After L.L. Bean, Carrier, Boeing and Ford, what U.S. company will be next to get an individual shout-out, threat or thrashing from President Trump?
It looks like the billionaire businessman will keep using his “bully pulpit” to hector and hail individual companies as he did before taking office. Given this trend, concerns are mounting about crony capitalism in the Trump era. Shell-shocked corporate executives are weighing how they should respond. In this climate we offer a proven, new model for the Trump administration and for business leaders to consider.
{mosads}Companies need a level playing field to compete in a dynamic, growth-oriented capitalist system, in order to focus on participating in the marketplace, not in the political arena or with political money. Crony capitalism, a number of economists believe, can distort the marketplace and bring harmful uncertainty to companies. And there’s an association between government-induced risk and companies increasing their political donations, according to academic research.
When Trump urges millions of Twitter followers to “Buy L.L. Bean” products in the wake of an L.L. Bean board member’s political contributions, when he calls out a single company with threats, or when he meets personally with executives seeking a merger of their companies, doesn’t it create an incentive for businesses to ingratiate themselves with his team? It’s notable that Trump-targeted Boeing pledged $1 million to his inauguration.
President Trump made “draining the swamp” a centerpiece of his campaign, yet in his inaugural address, he said nothing about campaign finance reform. A growing number of America’s leading companies are choosing transparency for their political spending, and they apply board oversight, too.
Will he endorse this voluntary effort and avert deepening the swamp?
If corporate leaders haven’t adopted transparency policies yet, will they do so and strike a blow against crony capitalism? Transparency mitigates risks and reassures shareholders that the companies they invest in are well-run. It can protect against political donations that might trigger a backlash in our fiercely divided political climate. Finally, an oversight policy helps companies shield against politicians’ shakedowns: a company can simply cite its policy and just say no.
These aren’t abstract concerns. They’re concrete. The presidential election cycle in 2016 broke political spending records, nearing $7 billion, up from $6.3 billion in the 2012 cycle. Driving much of the record costs were outside groups, including “dark money” groups not required to disclose their donors.
These groups have offered attractive conduits for corporate check writers wanting to remain anonymous. The U.S. Chamber of Commerce, for example, spent almost $30 million on influencing 2016 House and Senate races, while not identifying the donors. Overall, political dark money was projected to reach at least $132 million in 2016.
And while it’s not possible to calculate the sum spent by corporations on politics in 2016, a sense of scale is available from another arena―in the states―where more and more companies are turning for action. In the 2014 election cycle, business interests spent $1.1 billion on state candidates and committees. By comparison, in the same period labor groups spent $215 million and ideological or single-issue groups, $137 million.
Numerous companies already have chosen to lift the veil on their spending to influence elections. When a recent nonpartisan report examined the S&P 500, it found that 305 companies were disclosing some or all of their political payments. One hundred and eleven companies had policies requiring board oversight of political spending. And 143 firms had placed some level of restriction on their political spending.
It’s not enough to condemn our existing campaign finance system as “broken,” as Trump has done. We supported a proposal for the U.S. Securities and Exchange Commission to require disclosure of corporate spending on politics, but that proposal is six feet under now.
Transparency and accountability policies for corporations that open their checkbooks to influence elections are gaining mainstream support from U.S. businesses, but there’s still a long way to go. For a new anti-regulatory president and for businesses that haven’t signed up, what could be smarter than endorsing an idea that’s pro-growth, pro-democracy and voluntary too?
Bruce F. Freed is president of the Center for Political Accountability and an advisory board member of Zicklin Center for Business Ethics Research at the Wharton School. He spent a decade on Capitol Hill serving lawmakers in both the Senate and the House.
Charles E.M. Kolb is treasurer and a board member of the Center for Political Accountability. He was president of the Committee for Economic Development from 1997 to 2012 and served as deputy assistant for domestic policy to President George H.W. Bush from 1990 to 1992.
The views of contributors are their own and are not the views of The Hill.