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Managing the Risks of Corporate Political Donations: A Utilitarian Perspective

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Abstract

This paper applies a utilitarian analysis to corporate political donations. Unlike the more common rights-based analyses, it is argued that the optimal policy is the one that best satisfies society’s rational preferences concerning donor influence, adequate financing, donor pressure and the cost of maintaining and enforcing the democratic system. This analysis suggests that a ban is best if it would be generally observed and sufficient financing from other sources is available, otherwise a donation cap is a better option. Further, lobbyists should be banned from donating small gifts and drafting bills for candidates. The impact of disclosure and other risk management mechanisms are also considered.

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Notes

  1. All organisational donations are controversial, but corporate donations are the most controversial and widely discussed. It is beyond the scope of this paper to determine whether all organisations, including unions and non-profit entities, should be treated the same as corporations. One direction future research might take is to ascertain whether non-corporate organisations merit different treatment.

  2. Healthcare provides an example of how the mere fact that a right exists does not mean that society can ensure it is fully promoted. There can be no question that citizens have the right to life and that healthcare is vital to realising that right. However, there is an obvious limit to the amount of resources that the state can spend promoting this right.

  3. These reasons are: (A) to preclude the speech of others is to assume one is infallible; (B) truth is discovered in the collision of various opinions and (C) active and lively debate is the only way to ensure that we are not engaging in dogmatism and prejudice.

  4. Theoretically, the government might try keeping their policies of right violations secret. However, Goodin (1995, pp. 76–77) argues that should the policy of keeping secrets ever be discovered, the disutility caused by people’s worry will be even greater, as there is uncertainty as to how and when such violations will occur. Thus, in order to justify keeping secret a right-violating policy, the utility gains would have to be very high.

  5. It is not possible to source preferences directly as polling data provides insufficient information. A 2007 Gallup Poll survey (Newport and Carroll 2007), for example, found that 47% of 1,001 Americans deemed political action committee funding acceptable; whilst another 47% deemed it unacceptable, but did not identify specific preferences for the donations system.

  6. This comment referred to individual donations, but the point also applies to corporate donations.

  7. The term ‘reasonably expect’ is used because parties cannot reasonably expect to gather sufficient funding if they make no effort to acquire funds.

  8. A US Gallup Poll (Newport and Carroll 2007) surveying 1,001 Americans found that 75% thought that it was inappropriate for Presidential candidates to be receiving campaign contributions from lobbyists. Although poll data are not the most reliable proxy of public preferences and are subject to change, this poll indicates that currently there is a clear public preference to ban lobbyists from donating (at least in the US).

  9. Some social accounting researchers have, however, utilised corporate donation data as a variable when conducting research on a related topic (Roberts et al. 2003; Dwyer and Roberts 2004; Roberts and Bobek 2004; Cho et al. 2006; Cho et al. 2008).

  10. Senates may be structurally undemocratic in multiple ways. In the US, for example, each state is allowed two senators, despite significant differences in population levels. Members of UK House of Lords were traditionally appointed under a hereditary system, although more democratic methods of selection are now gradually being implemented.

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Acknowledgments

We wish to thank Gordon Boyce, Cary Di Lernia, Lorne Cummings, Dennis Arnold, anonymous reviewers and the delegates of the 6th Australasian Conference on Social and Environmental Accounting Research who provided valuable feedback on earlier drafts of this paper. We also wish to acknowledge financial support of Macquarie University.

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Authors and Affiliations

  1. Department of Accounting and Corporate Governance, Macquarie University, Sydney, NSW, Australia

    Shane Leong & James Hazelton

  2. Department of Philosophy, Macquarie University, Sydney, NSW, Australia

    Cynthia Townley

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  1. Shane Leong
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  2. James Hazelton
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Correspondence to Shane Leong.

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Leong, S., Hazelton, J. & Townley, C. Managing the Risks of Corporate Political Donations: A Utilitarian Perspective. J Bus Ethics 118, 429–445 (2013). https://doi.org/10.1007/s10551-012-1592-z

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