The Power of the Narrative in Corporate Lawmaking

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The Power of the Narrative in Corporate Lawmaking

The eighth seminar in the ECGI Spotlight Series was held on Monday, 04 April 2022 at 16:00 CEST (10:00 EDT).

The seminar focused on the below research paper from the ECGI Working Paper Series and was presented by:

Mark J. Roe and Roy Shapira

The Power of the Narrative in Corporate Lawmaking

ABOUT THIS EVENT

The power of narratives can determine business, economic, and political outcomes. Corporate governance scholarship has thus far largely ignored narrative power, perhaps unsurprisingly: historically, the plumbing of corporate and securities law rarely engaged public sentiment. However, in an era of increasing populism and burgeoning social media, such as ours, popular narrative, widespread perception, and notions of how-it-will-play in the media are becoming increasingly important in corporate lawmaking as well. Issues such as corporate purpose and stock buybacks now appear regularly in popular and political discourse, and not just in specialists’ analysis. Narrative analysis is therefore needed. The fact that narratives are a fuzzy concept that does not lend itself to neat models or statistical proofs should not deter us from starting to analyze why some corporate issues grip lawmakers and others do not.

To illustrate how important narrative power is and how it can be analyzed, Professors Roe and Shipra delve into the concept of stock-market-driven short-termism. Among policymakers, the media, and executives, the consensus is that the short-termism problem is widespread and pernicious. Yet the academic evidence for stock-market-driven short-termism as seriously damaging the economy is inconclusive and contested. Surely some companies are, as charged, excessively short-term. But the evidence of grave economy-wide damage is sparse and some of it negative. What explains this wide gap between contradictory evidence and assured perniciousness in the popular view? 

Their study offers hypotheses for why short-termism belongs to a group of corporate ideas that are simply better at being popular than others. Specifically, three strong qualities make its narrative power formidable: favourable initial connotations, category confusion, and repeated confirmation. They highlight the psychological, behavioural bases that make the short-termism narrative quite believable on its own (as well as the interest-group dynamics that the narrative bolsters). Influential interests cannot always obtain their goals unless those goals resonate with narrative rhetoric that persuades lawmakers, voters, and the media.  

The ECGI Spotlight Series is a global online seminar programme highlighting chosen papers from the ECGI Working Paper Series.

Spotlight Team:
Mike Burkart (Editor) | Miriam Schwartz-Ziv | Amir Licht (Editor) | Geeyoung Min
Contact: Spotlight@ecgi.org

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