Blog

Why have a PAC?

This is why…

Innovate to Motivate faculty member Brett Kappel weighs in on new research from Vanderbilt University:

The research finds that corporations gain clear financial benefits when individual employees make political donations.

What they describe in a new research paper is strong evidence that individuals who make political donations – whether at the behest of companies or not – directly benefit businesses in their communities.

“The reason we looked at individual contributions is because it accounts for about two-thirds of all the money given directly to politicians,” said Ovtchinnikov, noting that only about 10 percent of firms are actively involved in campaign finance. “Individuals are the big players in this game.”

The 2010 U.S. congressional elections saw an unprecedented boom in campaign spending – $4 billion in all, with about $1.12 billion coming in the form of individual contributions to candidates, according to the Center for Responsive Politics.

But it’s companies that are reaping the most recognizable benefits. Ovtchinnikov said firms located in areas where individual contributors most intensely targeted “economically relevant” politicians saw positive changes in return on asset (ROA) and market-to-book ratios. The bottom-line boost that comes from campaign donations is similar to investing in a new research-and-development or capital-expenditure project.