What Do Companies Do with Their Political Spending?

By James Kwak

Whatever they’re doing, it doesn’t seem to be good for shareholders. That’s one conclusion of a new paper by John Coates, a Harvard law professor, which I discuss in today’s Atlantic column (which originally misdated the Citizens United decision, thanks to some faulty proof-reading by me). Coates compares firm valuations with levels of lobbying and contributions by corporate PACs and finds that, outside of heavily regulated industries where everyone lobbies heavily, political activity is associated with lower firm value—implying that it’s more like a CEO perk than like a good investment from the shareholder perspective.

13 thoughts on “What Do Companies Do with Their Political Spending?

  1. It is likely a mistake to conflate success rates for more and less oligarchical industries, and for industries that have access to artificial monopolies (IP) and those that do not. Secondly, it is unclear to me why it is reasonable to assume there to be a clear link between lobbying for industry-wide rule-changes (assuming we are not talking about earmark bribes etc.) and benefits for specific players. As for the value destruction Coates talks about, is he serious? I realize the people who frequent your blog (or the people who are his professional colleagues) are unlikely to have read, say, Mark Ames’s Going Postal, but since when is value destruction a worry? Moreover, value destruction is a problem in pretty much all US-based corporations, and in nearly every industry, because of widespread adherence to a certain management ideology. So how conceivable is it that there is a meaningful connection to political spending?

  2. Mitt Romney wins New Hampshire primary

    By Mark Z. Barabak and Paul West
    “As much as anything so far the campaign has demonstrated the power of super PACs, the new political entities that can accept unlimited donations from individuals and corporations. The organizations were a force in Iowa, and to a lesser extent in New Hampshire, where several appeared to have decided not to waste their money in the face of Romney’s dominance. The pro-Huntsman Our Destiny PAC paid about $2.1 million for airtime starting in mid-November, apparently outspending other outside groups and official campaigns in the state.

    Several groups absent from New Hampshire—the pro-Romney Restore Our Future, the Perry-aligned Make Us Great Again and the pro-Gingrich Winning Our Future—are already on the air in South Carolina and Florida or planning to be soon.

    Restore Our Future plans to spend $2.3 million in South Carolina, and $3.6 million for a two-week statewide buy in Florida, according to a source tracking political media ads. Some of those commercials bolster Romney but the majority go after rivals Gingrich and Perry.

    Rick Tyler, a former Gingrich aide now working for Winning Our Future, said his super PAC will spend $3.4 million in South Carolina, much of it on ads echoing the stinging critiques Gingrich has made about Romney’s tenure at Bain Capital. The source tracking ad buys said the super PAC had acquired only about $1.3 million of air time reaching the state as of Tuesday afternoon.”


  3. The Sport of Kings
    Posted by HART WILLIAMS,

    “If you don’t get zillions from “bundlers” and, well, Charles Schwab, Paul Singer, David Koch and their plutocratic allies, you can’t compete. No matter how many voters might be inclined to vote for you. The money buys ads on the same media covering the horserace.”
    “Your cash”? You mean, obviously, you aren’t talking about the bottom 40 percent of the electorate, or, pretty obviously, the bottom 50 percent of the population?
    How can this be rational in any sense in a representative democracy? Seriously?

    You’ve already insulted and dismissed HALF the electorate? Really?
    Unless money is all that matters, that is.

    As we settle back to watch the Sport of Kings on our flat-screen, wall-mounted televisions, in high definition video and 5.1 surround sound.

    Who will be the GOP’s Seabiscuit?”


    The Sport of Kings
    very humorous and interesting article: read all: http://themoderatevoice.com/123887/the-sport-of-kings/

  4. Free Press:
    “Broadcasters are using our public airwaves to make big money off of the elections. They rake in political-ad money — which this year is supposed to soar into the billions — and pay short shrift to the kind of election reporting that helps us make informed decisions at the polls.

    The public has a right to know what broadcasters are doing to cover the elections. But media corporations are fighting hard against a Federal Communications Commission proposal that would create a publicly searchable database of all the electoral, local and civic programming our stations air.

    It’s time for us to fight back. Speak out now to tell the FCC you want to know how your local stations are covering the elections.”
    Free Press

  5. I think there are two main problems on this issue (with many more detailed probs fitting underneath the two biggies). First problem is the political composition of the court, which has been corrupted by right-wing propaganda which says money is the solution to all problems. See here: http://www.newdeal20.org/wp-content/uploads/2010/02/picture-21.png

    The second problem is judges (all judges, but especially Supreme Court judges, and higher courts) are required (required by their duty) to have a deeper than surface knowledge on a wide range of topics, that often times they do NOT have. The example that immediately springs to mind is Richard Posner who has innumerable times over the years spoken from his anus and given rulings on economics issues which he has very little understanding of. Posner’s version of an economics equation or equilibrium is to scream “free markets” until he’s screamed it enough times he’s bullied everyone into believing the sky is not blue, but it is whatever color “free markets” whispered in Posner’s ear.

    Do any of these Supreme Court judges have a clue what percentage of corporations’ public stock is now owned institutionally and how little impact these institutions have (assuming they give a rat’s a.s.s. to begin with) on corporate board members’ and CEOs’ decisions??? The ignorant and democracy destroying Supreme Court judges would do themselves a huge favor reading the stellar work of Jennifer Taub and other researchers’ work on corporate governance. This article is a great start:

  6. Those justices are so old I doubt they even know how to use a computer, heck, they might not even own a cell phone.

  7. @Woych – People have to get up and go to their local Town Hall meetings in person.

    Occupy the Town Hall. There is no database that can be created to take the place of that DEMOCRATIC FUNCTION called civic participation.

    Haven’t we had enough with the freekin’ algorithms?

    With people like Orin Hatch in D.elusional C.ity saying that POOR people can afford to pay more tax $$$$ – his only plan for *deficit reduction* (and Kwak’s plan, come to think of it) – the checks and balances against the Federal Government is Local Government. Wisconsin is THE only plan to work – one big recall is SANE after the shenanigans of last year – the over reach and hubris is demented.

    Don’t send those legislatures back to D.C. to skin us alive anymore with tax policies.

  8. Women need to stage a global – OCCUPY YOUR CHURCH – no men allowed :-))

    Press release draft :-),

    “…We are seeking asylum from MEN who want to use woman’s health issues – again – simply to make sure Obambi is not Prez for 4 more years – low life scum tactics, Part 2. Part 1 was *United Citizens* ruling…heck we might as well seek asylum inside the Church for that insanity, too….and while we’re at it, let’s seek ASYLUM from MEN throwing us out of our homes to pay for *slam-dunk” CATASTROPHIC wars…


  9. from wiki – Asylum (antiquity) – “….In ancient Greece the temples, altars, sacred groves, and statues of the gods generally possessed the privileges of protecting slaves, debtors, and criminals, who fled to them for refuge. The laws, however, do not appear to have recognised the right of all such sacred places to afford the protection which was claimed, but to have confined it to a certain number of temples, or altars, which were considered in a more especial manner to have the asylia. (Servius ad Virg. Aen. ii. 761.) There were several places in Athens which possessed this privilege, of which the best known was the Theseum, or temple of Theseus, in the city, which was chiefly intended for the protection of the ill-treated slaves, who could take refuge in this place, and compel their masters to sell them to some other person…”


  10. http://www.thedailybeast.com/newsweek/2012/02/05/ayaan-hirsi-ali-the-global-war-on-christians-in-the-muslim-world.html

    Life is so freekin’ *hard* in USA for *churches*, ain’t it? But, hey, what an inspiration to fellow Christians around the world who have to practice their *faith* in countries with *real* intolerant tyrannies and totalitarian regimes, to witness how the *church* in USA – under a federal system of separation of church and state – are defending themselves against the evil *forces* of woman’s health care needs…

    oh wait, I forgot, silly me – when it comes to women, the *churchs* in USA are jealous of the stuff men get away with in countries where there is no separation of church and state…

    choices – fill up the pick-up truck with cheaper gas or let more women study medicine and science….?

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