5/21/15 Revolving Door
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 Ã¢Â€Â“ letÃ¢Â€Â™s call them “revolvers”– with similar-sized companies in the same industry that didnÃ¢Â€Â™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 didnÃ¢Â€Â™t employ revolvers.
The researchers examined and discarded other possible scenarios. Leaving them with this conclusion: Some “Â€Âœpublic officials abuse their power while in office to favor certain companies with a view to gaining future employment.”Â€Â
The study is on our website.