How Philanthropy Can Help Hold Corporations Accountable to the Public Interest

Guns Down America

In the past six months, immigrant rights advocates have achieved notable victories and generated substantial political momentum by pressuring companies that are profiting from the Trump administration’s hard-line immigration policies.

Five hundred Wayfair employees recently walked out of the company’s Boston headquarters to protest its decision to sell beds to immigrant detention centers on the border. Tech workers at Google, Microsoft, and Palantir have protested their employers’ contracts with the Bureau of Immigration and Customs Enforcement, which uses private contractors to detain migrant families. And under pressure from advocacy and civil-rights organizations and shareholder activists, JPMorgan Chase and Bank of America recently decided to stop financing the private prison operators GEO Group and CoreCivic, which run immigrant detention facilities.

The banks’ move drove down the companies’ stock prices and intensified political pressure on the private prison industry: For example, Elizabeth Warren recently called for banning private prisons and detention centers.

The strategies that produced these victories — consumer and employee activism, shareholder advocacy, and divestment campaigns — are powerful levers for change. They can fuel social movements, push companies to end harmful business practices, and help build political will for broader public-policy changes.

Yet while philanthropists get deeper into public-policy advocacy, most have been slow to challenge the power and practices of corporations — a critical blind spot. For example, dozens of institutional shareholders participated in the Interfaith Center on Corporate Responsibility’s efforts to push JPMorgan Chase to divest from private prisons, but only one major foundation — the Nathan Cummings Foundation — signed on. Relatively few philanthropies have made a commitment to divesting from private prison operators.

Philanthropists can do much more with their resources and influence to hold corporations accountable to the public interest. With their multibillion-dollar revenues, global supply chains, and worldwide sales, multinational corporations wield more financial and political clout than many governments. And while they make obvious contributions to our society and economy, creating wealth and jobs and driving innovation, they also contribute to many of our most challenging problems: economic inequality, climate change, the opioid epidemic, and gun violence, to name just a few. Philanthropists who are serious about confronting these and other problems must grapple with the power of corporations that contribute to them through their business practices and political and lobbying activity.

What Philanthropy Can Do

The public has influence with corporations as consumers, employees, and investors — through pension funds and 401Ks. Philanthropists can ensure greater corporate accountability to the public interest through the following tactics:

Consumer pressure campaigns. “Name and shame” strategies that use petitions, corporate report cards, media campaigns, and other tactics can be effective ways to influence some corporations and industries — particularly well-known companies that serve consumers and have built socially responsible brands. For example, following the mass shooting in Parkland, several foundations supported a successful advocacy effort on the part of Guns Down America, Color of Change, and MomsRising to pressure FedEx to stop offering large discounts to National Rifle Association members — a partnership that was effectively subsidizing the NRA’s work to block passage of tougher gun-safety rules. The campaign gathered nearly 500,000 signatures and mobilized thousands of people to send emails to Fred Smith, chief executive of FedEx.

Employee activism. When employees work collectively, they can prod their companies toward practices that benefit workers and the larger community. Aside from union organizing and collective bargaining, there are other powerful forms of employee activism that philanthropists can support. For example, LGBTQ employee resource groups, with guidance and support from advocacy organizations like the Human Rights Campaign, played a crucial role in advocating for parity in employee benefits for same-sex couples at major U.S. companies, laying the groundwork for the many successes of the marriage-equality movement.

Employee activism can be particularly powerful in high-skill fields where companies compete fiercely for talent — such as in the tech industry, where many companies have built brands based on a broader social mission and are sensitive to employee concerns about their business practices. But there is also powerful employee activism and organizing happening among low-wage workers. For example, United for Respect organizes low-wage workers to fight for better wages and working conditions in retail. The organization’s membership is predominantly women, and more than half are women of color. With support from the Ford, Open Society, Arca, and NoVo foundations as well as the Foundation for a Just Society and the Wellspring Philanthropic Fund, United for Respect collaborated with the advocacy group PL+US to mobilize more than 100,000 Walmart workers to demand better paid family and medical-leave benefits. The company ultimately enacted a new paid-leave policy benefiting 550,000 full-time workers.

Legal strategies. Advocates have used lawsuits to hold a range of industries, including tobacco, coal, and agriculture, accountable for their harmful practices. For example, animal-welfare organizations such as the Animal Legal Defense Fund, Compassion Over Killing, and Humane Society of the United States have successfully sued factory farms for violating animal-cruelty laws, curbing particularly cruel and inhumane practices in the farming of pigs and chickens. Unlike pressure from employees and the public, which isn’t as effective with companies in low-wage industries that don’t interact directly with consumers, lawsuits can work with all types of industries and companies — especially those with deep pockets.

Investor activism. Working with institutional investors and advocacy organizations, philanthropists can use their standing as shareholders in publicly and privately held companies to push them to adopt more socially responsible business models, overhaul corporate board and governance structures, and be more open about their political activities. The Nathan Cummings Foundation has championed shareholder engagement strategies on environmental sustainability and economic equity issues. In 2017, the foundation worked with other investors and the advocacy group As You Sow to push Occidental Petroleum to assess the long-term impact of climate change on its business — the first time a major U.S. oil and gas company had agreed to such a proposal.

Philanthropists can also support investor activism through their grant making. The Arca and Nathan Cummings foundations have invested in Majority Action, an organization using investor activism to push major U.S. utilities to convert to green energy and to push the gun industry to make changes that promote greater safety. In 2018, Majority Action joined with Color of Change and the Interfaith Center on Corporate Responsibility to push American Outdoor Brands (the parent company of Smith & Wesson) to report on its efforts to monitor violence associated with its weapons and to build safer products.

Like lawsuits, investor activism can influence companies that may not be as susceptible to public pressure as big, socially responsible brands. But the potential impact can go much further than simply curbing unlawful activity.

Even while grant makers increasingly turn to the public-policy arena to make a difference, most have shied away from corporate-accountability work. Even philanthropists who are investing heavily in efforts to build power in the political arena through voter engagement, policy advocacy, and lobbying have largely overlooked the realm of corporate power.

That is a mistake. Greater philanthropic investment in corporate accountability strategies can help end corporate practices that harm communities and the environment and reduce corporations’ undue influence in our democratic process. It’s time for philanthropy to step up.

Loren McArthur is a senior director at Arabella Advisors.