Why the ban on political donations by American companies is not all the things it appears

Corporate America spoke harshly on Monday about how it would punish Republican politicians who sowed the Capitol uprising last week.

A variety of companies said they would no longer donate money from their Corporate Political Action Committees (PACs) to GOP officials involved in obstructing the certification of electoral college votes. Some Silicon Valley giants like Facebook, Google and Microsoft have anticipated all political donations altogether.

It could predict real change. But at first glance it doesn’t seem to be all.

While donations from PACs sound like a big deal, they reflect an increasingly smaller percentage of the total money in American elections. This is especially true in the first few months of the minor year of an election cycle, and some companies – like the three tech companies – made it clear on Monday that their punishment was temporary.

Of course, the decision is symbolic: Companies from Wall Street to Silicon Valley have long sought to position themselves as honest with brokers from both parties who are willing to work with Democrats and Republicans on issues that matter to their industry. They employ members of both parties in their Washington lobbies, and their donations from their corporate PACs have been an important part of that strategy and have been largely bipartisan. Many (if not all) companies that made the announcements on Monday specifically said they would specifically withhold donations from Republican officials.

The decision to reassess the bipartisan ethos, at least temporarily, is indeed significant. Instagram boss Adam Mosseri commented on this consideration in a tweet on Monday when he said Facebook was trying “to be apolitical, but it is getting more and more difficult”.

Beyond the symbolism, the impact of the decisions made by these companies could prove to be relatively minor.

Take Facebook, which on Monday said it would “pause all of our PAC posts for at least the current quarter while we review our policies.” But in the first quarter of 2017 – the final quarter after the presidential election – Facebook donated just $ 64,000 to politicians.

For example, what would be more important would be if Facebook board member Peter Thiel, a billionaire who funds conservative external groups, paused his millions in annual contributions.

Movements like these are more important as business donations in the American campaign funding system flow largely outside of corporate PACs. Corporations and affiliates today can fund outside groups that spend on behalf of candidates but are not a candidate-led committee, such as B. “Super-PACs” or political non-profit groups. No company has announced in the past few days that its decisions will apply to this type of donation, and this has not always been verified, as nonprofits are not required to disclose the origin of their donations at all.

According to the Center for Responsive Politics, corporate PACs contributed only 5 percent of the money raised in the 2020 election, up from 9 percent in 2016. This is in part because PAC contributions are capped at $ 5,000 per donation, a limit which has not increased since 1974, while Super-PACs and other outside groups can raise unlimited donations. Another factor is that savvy politicians on both sides have built small donor bases that make up ever larger percentages of all money in elections.

Direct corporate donations can lead to real money in some individual voting races, e.g. B. for a moderate Republican in the Secret Annex who does not face a competitive race and thus makes it easier to raise funds. About 20 percent of the money raised by the House Republican electoral committees came from PACs, according to the Center for Responsive Politics. But for them, too, PACs are playing an ever smaller role: this number was over 40 percent in the 2016 cycle.

Donations of PACs from companies attract a lot of attention – even from company employees who think civically – because they are public and because the connection to the company is so direct, in contrast to, for example, a manager in their personal capacity. In a way, the post-Capitol riots donation freezes are a perfect way for a company to vocalize its formal disapproval without inflicting too much pain and disrupting a relationship that it may need when the next tax or trade issue hits Washington shows up.

Democratic candidates have increasingly come to a similar conclusion, particularly in competitive primaries: many politicians have promised not to include corporate PAC funds on their committees and have given them a strong line to attack an opponent for lack of purity, which arguably more important than the few $ 5,000 checks they might otherwise accept.

So what would be really important? What would likely prove more significant for American elections would be if these donation bans become more permanent or if companies completely abandon their PACs; when corporate billionaire executives and board members undertake to follow their corporate policies in their own disclosed and undisclosed personal donations; or if they have fundamentally redesigned their lobbying strategies to avoid contact with GOP lawmakers or the entire Republican Party in Washington.

The past week could serve as a more comprehensive look back at how big business is approaching Washington. But the break in giving PAC to businesses would just be the beginning.

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