How Ex-Politicians Get Rich


When looking at the influence of corporate money in politics, we tend to focus on the billions of dollars spent on lobbying efforts and campaign contributions, but there’s another way that big business influences legislators — by promising them cushy positions on their boards of directors after they leave office. 24/7 Wall Street did a study of the 100 largest public companies and the former politicians who sit on their boards:

Just recently, following the scandal at Chesapeake Energy (NYSE: CHK) when CEO Aubrey McClendon made investments in drilling projects in which the company was involved, the issue was in the limelight again. Chesapeake, based in Oklahoma, has two powerful politicians on its board – former member of the Senate from Oklahoma, Don Nickles, and former Oklahoma Gov. Frank Keating. The company’s board members used the firm’s private planes for travel – a perk most governance experts frown upon. Perhaps the more salient question is why the two have stayed on the board under the current circumstances. It is equally reasonable to ask why politicians, with their backgrounds unrelated to running big companies, were even appointed to the board.

Many other politicians sit on the boards of America’s largest public companies, and some aspects of their services raise troubling questions. Some are successful lobbyists because of their Washington connections. These firms could work for causes or companies that do not have identical interests to those of the corporations of the boards on which they sit. There are questions about the past ethical behavior of others among these board members. In most cases, the former politicians have no obvious backgrounds that qualify them to be on public companies’ boards. A final problem is that some have done very well financially because they sit on several boards – another practice many corporate governance experts oppose.

The common thread among the directors on this list is that they have been paid very well in their roles. Most make more than a quarter of a million dollars a year. Most also have stock ownerships or grants that add substantially to those payments and usually amount to millions of dollars.

Even if it isn’t an actual quid pro quo, everyone knows what is going on here. If you play ball while you’re in Congress or a governor’s mansion, you can be assured of such positions. If you don’t, you’ll get locked out. And it doesn’t stop with politicians, it also extends to their staffers. Be a good little lapdog and you will have your pick of lobbying jobs for the companies you helped while you were working on Capitol Hill.

Comments

  1. says

    There’s a word for this in Japan – ama kudari – descent to heaven. Give handouts to large corporations as a politician, expect to retire to a cushy sinecure at one.

  2. Trebuchet says

    It’s not just politicians, either. There are darn few defense contractors without a retired general or two on the board.

    I will suggest, however, that the ex-politicians and generals aren’t so much being paid for what the previously did, but for their connection; cronies who are still in the government and military.

  3. Michael Heath says

    Trebuchet writes:

    It’s not just politicians, either. There are darn few defense contractors without a retired general or two on the board.

    I will suggest, however, that the ex-politicians and generals aren’t so much being paid for what the previously did, but for their connection; cronies who are still in the government and military.

    Most board members aren’t active enough with management to provide much back alley access for management. In addition the Board should have some representation beyond the stockholders, by also extending into major stakeholders as well. So from this perspective, if I were Chairman of a defense contractor, I’d absolutely want some retired generals. Just like GE likes have retired CEOs of major clients of their’s.

    I think the carrot being offered by Ed here is a real one, but not based so much on cronyism but instead the implied promise that if you are a member or staff of Congress, lobbyists and their clients will take care of you in the future if you play ball with them now. These lobbyists’ clients (corporations) can illustrate how they’ll do this for the pols by having retired pols on their Boards, while lobbyists do it by hiring staffers and making them rich.

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