Activist Capitalism and Democracy

70 Pages Posted: 26 Feb 2021 Last revised: 24 Aug 2021

See all articles by Simone M. Sepe

Simone M. Sepe

University of Arizona - James E. Rogers College of Law; University of Toulouse 1 - Université Toulouse 1 Capitole; Toulouse School of Economics; European Corporate Governance Institute (ECGI)

Saura Masconale

The Unibversity of Arizona Center for the Philosophy of Freedom

Date Written: February 25, 2021


Public corporations are brandishing their political identities. They are increasingly taking stands and messaging on highly charged social issues: gun control, gender and race, immigration, abortion, reproductive rights, and free speech. Corporate scholars have paid scant attention to this transformation, mostly retrieving old questions about the compatibility of corporate social responsibility and economic efficiency. This Article remedies this gap, offering the first comprehensive analysis of “activist capitalism” and arguing that its real cost is democratic rather than economic.
Economically, we show that under the asset price effects arising from the “moral portfolio” choices of today’s largest investors, there is no profitable deviation at the equilibrium for corporations as “producers of moral goods.” Refraining from activism makes a corporation less appealing to investors and hence less competitive. The price to pay for efficient activism, however, is “corporate conformity.” Because of the divisive and exclusionary nature of today’s moral goods—one cannot stand on both sides of a conflicting social issue—corporations conform to the majoritarian investor demand, even though it might represent just a minority of individuals under current equity reconcentration patterns and the rules of corporate voting.
Democratically, the threat is that activist capitalism might erode political equality in the adjudication of divisive moral matters. In Citizens United, Justice Stevens warned that corporations’ disproportionate means may lead to the marginalization of the voices of ordinary citizens. A similar argument applies to the distortionary effects of activist capitalism. We conclude by attempting to identify potential solutions to mitigate these effects.

Keywords: corporate social responsibility, asset pricing, political equality, democracy, corporate voting

JEL Classification: D11, D21, D24, D51, D53, D62, D71, K20, K22, L21, L23, G11, G12, G34

Suggested Citation

Sepe, Simone M. and Masconale, Saura, Activist Capitalism and Democracy (February 25, 2021). European Corporate Governance Institute - Law Working Paper No. 568/2021, Available at SSRN: or

Simone M. Sepe (Contact Author)

University of Arizona - James E. Rogers College of Law ( email )

P.O. Box 210176
Tucson, AZ 85721-0176
United States

University of Toulouse 1 - Université Toulouse 1 Capitole ( email )

2 Rue du Doyen-Gabriel-Marty
Toulouse, 31042

Toulouse School of Economics ( email )

21 allée de Brienne
31015 Toulouse Cedex 6
Toulouse Cedex, F-31042

European Corporate Governance Institute (ECGI) ( email )

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

Saura Masconale

The Unibversity of Arizona Center for the Philosophy of Freedom ( email )

315 Social Science Building
Tucson, AZ 85721
United States

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