Does Corporate Influence Matter in SEC Governance Rulemaking?

Effective corporate governance relies on a regulatory framework that aligns the interests of managers and shareholders. In the U.S., the Securities and Exchange Commission develops this framework through a formal rulemaking process—one that includes soliciting public comments intended to incorporate diverse perspectives and improve the quality of final regulations. Public corporations, as primary subjects of these rules, are key participants, submitting comment letters to shape the content and scope of governance regulations.

But does this corporate participation actually serve shareholders? Or does it serve management? In our paper, “Comments that Count: Corporate Influence in SEC Governance Rulemaking,” we investigate the motivations, effectiveness, and shareholder-value implications of public firms’ attempts to influence SEC governance rulemaking. What we find is consistent with the view that corporate engagement in this process primarily reflects managerial interests rather than shareholder value maximization.

Who participates, and what do they want?

To study these questions, we construct a comprehensive sample of 25 governance rules proposed and finalized by the SEC from 2007 through 2023, and collect the complete set of over 6,600 comment letters submitted on these rules. We leverage large language model techniques to classify the stance of each letter.

The results are striking. Comment letters submitted by public companies are predominantly pro-management: over 96% favor reducing regulatory oversight of managerial decisions or expanding management’s discretion and authority. For comparison, only about 29% of letters from academics, 23% from institutional investors, and 8% from individuals adopt similarly pro-management positions.

Moreover, among public firms, those that do submit letters tend to be associated with characteristics commonly interpreted as indicative of agency problems, including CEO-chairman duality, low institutional ownership, high cash holdings, low leverage, low profitability, low sales growth, and high SG&A expenses. These patterns are consistent with what we call the management interest hypothesis: that public firms, especially those with weaker governance, participate in governance rulemaking to protect entrenched management interests.

How effective is this influence?

A key innovation of our study lies in how we measure the influence of individual comment letters on final rules. When the SEC finalizes a rule, it publishes a detailed discussion of each provision, citing comment letters that informed each material change. We track how each change aligns with specific cited letters—whether the change runs in the direction the letter advocated or against it. This gives us a direct, granular measure of how specific letters shape final rules.

We find that public firms’ comment letters are significantly more likely to be cited in final rules and to lead to material changes aligned with their positions, particularly when advocating for pro-management changes. In terms of economic magnitude, public firms’ letters are associated with material rule changes that favor the positions they advocate over the positions they oppose—an effect equal to roughly 75.3% of a standard deviation—and receive about 69% more citations compared to those submitted by academics. Importantly, this influence remains qualitatively unchanged regardless of whether we control for letter length or sophistication, suggesting that regulators may give comments from certain submitter types more weight due to their identity and resources, such as their capacity to challenge rules in court.

Cross-sectional tests reinforce the picture: public firms’ influence is even stronger when the proposed rules have more significant governance implications and when their letters closely mirror those submitted by trade associations or legal consulting firms. In other words, corporate influence appears most pronounced when agency conflicts are most acute and when advocacy is amplified by other pro-management voices.

What does this mean for shareholders?

This is where the shareholder-value question becomes especially important. If corporate participation in rulemaking served shareholders—by helping regulators produce more efficient rules—we would expect the market to respond favorably when firms successfully shape final regulations. The evidence points in the opposite direction.

Public firms whose pro-management letters are cited in pro-management material changes to the final rule experience significantly negative abnormal stock returns upon the rule’s release. Specifically, the three-day market-adjusted CAR for these firms is −0.718%, compared to +0.676% for firms whose letters are not cited in aligned pro-management changes. The difference of 1.394 percentage points is significant at the 1% level. These results suggest that when the SEC’s final rule explicitly incorporates pro-management positions advocated by a public firm, the market views the outcome as detrimental to the firm’s shareholder value, consistent with the management interest hypothesis.

Policy implications

Our findings highlight a tension in the rulemaking process. Regulations intended to strengthen corporate governance may be undermined by the influence of public firms whose managerial interests diverge from those of shareholders. The open comment system seeks broad input to incorporate a diversity of viewpoints, but the disproportionate influence of well-resourced corporate commenters suggests that the system may benefit from additional safeguards.

To counterbalance this managerial influence, policymakers could encourage more systematic participation from shareholder advocacy groups and investor representatives. Greater transparency in corporate advocacy would also enhance managerial accountability. For instance, firms could disclose their regulatory policy positions and how those positions align with shareholder interests. Because right now, the comments that count the most may well be the ones costing shareholders the most.

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Du Qianzhou is an Associate Professor in the Department of Management at the University of Science and Technology of China.

Jiekun Huang is a Professor of Finance and Richard S. Williams Professor of Finance at Gies College of Business, University of Illinois at Urbana-Champaign, and an ECGI Research Member.

Pengfei Ye is an Assistant Professor in the Department of Finance, Insurance, and Business Law at Virginia Tech. 

Qiaozhi Ye is an Assistant Professor of Finance at the Dishui Lake Advanced Finance Institute, Shanghai University of Finance and Economics (SUFE-DAFI). 

This blog is based on a paper presented at the 2026 Corporate Governance Symposium and John L. Weinberg/IRRCi Research Paper Award Competition on 6th March 2026. Visit the event page to explore more conference-related blogs.

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