Business and Markets

It’s time to finally drain the swamp, one company at a time

February 4, 2021  • Judy Samuelson

The decision of big brands and banks to pull money from Republican politicians who agitated against the outcome of the US presidential election was a major story after the storming of the Capitol. It didn’t stop there, as some companies decided to hit the pause button on all political spending. IBM, meanwhile, earned kudos as a company that has drawn a clear line on political donations or electioneering of any kind, since its founding, and lives by it.

What now? Can this be a moment of real change in the practice of influence peddling by private interests? As executives and boards consider their options, we can hope they take advantage of the political “off-season” to refresh protocols and consider anew if their actions align with intentions when it comes to support for institutions of democracy.

I think these three questions might be clarifying for boards and executives attempting to figure out their next move:

1. What is the aim of our political activity?

While there are a number of companies that engage their lobbyists in broad coalitions working for the public interest—from gun control to environmental protections—and while we hope to see more action on solutions to climate change by both companies and trade groups, this is not how most of the lobbying dollar is spent.

Most of the activity is aimed at attaining or protecting advantages and subsidies to help a company or industry be more profitable. Economists have a name for it: rent-seeking.

The media has naturally focused on the national scene in recent weeks, but the conversation has also moved to state legislatures as this op-ed by Harvard Business School professor Michael Porter and Bruce Freed, who leads the Center for Political Accountability, makes clear.

Will local political activity also come under greater scrutiny? The common practice of companies pressuring local governments to trade jobs for tax abatements that undermine budgets for schools and transit hit a wall in New York last year, as Amazon could attest. At the local level, the tradeoff between private benefit and public good can get pretty complicated.

One of the truest tests of the Business Roundtable’s remarkable restatement of corporate purpose, and its argument that there are greater interests to serve than just that of shareholders, is whether they are willing to put the very health of the commons ahead of corporate profits. Are their policy positions aligned with their pronouncements?

Taking a hard look at how the priorities of the government relations team line up with what the CEO has said about corporate purpose and support for non-financial “stakeholders” is one way to open up this question about the goals of political activity.

2. Can we accomplish what we aim to do without buying influence?

There is a difference between political voice and political spending.

A sign of just how crazy the system of political spending has become is seen in donations by corporations that make up the largest source of election contributions. Companies are advised to move the money around. Republicans who tend to favor lower tax rates and less regulation receive more of the corporate dollar, but not by that much according to Yale School of Management’s Jeff Sonnenfeld, who convened the CEOs who made the first move to “defund” specific politicians. The goal for corporate donors is access, and the money needs to reach both sides of the aisle. It’s about assuring that someone will take your call or do your bidding when things get complicated.

Democrats are just as eager to take political contributions as Republicans. That’s how the system works. Politicians are consigned to dialing for dollars for hours each day and the dance between donors and incumbents moves faster and faster. We can barely see the alternative.

Companies will be urged to get back in the game after this cooling-off period ends. The logic runs that we need the voice of our major employers who care about a host of issues that are important to all of us, from infrastructure to good trade relations.

But the question remains, is it necessary to buy influence?

Business coalitions and individual executives have a voice, and also a keen interest in political decisions. But they also have access to politicians at all levels through their role as employers, as investors in public goods, and as creators of critical goods and services. IBM has its own protocols, as does the Center for Political Accountability, which promotes transparency across forms of political influence. Can a corporation use its voice without the corrupting influence of money?

3. Finally, a board might ask: What is in the best interest of the commons?

Political spending may be legal, but it is still the basis of corruption. Ironically, the very practices we take for granted in the US are prohibited outside our borders under the Foreign Corrupt Practices Act.

Citizens United opened the floodgates 10 years ago, resulting in the levels of political spending we just witnessed in the 2020 election. The US Supreme Court just accepted a case that will determine if donors to intermediaries can be kept secret. Disclosure is key to accountability. The role of so-called dark money makes efforts to “follow the money” elusive at best. Which brings us back to how business uses this moment.

The corporate hypocrisy needs to stop

The issues are massively complex, but businesses can’t have it both ways: They can’t proclaim their commitment to institutions that secure the rule of law and play along with an inherently corrupt system designed to bend those laws to their own advantage.

As companies pause to examine policy and practices linked to political spending, it opens the door to other questions and concerns—like whether one company can even make a difference, or if, as Fortune’s Alan Murray argues, businesses that eschew political spending will leave a vacuum to be filled by extremists. Business may in fact be a moderating influence on the candidates we elect. But business ultimately cannot succeed in a failed system. In the quest to support the institutions and protocols of our democracy, we need business leaders who are willing to be brave and start grappling with fundamental questions of equity, fairness, and true representative democracy. We also need first movers to open up blind spots in other domains that pit private inurement against the public interest—for instance tax avoidance, the widespread use of contract workers, and how we compensate executives.

At the root of many of these desired changes is the need for collective action. But the example of one company, or a handful of companies, can be instrumental. By stopping to question the status quo, business is enabling a moment of fresh thinking about the choices they make when it comes to political activity. Where will it lead?

The real purpose of the corporation is best understood through the actions they take. We have seen signals of change from business on environmental concerns, and many social issues and now in defense of democracy. They have stated their intentions. The work now is holding them accountable.

This article originally appeared in Quartz at Work January 27, 2021.