The WSJ opined this morning that:
Liberals have been trying to persuade CEOs and corporate boards to stop spending money on politics by claiming that it doesn't pay. But according to a new study by the cofounder of the Democratic-leaning Progressive Policy Institute, corporate participation in politics works for the companies and their shareholders.
In a report to be released Tuesday by the Manhattan Institute, economist (and former senior Clinton Administration official) Rob Shapiro and co-author Douglas Dowson sort through the academic literature and find that "corporate political efforts generally have positive effects on a firm's market value and its shareholder returns."
The relationship between business and government is complex, but Messrs. Shapiro and Dowson find that "most firms, like most individuals, behave rationally and strategically in their spending decisions on campaigns and lobbying, devoting resources in ways that, they have reason to expect, will benefit the corporations themselves and their shareholders."
The Manhattan Institute report is available here. The executive summary states:
Since the Supreme Court’s 2010 Citizens United decision held that corporate political expenditures are free speech under the First Amendment, various groups and individuals have advocated imposing new limits on corporate political activity. These efforts include calls on shareholders to demand that corporations refrain from involvement in the political process. Such demands have been buttressed by an emergent academic literature which, in contrast to what had been an established perspective, has questioned whether corporate financial contributions and even lobbying are actually in the interest of corporate shareholders. This paper reviews this new literature, contrasts it with previous work on this subject, and determines that the new studies ultimately fail to establish that corporate political activity adversely affects shareholder returns. ...
The dominant academic view for the last 20 years is that companies undertake political activity to secure advantages for themselves, based on a combination of opportunity and necessity. Their incentives to do so are clear, given that modern governments influence national economies in ways that affect the sales and returns of particular industries and companies.
There is a robust academic literature, both theoretical and empirical, on campaign contributions to candidates, especially those provided through corporate political action committees (PACs). The most common explanation for these PAC contributions is that they help corporations and other interests secure greater access to legislators and other public officials. Empirical studies also have shown that corporate PAC activities are positively related to a corporation’s size, concentration, level of regulation, and sales to the government. This research clearly suggests that cost-benefit considerations influence corporate decisions to form and use PACs.
The academic research on lobbying has stressed the role that corporate lobbying plays in providing information to legislators and other public officials, or, in one variation, providing political intelligence and connections. Further, various recent studies have shown that lobbying generates positive economic returns. A 2009 study published in the American Journal of Political Science, for example, found that for the average firm lobbying Congress, across industries and various measures of financial performance, each additional $1 spent on lobbying was associated with $6-to-$20 in new tax benefits. Similarly, a 2010 working paper by Hui Chen and two co-authors found that $1 spent on lobbying was associated with an additional $24–to-$44 in corporate income. The same study further found that those firms which lobbied most intensively—defined as lobbying expenditures as a share of assets, sales, and market capitalization—outperformed their benchmarks by 5.5 percent to 6.7 percent per year, for the three years following their intense lobbying.
Other studies have demonstrated the value of corporate political connections, measured through PAC contributions, and found additional, positive contributions from corporate political activity. These studies include, for example, event studies examining the effects on the value of politically-active firms of the sudden death of Senator Henry “Scoop” Jackson (D-WA) in 1983 and the surprise defection of Senator James Jeffords (R-VT) from the Republican Party in 2001. Further, a 2010 study published in The Journal of Finance suggests that the economic benefits of a corporation’s political connections are also evident over the long term. The authors reported that a one-standard-deviation increase in the number of candidates supported by a firm over the previous five years was associated with excess abnormal returns of 2.6 percent.
Extensive analysis and evidence, then, support the view that corporate participation in the political process yields generally positive returns for firms and their shareholders.