Power to Truth: Rethinking Corporate Responsibility with Karthik Ramanna and Anat Admati

What happens when corporate power exceeds accountability? In this episode of the web series, Power to Truth, Anat Admati, Stanford professor and faculty director of the Corporations and Society Initiative (CASI), joins Karthik Ramanna, Professor of Business and Public Policy at the University of Oxford's Blavatnik School of Government.  Together, they unpacked the complex ways corporations shape policies, impact democracy, and navigate the tension between profit and public good.

Admati introduced Ramanna as part of a rare group of business school professors who are interested more broadly in the world, highlighting his 2014 book, Political Standards, which examined how financial reporting and accounting rules are shaped by politics and conflicts of interest. This led to their collaboration on CASI’s 2020 "Corporations and Democracy" conference, addressing these issues with a session titled, Thin Political Markets.

Ramanna described "thin political markets" as scenarios where a small, highly informed group wields disproportionate influence over the creation of complex rules—such as accounting standards—due to their specialized knowledge and vested commercial interests. This concentration of power often results in outcomes skewed to benefit these insiders.

He recalled a pivotal moment while teaching a class on goodwill accounting rules. “I realized that companies could claim the benefit if an acquisition went well, but they weren’t required to claim the loss if it failed. I thought, wait a minute—how does this make any sense?”

This realization reshaped Ramanna’s career. As a professor teaching future business leaders, he began emphasizing the structural issues behind capitalism, arguing that corporate efficiency and profit-making are legitimate only within fair systems. When businesses manipulate rules to maximize profits, he said, they risk undermining the very system that enables their success, turning capitalism into a short-term, unsustainable game.

Admati and Ramanna discussed how politics can either strengthen or corrupt capitalism, raising the question: How can society ensure politics serves the common good over private interests? 

“Somehow, we've lost how central this is to the functioning of a democratic capitalist society,” Ramanna remarked. He made it clear that addressing this issue isn’t anti-capitalist; it is essential to preserve capitalism’s integrity.

They critiqued the "free market" concept, describing it as misleading. Admati noted its framing often conflates market freedom with personal liberty, fostering a false comparison between capitalism and totalitarianism. This ideology, rooted in hostility to government intervention, has long shaped debates about capitalism's role in society.

On corporate power, Ramanna highlighted the Supreme Court’s recognition of corporations as legal "persons," granting and later expanding rights like property ownership and political contributions. Admati pointed to other privileges such as the right for limited liability and perpetual existence, which, while fostering innovation, also raise accountability concerns given corporations' outsized influence on politics and policy.

Ramanna underscored capitalism’s capacity to lift millions out of poverty. He shared how his early life in India exposed him to the stagnation caused by socialism and he stressed the importance of an aspirational society that enables prosperity. Admati concurred, adding “you need a trustworthy government to kind of create good rules for everybody, including for corporations to enforce the contracts, to enable the markets to work.”

Both scholars reflected on their roles as educators, straddling business and policy schools. Ramanna described being a "bridge walker" between fields, encountering skepticism from government scholars about capitalism and resistance from business academics to constraining it. Admati shared similar experiences, noting how the private sector’s influence on democratic processes often goes underexamined, despite its centrality to shaping rules and policies.

They agreed on the need to critically examine how capitalism and democracy interact and how to ensure corporations contribute positively to society without compromising systemic integrity. Ramanna called for business schools to teach future leaders to reflect on their role in shaping the rules that balance corporate goals with societal fairness.

“How are we equipping them to have these conversations? It's not telling them what's the right thing to do. It's alerting them to the fact that the course of human history will be implicitly shaped by the kinds of moral choices they make.”

The conversation turned to Ramanna’s E-liability project, which seeks to transform corporate carbon accounting. Drawing on his financial accounting expertise, Ramanna criticized current practices, particularly Scope 3 emissions, as flawed and ideologically driven. He has proposed a foundational shift, envisioning emissions as a competitive business dimension.

“Instead of thinking about emissions as something that companies take on as a burden,” he said, “imagine if oil companies competed on producing barrels of oil that were the least emissions intensive, steel companies did that for steel, and cattle farms did it for cattle.”

The E-liability Institute plans to offer open-access tools and algorithms, ensuring transparency and accessibility. Drawing parallels to historical innovations like the "just-in-time" inventory system, Ramanna highlighted the potential for carbon accounting to unlock value and innovation.

“Once you create the performance measurement system, it unleashes value in ways that you can't even [imagine]. Information supply creates its own demand.”

He and Admati concluded by stressing the importance of keeping such tools freely available to avoid commercialization pitfalls, as seen with OpenAI’s shift to a for-profit entity. They both agreed that aligning business interests with global climate goals can set the stage for meaningful change in the future.