Ex-Politicians Boost Businesses

Problem

You’re considering hiring an ex-politician. Does his background have anything to bring your company? And you have an employee jumping ship to run for office. This that going to help your company out down the road?

Solution

That ex-politician will probably boost your bottom line. But the guy leaving to run for office? Don’t count on any significant returns, according to a study to be published in Managerial Finance.

Method

Researchers tracked more than three hundred individuals moving between public companies and politics over fifteen years.

The people they tracked served on boards or one of five key leadership positions: CEO, chief information officers, chief operating officer, chief financial officer, or executive vice president.

The politicians tracked included governors, representatives, senators, and presidents.

Results

Researchers found that it was 2.5 times more likely that a politician would move to a corporate position than the other way around.

When politicians moved into corporate settings, those companies, especially health and financial companies, experienced stock returns of 3.6 per cent per year higher than what was expected. Firms hiring ex-politicians tended to be large and with stagnant growth prospects.

On the other hand, when a corporate leader transitioned to political office, there was a slight bump in the stock price of their old firm for three days, but nothing significant after that.

According to the researchers, “In the US, most politicians tend to recuse themselves from any decisions or votes involving their former companies. On the other hand, many politicians who have been retired from public office for a few years continue to engage in lobbying activities, developing a solid network of important connections for certain industries. The former politicians who provided the most value to public companies were former cabinet secretaries.”

The Takeaway

If you’re looking at a resume with some political experience on it, don’t write it off—that represents a good network, feel for the regulatory body, and probably some salesmanship. On the other hand, if your co-worker is leaving the company for a run on Parliament, shake their hand and wish ‘em luck—but don’t expect anything else. Which is how it should be, after all.


 

 

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