Corporate Political Activity and Regulatory Capture: How Some Companies Blunt the Knife of Socially Oriented Investor Activism

Document Type

Article

Publication Date

5-1-2018

Abstract

Socially oriented shareholder activism is an increasingly important mechanism through which social movement organizations seek to influence the private sector by exerting pressure on corporate activities in areas such as human rights, environmental protection, and labor policies. This activism challenges the status quo of targeted firms and potentially their institutional field, disrupting “business as usual” and often drawing negative attention to the firms. We theorize that some firms might use corporate political activity (CPA) as an indirect, nonmarket strategy aimed at regulatory capture to reduce the impact of such disruptions. We focus on one popular avenue of shareholder activism—the proxy proposal mechanism—and the role the Securities and Exchange Commission (SEC) plays in allowing omission of socially oriented shareholder proposals from the proxy ballot. Using two distinct data sources, we find evidence that for S&P 500 firms, the SEC allows for the omission of the proposals from proxy ballots more frequently for those firms more active in CPA. These findings inform the growing scholarship on socially oriented activism as well as suggest the indirect influence of CPA on government agency decision making.

Identifier

85045133231 (Scopus)

Publication Title

Journal of Management

External Full Text Location

https://doi.org/10.1177/0149206316638162

e-ISSN

15571211

ISSN

01492063

First Page

2064

Last Page

2093

Issue

5

Volume

44

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