As a Turbulent Election Season Casts a Dark Shadow, Michael Hadani Strives to Shine a Light on Negative Aspects of Corporate Political Activity

Michael Hadani sees a chasm when it comes to corporate behavior research: “There is a lack of critical thought in mainstream management circles about the negative aspects of corporate political activity.”

Michael HadaniBorn in Israel and raised in the U.S. (as a child) and Israel, Hadani moved back to the United States 16 years ago. His outsider status gives him a unique perspective on American democracy and how corporations behave—or misbehave—within it.  

It’s a complex topic. There are two books he recommends to anyone interested in corporate political activity that help frame his own research approach: Who Stole the American Dream, written by Pulitzer prize New York Times reporter Hedrick Smith, a former correspondent for the Soviet Union, and Corruption in America, written by Fordham Law Professor Zephyr Teachout.

Smith’s book speaks to the decline of the middle class and the impact of the Reagan administration on deregulating Wall street to the detriment of Main street. Teachout’s book focuses on the roots of lobbying in the US—dating back to the 1770’s—revealing its inherent corruption from the beginning. The two books tie in neatly to Hadani’s work on corporate political activity and lobbying, illustrating important issues that he wishes many more researchers would address.

Hadani covers two main areas in his research. One area looks at how to reduce the tendency to engage in corporate political activities. “What I’m looking at specifically is how does being a politically active organization—whether it’s lobbying, hiring and using politicians for the board of directors—how does this impact the firm’s bottom line, how does this impact other stakeholders?” The second research stream looks at the intersection of political activity and corporate social responsibility.

Right now, he is developing a paper looking at the interaction of what happens when corporations consider the funding of political activity and research and development expenditures in tandem.

“Long story short, good things don’t happen. We have to make a choice, which is bad, because firms will often opt to invest less in research and development and more in political activity, which is not a good use of limited corporate resources. They’re going to be less competitive than politically active because they’re going to buy protection. This is what we’re seeing. This goes against strategy, this goes against competitive forces, and this goes against the basis of capitalism, because instead of competing, you’re buying protection. This is monopolistic rent seeking, everything that goes against having a competitive environment. We know this from large-scale studies. When you have political activity, economies shrink and are more corrupt in nature.”

Hadani has long had an interest in understanding lobbying and corporate political activity. He started out doing his undergraduate degree in psychology and business psychology while working as a consultant. He earned his PhD in business administration from the Martin J Whitman School of Management at Syracuse University, and he completed a minor in public administration at the Maxwell School of Citizenship and Public Affairs.

“That’s how everything started. Some of the faculty members there were doing research on lobbying and family firms, which were once my research area. I was looking at how family firms are politically active. It started very small and naive, then evolved.”

Hadani expressed that it is very difficult to publish in his discipline, due to a high level of scrutiny and much needed quality control, but also—as luck would have it—politics. “They’re trying to maintain a very high level of scrutiny and quality, which is good. Yet, my field is relatively small, and they are also trying to do some gatekeeping, so if they don’t believe the story, it’s not about the quality of the theory… it is also political. My first paper got rejected four times, even though today my findings are a given. Ten years ago, I couldn’t publish the paper. I published it in a secondary journal because top-tier publications simply didn’t buy the idea. Now people are publishing these papers and replicating what we found. That’s a problem too. We have to be very cautious. The problem is that we don’t focus on finding and revealing knowledge–we sometimes focus on maintaining knowledge.”

no lobbyists

A recently published paper of Hadani’s looked at how firms that are less socially responsible are more likely to engage in political efforts. “We find that they tend to be less supportive of social agendas and more obstructive. This supports new research that says that firms that have negative CSO, or negative stewardship responsibility, are more politically active. If I am less responsive to stakeholders, I’m going to be more politically active.”

Another paper by Hadani published this year in the Journal of Management, Corporate Political Activity and Regulatory Capture: How Some Companies Blunt the Knife of Socially Oriented Investor Activism, examines how corporate political activity—such as lobbying regulators, hiring former politicians to company boards, and contributing to political action committees—has been employed to prevent CSR proposals from consideration at shareholder meetings.

But all is not lost. In an additional study, Hadani found that the media can still be a powerful check on political activity; specifically, media attention reduces a firm’s ability to use lobbying and donations to receive government contracts. “We find that firms that are in the public media eye are not able to do that as effectively,” he said. “They’re able to get more contacts, but if you compare them to the firms that are outside of public sight, they are able to do that much less. So we look at public scrutiny as a disinfectant. The media has a role to play to shed light on the opaque nature of corporate political activity. Once you have more attention on you, you start conforming to normative expectations. And it also shows that political activity is a) opaque, and b) not normative. If you change your behavior because you are getting more attention, this means that your behavior is something that is shady.”

In his current role as a Management and Entrepreneurship professor at Saint Mary’s, Hadani sees a need to more comprehensively explore these topics with his students. He finds the field of strategic management a paradox. “We teach students to use strategies that have some serious negative social and ethical implications. When I say we, I don’t mean myself, I mean the field—these assumptions about the validity, the consequences, the legitimacy of the firm’s activities that we should challenge.”

“Surprisingly nobody talks about this in research. It is ridiculous that this is happening in fringe publications. Why is it happening? Why aren’t we having an honest conversation about this? We’re not.”

Select list of recently published research: