Study Finds Corporate Political Speech Doesn’t Hurt Bottom Line
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Critics of corporations participating in the political process use work by Harvard Professor John Coates and other scholars to support their rhetorical façade that political spending hurts a corporation’s bottom line. They then use this argument in the shareholder voting process to try to limit corporate political spending.
However, a study from the Manhattan Institute shatters this myth. In Corporate Political Spending: Why the New Critics Are Wrong, Robert Shapiro, who served as Under Secretary of Commerce for Economic Affairs under President Clinton, and Doug Dowson, Senior Analyst at Sonecon, find that the work of Coates and others “fail to establish that corporate political activity adversely affects shareholder returns.” Instead, they find that “[c]orporate political activity appears to have a generally positive effect on firm value, as reflected in excess market returns.”
Some recent studies have claimed evidence of harm, but Messrs. Shapiro and Dowson looked at the same data and found methodological and other errors.
For example, Harvard Law School's John Coates argues in recent studies that corporations become involved in politics mainly because their executives want to. They then become distracted and lose their strategic business focus. But Messrs. Shapiro and Dowson found problems in the studies with causation and selection bias, and they conclude that Mr. Coates's evidence fails to prove any negative effect on shareholder value and occasionally supports the opposite conclusion.
When you read reports about political activists and unions pushing “transparency” and “corporate responsibility” in shareholder meetings, they always refer to corporate “risk” from Coates’ work. Now you'll know it is part of an orchestrated charade to squelch businesses from exercising their first amendment political rights.