Investment-oriented political contributions boost the bottom line 

A public, for-profit corporation's duty to maximize shareholder value requires that it attempt to influence public policy in the corporation's favor. The methods of exerting influence over public policy include but contributions to political candidates, political parties, and political causes. (Lobbying is the most important of other methods used by corporations to influence public policy.) The larger the contribution, the greater the corporation's influence.

Whether corporate political influence entails corruption is much more than an academic question, as reported by the New York Times' David D. Kirkpatrick in January 2010 following the Supreme Court's decision in Citizens United v. FEC.[9] According to Kirkpatrick, "[t]he Supreme Court has consistently said that only fighting corruption or the appearance of corruption justifies laws that restrict political spending. Other rationales — like leveling the playing field between the haves and have-nots — are not enough." 

In "The Influence of Campaign Contributions on Legislative Policy," Lynda W. Powell of the University of Rochester cites a 2003 study by Michigan State researchers Sanjay Gupta and Charles W. Swenson entitled "Rent Seeking by Agents of the Firm" (paid site) that found "the amount a firm’s PAC and executives contributed to the tax-writing members of Congress was positively related to the anticipated financial gains to the firm."

Using a hybrid model, Powell attempts to predict a legislator's voting behavior based on the amount of time the legislator spends fundraising and the effect on "investment-oriented contributions." These are political contributions by managers made with the specific intention to increase corporate profitability and value, and by extension the manager's own profit-based salary and bonuses.

While party leaders and committee chairs can be expected to offer greater return on investment-oriented contributions than contributions to new legislators, Powell concludes that corporate political contributions increase the likelihood that the legislator will favor the firm in the legislature. Further, her research indicates that "[t]he more time members spend fundraising for themselves and for their caucus and the greater their relative rate of return on their fundraising time, the more they rely on [corporate] lobbyists."

In "Corporate Political Contributions and Stock Returns" (PDF), Michael J. Cooper of the University of Utah, Huseyin Gulen of Purdue University, and Alexei V. Ovtchinnikov of Vanderbilt University report that " the average firm participating in the political donation process contributes to 73 candidates over any five-year period, 53 of whom go on to win their elections."[10]

The research indicates that the more candidates corporations supported overall, the greater the "future abnormal returns," which the researchers define as an unexpected financial increase over a "characteristic matched portfolio over the same period." They conclude that the "contribution effect appears to increase for firms that have longer relationships with candidates, support more home candidates, and support more powerful candidates."[11] 

Further, while contributions to both House and Senate candidates proved to have "positive economic effects for the contributing firms," contributions to House members are particularly effective in boosting the bottom line. The study authors suggest that the greater impact of contributions to House members is related to the fact that "revenue and appropriations bills must originate in the House."

Whether corporate political contributions can be construed as corrupt is a matter of statutory interpretation. It is increasingly clear that investment-oriented contributions have a direct positive impact on the contributing firm's financial performance.


[9] Citizens United v. FEC (2010) 558 U.S. 310 [130 S.Ct. 876, 175 L.Ed. 2d 753].
[10] https://www.fdic.gov/bank/analytical/cfr/2009/aug/CFR_SS_2009_Cooper_Gulen_and_Ovtchinnikov_2009.pdf
[11] Ibid.