WASHINGTON -- The fight over corporate political donations is evolving from whether such gifts are in the public's interest to whether they're even in the interest of the companies themselves.
A pair of University of Minnesota finance professors who looked at the question found that on average, for every $10,000 a company donates to politics, its stock market value declines by $1.33 million in the next year.
The conclusion, from Rajesh Aggarwal and Tracy Wang of the university's Carlson School of Management, along with Felix Meschke of the University of Kansas School of Business, adds to a growing body of research that suggests that businesses' contributions generally hurt their shareholders rather than help them.
The researchers say companies that use their money for political donations tend to spend less on research and development and investment.
"This was strictly an academic exercise," Aggarwal said. "But I am persuaded that in many cases it is not in the shareholders' interests to be making political donations."
The issue is important in Minnesota, where activists have introduced shareholder ballot measures at both Target and 3M calling for studies on the feasibility of banning many types of donations. Both companies declined to comment on the academic research.
But the professors' conclusions are heresy to the political culture of Washington, where highly paid lobbyists and political fundraisers are presumed to rule.
The Manhattan Institute went so far as to issue a 40-page report titled "Corporate Political Spending: Why the New Critics Are Wrong." The report criticized Aggarwal and Harvard law professor John Coates by name.
The Manhattan Institute said Aggarwal's "results support, at most, an inference that ... companies' underperformance may be related to factors that also influence their decisions to contribute."
In other words, companies in challenging circumstances might be more likely to seek help in Washington than companies that are thriving.
3M's board made its case for political contributions in a 2012 proxy statement opposing a shareholder proposal to ban corporate general fund political contributions.
"Elected representatives at all levels of government make laws and regulations that can and do affect the company's business," the board wrote. "To effectively advocate the company's and stockholders' interests, we believe we must actively participate in the political process."
One problem, especially with corporate donations to outside political spending groups such as Super PACs, is that companies can suffer damage to their image.
"See Target and Chick-fil-A," said Harvard's Coates, who like Aggarwal and Wang, has research that shows many corporate political contributions can be "affirmatively bad" for shareholder value.
Target found itself boycotted in 2010 because its $150,000 contribution to the outside spending group Minnesota Forward went to back Republican gubernatorial candidate Tom Emmer. Target favored Emmer's stance on business issues, but his stance against gay marriage hurt Target's image as an inclusive company.