Shadow Governance

51 Pages Posted: 4 Oct 2019 Last revised: 10 Sep 2020

See all articles by Yaron Nili

Yaron Nili

University of Wisconsin Law School; European Corporate Governance Institute (ECGI)

Cathy Hwang

University of Virginia School of Law

Date Written: October 2, 2019


Corporations have something to say about some of the most important social and economic issues of our time—and one way they say it is through shadow governance. This Article spotlights a group of influential corporate policies comprising what we call “shadow governance.” These non-charter, non-bylaw governance documents express a corporation’s commitment to and process on issues as wide-ranging as campaign finance, environmental sustainability, and sexual harassment, but are largely overlooked by scholars and practitioners alike. This Article addresses that gap, revealing how shadow governance documents influence corporate decision-making and corporate behavior.

This Article makes two contributions to the literature. First, it presents a descriptive account of the scope of shadow governance in the modern U.S. corporation. It analyzes a hand-collected dataset of shadow governance documents from companies listed in the Standard & Poor’s 1500 (S&P 1500) to show the array of and variation in shadow governance documents. Second, this Article uses original interviews with directors and general counsels to show how shadow governance documents influence corporate decision-making. Among other things, these documents set the board’s annual agenda, define the metes and bounds of boards’ and committees’ responsibilities, and memorialize the corporation’s values. These are all exceptionally important corporate functions that are relegated to shadow governance documents, where shareholders and other corporate outsiders have little ability to effect change.

This Article’s exploration of shadow governance documents is both theoretically and practically important. Shadow governance documents are not just poorly understood—they are also largely overlooked by scholars and practitioners. This Article’s account has the potential to open a new field for scholarly research and to provide new strategies for those who wish to influence corporate behavior.

Keywords: Corporate Law, Corporate Governance, Boards, Charters, Committee Charters, Disclosure, Securities Law, Directors

JEL Classification: K12, K22, G34, G38

Suggested Citation

Nili, Yaron and Hwang, Cathy, Shadow Governance (October 2, 2019). 108 California Law Review 1097 (2020), Univ. of Wisconsin Legal Studies Research Paper #1487, Virginia Law and Economics Research Paper No. 2020-14, Available at SSRN:

Yaron Nili (Contact Author)

University of Wisconsin Law School ( email )

975 Bascom Mall
Madison, WI 53706
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Cathy Hwang

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

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