Scholarship by Professor Joshua Macey Honored
Two recent articles co-authored by Professor of Law Joshua Macey ’17 have been recognized for their contributions to corporate law and governance. One, an empirical study of how voluntary corporate social and environmental efforts shape the public’s appetite for government regulation, received the American Law and Economics Review’s 2026 Best (Empirical) Paper Prize. The other, an argument that the government’s deep involvement in industries like energy and defense unsettles the standard case for shareholder primacy, was named one of the 10 best corporate and securities articles of the year in the Corporate Practice Commentator’s annual poll of corporate law scholars.
The first article, written with Hajin Kim (University of Chicago) and Kristen Underhill ’11 (Cornell), “Does ESG Crowd In or Out Public Support for Regulation?” (American Law and Economics Review, 2025), takes on a question that prior research had answered in conflicting ways: When a company voluntarily addresses a social problem — cutting plastic waste, say, or curbing emissions — does that quiet the public’s demand for government regulation or amplify it? The authors argue that voluntary corporate action pulls in two directions at once. A visible effort can suggest a problem is already being handled, making regulation seem unnecessary; but it can just as easily signal that the problem is serious enough to merit attention, or that regulation would not be unduly costly to industry, making rules seem both more important and more feasible.
Because those mechanisms offset one another, Macey, Kim, and Underhill predicted that any net effect would be small and highly dependent on context. Two preregistered, randomized controlled studies with more than 2,800 participants, built around the actual materials firms have used to advertise their voluntary commitments, found no economically significant shift in support for regulation in either direction. The result helps reconcile a body of earlier studies that had reached opposing conclusions, and it cautions against the common assumption that corporate goodwill reliably crowds out, or crowds in, the case for public regulation.
The Best (Empirical) Paper Prize is awarded annually by the editors and prize committee of the American Law and Economics Review to the best paper published during the preceding year. Macey accepted the award at the American Law and Economics Association’s annual meeting, held at the University of Chicago, on May 15.
The second article, written with Aneil Kovvali (University of Virginia), “Private Profits and Public Business” (103 Tex. L. Rev. 711, 2025), Macey and Kovvali challenge one of the central justifications for shareholder primacy: the idea that because shareholders absorb a company’s residual gains and losses, directing firms to maximize shareholder value also tends to maximize social welfare. That logic, the authors argue, breaks down across a set of industries in which the government is deeply entangled with private firms — electric utilities, defense contracting, financial services, and pharmaceuticals. In those sectors, the government stipulates demand, caps or guarantees returns, limits competition, or stands ready to absorb the costs of a firm’s failure. Those interventions, the authors show, leave shareholder-focused firms positioned to “hold up” the government. Once a company becomes the government’s only realistic supplier, or its collapse becomes unthinkable, ordinary contract and regulation lose much of their disciplining force.
Rather than a one-size-fits-all rule, Macey and Kovvali set out context-specific governance reforms: among them, tougher merger review in government-dominated markets, fiduciary duties or board seats that account for non-shareholder interests, and a role for regulators in decisions about executive pay and retention. They note that agencies such as the Department of Defense, the Federal Reserve, and the Federal Energy Regulatory Commission already hold many of these powers but have largely declined to use them.
The article was named one of the 10 best corporate and securities articles of the year through the annual poll conducted for the Corporate Practice Commentator, in which teachers of corporate and securities law vote on a pool of more than 440 articles published that year. Due to a tie, it will be published alongside 10 other selected articles in the upcoming issue of the Commentator.
Macey’s research spans bankruptcy, environmental and energy law, and the regulation of financial institutions. His current work examines the fragility of the nation’s electric grid and how to improve its reliability while accelerating the transition to new sources of energy.
