Making corporate political donations seemingly requires complex calculation. Flesh-and-blood political candidates will imperfectly align with the corporation’s stated policy views, values, and long-term commitments. Consider the dilemma faced by a corporate manager weighing whether to allocate corporate assets to support a conservative state legislator. The legislator may favor lighter regulation on the corporation’s activities in the jurisdiction but also favor laws making it difficult for transgender individuals to access public bathrooms or for public schools to provide basic education about gender identity and sexual orientation. To the extent that the corporation has lesbian, gay, bisexual, or transgender stakeholders and a professed commitment to equality, making the donation invites a host of other risks. Even if the donation goes undiscovered, supporting the conservative legislator likely increases the difficulty the corporation will face in recruiting and retaining talented employees to work in the jurisdiction. If later revealed, the donation invites public backlash and boycotts.
Many corporations have faced public retribution for political contributions seemingly at odds with their stated values and brands. The private Anschutz Corporation recently attracted attention for its sizable donation to the Republican Attorney General Association. The association previously attracted national attention for funding former President Donald Trump’s rally on January 6, 2021, as well as making mass phone calls in advance of it telling people to “march to the Capitol and tell Congress to stop the steal.” Despite this history, the Anschutz Corporation donated $75,000 to the association days after the Supreme Court overturned Roe v. Wade on June 24, 2022, and directly after the association disseminated fundraising emails asking for funds to “combat the Democrats’ pro-abortion agenda.” The Anschutz Corporation operates many businesses, including Coachella and other live music events. Coachella’s success depends on its access to prominent artists—many of whom have signaled strong support for ensuring access to abortion services. In response to public outcry, the Anschutz Corporation issued a statement that its principal shareholder personally supports a woman’s right to choose.
At the same time, corporations have faced legislative retaliation for remaining consistent and advocating for their stated commitments. Responding to pressure from stakeholders, the Walt Disney Company opposed legislative efforts in Florida to prohibit education about sexual orientation and gender identity in public schools. In response, Florida’s governor led an effort to strip existing state law benefits from Disney.
Given these challenges and risks, many stakeholders might prefer to flatly prohibit corporations from making these donations instead of trusting corporate managers to set aside their own interests and act in the true interests of the corporation.
Yet, what are the interests of a corporation? If you listen to the corporate executives at the Business Roundtable, they believe that a corporation’s purpose extends beyond merely making money to doing more for communities. This new corporate rhetoric stresses the need to “foster diversity and inclusion, dignity and respect.” It includes, among other things, protecting “the environment by embracing sustainable practices across our businesses.” Whether the Business Roundtable statement serves as a meaningful commitment or a hollow marketing ploy designed to fend off real reform remains to be seen. How will its signatories defend their donations to politicians who deny the reality of climate change or who oppose reduced emissions targets?
This view from corporate leaders may be difficult to reconcile with Delaware law, which holds that the purpose of a corporation is simply to make a profit. Some take the view that sustainability and profit-seeking go hand in hand, as corporate leaders look to make sustainable profits over a long time horizon. Thus, donations to politicians advocating for stricter environmental regulation might also be justified as being in the corporation’s long-term interest. By protecting managerial judgment to allocate corporate funds in line with corporate managers’ business judgment about a corporation’s interest, nearly any donation may be justified.
Of course, not all states approach the issue as Delaware does. Many, such as Nevada, have passed constituency statutes allowing corporate leaders to consider the interests of stakeholders in making decisions. These states grant corporate leaders even more freedom instead of forcing them to somehow justify actions with some link to a profit-seeking purpose.
Corporate leaders will continue to face increasing pressure to take a stand on issues important to their stakeholders. This may include shareholders, employees, customers, or other business partners. As Professor Tom Lin details in his book The Capitalist and the Activist, these forces will continue to grow. It may not be possible to impose neat lines between economic and political life.