Published Wednesday, July 11, 2012
A new study suggests that most corporations don’t get their money’s worth when they make political contributions.
Rice University released details last month of research showing that in terms of influencing specific government policy, most companies come up empty-handed. Looking at 943 large, publicly traded firms, the researchers concluded that their political investments actually worsened their bottom line.
Putting a former public official on the board also coincided with weaker performance.
“Since our country’s founding, corporate political activity has been seen as promoting its own interests and agendas over those of the broader public,” said Doug Schuler, study co-author and associate professor of business and public policy at Rice’s Jones Graduate School of Business. “This study simply demonstrates that it might not be quite the return on investment that corporate America or the public at large believes it to be.”
The authors speculate that executives who make corporate political donations may make other risky investments and business decisions, too. They may be motivated by their ego or ideological beliefs rather than sober business reasons.
Of course, there are the case like the solar-power company Solyndra that gave to President Barack Obama’s campaign and wound up with a huge package of government loans, but it still went bankrupt.
The one area where the researchers did find corporations benefitting from their political activity are the highly regulated industries, like utilities, financial services and pharmaceuticals.
“We believe this may reflect the critical role that government can play in controlling resources and limiting behaviors through its rulemaking and enforcement processes, necessitating some level of political activities by the regulated firms,” Schuler said. “In regulated industries, firms are better able to target specific agencies and get to know their staff, which is more likely to result in more stable interactions.”
Perhaps this is a logical area of academic inquiry for graduate of the University of California at Berkeley who spent a year working in Enron Corporation’s government affairs office noted for its political involvement right up until it folded. But he is also a former certified public accountant who’s qualified to evaluate the financial strength of the companies being researched.
This study provokes some head scratching for those who support a limit on what lobbyists can give politicians and their staffers. As Schuler recognizes, its results fly in the face of popular notions of what leads to legislation in the Capitol.
What’s the point of a gift cap if the gifts don’t have any impact?
It may give lobbyists and their clients something to ponder as well. Maybe they should save their money.
Of course, most lobbyists readily admit that more of their job revolves around stopping or at least diluting unfavorable legislation instead of getting something passed. So, the executives of the companies in the study might argue that their bottom line would have been worse if they hadn’t opened the checkbook.
At the same time, the study provides the opposite lesson for those concerned about the two seats up for grabs this year in the Georgia Public Service Commission.
All of the challengers have been accusing the two incumbents, Stan Wise and Chuck Eaton, of being too beholden to the utilities. Pam Davidson, for example, says roughly 90 percent of Wise’s contributions come from utility employees or their attorneys.
Wise counters that they are exercising their right to the political process and that he isn’t biased by the donations. If he were, he asks, how would I decide which donors to kowtow to when their interests collide?
Besides, who else is going to contribute to a PSC candidate except those with a vested interest, as more than one incumbent has noted. Angela Speir did get elected in 2006 without any utility contributions or those from anyone else, for that matter, but many observers think she merely benefitted from lucky timing to run as a Republican as the state was turning red.
The candidates’ campaign-finance reports from 30 days before this month’s primary should have been filed last week, but computer problems at the ethics commission mean they’re not yet available to view online. As a result, no one knows how active the utilities have been so far in this campaign.
Voters aren’t the only ones with limited information. Shareholders also have a tough time monitoring corporate political giving -- and then only after the fact. That means it’s an area where executives are more or less operate with relative freedom.
Whether such contributions are wise from a business standpoint, the money generally shows no signs of stopping, despite what some college professors say.
(Walter Jones is the bureau chief for the Morris News Service in Atlanta.)