Why corporate America’s ban on political donations isn’t all that it seems

Why corporate America’s ban on political donations isn’t all that it seems

2021-01-11 22:50:00

Corporate America ran hard on Monday to talk harshly about how it would punish Republican politicians who seeded the uprising in the Capitol last week.

Several companies said they would no longer donate money from their corporate political action committees (PACs) to GOP office holders involved in preventing the certification of the electoral college vote. Some Silicon Valley giants such as Facebook, Google and Microsoft completely abandoned all political donations.

It could predict real change. But at first glance, it's not all it seems.

While PAC's donations sound like a big deal, they reflect an increasingly smaller portion of the total money in US elections. That's especially true in the early months of an out-of-year election cycle, and some companies – such as the three tech companies – made it clear on Monday that their sentences were temporary.

Certainly, the decision has symbolic significance: Companies from Wall Street to Silicon Valley have long sought to position themselves as fair to brokers with both parties, willing to work with Democrats and Republicans on issues important to their industries. They employ members of both parties in their Washington lobbying offices, and their donations from their corporate PACs were an incentive in that strategy and were largely twofold as well. Many (but not all) of the companies that made the announcements Monday specifically said they would withhold donations from Republican office holders.

So the decision to at least temporarily reassess that dual ethos is significant indeed. The head of Instagram, Adam Mosseri, gave a voice to that review a tweet on Monday when he said Facebook "is trying to be apolitical, but it's getting harder and harder."

But symbolism aside, the impact of these companies' decisions could be relatively small.

Take Facebook, which said Monday that it would "pause all of our PAC contributions for at least the current quarter as we review our policies." But in the first quarter of 2017 – the most recent quarter after the presidential election – Facebook donated just $ 64,000 to politicians.

What matters more, for example, is when Peter Thiel, member of Facebook's board of directors, a billionaire financier of conservative outside groups, stops his millions of dollars in annual contributions.

Such moves are more significant because donations from corporate interests largely flow outside the corporate PACs in the U.S. campaign finance system. Businesses and affiliated individuals today can fund outside groups that spend money on behalf of candidates but are not candidate-led committees, such as "super PACs" or political non-profit organizations. No company has said in recent days that their decisions will apply to these types of donations, nor can it always be verified, as nonprofits don't need to disclose the origin of their donations in the first place.

Corporate PACs contributed just 5 percent of the money raised in the 2020 elections, up from 9 percent in 2016. according to the Center for Responsive Politics. That's partly because PAC contributions are capped at $ 5,000-a-donation, a limit that hasn't been increased since 1974, while super-PACs and other outside groups can receive donations of unlimited amounts. Another factor is that savvy politicians on both sides have developed small dollar donors that make up ever-increasing percentages of the total money in elections.

Direct business donations can add up to real money in some individual down ballot races, such as for a moderate, backbench House Republican that has no competitive race and thus raises money easily. About 20 percent of the money raised by House Republicans' campaign committees came from PACs, says the Center for Responsive Politics. But even for them, PACs play an increasingly smaller role: That figure was more than 40 percent in the 2016 cycle.

Donations from corporate PACs attract a lot of attention – including from a company's civilian employees – because they are public and because the connection to the company is so direct, unlike, say, an executive in their personal capacity. So in some ways, the post-Capitol riots donation suspensions are a perfect way for a company to loudly voice its formal disapproval without causing too much pain and breaking a relationship that might need it when the next tax or trade issue occurs in Washington.

Democratic candidates have increasingly come to a similar conclusion, especially in competitive primaries: Many politicians have pledged not to take PAC money from their companies for their committees, giving them a strong line to attack an opponent because of a lack of purity arguably more important than the few $ 5,000 checks they might otherwise accept.

So what would really matter? What would likely prove more important to the US election would be if these donation bans become more permanent or if companies lift their PACs completely; when the billionaire corporate executives and board members pledge to follow corporate policies regarding their own disclosed and undisclosed personal gifts; or if they have fundamentally reshaped their lobbying strategies so as not to engage with GOP lawmakers or the entire Republican Party in Washington.

Last week could serve as a broader reset in the way big companies approach Washington. But the pause in corporate giving PACs would be just the beginning.


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