We argue that these donations are likely to destroy value as concern about such spending and demands for transparency rise.
In this article we explain the forces driving companies to make risky, potentially hypocritical donations.
Instead, corporations need to implement systematic and principled reforms to avoid future gaffes and controversies, reduce their involvement in time-wasting and costly political spending, and better align their lobbying and donations with their stated values. Capitol, for instance, public scrutiny of large corporate contributions to politicians who refused to certify the results of the 2020 presidential election led many companies to say that they would pause or even suspend political donations-some for a predefined period, others indefinitely.īut the risks and costs imposed by political contributions cannot be rationally or effectively addressed by ad hoc moratoriums. In an era when customers, employees, and investors are increasingly scrutinizing companies’ records on employee, environmental, social, and governance issues (we prefer the term EESG over the more common ESG, to appropriately emphasize the importance of employees), the threat of blowback from political contributions has become too great for executives to ignore. Perhaps most important, political donations greatly heighten corporate risk. Even the classic justification that corporate donations maximize shareholder wealth is on shaky ground: Emerging evidence suggests that they can destroy value by suppressing innovation and distracting managers from more-pressing tasks. Because political donations are controlled by managers, and because no corporate stakeholders, including shareholders, base their relationship with a company on the expectation that it will use its entrusted capital for political purposes, corporate political spending cannot reflect the diverse preferences and views of those stakeholders. A 2020 report by the Center for Political Accountability offers abundant examples: corporations that have publicly demanded racial equality while making contributions to groups and candidates that promote racial gerrymandering corporations that purport to be concerned about climate change while donating to groups that challenge the EPA’s clean-power plan and corporations that claim to protect LGBTQ rights while funding groups that helped elect supporters of the 2016 “bathroom bill,” which abolished certain antidiscrimination protections for gender identity.ĭeeper issues lurk beyond hypocrisy. That ruling freed corporations to fund political candidates and dark-money campaign committees (organizations that do not have to disclose their donors).Īs a result, companies now donate to help elect candidates they hope will do their industry’s bidding or support a specific cause, even as they publicly advocate for the opposite stance. Supreme Court’s 2010 decision in Citizens United v. Such inconsistency-what some have called hypocrisy-has become endemic in the corporate world as a direct consequence of the U.S. During the RSLC working group meeting that Google’s state policy manager attended, slides were shown calling “election reform” “the only line of defense of the Republican Party.” Months earlier, Google had also donated $35,000 to the RSLC from its corporate treasury. But there was a catch: Google had quietly funded a “policy working group” on “election integrity” with the Republican State Leadership Committee, an organization that supported the Georgia legislation and similar legislation in other states.
On April 14, 2021, in response to a restrictive Republican-sponsored voting law in Georgia, the CEO of Google joined 200 other corporate CEOs in publishing an open letter in the New York Times and the Washington Post stating opposition to “any discriminatory legislation” that would make it more difficult for Americans to vote.
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