Why companies spend all that campaign donation money
Why companies spend all that campaign donation money
This election season, we’re looking at political polarization: specifically, the role companies play in intensifying or easing political divides. One piece of this is how corporations spend money on political donations. For the 2022 midterm elections, businesses made $3.5 billion in contributions.
So what do they want for all that money?
Marketplace senior Washington correspondent Kimberly Adams has been looking into this and spoke with “Marketplace Morning Report” host David Brancaccio. The following is an edited transcript of their conversation.
David Brancaccio: When companies spend money for political purposes in an election year, they don’t see it as contributing to polarization, but, I think they would say, reducing risk. What kind of risk?
Kimberly Adams: There’s all sorts of ways that government affects the way that companies operate their businesses: regulations about how much, say, an energy company can pollute the environment. Or the condition in which a food producer has to keep its facilities. Companies also care about what government says about the rights of individuals, like how easy it is to unionize. Can customers sue you easily when something goes wrong? Even who counts as an employee versus a contractor. And then, businesses also care about the balance between federal and state laws. And all of those things I just listed, plus many more, can be influenced with political spending.
Brancaccio: You’ve covered this for a long time, but, remind us, what are some of the strategies companies use to spend money on candidates that they hope will help them reduce — again, that term — risk?
Adams: So, of course, they spend money on lobbying, which is directly sending their representatives, sometimes their employees, to meet with federal or state officials to make their case. Also, people in company leadership are often very wealthy, people who can write big donation checks to campaigns. Here’s Ciara Torres-Spelliscy, a law professor at Stetson University, and author of the upcoming book “Corporatocracy: How to Protect Democracy from Dark Money and Corrupt Politicians,” who says, if you’re talking about spending company money itself in federal races, there are two main ways.
Ciara Torres-Spelliscy: A corporation can set up a separate segregated fund, more commonly known as a corporate PAC. A corporate PAC can gather money from individuals who are associated with the corporation.
Adams: So those groups can bundle donations that individually legally meet campaign limits, but together make for a huge donation. And then companies can also funnel cash through industry groups and trade associations. But a lot of this money ends up flowing through so called “dark money” groups, and billions and billions of dollars end up in politics this way.
Brancaccio: Dark money, because you’re not quite sure who exactly is pouring the money in. But all of this can have risks for the company that’s getting involved.
Adams: Exactly. And then there’s the other side of the risk, if the candidate you support has other views that don’t necessarily align with your company values. So say you support a candidate that supports a business-friendly policy, but maybe has views on social issues that really upset your customers. You can face a backlash or hit to sales or a boycott. Dorothy Lund is a law professor at Columbia and points out there are risks coming from the markets as well, with more and more shareholders demanding to know where companies political dollars are going — which, right now, businesses don’t have to disclose, unless state law makes them.
Dorothy Lund: And so a lot of shareholders have been bringing these proposals, saying, “We want to see what’s going on.” And this was actually the number one ESG-type proposal that was voted on in the 2024 proxy season.
Adams: Lund also told me there’s research showing that companies that spend money in politics have a lower firm value than those that just opt out.
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.
