Dark Money Political Contributions Pose PR Risks to Corporations

 

Anonymous corporate political contributions threaten our democracy as amounts of “dark money” campaign donations grow exponentially, many political commentators warn. Lack of transparency in corporate contributions also threatens corporate reputation.

Regulations limit amounts individuals and corporations can donate to campaigns, political parties and political action committees (PACs). Corporations can donate unlimited amounts to super PACs; however, donor names are released to the public, a potential disadvantage to well-known or public companies.

In pursuit of anonymity, some companies make political donations through tax exempt social welfare nonprofits, known as 501(c)(4)s, and trade associations known as 501(c)(6)s. While they cannot be completely certain what candidate will ultimately benefit from their funds, donors remain anonymous, prompting the term “dark money.”

Secret Donations Increasing Fast

Spending by dark money groups reached $226 million in 2014, more than more than twice as much as in 2010, according to a study by the Brennan Center for Justice. In the 11 most competitive Senate races of 2014, dark money comprised almost 60 percent of outside spending by non-party groups. Observers predict dark money will continue grow as some groups attempt to swamp elections. Critics say political offices will be increasingly up for sale as wealthy individuals and corporations flood campaigns with anonymous contributions.

Proponents say political contributions allow corporations to participate in the democratic process and protect shareholders’ interests. Yet, if they choose to disclose nothing, their shareholders will not know who is receiving the contributions. Determining how corporations spend lobbying and political funds can be extremely difficult due to lack of industry standards or clear government regulations.

The Case for Transparency

Shareholders are the company’s owners and deserve to know how their investment is being spent, shareholder advocacy groups contend. Only through transparency can shareholders know if corporate leaders are working in their best interests. Transparency also ensures that corporate personnel are careful about following the law and serving their shareholders.

Without openness, a few high-level corporate executives could direct political donations, perhaps based more on their personal views rather than shareholder interests.

Lack of transparency about political contributions increases the possibility of PR crises caused by an insider releasing unauthorized information or a journalist digging for dirt. Unauthorized revelations pose a constant threat.  Leaks are bound to occur eventually at some prominent companies and cause public relations damage.

When a company’s dark money contributions are revealed, at least some shareholders will likely be unhappy. If a company is open about their donations, it should be able to attract investors who share its views.

PR personnel, who often oversee political lobbying and contributions as part of their public affairs functions, can advocate for greater transparency.

More Companies Opting for Openness

More companies are disclosing campaign contributions, sometimes in response to investor pressure.

United States Steel, under pressure the New York State Common Retirement Fund, which owned about $20 million worth of the company’s shares, agreed to publicly disclose its corporate political contributions.

At Chevron, proposed contributions go through a thorough review process. They are typically initially proposed and budgeted by public affairs personnel, working with business unit managers Donations are planned, budgeted, legally reviewed and approved by senior management, internal and external legal counsel, and in certain cases by the office of the chairman.

Target also explains how it makes contributions through its corporate funds and TagetCitizens PAC and discloses its political contributions.

Bottom Line: Transparency in political donations benefits corporations as well as stockholders and the general public. Without clear and open disclosures, shareholders cannot know if corporate executives are working in their best interests and the company increases its risk of a public relations crisis.