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17 USC 102

The Faux Politics of Corporate Spending

March 3, 2018

 

Campaign finance is something we hear about every day. If Congress votes against legislation that clearly enjoys support from the population, the immediate — and reasonable — reaction is to look at the companies and the individuals donating to members of Congress who voted against said legislation. After a mass shooting, people immediately — and, once again, reasonably — look to the NRA as an impeding force for change. I’m no different; in a column written in an angry haze following the Las Vegas Mandalay Bay massacre in 2017, I wrote that the NRA was a “monstrous kraken whose repulsive appendages [are] wrapped around each and every Republican politician.” It’s not even a false statement.

 

It’s true that companies and organizations are always funneling money into certain movements and legislation at all levels of government in our country. However, the vast majority of companies that do this do so with a lot more discretion than we would normally expect. There are purely self-contradicting, antithetical companies out there who donate directly to opponents of that which they claim to support, but most companies are generally intelligent enough to not say one thing and the proceed to donate to the opposing coalition. I want to talk specifically about several types of organizations that significantly alleviate companies in terms of disclosure and accountability, as well as why I don’t necessarily believe it incriminates corporations as much as it does special interest groups and their leaders. No, there is — in my opinion — a more insidious sect of donors, and they usually constitute a bridge — or, to use a more accurate metaphor, a railroad switch — between the corporation that provides the cash and the donor who receives it.

 

There are 501(c)(4) groups — referred to as “C4s” — otherwise known as political nonprofits that collect donations and conduct programs purposed around social welfare. Sean Sullivan of the Washington Post published a detailed analysis of these groups, which is undoubtedly better than any explanation I can give. However, I want to focus on one thing in particular when it comes to 501(c)(4)s. In my opinion, the most significant — and sketchy — feature of 501(c)(4)s is anonymity; these organizations aren’t compelled by IRS laws to disclose their donors. Therefore, if Johnny Redneck is secretly pro-choice and wants to donate to a Democratic campaign without letting all the other members of the Redneck family know, he could perhaps donate anonymously to the Planned Parenthood Action Fund, a left-wing 501(c)(4) organization, which would then direct funds to Democratic elections and efforts at the state, federal, and local levels. Johnny wouldn’t be an outcast thanks to donor anonymity. The same situation could happen if the parties or ideologies were reversed. Both parties are involved in this process but it turns out that right-wing nonprofits are much more involved in political efforts than their left-wing counterparts. According to the Center for Responsive Politics’ lobbying record and corporate political spending database OpenSecrets, during the 2012 election cycle, conservative 501(c)(4)s donated more than $260 million to Republican efforts, a stark contrast to the $35 million spent by liberal nonprofits.

 

More familiar are 527 groups — the Huffington Post and Mother Jones both published articles on this when controversy over President Trump’s leaving the Paris Climate Accord pushed corporations to take on climate change initiatives — organizations classified under section 527 of the IRS code and typically focused on influencing federal, state, or local politics, which can include but are not limited to policies, elections, issues, or appointments. These groups are exempt from federal tax but are required to file spending/contribution disclosures with the FEC, unless they either are state/local candidate committees or party committees, or if they collect less than $25,000 a year. Several of the most influential are the state-focused Republican (RGA) and Democratic Governors Association (DGA).

 

The key thing to understand about 527 groups is that they are basically political banks of you-scratch-my-back-and-i-might-scratch-yours sentiment. Everyone donates to the DGA and RGA, to the Democratic (DAGA) and Republican Attorneys General Associations (RAGA), to the Democratic Legislative Campaign Committee (DLCC) and the Republican State Leadership Committee (RSLC). Most of the companies on the S&P 500 — Verizon, Costco, Viacom, Lockheed Martin, Hewlett-Packard, Home Depot, Pfizer, you name it — give routinely to these 527 committees just to have a foot in the door. Hell, even Century Rehabilitation — some obscure rehabilitation center located in Los Angeles that isn’t publicly traded nor does it exist on any computer screen within America’s sprawling financial system — donated $50 thousand to the RGA during the 2016 election cycle. Apparently having an influence in politics is worth about as much as two month-long addiction rehab programs.

 

This kind of blind cash distribution can and will obviously lead to issues centered around corporate transparency and accountability. The U.S. government regards corporations as individuals, as it should. Therefore, discretion is essentially — and importantly — preserved, even in the case of corporate political spending.

 

For example, Warren Buffett's Berkshire Hathaway is listed by OpenSecrets as one of the RSLC’s biggest 2016 donors (a total of $427,950 throughout the election cycle). On its website, Berkshire Hathaway Energy’s environmental policy initiative says that the company is devoted to using more renewable and noncarbon sources of energy. One of the top recipients of RSLC funding in the 2016 election cycle was Jill Holtzman Vogel’s campaign — albeit unsuccessful; she lost — for Lieutenant Governor in 2017. In a 2015 legislative update from when Vogel was a member of the Virginia State Senate, she mentioned her pro-coal stance and her desire to reduce coal tax credits — which were/are substantial in providing incentives for energy companies to use more renewable energy sources. Coal is a carbon-based, non-renewable source of energy — which mean that Berkshire Hathaway is contradicting their own statements by making the donations it made to the RSLC.

 

Finally, there are the trade associations such as PhrMA and the U.S. Chamber of Commerce, who lobby on behalf of businesses and aren’t bound by law to disclose the corporations who perpetuate their existence — essentially a 501(c)(4) for corporations only, but much, much more influential. In regards to specifically the Chamber, for example, the most we can postulate (for lack of a better word) is by finding out which companies are beneficiaries of the Chamber’s initiatives, a process that is as unreliable as it is imperfect as it is unrefined. In fact, the process is so useless and lackluster that it doesn’t even serve as adequate for citation — making trade associations one of the most gaping examples of how easy it is for companies to financially support certain political initiatives and elections completely hidden from the public eye.

 

Furthermore, the fallacy with trade associations also applies to the companies themselves I can only describe it as the blind-donation phenomenon, which serves as somewhat of a hallmark of corporate spending deficiency. It’s the process through which companies pay trade associations membership fees in order to play big-boy politics with the other multinationals. By doing this, companies risk contradicting their goals because they don’t know where the trade association might send their cash. If you take a look at PhrMA’s 2014 tax exemption form, you’ll notice that the biggest trade association in the world made over $200 million in membership dues alone. Trade associations are like fraternities whose members, in this case, represent individual corporations. You pay copiously expensive dues — dues that go toward funding activities that you may or may not necessarily agree with — in order to have a seat at the table, a seat which you believe will lead to a more successful future for yourself.

 

There’s a statistic out there that says that 94 percent of the money that the Chamber received during the 2010 midterm elections went to fund the campaigns of climate change-denying candidates — I’m very skeptical of this number because it seems suspiciously large. The only thing backing it up is this report from the offices of obviously anti-Chamber of Commerce Senators, including Sheldon Whitehouse (D-RI), Elizabeth Warren (D-MA), Bernie Sanders (I-VT), and Richard Blumenthal (D-CT). The report’s citation for the number came from a Bloomberg article by Barry Ritholtz, who got the number from a decidedly anti-Chamber interest group for which there is no further citation. If the statistic is true, then any company who is a part of or donates to the Chamber is effectively working against climate change initiatives, which I know for a fact not every company agrees with. For example, Disney still funds the Chamber despite saying on their website that they are committed to “meet[ing] our long-term goal of attaining a ‘zero’ state of net greenhouse gas emissions and waste, while conserving water resources when and wherever we can.”

 

However, even if the Senators were all misled and the statistic is untrue, it’s already fairly widely-known that the Chamber — along with any conservative interest group for that matter — frequently supports climate change deniers and/or skeptics, which is fine if you are a company and want to donate to a cause with which you agree. That’s your prerogative. What’s not okay is writing on your website that you’re dedicated 100 percent to moving past fossil fuels in favor of clean, renewable energy while at the same time donating to a trade association or a 527 group or a 501(c) organization that might do with your money what you wouldn’t and unknowingly lobby for a Keystone Pipeline.

 

My point is, this issue isn’t a matter of ideology, it’s a matter of integrity for corporations to become more transparent and accountable in their political spending, for the sake of investors, shareholders, and the economy if not for the American people. There’s a whole issue about campaign spending responsibility and shareholder resolutions on corporate political spending, but that can be saved for another article — in layman’s terms, it’s difficult for shareholders to see how much the companies whose shares they own are donating and who those companies are donating to. Imagine caring a lot about climate change while owning shares of a company that — without your knowledge or your permission — donated to a trade association which then lobbied Congress to kill environmental regulation. Sorry, I’m getting off-track.

 

Should companies stop giving to groups? No, absolutely not. But people ought to know why time and time again corporate spending constantly goes toward causes that those corporations don’t support. Instead of calling those corporations hypocrites or sellouts or liars or crooks, we should understand how the system works. Only then can we have a productive conversation on transparency and accountability — the two most important and desirable features of corporate political spending.

 

Photo credit Gage Skidmore, Creative Commons

 

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