January 12, 2004 -- One of the goals of academic research is to search out intellectual terrain that nobody else has yet explored. The problem, of course, is that if you are fortunate enough to discover untouched ground, you find yourself all alone. The excitement of discovery is tempered by a cold splash of uncertainty: where exactly am I going and how do I not get lost? The Miller Center, in arranging for Cathie Jo Martin to be my mentor during my fellowship year, helped ensure I would not get lost. My thanks to her for being willing to share her insights and lend me her compass.

My research explores a hidden source of business political power: the use of
corporate social and environmental efforts for political gain. Three stories illustrate
what I mean by this. The first story stars House of Representatives Majority
Leader Tom DeLay (R-TX), who this spring led a group of congressmen on a trip
to an exclusive resort in Key Largo, Florida. The congressmen were joined there
by a handful of D.C. lobbyists for three days of golf, fishing, and R&R. In order to
send a representative, each lobbyist’s organization had made a $10,000 to
$250,000 charitable donation to the DeLay Foundation for Kids, established by
Rep. DeLay and his wife to benefit foster care children. While DeLay refused to
disclose the names of the participants, the vast majority were likely not philanthropists with established commitments to helping needy kids. Rather, they were lobbyists who represented organizations with interests before Congress. Most
were probably corporate lobbyists—very few citizen groups have the means to
pay entrance fees that start at $10,000. The fundraiser thus represented not only
an opportunity for firms to build goodwill with one of the most powerful politicians
in the country, but also a chance for a handful of corporate executives to
mix and mingle, swim and sun, and drink and dine with members of Congress for
several days in a private, luxurious setting.

A second story concerns New York City Mayor Michael Bloomberg, who currently
has on his hands a long political to-do list, a $4 billion budget shortfall, and
plummeting voter approval ratings. His solution to the mismatch between city
needs and city resources has been to appeal to the private sector for help. He has
asked companies to be good corporate citizens and do their part to bail the city
out, inviting them to underwrite basic public services like street cleaning, neighborhood security watches, and programs for the elderly. Presumably, companies that do pitch in will earn some measure of gratitude from the mayor.
A third story involves Pfizer pharmaceutical company. In January 2002, Pfizer announced a major new philanthropic initiative aimed at low-income elderly Americans. Responding to growing concern over the skyrocketing prices of prescription drugs, Pfizer and other companies volunteered to provide poor elderly citizens with drugs at massive discounts. The announcement came at a time when Congress was under enormous pressure to do something about drug affordability and coincides with a massive pharmaceutical lobbying campaign to protect their
interests in turbulent political times.

While some in Congress are calling for significant new regulation of pharmaceutical
pricing, others suggest that voluntary steps such as Pfizer’s could substitute for additional government intervention.

These examples vividly illustrate the corporate use of philanthropy and
other “good corporate citizen” efforts as a political resource. My study explores
how the activities that fall under the umbrella of “corporate social responsibility”
(CSR)—such things as philanthropic giving, employee volunteerism programs, environmental protection and conservation steps, cause marketing, employer of choice initiatives, community economic development, ethics codes, and triple-bottom line reporting—may be relevant to a company’s fortunes in the political arena. My central thesis is that these activities, which have been all but overlooked by citizens and scholars, represent an enormous, largely hidden source of
political power for corporations.

Conventional accounts of business political power make no mention of philanthropy or other social responsibility efforts. They assume that corporations wield influence in the political process in part because they have greater resources to devote to PAC contributions, soft money donations, or lobbying operations. They assume
firms have power in part because they have technical and political information
that officials value. And they assume that companies have political influence in part because lawmakers naturally privilege business needs to ensure the country’s economic wellbeing.

These accounts, however, miss the kind of activity exemplified by the DeLay Foundation fundraiser. This “political philanthropy” is charitable giving that helps the donor obtain access to or build goodwill with politicians.

Sometimes a philanthropic donation to a politician’s favorite charity can provide the firm with direct entrée to the politician, as with the DeLay case. In other cases, philanthropic donations can earn a politician’s favor by supporting an organization dear to his heart, his ideological or policy agenda, or a family member’s livelihood. In both respects, philanthropy can give firms potential influence with important lawmakers. Prevailing accounts of corporate power miss another way in which
social responsibility efforts might translate into political influence. Here Mayor Bloomberg’s bind is instructive.

Much of what corporations do in the name of CSR—supporting local schools, sponsoring health care clinics, cleaning up parks, underwriting downtown revitalization—constitutes community problem-solving. Goodcorporate citizens act, in effect, as partners to public officials in providing the public goods for which voters hold elected officials accountable. Being viewed as a helpful partner can also
improve a firm’s standing with key lawmakers. In New York City, we would assume that companies that answer Bloomberg’s call for help would at least get a respectful hearing next time they want governmental assistance with some matter of particular interest to them.

Good corporate citizens do something else that can help them with public officials: they engage in self-regulation. Some important CSR efforts, such as environmental management systems, outstanding employee health and safety practices, codes of
ethics, or responsible marketing and pricing practices (such as Pfizer’s move), reflect firms’ commitment to going above and beyond regulations already on the books. Firms that voluntarily hold themselves to higher standards in the areas of employment, environment, or accounting practices, for example, are likely to be viewed especially favorably by officials. Such good corporate citizens require less
monitoring and oversight from officials, are less likely to contribute to problems which might erupt in officials’ backyards, and are more likely to help officials solve existing public policy problems (such as prescription drug affordability).

In three important respects, then, socially responsible firms provide public officials with things they value. They supply desired philanthropic donations, contribute to public goods, and practice self-regulation. We should not be surprised if, in return, grateful public officials reward good corporate citizens with access and other political benefits. Indeed, there are excellent intuitive reasons to believe that these
CSR efforts—the social, environmental, and philanthropic contributions that firms make—represent a significant but neglected source of political influence.

This is not to suggest that firms initiate social responsibility efforts solely or even primarily to obtain political benefits. There are many good economic
reasons why profit-maximizing companies today engage in these practices.

And some companies make no connection at all between their CSR programs and their political agendas. But politically savvy companies can use their social responsibility efforts to improve their reputations with various political players, nurture relationships with particular politicians, and advance specific political bargaining objectives.

So is there any evidence beyond anecdotes that indicates corporations use their social responsibility efforts for political gain? And is there any evidence that there are political benefits to being a good corporate citizen? My survey of senior government affairs executives at Fortune 500 companies suggests that the answer to both questions is “yes.” This inside-the-corporation look at the connection between CSR and politics leaves little doubt that a good number of America’s biggest companies seek to leverage their social responsibility efforts for political
advantage. Their reasons for doing so vary—in some cases, it seems they are
pressured by politicians to provide social goods, while in others, they are
looking to get mileage out of steps they’ve already taken for other, non-political reasons. Here’s a quick look at some of the most interesting findings from the survey, which was completed by 44% of all Fortune 500 companies.

For starters, corporate executives describe considerable pressure from public officials to make philanthropic donations. Nearly three-quarters of the companies I polled said that they are approached at least five times a year by public officials (or their staffs or allies) with requests to give money to a particular nonprofit organization. Roughly a third of them receive more than twenty such appeals each year. How often do companies grant these philanthropic requests? This is a sensitive question. Few companies are likely to admit publicly that they use their charitable giving or other CSR activities as a political resource. The public wants corporations to engage in CSR because it is the “right thing to do,” not because it serves the firm’s own interests. Supporting charitable causes to cozy up to politicians would likely be viewed by the public as extremely distasteful, even unethical.

As a result, we should expect underreporting of CSR-politics linkage. Moreover, the timing of this survey, administered in April and May 2002 just as a wave of corporate accounting scandals was topping the news, may have made executives especially wary of admitting to any practices that might be construed as ethically questionable. The prevalence of political philanthropy they reported should therefore be considered conservative.

Table 1 depicts the stated frequency of political philanthropy among Fortune 500 companies. Whether this is evidence of widespread political philanthropy is, to some degree, a matter of interpretation. Half of all firms say they never make a philanthropic gift just because a politician asked them to.

That may be encouraging to those who disapprove of coordinating CSR and politics. But the other half do give to politicians’ favored charities—the same proportion that make soft money contributions.

Thirty percent say they make up to five such gifts a year, and another 20 percent say they make five or more. Moreover, when asked about the frequency of political philanthropy among other companies in their industry, 72 percent say it is somewhat or very common. Only 29 percent say it is not at all common. So while only half the firms say they themselves make political philanthropy contributions,
close to three-quarters say everyone else does.

Other evidence indicates linkage between firms’ philanthropic and political operations. More than half say that someone on their firm’s government affairs staff plays an advisory role to the company’s foundation or charitable giving program. Sixty-six percent said they provide public officials with papers or brochures that spell out their efforts to be a good corporate citizen through philanthropy, environmental initiatives, or programs to improve conditions for employees or the community.

And the survey found that corporate citizenship efforts commonly provide opportunities for firms to work side by side with public officials. A remarkable 82 percent of firms have worked on philanthropic, environmental, or community initiatives with the mayor, 66 percent with the governor and 55 percent with their congressional representative. Just over a quarter (26 percent) have collaborated with a key congressional committee chair on CSR initiatives. These findings all suggest that a company’s CSR profile isrelevant to its standing with public officials.
Moreover, the more politically active a company is, the more likely it
is to link its civic operations with its political operations. As Table 2 indicates,
politically active companies are the firms most active in politically-relevant CSR. Companies heavily engagedin traditional political activities (such as making PAC contributions, giving soft money, having a Washington office, or testifying before Congress) are also more likely than other companies to have someone on their political staff weighing in on charitable giving, to make gifts to charities affiliated with important lawmakers, and to provide politicians with brochures on their corporate citizenship activities. The survey results strongly suggest that social
responsibility efforts are part of government relations strategy for the most
politically sophisticated firms.

This still leaves open the question of what benefits companies get for their CSR efforts. Business executives say a record of corporate citizenship helps in
myriad ways, including enhancing the credibility of a lobbying message, making
it more likely a politician will grant the firm access, or improving the firm’s chances for securing specific political objectives. Almost one in five (19 percent) government affairs managers say their philanthropic, environmental, employee or community efforts have helped their firm gain favorable regulatory treatment or avoid additional regulation.

One in ten say such efforts helped their company obtain a specific political benefit such as legislative support from a particular official, a government contract, or a tax break. Seven in ten say their CSR efforts have improved the firm’s relationships with other groups active in the political process, such as consumer advocacy, environmental or labor groups. And in a separate quantitative analysis I did of Fortune 500 participation in congressional hearings, I found that the firms
with the best reputations for corporate citizenship were much more likely to be invited to testify than other companies— even controlling for firm spending
on PAC contributions, soft money, and lobbying. In fact, socially responsible companies were more likely than heavy PAC or soft money contributors to win this kind of access to Congress.

If we want to understand why corporations have so much power in American politics, then, we must consider how firms use their philanthropic resources. These resources are extensive.

In the 1999-2000 election cycle, corporations spent almost $200 million on PAC contributions and almost $400 million on soft money. In comparison, they spent $20 billion in philanthropy over the same time period. If even five percent of that philanthropy was politically- motivated—donations made to a politician’s favorite charity or community programs underwritten at a politician’s behest—then we are talking about $1 billion in politically-interested money that has gone unnoticed by the public and researchers. This is no trivial source of influence, and it is one wholly
unique to the business community. No citizen group, and few private individuals, can hope to make philanthropic donations, institute environmental improvements, or establish community initiatives on the scale that corporations can. Corporations therefore approach the representation system with a type of political leverage unmatched by other interest groups. So is this a good thing or a bad thing for American democracy? At a community level, such judgments can to some degree be made on a case-by-case basis: is the magnitude of a company’s contribution to society greater than or less
than the benefit it extracts from the political system? At a broader normative level, though, such judgments are much harder to make.

Citizens and scholars alike have long regarded corporate power in American politics warily. The image of big corporations wielding a disproportionate
and narrowly self-serving say in our democracy fuels public cynicism about whether government really belongs to the people. Accordingly, “good-government” reformers have sought to limit corporate influence by changing the rules regarding political action committees, soft money, and lobbying practices. But business is not
powerful just because it has bigger PACs, more soft money, and betterconnected
lobbyists. It also has a monopoly on another political resource: social, philanthropic, and environmental contributions. This resource enhances corporate political power, but also generates social benefits.

It therefore complicates the task of those who would argue that business power is unequivocally harmful to the public interest. Thoughtful appraisals of corporate influence—and of the condition of American democracy—will depend on developing a much better appreciation of this hidden source of business power.