Halting corporate political contributions isn’t enough to protect democracy

January 23, 2021, 4:00 PM UTC
Commentary-Congress Joint Session-PAC
Corporations can still spend unlimited amounts to influence politics even if they stop sending PAC money to campaigns, writes Timothy Werner.
Erin Schaff—Pool/REUTERS

Since the riot at the U.S. Capitol, several major corporations, including American Express, Facebook, and Morgan Stanley, have won praise for restricting campaign contributions from their affiliated political action committees, or PACs. While this is an admirable action, it is largely symbolic.

As a scholar of corporate political activity, I find it difficult to credit companies much for this act. That’s because corporate PACs play an increasingly minimal role in our political system. There are far more important ways in which the disclosure of ties between firms and politicians need strengthening.

When corporations restrict PAC contributions, they are not ending their use of money to influence politics. Rather, they are only restricting one relatively insignificant form of political activity. Corporate PACs, which are funded by employees and shareholders, can only give a candidate $5,000 per election. But corporations are still free to spend unlimited amounts on “dark money”—political spending by nonprofit organizations that do not need to disclose their donors—to influence campaigns, or on lobbying to influence legislation.

Further, it is unclear that cutting off PAC contributions will serve as a concrete punishment for any politician, since a growing majority of their funding comes directly from individuals.

Restricting PAC giving to individual politicians is thus only a first step. To truly make a difference, PACs must also withhold contributions to the campaign finance committees of these politicians’ parties—in this case, the Republicans. That may persuade the party to discipline members who voted to reject the outcome of the election.

Companies should also voluntarily disclose and stop giving money, whether directly or covertly from their corporate accounts, to 527 and dark money organizations—both of which can spend unlimited amounts to influence federal elections. Once companies give funds to these outside groups, they largely lose control over them. Failing to similarly restrict these donations could allow financial support to controversial politicians to continue. Facebook and the University of Phoenix, for example, have suspended or demanded refunds from the policy arm of the Republican Attorneys General Association, which has been accused of helping to facilitate the Capitol takeover.

In the long run, even these steps are insufficient to strengthen our democracy while simultaneously lowering companies’ risks from political activity. More companies must support increasingly thorough and legislatively mandated disclosure policies.

For example, the individual contributions of top managers should be more explicitly linked to their companies. Although current law requires individual donors to identify their employers, there are many examples of evasion by executives and campaigns through non-reporting and the use of alternative “employment,” such as nonprofit board memberships. The Federal Election Commission must step up its enforcement, and either via regulation or legislation, top executives should be tied to their organizations via a common unique identifier such as that employed by the Securities and Exchange Commission.

Ultimately, to scholars of money in politics, campaign contributions are a sideshow: On average, companies spend vastly larger sums from their corporate accounts on lobbying Congress and the federal bureaucracy. Lobbying must be a target for any reform effort, whether voluntarily adopted or mandated.

Several U.S. states already require that corporations identify the specific pieces of legislation or regulations that they are lobbying on, their lobbying position, and the names of the specific legislators or regulators targeted. At the federal level, only foreign firms that lobby in the U.S. are required to report such information. We must extend these requirements to all firms and make the data broadly available.

The time for change is now. Reform of money in politics typically occurs following major events that grab the public’s attention. Real disclosure of campaign contributions only began in the 1970s in the wake of Watergate. Public disclosure of corporate lobbying only began in the 1990s and started happening on a quarterly basis in 2007, following scandals involving the House bank and the disgraced lobbyist Jack Abramoff, respectively.

Voters need to better understand the role of corporate influence in public policymaking. We must go beyond the—potentially temporary—halting of corporate PAC contributions. We must have bold reform that empowers the American people to hold their elected leaders and corporations accountable for their actions.

Timothy Werner is an associate professor of business, government, and society in the McCombs School of Business at the University of Texas at Austin. 

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