There is a must read op-ed in today's WSJ by polic sci/bus admin prof David Primo on efforts by activists to compel additional corporate disclosure of political contributions. The op-ed is based on a paper Primo coauthored with Saumya Prabhat of the Indian School of Business. The abstract of the paper tells us that:
We utilize a quasi-natural experiment to examine whether disclosure and shareholder approval of political expenditures reduces shareholder risk. In particular, we examine the Neill Committee Report (NCR), which led to the passage of the United Kingdom’s Political Parties, Elections and Referendums Act 2000 (PPERA) and strengthened disclosure of and required shareholder approval for campaign contributions. Using a differences-in-differences methodology, we find that politically active firms saw an increase in their stock’s volatility along with negative long-term abnormal stock returns upon the release of the NCR. These results present a challenge to arguments for greater shareholder oversight of corporate political activities.
In the op-ed, Primo makes some key points:
- "disclosure and approval requirements tend to hurt shareholders"
- "Disclosure proponents are expressing concern for shareholders as a pretext for restricting corporate activity in politics."
- "'Activist' investors are often more concerned with their ideological goals than with stock returns."
- "the progressive nonprofit Media Matters has developed an entire strategy built on existing disclosure requirements to "provoke backlashes among companies' shareholders, employees, and customers, and the public-at-large," according to a 2012 leaked strategy memo. Imagine what Media Matters could do with more disclosure requirements."
Exactly.
