While it is widely recognized that companies regularly lobby Congress, we show that most large public companies also lobby executive agencies. Given that executive agencies are not beholden to companies for campaign contributions, it is not clear whether agencies would have an incentive to provide favors to companies. However, we find that company lobbying of agencies has significant effects: It leads to more favorable rules, more special exemptions, more favorable decisions on enforcement actions, and more government contracts. These effects are stronger among agencies with closer links to the private sector, what are commonly referred to as ‘revolving door’ agencies. In sum, while campaign contributions give members of Congress an incentive to provide benefits to companies, our evidence suggests that career opportunities within the private sector give employees of executive agencies an incentive to provide benefits to companies. Following a negative exogenous shock to agency power, the Supreme Court’s Chevron decision, firms engaged in agency lobbying experienced negative abnormal returns.

Motivations for Lobbying

Companies may lobby executive agencies for two reasons. First, lobbying can add value by providing information to policy makers, who may lack expertise and time. This “information channel should contribute to better regulatory decisions. Second, lobbying can add value by influencing regulatory outcomes to the benefit of an individual company. This “influence channel” can operate through a quid pro quo framework in which agency staff seek some benefit from companies. One example would be career opportunities in the private sector. Alternatively, this influence channel might also play a role if agency staff are convinced by the arguments of lobbying companies; for example if they do not hear arguments from opposing parties. This is commonly referred to as regulatory capture.

Pervasiveness of Lobbying 

Within our sample of the largest 500 public companies between 1999 and 2023, nearly 80 percent lobby both Congress and executive agencies. In contrast, only 4 percent of companies solely lobby Congress. The average company lobbies five to six agencies, with the most frequently lobbied agencies including the Department of Commerce, Department of Treasury, Department of Health and Human Services, and Department of State. Companies focus their lobbying on different agencies in different years.

Benefits of Lobbying

We focus on five potential benefits to lobbying executive agencies. Our first set of tests focuses on agency rulemaking. Findings are striking. When an agency is engaged in rulemaking that is related to a company’s business, the company significantly increases its lobbying of that agency. Lobbying increases in the year a company-relevant proposed rule is announced. Companies benefit from this lobbying around the announcements of both the proposed rule and the final rule, and companies that have lobbied the agency have significantly higher abnormal returns than non-lobbying companies for whom the rule is similarly relevant.

Our second set of tests focuses on agency waivers, which represent company applications for exemptions from various rules. Findings are similar: Company lobbying of an agency is significantly higher around the time of such waivers.

Our third set of tests focuses on enforcement actions. Through FOIA requests, we obtain data on investigations by both the SEC and the Wage and Hour Division within the Bureau of Labor. We find that companies significantly increase their lobbying of an agency in the year the agency initiates an investigation, and it remains elevated for several years. To examine the impact of this lobbying, we look at abnormal returns around the announcement of final enforcement actions, which are observed for all government agencies. We find that company abnormal returns around announcement of enforcement actions are significantly higher (or less negative) among companies that have lobbied the enforcing agency over the past year.

Our fourth set of tests focuses on government contracts. We again find that companies’ lobbying activities are significantly related to these agency actions. Company lobbying of an agency is significantly higher in the year of a contract grant.

In aggregate, our results lend strong support to the influence channel of lobbying, in addition to the information channel. Companies obtain significant benefits through their lobbying of government agencies.

Agencies’ Incentives to Provide Benefits to Companies

The pervasiveness of executive agency lobbying, combined with the benefits that companies obtain, suggests that agency staff must receive some benefits in return. We find that the potential for jobs in the private sector plays a critical role. Officials who may transition to corporate roles have strong incentives to maintain positive industry relationships, creating valuable opportunities for strategic engagement.

Our data reveal a clear pattern: Agencies with higher private sector mobility attract more intensive corporate lobbying. This is especially true when companies are seeking to influence agency rulemaking or enforcement decisions.

The Chevron Decision

In 2024, the U.S. Supreme Court overturned its ruling in Chevron v. Natural Resources Defense Council. This ruling effectively decreased the power of executive agencies. As such, it should decrease the value of lobbying these agencies. We take advantage of this negative exogenous shock to agency power to perform one final test. Consistent with expectations, we find that firms engaged in agency lobbying had negative abnormal returns around this decision.

Conclusion

Overall, our findings suggest that companies’ influence over the regulatory sector is greater than previously recognized. In addition to lobbying Congress, companies lobby the executive agencies that conduct enforcement actions, grant contracts, or engage in rulemaking that is relevant to the companies’ business. Companies obtain significant benefits from this lobbying. Agency staff are more motivated to provide such benefits when revolving-door dynamics with the private sector are more pronounced.

This post comes to us from professors Michelle Lowry at Drexel University and Ekaterina Volkova at the University of Melbourne. It is based on their recent paper, “Corporate lobbying of Bureaucrats,” available here.