09 - 10 June 2018, 13:00 - 16:00
Blavatnik School of Government, Radcliffe Observatory Quarter, Woodstock Road, Oxford OX2 6GG
Invited audience only

About the Conference

In two previous conferences (1) 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.

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.


Saturday 9 June 2018

13.00 – 14.00  Introduction: Laying out the Key Questions
Rebecca Henderson and Karthik Ramanna    

14.00 – 14.15  Break

14.15 – 15.45  Panel #1 
Judges/Regulators: William Blair (formerly, UK Commercial Court), Leo Strine (Delaware Supreme Court), and Jaap Van Manen (Dutch Corporate Governance Commission); Moderator: Katja Langenbucher (Goethe U)

15.45 – 16.00  Break

16.00 – 17.30  Papers #1

Viktar Fedaseyeu (Bocconi), on CEOs as politicians
Discussants: Andrew Eggers (Oxford) and Diana Henriques (NYT)
Clare Wang (Iowa), on MNCs, local institutions, and political risk
Discussants: Bruce Kogut (Columbia) and Colin Mayer (Oxford)

18.15   Drinks

19.00   Dinner

Sunday 10 June 2018

08.30 – 09.45  Panel #2
Media: Jonathan Ford (FT), Justin Fox (Bloomberg), Diana Henriques (NYT); Moderator: John Kay (Oxford)

09.45 – 10.00  Break

10.00 – 11.30  Papers #2 

Ray Fisman (Boston), on corporate philanthropy as lobbying
Discussants: Lynn Paine (Harvard) and Birgit Spießhofer (Dentons)
Reining Petacchi (Georgetown), on political contributions and state subsidies
Discussants: John De Figuereido (Duke) and Justin Fox (Bloomberg)

11.30 – 11.45  Break

11.45 – 13.15  Papers #3

Pepper Culpepper (Oxford), on the power of platform firms
Discussants: James Morone (Brown) and Cornelia Woll (Sciences Po)
Roy Shapira (IDC), on law & the media
Discussants: John Armour (Oxford) and John Coates (Harvard)

13.15 – 13.45  Lunch

13.45 – 15.30  Discussion: (1) How will corporations respond? (2) What are the opportunities for research, teaching, and policy?
Rebecca Henderson, Karthik Ramanna, and Luigi Zingales


Conference Organizers:

1 At Harvard, November 20-21, 2015; at Chicago, March 3-4, 2017.

2 See, 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.