Corporate Political Influence 101

Organizations have considerable power when it comes to influencing politics. Companies are facing growing scrutiny on how they use money, lobbying and advocacy to advance their policy priorities. Business leaders should understand the basics of corporate political influence to determine the best strategy for their organization.

Corporate Political Spending

Direct Corporate Contributions

Under U.S. federal law, companies cannot directly donate to federal political candidates or national party committees through their own corporate account. However, companies can make political donations through their own political action committees (PACs) or through a third-party PAC, Super PAC or organization. Individuals (including business executives and board members) can contribute up to $2,500 directly to federal candidates from their personal accounts.

Non-federal donation laws are determined by state and local laws. A majority of states allow corporations to donate directly to candidates, and some have limits on what the contribution amount can be. The National Conference of State Legislatures provides a comprehensive list of state limits on donations to candidates.

Indirect Corporate Contributions

PACs & Super PACs

Many businesses have PACs. Corporate PACs solicit donations from their employees and make their donations in the name of the PAC to political candidates or campaigns. PACs have contribution limits depending on how the funds are being used. Super PACs are also called “independent-expenditure only PACs” are not allowed to donate directly to candidates or parties, but they have no limits on political spending independently of campaigns, for example, running ads, sending mail, etc.

Dark Money

Companies can also contribute to non-profit 501(c)(4), (5), and (6) organizations that are permitted to use funds for political activities. Since these organizations are not required to publicly disclose their donors, these political contributions are considered “dark money.”

Corporate Lobbying

Many companies use lobbyists - either in-house or through a third party firm or coalition - to lobby for or against policies that could impact their business. For example, a company focused on solar energy may meet with legislators to persuade them to enact legislation that promotes clean energy, an insurance company may lobby against enforcement measures, or a tech company may encourage legislators to take specific action on cybersecurity. Lobbyists can be involved with working with legislative teams to craft legislation or push for revisions to advance policies that fit their organization’s political agenda. Often times, corporate lobbyists lobby for budgetary/appropriation requests.

In 2021 alone, there were nearly 15,000 active lobbyists and total lobbying spending reached $3.77B. Our partners at OpenSecrets have done extensive research on corporate lobbying efforts at the federal level, including current trends and segmentation by industry.

Corporate Advocacy

The third pillar of corporate political influence is corporate advocacy. Advocacy involves any efforts to influence politics outside of spending money or officially lobbying. Examples include businesses issuing a public statement or signing onto a coalition letter to express their opposition to proposed legislation, mobilizing ERGs (employee resources groups) to advocate on behalf of a bill, or an executive publicly testifying at a public hearing in favor of or opposition to legislation.

Increasingly, U.S. companies have advocated for or against policies addressing social issues, including racial and gender equity, voter suppression, climate change, etc. Recent examples of corporate advocacy include:

Like corporate political spending and lobbying, it is important for businesses to make sure their advocacy efforts are aligned with their mission, values, culture and policies.

Leadership Now Perspective

Increasingly investors and employees seek to understand how political spending aligns with a company’s ESG priorities and if that spending is creating unintended risks. At Leadership Now, we recommend leaders of U.S. public companies take action to ensure their corporate political influence is transparent, aligned with ESG goals, and contributes to a stable political and economic environment.

Companies can take several steps to proactively manage risk. The first is to make sure political spending is transparent. This is measurable -- it is currently tracked by the CPA-Zicklin Index -- and is a factor ESG investors can consider. Second, decision-makers need to be clear on what their corporate values and risks are -- whether it is climate change, election risks, or inclusion -- and understand if those priorities are reflected in the candidates and political organizations their company funds. Our ESG & Political Influence Overview below highlights how political spending impacts ESG priorities and offers a roadmap for company leaders to proactively manage risks through greater transparency.