Businesses that engage in political activity see a boost to their bottom lines, says a study by a University of South Florida researcher.
Seem obvious? Previous evidence has been inconclusive, prompting USF business professor Sean Lux and two University of Tennessee researchers to comb through earlier studies. Their work, published this month in the Journal of Management, demonstrates a clear tie between corporate political activity and improved performance.
Such activity can range from directly giving funds to a candidate's campaign or hiring lobbyists to influence politicians. Think Disney winning a copyright law to lengthen its hold on Mickey Mouse or Lockheed Martin lobbying Congress to keep producing the F-22 Raptor. The researchers' interest was piqued a year ago by the Supreme Court decision in Citizens United vs. Federal Election Commission that Congress cannot regulate political speech. The decision loosened restraints on a company's ability to contribute money to support or attack politicians. That raised the stakes behind a key question: Do contributions work?
Corporate performance suggests so.
Why companies lobby
The study points out several factors that increase the likelihood a company will turn to political action as a business move. The most significant:
• Whether or not a politician is an incumbent. Companies prefer incumbents, who are more likely to be able to deliver.
• How tightly the business environment is regulated. The more tightly regulated the industry, the more political activity.
• The size of the company, with larger companies more likely to participate.
Lux mentions Disney, which successfully pushed to influence copyright law in its favor. The Copyright Term Extension Act, passed in 1998, extended the period intellectual property remains exclusive. Disney's political action committee spent $6.3 million to extend its intellectual property rights to Mickey Mouse — far less than what it would have cost had they lost that control.
Meanwhile, companies with government contracts have a particular incentive to engage in political activity. The study mentions aeronautics company Lockheed Martin, which spent nearly $10 million on lobbying last year, according to OpenSecrets.org, a website that tracks campaign contributions. It's the only source of fighter aircraft for the military, so even when lobbying efforts fail, it's not for lack of advocates. When Defense Secretary Robert Gates said in 2009 that the costly F-22 Raptor should be phased out of production because it didn't suit the modern battlefield, 184 members of Congress signed a letter to President Barack Obama saying the jet was "crucial to the security of our nation."
Rep. C.W. Bill Young, R-Indian Shores, was among them. The longest-serving Republican in Congress, he was perhaps the most lobbied man in the nation during a six-year stint as chair of the House Appropriations Committee, Lux said. Lockheed Martin ranks as Young's top contributor, handing him $96,800 over his career, according to OpenSecrets.org. While the F-22 Raptor is still scheduled to be phased out, 168 had been produced through October.
The USF study concludes that companies clearly gain advantage by influencing politicians, that more businesses are involved in politics than ever before and that after the Citizens United decision, corporate political activity is likely to increase.
The case asked whether Citizens United, a conservative production company, could air commercials during the 2008 campaign for a film that criticized Hillary Clinton. Previous law restricted political ads within 30 days of a primary. The court decided 5-4 that corporations have the right to free speech in the sense that the government can't stop them from making political statements.
USF researcher Lux says that's likely to boost the role of 501(c)(4) organizations — tax-exempt groups that can receive anonymous contributions and engage in political speech as long as less than 50 percent of their activity is nonpolitical.
That raises concern among advocates for consumers and taxpayers. Steve Ellis, vice president of Taxpayers for Common Sense, agrees Citizens United is going to allow greater corporate access to politicians. The nonpartisan organization works as a watchdog on government spending. He's concerned it raises the likelihood legislators will act outside the public interest.
"If it doesn't work, don't fund it," Ellis said.
Bill Newton, executive director of the Florida Consumer Action Network, argues that corporations shouldn't have the same rights as people because they don't have the same responsibilities — and a company's only function is to make money.
"Its corporate charter requires it to function for the benefit of its shareholders," he said.
Newton says the issue contributes to voter cynicism and low voter turnout.
Lux sees at least one possible benefit for voters — since 501(c)(4) organizations can be created for any particular cause, the political landscape could become more varied.
"I believe Citizens United will probably diminish the role of national political parties and end up giving the average voter more choice," he said.
But corporate political activity's tie to corporate performance suggests that government is coming into the marketplace to the benefit of some companies, Lux said. The study did not quantify how much corporate performance boosts the bottom line, something Lux said is a fertile area for study.
"If companies are benefiting from corporate political activity, they're perhaps gaining an advantage in the marketplace based on politics and not by putting the best product or service out there. And that could be socially detrimental," he said.