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Zhao Li

Richard DiSalvo

December 2nd, 2022

Stakeholder activism can have a big influence on corporate political donations

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Estimated reading time: 10 minutes

Zhao Li

Richard DiSalvo

December 2nd, 2022

Stakeholder activism can have a big influence on corporate political donations

0 comments

Estimated reading time: 10 minutes

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Following the US Capitol insurrection on January 6th, 2021, many corporations pledged to pause their political action committees (PACs)’s campaign contributions to Republican members of Congress who objected to the 2020 Electoral College count. In new research Zhao Li and Richard DiSalvo find that companies with more Democratic-leaning stakeholders, such as their employees and Twitter followers, were more likely to freeze their contributions to Republican Objectors. They also find that while many companies who had previously paused contributions to PACs supporting Republican Objectors have since started to contribute once again, they now do this at a much lower rate. 

The storming of the US Capitol on January 6th, 2021, shocked the nation and the world. It also led to mounting public pressure on corporations to not only denounce the event, but also to disassociate from the 147 Republican members of Congress who objected to the 2020 Electoral College counts (which we refer to as “Republican Objectors”). Soon after the insurrection, CNN conducted a survey of the 280 Fortune companies that had made campaign contributions to Republican Objectors in 2019-2020 through their corporate political action committees (PACs). Of the 123 companies that pledged a response, 87 promised to pause all PAC donations in order to reassess their candidate selection criteria, and 36 stated they would freeze their PAC contributions to Republican Objectors.

To the best of our knowledge, there has never been such a concerted effort among large US companies to withhold PAC contributions to take a public stance on a contentious socio-political issue. Companies generally use PAC contributions to buy lobbying access to, and regulatory favors from, influential legislators.

Nonetheless, many firms declined to announce any adjustment to their PAC contributions (particularly by boycotting Republican Objectors) in response to the Capitol insurrection. Moreover, media outlets have been calling out the hypocrisy of corporations that reneged on their PAC pledges.

Why did some companies boycott Republican Objectors while others did not?

Why did firms differ in their stated and revealed commitment to discontinue PAC contributions to Republican Objectors? In new research, we conjecture that companies with more Democratic-leaning stakeholders (e.g., employees, shareholders, consumers) were more likely to pledge to pause PAC contributions specifically to Republican Objectors. Our hypothesis draws upon a growing body of research that underscores stakeholders’ influence over corporate political activities: stakeholders demand corporate PAC contributions to align with their partisanship or ideology; some stakeholders – especially employees – can be quite informed about to whom corporate PACs contribute; and, despite a lack of formal decision power, stakeholders have various market and governance avenues to affect the allocation of corporate PAC contributions.

Mirroring polarized public reaction to the Capitol insurrection, we find that companies with more Democratic-leaning stakeholders – as revealed by employees’ past campaign contribution records and by the political composition of their corporate Twitter followers – were more likely to announce a freeze in PAC contributions targeting Republican objectors (36 companies). We also find that the stakeholders’ partisanship is important even after we account for companies’ past corporate PAC contribution patterns (partisan leaning, historical sensitivity to partisan swings in Congress, and past contribution amounts to Republican Objectors), reputational concerns, corporate social responsibility track records, and geographic ties to Republican Objectors. In contrast, as Figure 1 shows, stakeholder partisanship does not significantly predict whether firms would announce a pause in all giving to all parties at the federal level, which was the case for 87 companies.

Figure 1- Companies’ likelihood of pausing PAC contributions for all or for those targeting Republican Objectors

Panel A displays results from three separate regressions each entering only one measure of stakeholder partisanship (e.g., Twitter % Dem. in regression 1, Employee Donor % Dem. in regression 2). Panel B displays results from one regression with all three measures of stakeholder partisanship entered simultaneously. Effects are multiplicative; no effect occurs when the coefficient is 1 (vertical line).

Recent campaign finance developments

What has happened since these pledges were announced? We also analyzed campaign finance disclosures through the first quarter of 2022 across the three groups of companies by pledge type.

As shown in Figure 2, notable differences in firms’ likelihood of donating to Republican Objectors emerged as early as the second quarter of 2021. By then, firms that announced a pause in all federal giving were as eager to restore their PAC contributions to Republican Objectors as were firms that declined to publicly commit to changing their PAC contribution practices. 

Figure 2 – Firm Pledge Compliance, Extensive Margin

By contrast, companies that pledged to freeze contributions to Republican Objectors (36 companies) remained reluctant to fund these legislators’ campaigns throughout 2021. Moreover, we find that these firms did not appear to systematically violate the spirit of their pledges via other covert – though still observable – channels of money in politics, including corporate PAC contributions to Republican Objectors’ leadership PACs, bundled employee campaign contributions to Republican Objectors, and corporate donations to the Republican Attorneys General Association.

Photo by Adam Nir on Unsplash

 

By 2022, among firms that pledged to pause PAC contributions to Republican Objectors, the share of them that gave any PAC contributions to Republican Objectors increased significantly, albeit they were still giving at a lower rate than that of the other firms. More importantly, as shown in Figure 3, when we examine the intensive margin of corporate PAC contributions – specifically, how many Republican Objectors a corporate PAC gave to in each quarter – we find that most firms that pledged to freeze contributions to Republican Objectors donated to a much smaller number of Republican Objectors even in 2022. 

Figure 3 – Firm Pledge Compliance, Intensive Margin

A firm’s stakeholders matter for where they give political contributions

As the public increasingly demands that companies demonstrate leadership on socio-political challenges – Black Lives Matter, LGBTQ rights, abortion access, voter disenfranchisement, etc. – the composition, and the associated behavior, of corporate stakeholders may determine which firms stay silent versus speak up, and which firms put their money where their mouths are. However, the net societal impact of stakeholder activism targeting corporate political activities is ambiguous. On the one hand, stakeholders – in our case Democratic-leaning ones – may be able to mobilize businesses to defend democratic institutions through more meaningful public statements and more durable corporate political resource commitments.

On the other hand, as stakeholders seek to transform corporate political activities into a new frontier of corporate advocacy, this may risk retaliation from politicians that have been targeted (e.g., Republican Objectors) and incite populist backlash among such politicians’ supporters. By undermining the bipartisan legislative coalitions that corporate America has meticulously cultivated through decades of PAC contributions, stakeholder activism targeting such observable dimensions of corporate influence-seeking activities could ultimately compel these activities to “go dark.”


About the author

Zhao Li

Zhao Li is an Assistant Professor of Politics and Public Affairs at Princeton University. She studies American politics and political economy with a focus on campaign finance in the United States.

Richard DiSalvo

Richard DiSalvo is a Lecturer and Associate Research Scholar at the Princeton School of Public and International Affairs. He is a microeconomist interested in public policy, teaching economics and statistics, and doing research in education policy.

Posted In: Elections and party politics across the US

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