It's Sunshine Week 2014! For those unfamiliar, Sunshine Week aims to improve the conversation about access to information, encouraging more disclosure from the U.S. government. Money in politics is a primary issue, and given that this is an investing site, our focus this week is on publicly traded companies and the money they spend lobbying Washington. All of the data in this article comes from opensecrets.org and the Senate's Lobbying Disclosure Act database.
Today, our focus is on Google (NASDAQ:GOOGL). The tech company was in the top five for lobbying spending out of all publicly traded companies. Of the $3.21 billion spent on lobbying last year, $15.8 million of it came from Google.
Let's not kid ourselves: $15.8 million is a ton of money for a company that "does no evil" to spend on an activity considered by many to be quite terrible. But as with any number, it means nothing without some context. If we look at Google's spending history and it doesn't jibe, maybe we can dismiss 2013 as an aberration.
No other company in the top five for lobby spend has a chart this straightforward; Google has fully embraced lobbying over the past decade. Clearly, the company sees value in lobbying Washington, but perhaps this sort of spending is a hallmark of the tech industry?
To test that theory, we can look at the spending of other tech giants like Facebook, Yahoo!, and AOL. If we pooled the lobbying expenditures for these four companies, here is how it would break down on a percentage basis:
Google easily outspends the other three companies here. It's not a perfect comparison to begin with -- these companies are all substantially different than each other -- but the huge disparity is still surprising. Ultimately, our first two charts raise the question: What on earth is Google lobbying for?
Here's a look at the Google's lobbying record broken out by the number of filed reports by specific issue code:
Lobbying data can be a quick way to break down exactly what a company advocates for. In Google's case, it's a bit more difficult because of the sheer number of issues it aims to influence. There are 10 represented here, and another 12 make up the "other" category. If you want to know what matters to the future of Google, to the health and success of the company, you can start with its lobby filings. Investors can dig deeper in the list above here.
Why all of this matters to you
Now that we've flushed out Google's lobbying profile, it's fair to ask what it all means. Does lobbying really matter to investors? Actually, yes.
Academic studies and theoretical indexes both point to the superior performance of companies that lobby compared to companies that don't or the S&P 500 index as a whole.
An academic paper out of the University of Mississippi published last summer concludes that there is a direct link between lobbying activity and shareholder wealth, with the authors writing, "Our results suggest that stocks of lobbying firms significantly outperform non-lobbying firms."
Further support comes from the investment research firm Strategas, which created an index that tracks the 50 companies that spend the most money on lobbying each year. It claims its index has beaten the S&P 500 for the last 15 straight years, implying the market is not properly valuing lobbying expenditures.
Lobbying is not necessarily viewed as an investment opportunity in the minds of most shareholders, but maybe it should be. In the spirit of Sunshine Week, it's time to celebrate disclosure and shine a little light on the lobbying activities of your stock holdings.