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Politics and the Business Corporation

8 Pages Posted: 5 Jan 2004  

Robert H. Sitkoff

Harvard Law School

Abstract

This essay explores the policy bases for, and the political economy of, the law's long-standing regulation of corporate political speech. The essay has three parts. First, it contends that the conventional justifications for regulating corporate interventions in politics - that corporate donations unnaturally skew the political discourse (bad politics) and that corporate political donations harm shareholders (agency costs) - assume irrational investors and substantial capital market inefficiency. Drawing on public choice theory, the essay also explores the aim of retarding rent-seeking as an alternative justification for regulating corporate interventions in politics. Second, the essay reexamines the history of the regulation of corporate political speech and suggests a political economy analysis whereby corporations favored limitations on corporate donations in order to obtain protection from rent extraction by politicians. Finally, the essay explores the implications of this analysis for the modern regulation of corporate political donations.

Keywords: Corporate Political Speech, Political Extortion, Economic Theory of Regulation, Tillman Act, Agency Costs, Rent Seeking, Public Choice, Rent Extraction, Soft Money, Hard Money, PACs, Campaign Finance

JEL Classification: G38, H32, K22, L21, L51, N41

Suggested Citation

Sitkoff, Robert H., Politics and the Business Corporation. Regulation, Vol. 26, pp. 30-36, Winter 2003-04. Available at SSRN: https://ssrn.com/abstract=479821

Robert H. Sitkoff (Contact Author)

Harvard Law School ( email )

1575 Massachusetts Avenue
Cambridge, MA 02138
United States
(617) 384-8386 (Phone)
(617) 812-6195 (Fax)

HOME PAGE: http://www.law.harvard.edu/faculty/directory/facdir.php?id=649

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