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Corporate Political Strategy: An Examination of the Relation between Political Expenditures, Environmental Performance, and Environmental Disclosure

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  • Charles Cho

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  • Dennis Patten

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  • Robin Roberts

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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 onâ\x90£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. Copyright Springer Science+Business Media, Inc. 2006

Suggested Citation

  • Charles Cho & Dennis Patten & Robin Roberts, 2006. "Corporate Political Strategy: An Examination of the Relation between Political Expenditures, Environmental Performance, and Environmental Disclosure," Journal of Business Ethics, Springer, vol. 67(2), pages 139-154, August.
  • Handle: RePEc:kap:jbuset:v:67:y:2006:i:2:p:139-154 DOI: 10.1007/s10551-006-9019-3
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    References listed on IDEAS

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    1. Kroszner, Randall S & Stratmann, Thomas, 1998. "Interest-Group Competition and the Organization of Congress: Theory and Evidence from Financial Services' Political Action Committees," American Economic Review, American Economic Association, pages 1163-1187.
    2. Patten, Dennis M., 2002. "The relation between environmental performance and environmental disclosure: a research note," Accounting, Organizations and Society, Elsevier, vol. 27(8), pages 763-773, November.
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    Citations

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    Cited by:

    1. Tom Thomas & Eric Lamm, 2012. "Legitimacy and Organizational Sustainability," Journal of Business Ethics, Springer, pages 191-203.
    2. Li Sun & Marty Stuebs, 2013. "Corporate Social Responsibility and Firm Productivity: Evidence from the Chemical Industry in the United States," Journal of Business Ethics, Springer, pages 251-263.
    3. Wendy Heltzer, 2011. "The asymmetric relationship between corporate environmental responsibility and earnings management: Evidence from the United States," Managerial Auditing Journal, Emerald Group Publishing, vol. 26(1), pages 65-88, January.
    4. repec:kap:jbuset:v:143:y:2017:i:1:d:10.1007_s10551-015-2758-2 is not listed on IDEAS
    5. Cho, Charles H. & Roberts, Robin W. & Patten, Dennis M., 2010. "The language of US corporate environmental disclosure," Accounting, Organizations and Society, Elsevier, vol. 35(4), pages 431-443, May.
    6. Jean-Noël Chauvey & Sophie Giordano-Spring & Charles Cho & Dennis Patten, 2015. "The Normativity and Legitimacy of CSR Disclosure: Evidence from France," Journal of Business Ethics, Springer, pages 789-803.
    7. Jennifer C. Chen & Dennis M. Patten & Robin Roberts, 2008. "Corporate Charitable Contributions: A Corporate Social Performance or Legitimacy Strategy?," Journal of Business Ethics, Springer, pages 131-144.
    8. Gary Peters & Andrea Romi, 2014. "Does the Voluntary Adoption of Corporate Governance Mechanisms Improve Environmental Risk Disclosures? Evidence from Greenhouse Gas Emission Accounting," Journal of Business Ethics, Springer, vol. 125(4), pages 637-666, December.
    9. Lloyd, Bob, 2007. "The Commons revisited: The tragedy continues," Energy Policy, Elsevier, vol. 35(11), pages 5806-5818, November.
    10. Cedric Dawkins & John Fraas, 2011. "Coming Clean: The Impact of Environmental Performance and Visibility on Corporate Climate Change Disclosure," Journal of Business Ethics, Springer, pages 303-322.
    11. Toms, Steven, 2008. "Asymmetric Response: Explaining Corporate Social Disclosure by Multi-National Firms in Environmentally Sensitive Industries," The York Management School Working Papers 42, The York Management School, University of York.
    12. Charles Cho & Martin Martens & Hakkyun Kim & Michelle Rodrigue, 2011. "Astroturfing Global Warming: It Isn’t Always Greener on the Other Side of the Fence," Journal of Business Ethics, Springer, vol. 104(4), pages 571-587, December.
    13. Clemens Austin C., 2014. "All politics is local, but lobbying is federal and local: the validity of LDA data," Business and Politics, De Gruyter, vol. 16(2), pages 1-23, August.
    14. Christine Mallin & Giovanna Michelon & Davide Raggi, 2013. "Monitoring Intensity and Stakeholders’ Orientation: How Does Governance Affect Social and Environmental Disclosure?," Journal of Business Ethics, Springer, vol. 114(1), pages 29-43, April.
    15. Paul A. Griffin & Yuan Sun & Steven Cahan, 2013. "Strange bedfellows? Voluntary corporate social responsibility disclosure and politics," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 53(4), pages 867-903, December.
    16. Michele Fabrizi & Christine Mallin & Giovanna Michelon, 2014. "The Role of CEO’s Personal Incentives in Driving Corporate Social Responsibility," Journal of Business Ethics, Springer, pages 311-326.
    17. Noushi Rahman & Corinne Post, 2012. "Measurement Issues in Environmental Corporate Social Responsibility (ECSR): Toward a Transparent, Reliable, and Construct Valid Instrument," Journal of Business Ethics, Springer, vol. 105(3), pages 307-319, February.
    18. Cedric Dawkins & John Fraas, 2011. "Erratum to: Beyond Acclamations and Excuses: Environmental Performance, Voluntary Environmental Disclosure and the Role of Visibility," Journal of Business Ethics, Springer, vol. 99(3), pages 383-397, March.
    19. Burmester, Brent, 2016. "Upgrading or unhelpful? Defiant corporate support for a marine protected area," Marine Policy, Elsevier, vol. 63(C), pages 206-212.
    20. Shane Leong & James Hazelton & Cynthia Townley, 2013. "Managing the Risks of Corporate Political Donations: A Utilitarian Perspective," Journal of Business Ethics, Springer, vol. 118(2), pages 429-445, December.
    21. Pantzalis, Christos & Park, Jung Chul, 2014. "Too close for comfort? Geographic propinquity to political power and stock returns," Journal of Banking & Finance, Elsevier, vol. 48(C), pages 57-78.
    22. Yunfeng Liu, 2014. "The Analysis of Financial Enterprises Recruitment Strategy and Way of Choosing and Employing People------Citigroup, for Example," Research in World Economy, Research in World Economy, Sciedu Press, vol. 5(1), pages 99-105, March.
    23. Jennifer Chen & Charles Cho & Dennis Patten, 2014. "Initiating Disclosure of Environmental Liability Information: An Empirical Analysis of Firm Choice," Journal of Business Ethics, Springer, pages 681-692.
    24. Charles H. Cho & Jillian R. Phillips & Amy M. Hageman & Dennis M. Patten, 2009. "Media richness, user trust, and perceptions of corporate social responsibility: An experimental investigation of visual web site disclosures," Accounting, Auditing & Accountability Journal, Emerald Group Publishing, vol. 22(6), pages 933-952, July.

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