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Wednesday, July 16, 2014

Study: Only executives get richer in crony capitalism

In what may come as heartbreak for the U.S. lobbying industry, a new study suggests business success or failure has little to do with political connections.

The study, published by the Mercatus Center at George Mason University in Fairfax, Va., finds that political activity has no significant effect on the performance of most firms and industries.

Company executives, however, well, that’s a different story.

While lobbying on behalf of industry has soared amid increasing government handouts and sweetheart crony capitalism deals, the study’s authors, economists Russell Sobel and Rachel Graefe-Anderson, find little evidence that firms or their shareholders benefit.

“We do, however, find a robust and significant positive relationship between political activity and executive compensation,” the economists state. “Therefore, while industry and firm-level performance are not robustly related to ‘cronyism,’ executive compensation is — suggesting that any benefits gained from corporate political activity are largely captured by firm executives.”


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