Politics Boosts Business but Not Vice-Versa

Companies can boost their bottom line by hiring a former politician, but business leaders don’t benefit their companies by getting into politics.

"In some sense, it's gratifying that we only found a positive trend associated with former politicians being hired into corporate leadership," says Stephen Ferris. "It's a weak, but implicit, endorsement, of the integrity of our political and commercial practices." Ximagination/iStock

Companies can boost their bottom line by hiring a former politician, but business leaders don’t benefit their companies by getting into politics.

“We found that the value created for firms is much greater when individuals move from politics to the board or executive team rather than the other way around,” says Reza Houston, coauthor of the study and a doctoral student in the Trulaske College of Business.

“In the United States, we have specific legislation that prevents politicians from providing ‘kickbacks’ to their former companies while they hold public office.

“Because of this, CEOs or other high-ranking company officials who move to political office do not increase the value of firm when compared to former politicians who join the leadership team of a company.”

In their study, Houston and Stephen Ferris, professor and director of the Financial Research Institute, tracked more than 300 individuals who moved between public companies and politics over 15 years.

Individuals they tracked either served on a board of directors or held one of five leadership positions: CEO, chief financial officer, chief operating officer, chief information officer, or executive vice president. The politicians they tracked included presidents, senators, representatives, and governors.

It was 2.5 times more likely that a politician would transition to a corporate position compared to a corporate leader moving into politics.