Who are the pivotal actors and interests shaping corporate governance? Traditional accounts focus on shareholders, directors, and officers, and treat corporate governance as largely an intra-firm issue of power, incentives, and monitoring. Recent scholarship has expanded this view by identifying additional actors and forces, including the diverse constituents of the U.S. “corporate governance machine” (such as proxy advisors, stock exchanges, stock indices, and ratings agencies), as well as international organizations that have propelled “the rise of international corporate law.” Other commonly identified influences include corporate gadflies, the state as a shareholder, and broader political-economic forces such as populism, nationalism, and geopolitics.

These accounts, however, often leave out an important part of the picture: the role of nonprofits in shaping corporate governance. In our Article, Engines of External Governance, we examine how nonprofits have become key drivers of external governance—the ways in which actors outside the firm seek to embed broader objectives into corporate decision-making. Bringing nonprofits into focus sheds critical light on corporate governance developments and their trajectory.

The World of Nonprofits Shaping Corporate Governance

Nonprofits have increasingly waged battles at the heart of corporate governance and have left a significant mark in expanding the boundaries of the field. We identify the range of nonprofits that engage in external governance, discuss their defining features, and explain why governance-related activism occurs through nonprofit vehicles. The nonprofits exerting influence on corporate governance are remarkably diverse. Some were established decades ago; many have emerged in the twenty-first century. Their mandates range widely: some have broad missions, others are highly specialized; some were founded to intervene in corporate governance, while others encompass wider agendas. Some focus domestically; others operate on an international scale or across multiple jurisdictions. They also vary in funding and in perceptions of whose interests they serve.

This diverse group includes organizations such as Oxfam, Greenpeace, As You Sow, Ceres, Amnesty International, Global Witness, B Lab, Shareholder Commons, Interfaith Center for Corporate Responsibility, National Center for Public Policy Research, and Heritage Foundation, among many others. By mapping dozens of nonprofit influencers across jurisdictions, we show their wide reach and growing interest in corporate governance.

The Strategic Playbook

Nonprofits are neither “one-trick ponies” nor “lone wolves.” They often mobilize a variety of partners and employ a wide array of strategies to achieve their objectives. We identify four main elements of nonprofits’ corporate governance influence playbook. Strikingly, nonprofits with opposite ideological commitments frequently rely on the same repertoire of tactics:

• Legislative and regulatory advocacy. Nonprofits lobby for statutory or regulatory change and have contributed to key shifts such as global supply chain and related legislation, benefit corporation statutes, and anti-ESG legislative efforts.
• Litigation. Nonprofits have initiated litigation against companies and directors, and have challenged regulatory requirements on issues ranging from climate-related governance to anti-ESG claims. In some jurisdictions, nonprofits also substitute for the absence of a robust plaintiffs’ bar by acting as important plaintiffs and helping solve shareholders’ collective action problems.
• Shareholder proposals. Nonprofits are at the forefront of filing proposals and mobilizing around environmental and social issues from climate to DEI, as well as opposing forces pushing back. They also influence longstanding governance topics and operate as “laboratories” of governance ideas, from de-staggering boards to newer debates shaped by portfolio theory.
• Soft law and shaming campaigns. Nonprofits influence governance through standard setting, codes of conduct, indexes, white papers, advising and collaboration, and shaming campaigns that shape and enforce norms outside formal legal channels.

Critically, these strategies do not operate in isolation. Lobbying for disclosure legislation, for example, becomes far more potent when combined with shaming campaigns, while standard-setting can slowly build investor awareness that ultimately hardens into voting guidelines or new legislation.

Unpredictable Chain Reactions

Nonprofit activism has also generated unpredictable chain reactions in which actions spark reactions in surprising and often unintended directions. Perhaps the most striking historical example is the wave of CSR-related activism by nonprofits in the 1960s and 1970s, which paradoxically catalyzed the development of shareholder primacy theory. More recently, the sustained push by some nonprofits to advance ESG, DEI, and climate-related agendas has triggered an equally vigorous countermobilization by other nonprofits, producing unpredictable trajectories of developments that go beyond simply restoring the previous state of affairs.

Hydraulic Effect and Broader Implications

The diverse missions, global reach, and multifaceted strategies of these nonprofits give rise to a hydraulic effect: when one channel of influence is narrowed, pressure resurfaces through another. This dynamic helps illuminate current debates, such as efforts to restrict shareholder proposals, and shows why attempts to curtail specific mechanisms of influence may fail to eliminate the underlying pressures that nonprofits harness and represent.

Indeed, the persistence of these pressures across channels also helps explain the unexpected direction of twenty-first-century corporate governance, which has become more expansive and contested than the convergence once predicted by the “end of history” thesis. The turn of corporate governance toward external interests is not only due to efforts by managers and shareholders, as usually assumed, but also to sustained activism by organizations devoted to causes other than profit. Increasingly, many nonprofits view corporate governance as the proper realm in which to advance, or conversely to resist, broader social reforms. Further, their transnational reach means that small victories in one jurisdiction can pave the way for developments elsewhere.

Assessing Nonprofit Influence

Finally, recognizing nonprofits as engines of external governance also raises important normative questions. Given the wide variety of nonprofits and the vastly different issues they seek to influence, it is impossible to categorically assess their impact as uniformly positive or negative. Nonprofits may operate as vital intermediaries, providing checks and balances on corporate actions, bringing subject matter expertise, and filling gaps left by market failures or inadequate regulatory oversight. By contrast, nonprofits can generate conflicting priorities that hamper corporate decision-making, crowd out governmental regulation, or contribute to costly and unpredictable regulatory environments. Nonprofits themselves also present distinct agency problems and legitimacy concerns given that they often operate without significant financial stakes in the firms they target, are shielded by organizational opacity, and may lack accountability for their influence.

One’s view may also depend on the position one takes in the central debate about the purpose of corporate governance. From a traditional shareholder-value perspective, nonprofit interventions may appear as costly external disruptions. Those who embrace a stakeholder-oriented view are more likely to adopt a supportive stance, seeing nonprofit advocacy as a necessary tool for ensuring that wider interests are represented in corporate governance. Yet even within each of these perspectives, nonprofit influence defies easy assessment. The same organization that might impose costly external demands in one campaign might helpfully reduce collective action problems in another, and the rapid cycle of action and backlash can transform today’s reform into tomorrow’s instability. Recognizing these complex dynamics is essential not only for comprehending real-world developments in corporate governance, but also for informing efforts to shape its future direction.