By Hannah Sharpe
Corporations have already begun to adapt to growing consumer demands of addressing social, political, and environmental issues. The answer to how deep their promises go, however, lies in the tangled web of campaign finance and its influence in American politics. In this post, we discuss the history, the nuance, and the influence behind these complex yet powerful political funding machines.
The first Political Action Committee (PAC), also known at the time solely as a Separate Segregated Fund (SSF) was created in 1944 by the Congress of Industrial Organizations to push forward the agenda of the industrial movement, aiming to re-elect FDR and to lobby for pro-labor legislation. In the complex world of campaign finance, limitations of funding and use of funds has evolved alongside changing regulation starting with the ruling of the 1971 FECA and the amendments that followed (BCRA, Citizens United, McCutcheon). Corporations and unions have the option to fund political activity through their own business PACs or through Super PACs: independent expenditure-only political action committees.
Corporate PACs Vs. Super PACs
Crucial in deciphering an ideological stance on the current state of PACs is the distinction between Corporate (Connected) PACs and Super PACs.
A company can elect a body to form a Corporate PAC in which they can pool employee raised funds in a completely separate treasury from its own and donate those funds to a campaign, political party, or a candidate, with limitations. A company cannot take the funds from its own treasury and fund campaigns, candidates or parties on a federal level. The state-by-state limitations on direct corporate contributions vary.
Then.. there are Super PACs. The ability for corporations to alternatively opt to donate to issue-aligned Super PACs may seem to many an undoing of the laws set forth to protect Democracy from corporate buy-out, but it’s totally legal. The Supreme Court’s recent ruling on Citizens United is what determined this activity to be lawful under the protection of the First Amendment (albeit with high remaining levels of debate).
Money Goes Farther in a Corporate PAC
A guide published by the FEC in 2018 states, “a connected organization may use its treasury funds, including funds derived from commercial activities or dues payments, to pay the costs of establishing, administering and soliciting contributions to the SSF” (page 12). This means that Corporate PACs can capitalize on the funds they raise without having to direct those funds to operating or administrative costs, allowing more of the money raised to go directly towards its intended recipients. In the 2018 election cycle, Ideological PACS (single-issue focused) spent 7.44% (total of $23.3M) of their budgets on admin and operating costs while Corporate PACs spent only 1.4% (a significantly lower amount of $9.2M).
Whose interests are represented in a Corporate PAC?
Corporate PACs primarily represent the “restricted” class of employees— the limited group of people they are allowed to solicit contributions from (typically more senior-level, higher-paid individuals. See Solicitable Class of Corporation, FEC). The PAC can accept unsolicited donations as well from other employees, but this is a rare occurrence. The result leads to higher paid executives often dominating the makeup of the contributions to the PAC. Therefore, one could make the claim that senior-level management and shareholders donating to a corporate PAC care most to have their money go towards politicians and lobbying efforts that align with the financial interests of the business.
The Real Corporate Influence at the Federal Level
With all of the “money talks” rhetoric, one might think that this all leads to excessive influence from special interests in our government today.
When it comes to direct candidate contributions from Corporate PACs, the jury is still out on that conclusion. There has been little evidence correlating corporate contributions to specific candidates to big benefits for a particular company, at least at the federal level. In looking at a very close election, when a company’s preferred candidate won, the stock price only went up by 0.05%. With such a small increase, it begs the question of where corporate influence really is.
Likely, the answer lies in industry-wide lobbying and ballot measures. Corporations can choose to wield more influence in Washington by directing their PAC money to these efforts. It’s no surprise that companies like Facebook and Amazon spent $16M+ on lobbying in 2019. And when they are not lobbying for their specific business interests, corporations still want to keep politicians friendly to their business. Therefore, the way to a politician’s heart is through contributing to issues that hold significant weight on how those politicians are elected. This can be accomplished through ballot measures. In years past, corporate interests have accounted for more than 75% of the contributions towards statewide ballot measures.
If you’re feeling discouraged and a little confused, that’s understandable. This upcoming election cycle is also an opportunity to feel empowered however. Not only in how you vote but in how you buy. In the areas where you can more tightly control your spending, shop smaller businesses or shop at corporations that you feel positively ripple beyond their own industry interests and align with your values. Most importantly, don’t fall asleep at the wheel. Stay informed, stay educated, and stay aware.
Hannah Sharpe is a guest editorial contributor and strategic advisor for Cluey. In addition to her work with Cluey, she is also currently in the Page Program at NBCUniversal. Hannah has a passion for cooking, botany, media and entertainment. Her most recent passion is to learn about and understand the systems around us and how consumer behaviors impact those systems at home and on a global scale. She is excited to be one of the builders bringing Cluey into the new and improved Information Age.