Corporate political strategy: An examination of the relation between political expenditures, environmental performance, and environmental disclosure

    Authors

    C. H. Cho; D. M. Patten;R. W. Roberts

    Comments

    Authors: contact us about adding a copy of your work at STARS@ucf.edu

    Abbreviated Journal Title

    J. Bus. Ethics

    Keywords

    business ethics; corporate political strategy; environmental disclosure; environmental performance; political expenditures; SOCIAL PERFORMANCE; FINANCIAL PERFORMANCE; UNITED-STATES; MANAGEMENT; Business; Ethics

    Abstract

    Two fundamental business ethics issues that repeatedly surface in the academic literature relate to business's role in the development of public policy [Suarez, S. L.: 2000, Does Business Learn? (The University of Michigan Press, Ann Arbor, MI); Roberts, R. W. and D. D. Bobek: 2004, Accounting, Organizations and Society 29(5-6), 565-590] and its role in responsibly managing the natural environment [Newton, L.: 2005, Business Ethics and the Natural Environment (Blackwell Publishing, Oxford)]. When studied together, researchers often examine if, and how, corporations influence environmental policy decisions. Drawing from literatures on corporate political activity, corporate social and environmental performance, and corporate environmental disclosure, we develop and empirically examine two research questions concerning the relations between corporate political expenditures, environmental performance, and environmental disclosure. The questions are: (1) Do corporations that are poorer environmental performers spend more on political activities than their better-performing counterparts? (2) Is there an association between corporations' spending on political activities and the extent of their financial report environmental disclosures? We investigated these questions through analyses of data we gathered on a sample consisting of 119 U.S. environmentally sensitive firms for the 2001-2002 election cycle. After controlling for firm size and specific industry effects, our tests reveal a significant, inverse relationship between firm environmental performance and political spending. This is consistent with the notion that U.S. firms with relatively poorer environmental performance records engage more intensely in corporate political activities as part of their overall strategic management of their relationship with the state. In addition, a significant and positive association between the amount of political spending and the extent of environmental disclosure suggests that environmental disclosure and political spending are both proactive, complementary tactics to strategically manage public policy pressure. If corporations' strategies are intentionally designed to unreasonably limit their environmental responsibilities or to misrepresent firm environmental performance, then we argue that these activities reflect a significant lapse in ethical conduct.

    Journal Title

    Journal of Business Ethics

    Volume

    67

    Issue/Number

    2

    Publication Date

    1-1-2006

    Document Type

    Article

    Language

    English

    First Page

    139

    Last Page

    154

    WOS Identifier

    WOS:000240513500003

    ISSN

    0167-4544

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