To Avoid Courts, Big Corporations Pay Lobbyists for Results

The following is an excerpt from an article by the Social Justice Foundation: psmag.com

An October study examined the relationship between corporations’ lobbyist payments and their employee litigation records. The first finding was obvious: Companies that experience employee litigation spend way more on lobbyists ($970,000 a year) than companies that don’t ($180,000). And, the study explains, those companies are getting great value for the extra $790,000 they’re spending.

By reviewing the 27,794 employee lawsuits filed between 2000 and 2014, the study’s authors found that court case outcomes were more favorable for companies that lobby versus those that don’t. Or, as the abstract put it, the case results show “the benefit of building political capital to obtain biased outcomes in favor of politically connected firms.” (These findings were replicated in a 2011 study of the Chinese system that concluded “politically connected defendants … have higher stock returns and are more likely to appeal against adverse outcomes and to obtain a favorable appeal result.”)

The full abstract from the original study:

In this study, we analyze employee litigation and other work-related complaints to examine if the judicial process favors firms that engage in lobbying. We gather data for 27,794 employee lawsuits (after their initial court hearings) filed between 2000 and 2014 and test the relationship between employee allegations and firms’ lobbying strategies. We find that employee litigation increases the number of labor-related bills in our sample. We document that an increase in employee lawsuits may drive firms into lobbying to change policy proposals. We also find robust evidence that case outcomes are different for lobbying firms compared to non-lobbying rivals, which may protect shareholder wealth in the long run.

Our results suggest lobbying activities may make a significant difference in the effects of employee lawsuits. Our findings highlight the benefit of building political capital to obtain biased outcomes in favor of politically connected firms.