by Constantin Gurdgiev, TrueEconomics.Blogspot.in
Corporate Power, Charity, and Social & Policy Impacts
In an important discussion, titled “Tax-exempt lobbying: Corporate philanthropy as a tool for political influence“, Marianne Bertrand, Matilde Bombardini, Raymond Fisman, and Francesco Trebbi (02 September 2018, https://voxeu.org/article/corporate-philanthropy-tool-political-influence) discusses how corporations manipulate the tax code and the political system.
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This paper argues that as
“special interests use donations to influence the political process“, “…philanthropic efforts in the US are targeted, at least in part, to influence legislators. Districts with influential politicians receive more donations, as do non-profits with politicians on their boards. This is problematic because, unlike PAC contributions and lobbying, influence by charity is hard for the public to observe.”
The resulting conclusion by the authors is that the case of corporate-charity interlinks “amounts to a taxpayer subsidy of corporations expressing their political voice“. In other words, concentration of market power causes concentration push in lobbying and, thus, potentially forces policy formation to more closely reflect the interests of the corporate donors at the expense of the taxpayers and ordinary voters.
This is a very important issue in any analysis of the functioning of our democratic processes. But it also raises another ‘adjoining’ issue, not covered in the paper: American corporations are increasingly relying on other channels to alter social (and related policy) outcomes today. This channel is the companies increasing financial and other commitments to Corporate Social Responsibility and Social Impact (or even broader ESG) targeting. Whilst benign in its core values and ethos, the channel can be open to potential abuse by corporate powers. In addition, like charity status channel, the CSR and SI/ESG channel also avails of public funding link ups to corporate balance sheets (via tax incentives, subsidies, co-financing of projects, etc). The question worth asking, therefore, is the following one: To what extent do modern SI/ESG and CSR strategies of major corporations align with their lobbying objectives? In other words, do corporates use SI/ESG/CSR strategies to promote self-interest beyond purely societal interest?
Surprisingly, very little research in the Social Impact or ESG analysis has been devoted to the potential for corporations to ‘game the system’ in their favour.
This essay appeared originally on True Economics, 09 September 2018.
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