An article adapted from Professor Martin Gelter’s recent paper discussing economic nationalism, protectionism, and corporate governance was published in the Harvard Law School Forum on Corporate Government.
During the past decades, participants in corporate law and corporate governance academic debates around the world have generally been skeptical of policies implementing economic ‘Nationalism’ or ‘protectionism.’ While these are chiefly subjects of other areas of law, such as foreign direct investment or international trade law, literature in recent years has documented a close interaction with corporate law and governance. This paper argues that corporate governance policies intended to serve a particular country’s interest may not always be as bad as we usually think.
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Depending on the circumstances, “nationalist” or “protectionist” corporate governance policies will not invariably have adverse effects. Political leaders are responsible for the well-being of their constituents. While they will often be motivated by being reelected, policies from which constituents benefit seem legitimate. Even strong supporters of globalization in corporate governance must acknowledge the risk of backlash. Preempting a heavy-handed intervention that might come after a situation or political turmoil will likely be beneficial if the protectionist policies initially prompted are less harmful than those that might follow. A moderate level of protectionism may be better than a radical solution that inflicts severe long-term damage.