The Quest for Legitimacy: A Public Law Blueprint for Corporate Governance

The Quest for Legitimacy: A Public Law Blueprint for Corporate Governance by Stavros Gadinis and Chris Havasy was selected as a top 20 article for the Environmental Law and Policy Annual Review (ELPAR) in 2025. Published annually in ELI's Environmental Law Reporter (ELR), in collaboration with Vanderbilt University Law School, ELPAR identifies some of the year’s best academic articles that present creative and feasible legal and policy solutions to pressing environmental problems.

To better navigate the unprecedented pressure companies are facing to take positions on a range of contentious issues such as climate change, voting rights, and gender equity, corporate law should borrow “legitimacy-enhancing governance tools” from administrative law, according to professors Stavros Gadinis and Chris Havasy.

In The Quest for Legitimacy: A Public Law Blueprint for Corporate Governance, originally published in the University of California Davis Law Review, the authors explain that corporate managers are often called upon to “take a stand,” but their decisions are frequently met with intense scrutiny and backlash across the political spectrum. Progressives may criticize corporate initiatives as superficial “greenwashing,” while conservatives may accuse companies of advancing the agenda of “woke” elites.  

According to the Gadinis and Havasy, these conflicts raise fundamental questions about the “legitimacy of corporate decisions” in social reform and expose the limitations of existing corporate law in guiding managers. They contend that just as government agencies face legitimacy crises when their decisions are viewed as “arbitrary, unrepresentative, and biased,” corporations confront similar criticisms when stakeholders distrust corporate managers’ authority to act on broad social matters. The authors point out that administrative law has developed a “sophisticated toolkit” emphasizing “transparency, accountability, consultation, and reason-giving” to bolster public confidence in agency decision-making. They propose a comparable “public law blueprint” for corporations that would help managers adopt legitimacy-enhancing governance tools to build trust with stakeholders, reduce costly conflicts, and preserve firm value.

Corporate law’s narrow focus on fiduciary duty—whereby managers are granted wide discretion provided their choices broadly benefit shareholders and comply with the business judgment rule—fails to account for the full range of legitimacy challenges managers face, according to the authors.  They emphasize that stakeholders now view corporate leaders not only as business executives but as social actors whose choices carry far-reaching consequences. Yet, legal justifications alone cannot address criticisms that managers lack expertise, accountability, or impartiality.  

The authors suggest that “lessons from administrative law,” developed to confront similar doubts about government authority, can fill this gap. Administrative processes such as notice-and-comment rulemaking, transparency requirements, and reliance on independent expertise enhance both “sociological legitimacy” (acceptance of decisions by key stakeholders) and “moral legitimacy” (perceptions that decisions are substantively fair and procedurally sound).  

They explain that corporate parallels already exist in voluntary governance practices. For example, stakeholder outreach mirrors notice-and-comment rulemaking procedures by allowing interested groups to provide input, shaping more grounded and broadly accepted outcomes. Similarly, corporate disclosure of sustainability metrics parallels administrative transparency mandates, while reliance on external experts resembles agencies’ use of scientific and technocratic expertise.  

Their proposed public law blueprint calls for corporations to systematically adopt a set of legitimacy-enhancing governance tools, including increased stakeholder participation, improved transparency and disclosure, standardized decision-making methods, and incorporation of external expertise. And they note that implementing these tools together strengthens their effect—robust disclosures, for example, are more credible when coupled with meaningful accountability mechanisms. The authors maintain that although this framework requires new institutional commitments and resources, many firms are already experimenting with similar measures, suggesting that managers perceive the benefits as outweighing the costs.  

The blueprint also bridges the divide between “stakeholderism and shareholder primacy.” For stakeholder advocates, it offers a structured way to ensure that corporate decisions incorporate diverse voices and account for broader social effects. For shareholder primacy proponents, it provides a safeguard against “costly legitimacy challenges” that can erode firm value.  

Although the landscape has changed dramatically since their article was first published over a year ago, the authors note that their proposals are gaining traction and are even more important today: “While the US regulatory environment has shifted since the Article was published, we are seeing non-profit organizations, firms, and foreign governments adopt some of our proposals to improve the legitimacy of corporate actions across numerous socio-economic areas.” They explain that “particular movement has occurred regarding sustainability disclosures, standardization, and the use of private experts.”  According to the authors, firms are also increasingly “creating active and on-going communication methods with their employees, such as through the expansion of employee resource groups and the adoption of regular corporate town hall meetings with employees.”  

In sum, Gadinis and Havasy emphasize: “As corporations continue to dive into (or be dragged into) complex and divisive socio-economic issues, it behooves corporate leaders to take a page from administrative governance to improve corporate decision-making and augment the legitimacy of their actions in these areas.”