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Are Corporate Political Donations Wise Decisions?

Jim Prevor’s Perishable Pundit, August 30, 2010

Our piece, Supreme Court Ruling May Push Political Donations Toward Trade Associations, addressed a then-new Supreme Court ruling in the case of Citizens United v Federal Election Committee. The gist of the decision was that corporations would have much greater freedom to engage in political speech. We also suggested, and still believe, that the end result will make trade associations more important as confidential conduits for political donations.

Target, however, has gotten itself in a fix. It donated $150,000 to a group called Minnesota Forward, whose purpose is to elect Minnesota politicians who are in favor of low taxes and are focused on private sector job growth. Since Target pays a lot of taxes, it is perfectly understandable that it would like to see politicians who favor lower taxes elected.

In fact, Target made no effort to hide its donation, doing it not through a 501c4 or 501c6 — both of which could have protected Target’s anonymity. It did it through an electioneering entity that makes full disclosure.

Of course, the problem is that politicians take many positions, and it turns out that Republican Representative Tom Emmer, whose gubernatorial campaign was supported by Minnesota Forward, opposes gay marriage. Next thing you know Human Rights Campaign, which advocates for gay rights, was asking Target to donate $150,000 to pro gay marriage candidates, and Moveon.org called for a boycott. Here is a video of a “flashmob” staged at a Target Store:

The substance of the protestors’ argument is weak. Corporations, unions, etc., are all mechanisms which people use to join together to efficiently do their business. It is not clear why two individuals can each donate $50,000 but a corporation owned by those same two individuals should not be able to make the donation.

This still leaves open the question of whether corporate political donations are wise.

It depends. Target got caught because it has cultivated a clientele with an attempt to portray itself as more worldly, sophisticated and, yes, liberal, than the behemoth from Bentonville. So consumers who had chosen to shop at Target because it made them feel more sophisticated than shopping at Wal-Mart could be more easily roused as the donation was counter to the image they had of the company.

In contrast, not much happened when News Corp., which owns, among other things, Fox News and The Wall Street Journal, made a million dollar donation directly to the Republican Governors Association. Of course, political opponents are screaming bias, although many media companies have made political donations in the past. Mostly, though, the outcry against this much larger and more directly political donation has not risen to the level that Target is experiencing.

Most probably, it is because the News Corp. donation is generally in line with what viewers of Fox expect. In other words, if Ben & Jerry’s were still a private company and it donated money to reelect the Socialist Senator from Vermont, Bernie Sanders, it would be hard to get a consumer boycott going. If Ben & Jerry’s announced a big donation to some right-wing caucus, the petition would be filled in a day.

We saw a similar issue arrive when John Mackey, the co-founder and CEO at Whole Foods Market, wrote a piece for The Wall Street Journal op-ed page opposing ObamaCare — titled The Whole Foods Alternative to ObamaCare. Because this piece caused cognitive dissonance among the Whole Foods shoppers who assumed the company was consistently Liberal and Democratic, it was quick business to set up a boycott.

It is predictable. We would also say it is bad for America. Whole Foods is mostly seen as a paragon of “corporate responsibility” by those who value such things. Its CEO wrote a very adult policy proposal. To boycott the chain is to imply that independent thought is not allowed. It is bad for the country.

The actual business effect of these boycotts on Whole Foods or Target is quite questionable. Most people aren’t that engaged, and to what degree they impact business is unclear. It is also true that in politics, for every action there is a counter-reaction. Megan McArdle, the astute business and economics editor of The Atlantic, promised to support Whole Foods because of the boycott:

I myself do not particularly care for Whole Foods — I find them overpriced, and their prepared food isn’t very good. But as long as the progressive boycott lasts . . . well, Mr. Mackey, you’ve got another customer. I doubt I’m the only conservative or libertarian who will make the same pledge.

So the Citizens United Supreme Court Case has added a new piece to the three-dimensional chess game of corporate image for businesses. Wise executives will think carefully about how and if they donate.

Most advocacy groups probably care more about getting headlines and donations than actually having a boycott succeed. But those who do care about the impact of their boycotts ought to also be wary. After all, if a lot of people, who have demonstrated that they prefer supercenters through their shopping choices, were to actually boycott Target, isn’t it highly likely that they would wind up shopping at Wal-Mart?

Is that actually what the Target boycott advocates actually desire? Seems unlikely, but it is the most logical impact of their actions.

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