An increasing number of public institutional investors are adopting sustainable and ethical investment policies. While financial tests of materiality and norm structures are often assumed to guide their implementation, this assumption is challenged by the increasing complexity in global financial markets. This article provides an analytical framework to explain these implementation problems by drawing attention to the ambiguity inherent in investment policies. Ambiguity means there is no ideal outcome. Agents must use their discretion to interpret investment policies, which is at odds with conventional theories of discretion that assume a unique policy goal. This article argues that ambiguity impacts institutional investors in two contrasting ways. Ambiguity acts as a built-in mechanism for adapting investment policies to increasing complexity in global financial markets. But the resources required to maintain legitimacy under ambiguity detract from the investor's capacity to actually implement its policy. This framework is used to analyze the evolution of the Norwegian sovereign wealth fund (SWF)'s ethical investment policy. The article finds that agents use their discretion to interpret the Fund's investment policy in ways that align with its long-term mandate.

In the US, the failure of climate legislation and the implementation of EPA rules are the subject of intense scholarly and public debate. However, the debate has not investigated – and at times has further obfuscated – the preferences and expected tactics of industry stakeholders. Scholars of management and regulation argue that firms’ profit motives can be aligned with socially beneficial outcomes, but they assume that firms prefer market-based regulation over the status quo. Correspondingly, corporate stakeholders have been portrayed as protagonists in campaigns for climate legislation. In a case study of the cap and trade fight during 2009 and 2010, I find that industry stakeholders primarily mobilized to maintain the status quo, but simultaneously joined the cap and trade coalition in order to favorably shape potentially inevitable climate legislation. The case underlines the importance of deeper investigation of business preferences and provides evidence for theories that prioritize power resources and the structural power of business.

This paper explores the determinants of pro-minority shareholder corporate governance reforms. Using a Cox conditional model in gap time, this paper provides new empirical evidence on the linkages between the adoption of pro-minority shareholder corporate governance reforms at the firm level and government ideological affiliation in 16 OECD countries over the period 1970–2009. I find strong evidence linking rightward shifts in government ideological orientation with the adoption of minority shareholder protection legislation. This result supports our argument that changes in the composition of the coalition of heterogeneous interests and/or a change in the expectations of the parties’ constituency will affect government strategy on the adoption of pro-minority shareholder corporate governance reforms. I also find that the macroeconomic context at the international level may influence the adoption of these reforms. Our findings suggest that international economic integration has resulted not in the convergence of corporate governance regimes to the Anglo-Saxon model, but rather the emergence of hybrid corporate governance systems.

The “cooling-off period” has remained a fixture of domestic consumer-protection legislation. Yet, as I argue in this paper, the longevity of these provisions is neither the result of their effectiveness at solving the problems they were intended to solve nor the forces of path dependence. Rather, I suggest that the cooling-off period has endured because of a process of gradual ideational adaptation. Over the course of the 20th century, legal and economic intellectuals advising government agencies have abandoned traditional consumer-protection rationales that led to the creation of cooling-off periods in favor of a paternalistic policy orientation that integrates behavioral science insights. Though the organizational problems the cooling-off period were expected to resolve have been more effectively addressed through the concurrent institution of other protective measures, such as the disclosure document and compulsory advisory provisions, the cooling-off period has found new uses and advocates, which have made it far from obsolete.

What accounts for the growing cost of government in the US? [Berry, William D., and David Lowery. 1984. “The Growing Cost of Government: A Test of Two Explanations.” Social Science Quarterly 65 (3): 735–749] tested two explanations for why the costs of goods and services in the public sector have increased faster than these costs in the private sector in the US: “Baumol's Disease” [Baumol, William J. 1967. “Macroeconomics of Unbalanced Growth: The Anatomy of Urban Crisis.” The American Economic Review 57 (3): 415–426], which focuses on the need for government to match wage increases in the more productive private sector, and [Buchanan, James M., and Gordon Tullock. 1977. “The Expanding Public Sector: Wagner Squared.” Public Choice 31 (1): 147–150] Bureau Voting explanation, which focuses on the voting power of government employees. Berry and Lowery (1984) tested these two explanations using data for the 1947–1979 period and found strong support for the former but little support for the latter. Decades later, a much longer time-series is now available for empirical analysis. Additionally, the character of both public- and private-sector production and the voting power of public employees have changed in ways that may influence the empirical veracity of the two explanations. For these reasons, we extend the original analysis through 2010 to assess whether Baumol's Disease and Bureau Voting continue to have relevance for understanding government cost growth. We find that Baumol's Disease continues to be the better explanation despite changes in both sectors, although public sector wages are now more closely tied to general private rather than manufacturing wages, suggesting that growing production costs may be serving as an increasingly relevant downward pressure on the scope of real government activity.