CNNMoney recently identified the companies that do the most lobbying on Capitol Hill. Topping the list are General Electric, AT&T, and Boeing Co. The analysis found that big lobbying doesn’t necessarily go together with big profits, at least in the short term.
Much public discussion of corporate lobbying focuses on the potential violations of democratic principles, but what if lobbying isn’t even in the best interests of companies’ shareholders or employees? A 2007 paper published in the journal Challenge suggests this may often be the case. The paper’s author, environmental economist Robert Repetto, offers a number of ways that companies may end up advocating in ways that are precisely the opposite of helpful to its stakeholders. Repetto focuses largely on policies related to climate change, although his arguments could be applied in other areas as well:
- Strategic mistakes: The Big Three carmakers spent years lobbying against fuel-efficiency standards and continuing to develop gas guzzlers, allowing Japan to overtake them in the market for hybrids and other fuel-saving vehicles.
- Bad alliances: Most companies belong to trade associations and help fund their lobbying work, which often involves taking positions that may not be in the best interests of some members. For example, the energy utility group Edison Electric Institute opposes laws to control greenhouse gas emissions “though several of the electric utilities in its membership believe correctly that, on balance, they would benefit from mandatory government-imposed limitations.”
- Opposing oversight: Many corporations lobbied against a section of the 2002 Sarbanes-Oxley Act that required top management to ensure that internal systems captured all relevant information. Research has showed that companies without these kinds of internal controls underperformed their peers, making opposition to the requirement counterproductive for improving returns to the company.
- Blowback: Fighting against measures to control climate change could hurt companies’ reputations, making it harder to engage with the political process and creating a PR disaster.
- Narrow focus: Corporations generally claim to be focused on protecting their shareholders’ interests, but shareholders are also citizens, taxpayers, and owners of other businesses. Repetto points to the infamous manipulation of deregulated California energy markets by Enron and other companies as a clear case in which the public, including shareholders, ended up paying billions.
When it comes to the wider problems of corporate lobbying’s effects on democracy, the necessary remedies may be complicated reforms of government systems. But Repetto says the issues he points out have a simpler fix: the boards of directors that represent shareholders need to demand more oversight powers when it comes to their companies’ lobbying.