Putting corporate America’s new ‘stakeholder’ principles to work in regulatory policy

Too often, the corporate response to regulation has not been “what’s best for all stakeholders,” but “what’s best for the CFO (Chief Financial Officer).” The lobbying refrain sounds like this: “because regulation could hurt profits, it will hurt our ability to invest and innovate and therefore hurt the public interest.” You hear this from Big Pharma’s television ads. Broadband networks used the argument to kill net neutrality. Big Tech hides behind it to exploit our personal privacy. For almost 50 years—spearheaded by the Chicago School of economists—the gospel that companies know best and regulation is bad has been corporate America’s default policy position. The argument received a boost with the arrival of the internet. As new companies arose and old companies retooled, digital technology was presented as something close to magical. Anything that interfered with the companies’ ability to make their own rules for the digital marketplace threatened to break that magic. 

As a regulator, I lost count of the number of times the benefits of “permissionless innovation” were touted as the reason to oppose oversight of corporate activities. The myth of the genius in the garage became the image of digital businesses, whether large or small. It was great positioning, but a specious argument. Oversight of the digital marketplace is less about pre-approval “permission” to follow new ideas than it is about constraining the inherent excesses of company-made rules. The result of “permissionless innovation” has too often resulted in “permissionless exploitation.” 

[Tom Wheeler Chairman Tom Wheeler is a visiting fellow in Governance Studies at Brookings. Wheeler is a businessman, author, and was Chairman of the Federal Communication Commission from 2013 to 2017.]