policymakers to design new rules that will make it costly for
firms to continue such actions. Various non-governmental
organizations (NGOs), ranging from environmental
organizations to consumer-advocacy groups, can play an
important role in identifying and publicizing poor corporate
behaviour, and also in lobbying the government for change. If
the case is persuasive, and sufficient public pressure can be
brought to bear on the policymakers, policies will eventually be
changed. An example is the relatively recent design of
environmental protection policies. Many years ago, Canadian
firms could pollute the environment with impunity, whereas
today many types of pollution are illegal and some emissions
are closely monitored by government agencies. Another more
recent example is the push by governments for improved
financial-market regulation following the global financial crisis
of 2008 that caused a major world-wide recession.
A second way that firms can be encouraged to change their
behaviour is through the expression of consumers’ preferences
in the marketplace. If enough consumers dislike a certain
activity by a specific firm, and these views can be expressed
clearly enough in terms of consumers’ demand for the firm’s
products, the firm may be convinced to change its behaviour.
In this case, new laws or regulations may not be required; the
firm decides, on the basis of the possible decline in sales it will
suffer if it continues its unpopular activities, that a change in its
behaviour is required for profit maximization. One example