Discount yellow mulberry bag Outlet Lobbying doesn’t help companies or shareholders

leather small purse Lobbying doesn’t help companies or shareholders

economy? Many people think so, but a recent comprehensive study throws cold water on those notions.

The numbers instead indicate that lobbying hurts the underlying capital values of the corporations. Lobbying doesn’t increase the chance that favored bills are passed by Congress, and it isn’t associated with the company receiving more government contracts.

Those are the key results from a new study by Zhiyan Cao, Guy D. Fernando, Arindam Tripathy and Arun Upadhyay, published in the Journal of Corporate Finance and considering 1,500 S companies over the period 1998 to 2016. Neither spending money at all on lobbying nor spending more money on lobbying over those years seem to help companies, and for that matter contributions to political action committees don’t work either.

Lobbying is more likely to damage corporate performance when the company is more complex and diversified. A large conglomerate may find it hard to come up with simple, to the point political requests that can much help the bottom line. Lobbying is most likely to help high growth companies. If those companies do reap political favors, it will benefit them more over a bright and long lasting future.

If corporate lobbying is an unprofitable use of money, why does it happen? One possibility is that corporate leaders are using company resources to indulge their own ideological preferences. Other researchers have found that companies with weaker governance and more entrenched management are those more likely to spend on lobbying. This study finds that lobbying expenditures are higher when the percentage of CEO perks is higher and when the board of the company is larger.

It’s also possible lobbyists are ripping off companies with slick sales pitches, or that incompetent CEOs are spending money on lobbying so they seem to be doing something constructive. In any case, it seems shareholders would be better off if managers were less interested in politics.

That said, companies don’t spend much money lobbying, at least not relative to their other activities. From the companies studied, the average lobbying expenditure usually runs between $1 million and $2 million a year, whereas the median or typical expenditure is usually in the range of $500,000. For purposes of contrast,
Discount yellow mulberry bag Outlet Lobbying doesn't help companies or shareholders
the Coca Cola Co. is spending, by one estimate, about $4 billion globally on advertising to consumers. For all the talk of crony capitalism, governments are still not the most important audiences for businesses. The real cost is not the dollars spent but rather the capturing of top managers’ attention and how that changes priorities. Lobbying firms can also make public or political enemies, and so the costs of lobbying are by no means entirely reflected by the dollars spent.

If you are curious, the sectors that tend to spend relatively high amounts on lobbying tend to be petroleum refining, transportation equipment, railroads, chemical and allied products (the category includes pharmaceuticals), coal mining, and air transportation.

Has the effectiveness of business lobbying changed under Trump? After all, the recent tax bill cuts the corporate rate down to 21%, and numerous deregulatory initiatives are under way.

This study doesn’t cover the last year, and so room is open for an interpretation of lobbying that it pays off once but big every few decades. Another possibility is that the Republican Congress and many of Trump’s appointees actually believe in these tax changes, and business lobbying wasn’t the major driving factor, even if it shaped some of the details. Keep in mind that the Trump administration hasn’t exactly made business happy on trade, immigration, or the general predictability and political stability of American government,
Discount yellow mulberry bag Outlet Lobbying doesn't help companies or shareholders
even though many business lobbyists have wished for those results.