Effects of corporate lobbying on Chief Executive Officer remuneration and corporate performance

According to the Theory of Economic Regulation, corporate lobbying is a productive investment for firms looking to influence legislation and public policy. Corporate political activity can generate benefits for the organization; however, in the presence of agency conflicts the advantage is often offset by agency costs borne by the shareholders. Sometimes excess remuneration is offered by the principal in exchange for the agent’s commitment to shareholder wealth creation. In this study we evaluated the association between corporate lobbying, chief executive officer remuneration and corporate performance in 238 firms traded on the New York Stock Exchange, covering the period 2014-2017. Our regression analyses reveal that corporate lobbying is positively associated with chief executive officer remuneration and negatively associated with corporate performance, suggesting the existence of agency costs resulting from corporate lobbying. In such scenarios, based on our sample, corporate lobbying does not improve performance or generate benefits for shareholders, but serves as a personal and political tool for executive self-promotion.