Regulation, Public Attitudes, and Private Governance

• Date: 01 March 2019
• Published date: 01 March 2019
• DOI: http://doi.org/10.1111/jels.12209
• Author: Janice Nadler,David A. Dana

Journal of Empirical Legal Studies

Volume 16, Issue 1, 69–93, March 2019

Regulation, Public Attitudes, and Private

Governance

David A. Dana, and Janice Nadler*

Corporate adoption of politically contestable practices (e.g., sustainable forestry; cage-free

eggs) is increasingly common. In two studies, we empirically explore the relationship

between corporate practices and subsequent public support for legislation mandating such

practices. One hypothesis is that public support for new legislation decreases following

corporate action because the private sector is perceived to be adequately managing the

problem, thus obviating the need for a legislative response. A competing hypothesis is that

public support for new legislation increases because people are prompted to recognize the

issue in question as one in need of regulation. Our results suggest that announced

changes to corporate practices can increase public support for legislation, but the effects

differ depending on the political orientation of the perceiver. Legislators might fruitfully

integrate corporate endorsements into public information efforts.

I. Introduction

In recent years, activists have turned away from focusing on public politics and public

political institutions and instead devoted substantial resources to what is sometimes

dubbed “private politics” or “private governance” (Abito et al. 2015; Baron 2003; Egorov &

Harstad 2015; Vandenbergh 2013). In addition to activist campaigns formally organized

by NGOs, private politics can also take the form of shareholder activism by insiders, as

well as boycotts and protests by outsiders (Soule 2009). In the private governance model

of regulatory change, social movement actors target corporations that are either directly

engaging in practices the activists find objectionable or contracting with supply chain

sources engaging in such practices. Through some combination of threats, entreaties,

and collaboration or even ongoing partnership, the activists persuade the corporations to

*Address correspondence to Janice Nadler, Northwestern Pritzker School of Law, 375 E. Chicago Ave., Chicago, IL

60611; email: jnadler@northwestern.edu. Dana is Kirkland & Ellis Professor of Law, Northwestern Pritzker School

of Law; Nadler is Research Professor, American Bar Foundation and Nathaniel L. Nathanson Professor of Law,

Northwestern Pritzker School of Law.

We are grateful for financial support from the Nathaniel and Leah Nathanson Research Fund at Northwestern

University Pritzker School of Law, and the American Bar Foundation. We received thoughtful feedback from work-

shop participants at the Conference on Empirical Legal Studies, the American Bar Foundation, the Center for the

Study of Law & Society at Berkeley Law, and the Searle Center on Law, Regulation, and Economic Growth at

Northwestern Law.

69

adopt voluntary, nongovernmental, private self-regulation that entails limiting or even

eliminating the practices (Baron 2016; Baron & Diermeier 2007; Hugill et al. 2016), and

sometimes with the result that the firm becomes more receptive to future activist chal-

lenges (McDonnell et al. 2015). Some firms might adopt more stringent and more costly

measures than those required by law in an effort to trigger tougher regulation and raise

rivals’ costs (Denicolo` 2008). However, regulators have enforcement discretion, and while

tough self-regulation can sometimes crowd out legislation, it can alternatively lead regula-

tors to demand higher compliance from firms that “signal green” (Lyon & Maxwell 2016).

Social movement activists have had notable success in inducing corporations to

engage in private governance. Issues in which private governance has played a major role

include climate change, environmental safety risks (including nanotechnology), discrimi-

nation, working conditions (including wage levels), safety of employees or customers,

endangered species protection, and animal welfare (Abito et al. 2015; Light & Orts

2015). Fourteen percent of the world’s temperate rainforests and 7 percent of global fish-

eries are governed by private certification systems that were adopted, at least in part, as a

result of NGO activism (Vandenbergh 2013). Two of the largest and best-known U.S.-

based multinational corporations, McDonalds and Walmart, were the targets of a large

amount of activism, especially in the 2000s. For example, McDonalds was the target of

obesity lawsuits and a successful documentary (SuperSize Me). Walmart faced campaigns

from pro-labor groups, among others. Those two firms have adopted a remarkably wide

range of new internal rules and requirements for what they sell and how they conduct

their businesses (Vandenbergh 2006). Others have followed suit.

While there may be a number of reasons for social movement activists to focus on pri-

vate governance, one generally cited reason in the United States is that federal legislative

change is slow and arduous, if not impossible. As Diermeier explains, “[m]any activists now

believe that the ‘long march through the institutions’ takes too long and can be easily

blocked” (Diermeier 2007; see also Vandenbergh 2013). Thomas Lyon has noted that a great

deal of work remains on empirical questions regarding the relationship between private gov-

ernance and public politics (Lyon 2012). To the extent that scholars have addressed the

effects of private governance on the likelihood of and nature of new public regulation, they

have focused on the question of how private governance changes the lobbying efforts and

practices of rational profit-maximizing corporations that engage in such governance, and the

welfare effects that might follow (Egorov & Harstad 2015; Lyon 2012; Lyon & Maxwell 2008).

Some worry that corporate voluntary compliance initiatives end up crowding out legal

accountability and public regulation (Bartley 2005; Werner 2012). Under certain conditions,

such crowding out might have beneficial welfare effects because self-regulation can reduce

transaction costs (Egorov & Harstad 2017; Maxwell et al. 2000). But these benefits might be

smaller than those achieved through government regulation, and they depend on firms

engaging in a genuine initiative and not just “greenwashing” (Glachant 2007).

Scholars generally have not addressed, or even raised, the question of whether pri-

vate governance might have an effect on the political economy of regulation by changing

the preferences of portions of the electorate. One notable exception is Malhotra

et al. (2017), who studied support for government regulation of six environment issues

(e.g., banning all plastic packaging for food and beverages) among voters, environmental

70 Dana and Nadler