5/21/15 Revolving Door

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The term “revolving door” refers to people who go from the private sector into government.  And vice versa.

The question is often raised on whether this gives a particular company an advantage over its competitors.  Three researchers have answered this very question.

They examined company stock performance between the years 1990 and 2012.  They compared companies that hired a government employee or who had an employee take a government post – let’s call them “revolvers”– with similar-sized companies in the same industry that didn’t have any revolvers.

There was no statistical difference in stock performance for companies in which an employee left to take a government post.  Nor was there any significant difference during the period of time in which a revolver was employed by a company.

However, there was a difference in a third scenario.  Companies benefited when working with a revolver while he was a still government employee but would eventually be hired by that firm.

These companies had higher stock performance and received more government contracts than similar companies that didn’t employ revolvers. 

The researchers examined and discarded other possible scenarios.  Leaving them with this conclusion:  Some “€œpublic officials abuse their power while in office to favor certain companies with a view to gaining future employment.”€

The study is on our website.

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