know, during war times, but also in the midst of the civil rights era, corporations were present. So this idea that the two lanes should be completely separate is something that some economists sort of idealize but it cannot work that way. Now there are certain things that are more troublesome than other think about political contribution and campaigning. That's a problem. And we have a far bigger problem here than in other places because of Citizens United, because this is considered a speech that should be protected under the First Amendment. But there are other things that bother a lot of people, but they're more rational lobbying. For instance, if you and I own a shop and that shop is being somehow targeted by some bad regulations, we're going to try to do everything we can to convince the regulators that their actions are wrong. And so that's what's behind lobby not defending the entire system, but it's rational if you're a business owner to do that. And this in some ways is an extension of that. It sort of like catches the eye because it's not that we're traditional lobby sort of goes which is or the actual regulations dealing with my business but you know, it's more about my employees or about macro systemic items like you know, the environment, you know, climate. Right. And so, and the risk that comes with that. So where's the long term risk? And I the book separates the analysis of what's good, what's good or bad for corporations themselves for the business from a sort of business standpoint. But then I use a societal lens and you know, talk about the pros and you know, the pros and the pros. We can say, you know, we mentioned earlier the extent the expansion of benefits to same sex couples, you know, ultimately resulted in, you know, these being the law right now. So those are good things. The bad things are, you know, one we mentioned already, it's something we see, you know, this phenomenon, corporate governing is flaky. You know, times changed, political conditions change and now they're silent and so now they're not really backing you up. And so if you're an ally there, if you thought that you found an ally in corporations and now they're just silent. I'm not surprised that but because you know, they, they respond to all this different inputs and pushes and pulls and they're in the mid and they cannot really make a principled decision and stay the course because they're subject to all the different market pressures. The bigger risk that I see over the long run is that, and this is particularly true for the United States, you know, we love individualism. We love to sort of have all things private. But 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. You know, we're at a time where we're, like, starting to realize that if we use AI tools too much, our brain stops working. Well, and this can be also true for politics. You know, like, why using corporations? You know, you have several tools at your disposal to sort of engage you with the political actors that you need to engage with. You know, try to cut the middleman here and the middleman here being the corporation, maybe, you know, forge some temporary alliances, but don't think that that's the way to go, because, hey, look, one of the reasons these became such a big thing is that there's this realization in the US that, you know, Congress cannot do anything, that, you know, politics is so gridlocked that there are these. These crazy regulatory vacuums. And sure, corporations are the only game in town. Let's use them. And sure, you know, that's Realpolitik. Makes sense, practical. But, you know, you know, the substitute is never good. You know, you have to always strive to get the thing done through the mainline, because otherwise it's always gonna come out with some flaws, and then you're gonna start with, like, trying to fix the flaws and you completely lose. What's your goal? Right. Your goal is not to be outraged because corporations are not. Are not saying anything against these administration. Right. Your goal should be to, you know, do everything you can to stop that administration from doing the stuff that. That harms people. So, you know, should we.
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B
Should we be thinking differently about, like, giant multinational corporations, Apple as an example. Right. That have business, important parts of their business lodged in countries with whom we have complicated relationships? Let's say, should we think differently about those and their sheer size and wealth and power, then I don't know what a good example would be sort of something, you know, smaller with. With fewer international concerns and with less money and therefore less ability to use that money to change politics?
- [23:29]
C
That's a good question. And the book doesn't really get too much into the international component of things. It is mostly on the US Situation. But of course, you cited Apple, which is one of the many multinationals from here in general, multinationals raise a bunch of additional problems. And I think that it's. It's intuitive to think that, yes, maybe those are more dangerous because they're obviously also bigger, and also they can do a bunch of arbitrage so they can purport to be good citizens here and be an awful citizen someplace else. That's correct. The counter to that is that we are very much aware of it. And they are subject to potential backlash for customers who can call them out on hypocrisy. And that's happening, by the way, if you look at the empirical literature they show, and this comes from marketing literature for the most part, is that one of the things that can go terribly wrong when you're trying to intervene in the political space is that the customers, the markets, they perceive you as insincere. If you're not perceived as authentic, you're gonna have problems. So, you know, if you think about some big debacles that happened. If you recall a few years ago, there was a, A, a commercial by Pepsi that backfired at Pull it out because they were trying to, to show that with a can of soda you could stop racism. Which is crazy, right?
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B
Turns out that's not true.
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A
Yeah.
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C
You know, so there are the larger, the largest corporations are, you know, they gain more attention, especially if they make the gadgets that we use on a. Not on a daily basis, but every minute of our lives. So, you know, we're more sensitive to what happens with them. And, you know, it's easier to sort of spot, you know, the best stuff that they're doing in other jurisdictions. So maybe because of that, I wasn't focused on international part because I thought, well, you know, we sort of anticipate this story, and it's sort of part of the bigger picture, which is if the, you know, they got to be very careful of what they're, what they're, what they're trying to say, because if they don't practice what they preach, they are, they're in danger.
- [26:05]
B
You're listening to the Public Policy Channel of New Books Network, and we've been speaking with Matteo Gotti, the author of Corporate Power and the Politics of Change from Cambridge University City Press. Matteo, thank you so much for joining us today.
- [26:17]
C
Thank you so much. It was a pleasure.