Corporate Political Power: The Politics of Reputation & Traceability
Amanda Shanor
Mary-Hunter McDonnell
Timothy Werner
We live, it is said, in a second Gilded Age, in which politics is dominated by corporate power and elite business interests. But how does corporate money flow into politics? This Article provides an original empirical analysis of when and why corporations engage in particular forms of political activity and uses those findings to develop a novel, empirically-grounded approach to the First Amendment's treatment of traceability mandates in politics.
We analyze the conditions under which firms shift between (1) using their political action committees (PACs) to contribute to candidates and political parties, and (2) engaging in less traceable forms of political activity, like lobbying, in which the specific targets of firms' influence efforts are unknown. This Article identifies a key variable that explains when and why corporations shift from lighter (more traceable and direct) to darker (less traceable and more indirect) channels of political engagement. We demonstrate that corporate political activity grows darker as a firm's reputation grows more negative. This dynamic produces the disquieting result that the corporate political interventions that are likely to be the most controversial are also those most likely to be deployed in ways the public is least able to monitor.
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Our findings indicate that the traceability of money creates a concrete limit on the ability of corporate actors to influence politics—a limit which plausibly applies to political giving more broadly. Corporate donors who are seen as political liabilities find it increasingly difficult to locate politicians who will openly take their money or accept other support. Politicians refuse or return traceable donations from disreputable donors. Our research thus demonstrates that the power of business in politics is more conditional than generally appreciated.
This Article uses these empirical findings to interrogate the relationship between traceability mandates in politics and theories of the First Amendment. While the Supreme Court has prominently struck down restrictions on money in politics in cases like Citizens United v. Federal Election Commission, it has repeatedly upheld a variety of disclosure requirements. For a range of reasons, including the Supreme Court's decision in Americans for Prosperity Foundation v. Bonta, however, disclosure mandates are likely to become an increasingly important site of conflict in both policy and litigation, making it ever more important to assess and theorize the justifications for them.
Our research suggests an empirically-grounded justification: traceability alters politicians' behavior, causing them to act more consistently with public opinion. In other words, traceability mandates make politicians more accountable to the people. At the same time, there is evidence that traceability policies, and the reduction of darker corporate money in politics they produce, promote the public's belief that their views shape the political system. Traceability mandates, in sort, advance both objective and subjective forms of democratic accountability. We thus argue that policies that advance the traceability of corporate money in politics not only further core First Amendment values but may be required by them.
By identifying how and why corporate money flows into politics at a fine level of detail, this Article also provides important information that policy makers can use to craft campaign finance and lobbying reforms. Our empirical findings and theoretical analysis support policy changes that increase the traceability of corporate money in politics, including broader and more robust disclosure requirements for corporate lobbying and individual donations made by corporate executives and directors.
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Introduction.............................................................................................156
I. Why Firms Shift to Darker Money: The Empirics of Corporate Political Activity.....................................................166
A. Unpacking the Repertoire of Corporate Political Activity ........166II. The Case for More Rigorous Traceability of Corporate Political Activity.........................................................................191
B. The Role of Corporate Reputation in the Selection of Political Tactics .......................................................................................169
C. Testing the Proposition that as a Firm's Reputation Falls, It Will Shift Towards Darker, Less Traceable Political Tactics ...................................................................................... 173
1. Variance in the Traceability of Common Political Tactics ................................................................................ 173
2. Study 1: The Relationship Between Corporate Reputation and the Traceability of Political Activity............................ 175
a. Dependent Variable: Tactical Traceability ................. 1763. Study 2: The Relationship Between Corporate Reputation and Obfuscation of Employer Relationships in Disclosures ......................................................................... 186
b. Independent Variables ................................................. 179
c. Controls ....................................................................... 181
d. Methods and Results.................................................... 184
a. Sample Construction and Measures ............................ 188
b. Results .......................................................................... 189
A. Greater Traceability of Corporate Political Activity Would Enhance Democratic Accountability ........................................ 192
1. Traceability Mandates Are Consistent with Existing Precedent and the Reason the Court Has Found Election-Related Disclosures Constitutional.................................... 193B. Policy Reforms to Enhance the Traceability of Corporate Political Activity ....................................................................... 208
2. Traceability Would Foster Both Objective and Subjective Forms of Democratic Accountability ................................. 200
3. The First Amendment Is Not Only a Right from Government Interference but Also to Democratic Government .............. 204
Conclusion.................................................................................................215
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If you have paid any attention to American politics in the last ten years, you have heard that the political system is broken, awash in corporate money. The public is increasingly wary of corporate power and money in politics,1 and polling suggests that an overwhelming majority of Americans support the reduction of corporate influence in the political system.2
The storming and siege of the U.S. Capitol on January 6, 2021—and the spotlight it cast on the gravity of threats to American democracy—sent shockwaves through the world of corporate political giving. Many prominent firms, including Morgan Stanley, Walmart, Disney, and Amazon, publicly committed to not make donations to the Republican lawmakers who opposed the certification of the Electoral College votes making Joe Biden the 46th President.3 Others, such as Goldman Sachs, Facebook, McDonald's, and Visa, paused all political giving.4 The U.S. Chamber of Commerce—"the nation's largest business lobbying group"—strongly "condemned President Trump's conduct that led to" the insurrection, and vowed that politicians who "backed his efforts
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to discredit the election would no longer receive the [Chamber's] financial backing."5 As said by Morgan Stanley and Merck board member Thomas Glocer,6 "[w]e have to create some level of cost" for supporting acts that threaten our democracy, explaining that "[m]oney is the key way" to do that.7
It is too early to tell whether the corporate world's political rebuke will last or have a meaningful effect on the future trajectory of the Republican Party, which is now roiled by internal conflict. In the wake of the events of January 6, Chairman and CEO of JPMorgan Chase Jamie Dimon asserted with regard to corporate political giving that "[n]o one thought they were giving money to people who supported sedition."8 Regardless of whether that is true, it is difficult to deny the significant role of corporate money in the arc of American politics—and the increasingly loud calls to regulate it.
Prominent candidates have long called for sweeping reforms to take the political process away from corporations and the ultra-wealthy and put it back in the hands of the people—including dramatically increasing disclosure around lobbying and other corporate political activity, requiring all lobbyists to register, and limiting the ability of lobbyists to move in and out of government jobs.9 Democrats introduced a constitutional amendment to overturn Citizens United v. Federal Election Committee, with the 2016 Democratic party platform asserting, "We need to end secret, unaccountable money in politics by requiring, through executive order or legislation, significantly more disclosure and transparency—by outside groups, federal contractors, and public corporations to their shareholders."10 By 2020, every Democratic presidential candidate in the election vowed to turn down donations from corporate political action committees (PACs), and many pledged to refuse support from federal lobbyists
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as well.11 Several, including Elizabeth Warren and Bernie Sanders, ran on platforms focused on getting corporate money out of politics.12
oversight and disclosure of political spending and lobbying activity is now the most common issue in shareholder proposals.13...
