How the Corporate Boycott of the GOP Could Backfire

Drawdown of corporate contributions could lead to more extremism, research shows

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January 20, 2021

The wave of corporations cutting their political giving in the wake of the Capitol riot is intended to punish Republicans for backing the president's reckless election challenge, but a surprising body of academic research suggests the corporations' actions could unintentionally fan the flames of extremism.

Dozens of corporations have ended contributions to House and Senate Republicans who backed Donald Trump's attempt to overturn the election in Congress, while others have paused giving altogether, citing the violence in the Capitol. But their withdrawal may leave an unexpected vacuum: Research indicates that corporations exert a depolarizing effect on politics, while their absence allows more extreme individual donors to exercise greater influence.

A corporate attempt to punish irresponsible behavior could unintentionally induce more of it, as those left out in the cold turn to even more extreme supporters to prop them up.

In the wake of the riot, corporations such as Amazon, Comcast, and Walmart have suspended contributions to Republicans who voted against certifying the results of the Electoral College's vote. Others, such as Google, Ford, and Wells Fargo, have temporarily suspended all political donations, with an uncertain timeline as to when, or how, they'll resume.

The surge of (in)activity is part of a broader trend over the past four years, as activist groups pressure corporations to withdraw their support from politicians, media figures, and others. But in this most recent case, the boycott seems to have been-self-instigated: An Amazon spokeswoman said the withdrawal was in response to the "unacceptable attempt to undermine a legitimate democratic process," while Comcast said it was responding to the "violence we witnessed at the U.S. Capitol last week."

They may also have less patriotic reasons, as corporations may fear that contributions could hurt their image with consumers and, thereby, their bottom line. Regardless of their motivations, the effects are likely to be the same: a reduction in the moderating influence of corporate giving.

Corporate contributions don't work the way some might think. When people think about such giving, most assume a simple quid pro quo: A company gives a politician a big check, and in return the politician votes how the corporation wants. Research, however finds that this mostly doesn't occur: Giving by corporate and other non-ideological PACs (as distinguished from ideological groups, such as unions) does not tend to directly influence political activity as measured by floor votes.

Instead, corporate contributions are more like long-term investments, focused on building a relationship that eventually nets a favor or two. This approach, called "access-oriented" giving, explains why corporations are big backers of incumbents, whose financial advantage is driven largely by non-ideological groups seeking access. It also explains why corporations don't care about party: When legislators switch parties, their individual receipts change dramatically, but their corporate receipts don't. In both cases, what matters is preserving a relationship over the long run.

In part because of this, corporations also tend to prefer giving to moderates, whose institutional durability and flexible views make them well-suited for access (consider Joe Biden's close relationship with credit card companies). In fact, more support from non-ideological PACs tends to distinguish moderates from extremists, who have similar average hauls but from different pools of donors.

Individuals, by contrast, tend to give to more polarizing or ideologically extreme candidates—they are "ideology-oriented" because the sort of person who opens his wallet to a candidate is more ideologically motivated than both corporations and individuals who don't give. That means they prefer those far out on the political spectrum, such as Sen. Bernie Sanders (I., Vt.), who massively outpaced competitors in the 2020 Democratic primary for individual contributions.

Corporate political giving, therefore, tends to have an overall moderating effect on the composition of legislatures. This is because corporate giving tends to power moderates to victory, but also because reducing corporate giving increases the relative financial influence of more extreme individuals over politicians, in turn pushing them to be more extreme over time.

Research has found this effect in state-legislature races across the country. Public funding of elections, which cuts incumbents' financial advantage relative to challengers, increases polarization in state legislatures primarily by reducing the giving of access-oriented PACs. Contribution limits imposed on PACs by states make legislatures more extreme, while limits imposed on individuals make them less extreme. That's not just because the limits result in different candidates getting elected, but also because they change the fundraising options current elected officials have.

It's not hard to imagine how this effect would play out with the current boycott. A withdrawal of corporate contributions in general could risk more moderate members' political futures. A boycott targeting those who voted with Trump could leave them even more beholden to their most extreme supporters, entrenching their viewpoint in Congress.