THE THEORY
Corporations hire lobbyists, buy TV ads, and contribute to political action committees to influence members of Congress.
Do they also use their charitable giving to help get their way on Capitol Hill?
The answer is a resounding yes, according to a study by four U.S. and Canadian economists. Companies often use their foundation grants as a “smokescreen” to appear virtuous, says Raymond Fisman, one of the authors. By targeting their tax-deductible gifts to charities that are close to lawmakers, businesses are using their philanthropy to score points in the influence game. “This is a tax-advantaged form of lobbying,” he says.
THE TEST
The researchers dug through corporate-foundation grant records from 1998 to 2015. Tracking 320 large companies, they charted how corporate-philanthropy dollars flowed compared with company PACs and tested whether money was directed to charities that have lawmakers serving as board members.
RESULTS
Corporate philanthropy closely tracked company PAC expenditures. Money flowed to charities in a House member’s district when that member was assigned to a committee of interest to the corporation. Money ebbed out of a district when a legislator retired and a greener lawmaker was sworn in. And when a lawmaker served as a board member to a charity, gifts to that nonprofit increased nearly sixfold.
Over all, the researchers suggested that $1.3 billion in corporate grants was politically motivated in 2014. That’s well above the $464 million spent that year by corporate PACs and more than one-third the amount businesses spent on lobbying.
DIG DEEPER
If the money given to a nonprofit goes to a good cause, does it matter if a political motivation is behind the gift? The study didn’t delve into the merits of the contributions. “We’re concerned with the use of charitable giving as a way of distorting the interests of politicians, first and foremost,” Fisman says, adding that other corporate-giving practices, such as letting employees and customers dictate who receives gifts, could also make giving less effective.
FIND IT
“Tax-Exempt Lobbying: Corporate Philanthropy as a Tool for Political Influence” is a working paper by Marianne Bertrand, Matilde Bombardini, Raymond Fisman, and Francesco Trebbi.
