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ANALYSIS
March 2, 2009
Sagging Index no longer reflects what’s going on in the market, some say, Replacements? Google it, to start.
March 2, 2009
Downward price spiral will actually boost the cost of capital for most companies. CFOS, take note.
March 2, 2009
The latest bailout at AIG could be a preview of how the president will deal with Wall Street.
March 2, 2009
No corporate defaults. Big debt offerings. Percolating CP issuance. Things may be looking up in the capital markets.
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November 9, 2008 12:01 AM ET
The membership of corporate boards could change significantly based on the outcome of last week's election, as some companies may look to hire Bush administration insiders or former lawmakers with connections to the incoming regime. And such hires could actually make a difference in the share price of corporations, if the findings from a forthcoming study are to be believed. According to the study, which will be published soon in the Review of Financial Studies, companies whose boards had Republican connections fared better after the 2000 election than companies with boards with Democratic connections. Specifically, stock prices at the Republican-leaning companies jumped about 3% more on average than those of other companies in the S&P 500, while stock prices of Democratic companies dropped about 3%. This disparity was noted especially among companies that had at least one board member with former affiliations with the Republican Party and no board members with affiliations with the Democratic Party. “We got some flack about this, because people were saying it is not exactly cronyism and it is just individuals who know how the government works,” said Eitan Goldman, an Indiana University finance professor who co-authored the study with professors from the University of North Carolina and the European School of Management and Technology. “We're not legal scholars, so we're not saying whether it is legal or illegal.” The study found that 153 of the S&P 500 companies had political connections during the 2000 elections. There were 78 companies whose board members had only Republican affiliations, while Democratic-affiliated boards controlled 47 companies and the remaining companies' boards had at least one director with affiliations to each major political party. A similar study by the same authors found that after Republicans swept the House and Senate in 1994, companies with Republican-leaning boards did significantly better in procuring government contracts than companies with Democratic-leaning boards—perhaps by as much as hundreds of millions of dollars. Mr. Goldman said there are plenty of possible explanations for the correlation. The government contracts could have been larger because they were in industries such as defense and oil, which naturally lean Republican, and the companies would have likely benefited regardless of who was on the board. “There's no clear evidence that [having a partisan board member] gives access to politicians,” he said. And while they don't have data for other elections, Mr. Goldman said it is likely companies with Democratic-affiliated board members would fare better under an Obama administration. “It would make sense that it would go both ways,” he said. Peter Gleason, chief financial officer for the National Association of Corporate Directors, said many companies have moved away from hiring “big-name politicos” as directors in recent years and have focused instead on directors with specific skill sets. “We've got Sarbanes-Oxley now, we've got independence requirements...things have changed,” he said. However, Mr. Gleason noted former government officials often have important skills, such as the accounting expertise possessed by former commissioners of the Securities and Exchange Commission. That could lead to a rush to snap up Bush administration appointees when they leave office over the next few months, he said. A number of corporate boards already include former government officials, such as Al Gore at Apple and former Reagan administration economic adviser Martin Feldstein at AIG. 
Bowles: Dem power sits on GM, Morgan Stanley boards.
Despite the decisions by some companies to populate their boards with one party's members, such a split does not seem to exist in political donations. Mr. Goldman examined political donations from employees of 315 of the most politically active companies and found that in 2000, more money went to Republicans—about $158 million, compared with $88 million to Democrats. However, just 18 of the 315 companies studied donated to only one of the major political parties. FW
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