Before I sign off, I’d like to thank Danielle et al. for their hospitality. I’m very glad to have had this opportunity to share some of my thoughts, and to get some great feedback. Let me finish up by offering an alternative rationale – grounded in public choice theory – for limited shareholder authority over corporate political spending.
Shareholder regulation of corporate political activity may not only decrease agency costs within the firm, it may improve overall societal welfare. First, diversified shareholders might be able to constrain the costs of rent-seeking behavior that merely redistributes wealth between portfolio firms. Second, all shareholders may want to reduce the possibility of political extortion by removing from management the final say on certain kinds of political expenditures. Allowing shareholders to regulate corporate political activity could limit these social welfare-decreasing activities, and channel corporate resources to more productive uses. I sketch these arguments in more detail below. Read More