It's no secret: America's electoral system faces a crisis of trust, driven by the proliferation of disinformation that threatens Americans' trust in elections. Businesses have a vested interest in a stable democracy, but what can they do to address these challenges? This Business for America webinar explores the risks facing our democracy, the state-of-play regarding state and federal elections policy, and practical actions the private sector can take to promote trust and transparency in campaigns and elections.
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Corporate black holes prevent fair play in the U.S. economy
Aug 23, 2024
Frazier is an assistant professor at the Crump College of Law at St. Thomas University and a Tarbell fellow.
NASA defines a black hole as “a place in space where gravity pulls so much that even light can not get out.” This celestial abnormality can even distort space-time. Though invisible to the human eye, a black hole is detectable by the extent to which everything around it is morphed to its will.
The same is true of our biggest corporations. The total reach of companies like Amazon, Meta and Google seemingly exceeds human capabilities. Yet, the extent to which our laws, culture and daily lives revolve around these corporate black holes reveals a hard truth: Fair play does not characterize our economy. The best ideas may never come to fruition and the smartest people may never realize their potential — they lack the escape velocity necessary to operate beyond the pull of the black holes.
Affording every individual economic opportunity and liberty is at the core of our antitrust tradition. It’s the idea that motivated Theodore Roosevelt, William Howard Taft and Woodrow Wilson to reorient our approach to goliath corporations. They realized that when some companies have an unearned advantage over others, there’s a need to help level the playing field. Roosevelt used publicity to call out CEOs who wanted to flout the rules. Taft leaned on the courts to enforce existing laws. Wilson created the Federal Trade Commission to spot new corporate shenanigans.
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Each president thought creatively about how best to curtail corrupt, fraudulent and just plain bad business practices. They succeeded … sometimes. They also fell short … a lot. Teddy couldn’t help but assume that his fellow gentlemen would only do right by the American people. His predecessors likewise paid close attention to the interests and demands of the elite class that bankrolled their campaigns and demanded passes from too much regulatory scrutiny.
Those shortcomings shouldn’t distract from the larger message: They each acknowledged that fair play was more important than unjust economic growth.
Fair play is missing from today’s economy. Consumers are trapped in the orbits of a few massive corporations. You can quit Facebook, but your friends will demand you join WhatsApp or Instagram. Your social media still resolves around Meta.
Startups are likewise roped into these economic black holes. Companies like Amazon will extract everything from novel threats. They’ll lure employees from small businesses, or emulate the products of mom-and-pop shops. And, if necessary, they will simply absorb their competition via an acquisition.
The long-term ramifications of giant corporate black holes are significant. Consolidation across several industries has had a particularly pronounced effect on workers and their wages. Leading antitrust scholars forecast that Americans could be earning upwards of $10,000 more in annual income under more competitive conditions. Competition would not only boost incomes but also stretch dollars further. As companies bunch together they also tend to jack up prices. Americans may also have more career opportunities in a more competitive economy. The dominant corporations in their respective industries generally hire fewer workers — driving down total employment.
The laws of anti-competitive gravitational forces under which corporate black holes trap us in their orbit may finally be coming to an end. Like Copernicus realizing the sun’s pull, federal officials have awoken to the democracy-sapping effects of corporate black holes. FTC Commissioner Andrew Ferguson, for one, acknowledged that “society reaps the benefits of free enterprise only if it protects the system from monopolies and fraud.” His colleague, Commissioner Alvaro Bedoya, has similarly called for the public interest rather than private profit to be at the center of our economic policies.
This emerging consensus justifies optimism but begs the question: How can individual Americans achieve the escape velocity necessary to wrest control over their economic fates from the biggest corporations? A full outline of those policy options exceeds the scope of this short essay. For now, the most important thing is realizing that our economy does not have to revolve around the priorities of corporate black holes. This Copernicus Revolution can serve as the basis for rewriting our collective narrative and understanding of what fair play means in the modern economy.
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Mass consumerism and the hypocrisy of Gen Z
Jun 26, 2024
Pruthi is a professor of entrepreneurship at San Jose State University, where she is a co-founder and director ofHonorsX, and a public voices fellow with The OpEd Project. Kharbanda is a senior at Presentation High School in San Jose, Calif.
California lawmakers recently approved two bills banning grocery and convenience stores statewide from offering customers reusable plastic bags. These bills are the next step in combating plastic waste, but what about the waste from mass consumerism that has come to pervade our lives?
Through the past decades, we have been trained to shop, purchase and consume products to solve our problems. While mending old clothing or refurbishing used goods have become things of the past, new products that are ubiquitously promoted are cramming our stores, screens, mailboxes and nearly every aspect of our lives.
Growing up in the digital age, Gen Z is the prime target for this consumerist culture. Their lives are catered toward finding flaws with what they currently own and buying the next best thing. In the process, our world lays waste, proving the disastrous effects of those spending habits.
According to the U.S. Bureau of Labor Statistics, in 1930, the average American woman owned nine outfits. Today, that figure is 30 — one for every day of the month. Much of this clothing is hoarded. The Daily Mail reports that women in the U.K. buy half their body weight in clothes each year, storing 22 unworn items on average in their closets. While those who have the luxury to buy in excess live in momentary bliss, young women and children who are exposed to toxic chemicals in factories that manufacture those items pay the price.
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We are deeply alarmed by the wicked social problems facing our world, and we need to reawaken Gen Z’s consciousness on an urgent basis.
The origins of mass consumerism
Late Capitalism, a concept refined by German economist Werner Sombart, refers to the drastic expansion of goods and services in the West after World War II. As the U.S. solidified its role as a global leader, technological innovation ushered an era of prosperity. American citizens were able to buy a variety of goods and services like never before; in reality, they became “consumers.”
This philosophy was not a sudden mistake, but a calculated attempt to build the U.S. economy while depleting resources to generate profits and uncritical consumers who submit to the system of mass production and mass marketing, an ever-widening abundance of goods within a culture that emphasizes buying and selling, desire, glamor and flexible, purchase-driven identities.
Mass consumerism became a grave reality with the rise of e-commerce platforms. Today, American consumers are surrounded by hundreds, if not thousands, of options for a singular good, and sellers who use a variety of unethical and exploitative tactics to lure consumers into buying more.
Gen Z’s mass consumerism
Deemed as a trendsetting generation, Gen Z is known to defy expectations and break racial, gender, and social norms. Gen Z is praised for its care of diverse groups of people, its call for action regarding social injustices and its unwillingness to tolerate the status quo. Their preaching of climate activism and boycotting of brands merit accolades. However, Gen Z is also a generation that consumes at an unsustainable rate: clothes, makeup, technology and every other imaginable product.
The rise of e-commerce, trend cycles and social media has magnified these habits. One of the most evident instances of Gen Z's tendency to make large purchases for low prices is in the fast fashion industry. The Chinese online giant Temu’s catchline is “Shop like a billionaire,” whereas stores like Forever 21 and Zara sell the idea of buying luxury on a budget. The more of an item Gen Z consumes, the less satisfaction they derive from each additional unit as the Law of Diminishing Marginal Utility aptly sums up.
According to data from CivicScience, 90 percent of Gen Z between the ages of 18 and 24 report using social media. A November 2022 Statista survey found that nearly 40 percent of Gen Zers in the U.S. spend more than four hours on social media platforms everyday. In “GenZ and Media-Overexposure to Products Leads to Overconsumption”, Kyungmin Min discusses the French term “Panoplie,” which signifies a person who believes that their purchase of a particular product places them among a consumer group. From theKardashians,who promote slim, sun-tanned bodies to rich influencers who advertise exclusive brands and businesses, social media has ingrained the message that if one buys a particular product, they are able to partake in a desired lifestyle.
Infiltrating our phones and cluttering the screens of Tik-Tok, Youtube and Instagram, the aesthetics of “clean girl,” “mob-wife” or “old-money” motivate purchases not only by a simple preference, but by a deeper desire to segment a connection with a social class.
The heart of Gen Z hypocrisy and a call to action
So, what can Gen Z do to address their conscious indulgence in fast fashion and other forms of mass consumerism? They can adjust their behavior to make a difference but they can also be proactive to have their voice heard. Whether it is as climate activists at global conferences or becoming involved in other corporate issues that interest them, it doesn’t matter. Gen Zers can make a difference if they choose to become involved.
To be sure, just 100 of the world’s companies are responsible for 71 percent of emissions. Yet, Gen Z cannot be absolved of their responsibility to combat consumerist culture. Several innovative new businesses like Patagonia andTOMS are socially responsible ventures that are extensions of their founders’ philosophy of sustainable production and consumption. Furthermore, no company can be successful without its customers. Whether it is Amazon, Target, Forever 21, Coca-Cola or Nestle, millions partake in their successes simply through buying their products.
The message for Gen Z is to not forget their own role in working towards a better planet. In addition to calling out companies if they believe profits are excessive they must work through their own actions and motivations to purchase fewer goods. Let’s collectively reduce our identities as consumers and replace them with refusers if we are to eradicate waste and mend the injustices and inequalities that we as individuals believe must be addressed.
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The hidden iceberg: Why corporate treasury spending matters
May 13, 2024
Freed is president and co-founder of the Center for Political Accountability.
Too much media coverage and other political analyses focus on contributions by corporate political action committees but overlook the serious consequences of political contributions made directly from corporate treasury funds.
In talks with corporate executives, the default too often is almost exclusively on company political engagement through its PAC. This ignores what one political scientist has likened to an iceberg of spending, where disclosure is not required (and hence is “dark money”) or is partial (only by the recipient, not the donor) and totals are much greater than the amounts allowed for PAC spending.
This spending matters greatly. Donations from treasury funds have been crucial for reshaping state legislatures and influencing national politics and policy over the past 14 years. In the 2010 election cycle, so-called 527’s became a strategic part of the political funding process through targeted spending. Those organizations are nonprofits formed under Section 527 of the Internal Revenue Code, which grants tax-exempt status to political committees at the national, state and local levels.
They have played a major role in underwriting changes in control of state legislatures and redistricting of political maps that followed. They have been crucial for the election of attorneys general engaging in lawsuits that impact women’s reproductive rights, voting rights, election administration and the regulatory powers of the U.S. government. They have played a major role in gubernatorial races by serving as conduits for money to evade contribution limits. These groups are the governors associations, state legislative campaign committees and attorneys general associations.
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Companies are exposed to serious risks from political spending with treasury funds. It directly links their brands with controversial candidates and issues important to consumers, workers and shareholders. Accordingly, the Center for Political Accountability, unlike other research and advocacy groups, closely tracks corporate political spending from treasury funds, and its associated risk and consequences.
Let’s review the differences between corporate treasury spending and PAC spending.
Corporate treasury spending
- It draws directly from corporate profits. When a company gives to third-party groups, it loses control over its money and can be tarred with the consequences.
- It funds dark money groups, which are not required to disclose their donors.
- With no contribution limits, donations can run into six- and seven-figure sums, vastly above PAC giving. This is a dominant political spending source.
- These contributions have a major impact on state political races. They comprise almost a third of donations to 527 groups, which spend heavily in legislative, executive and judicial races. In a “massive change,” states are increasingly where policy gets made.
Corporate PAC spending
- PAC donations largely come from contributions from employees, not directly from a company’s profits.
- Donations to PACs, and donations they make, must be disclosed publicly.
- Donations to PACs, and donations they make, are strictly limited.
- Corporate PAC donations focus overwhelmingly on federal races, and attention to them diverts it from state politics and its immediate impact on voters, democracy and society more broadly.
The bottom line
More than ever, consumers, employees, shareholders and other stakeholders are keenly interested in supporting companies whose values align with their own. The political causes and candidates that a company supports are a key metric for assessing those values. Corporate PAC spending only partially illuminates the totality of a company’s political influence. To fully assess a company’s impact on the political landscape, contributions made from treasury funds must be closely examined.
The Center for Political Accountability focuses on company adoption of disclosure and accountability policies for company spending with treasury funds because of the much greater impact of this spending and the heightened risk that accompanies it. Our effort over the past two decades, using corporate governance and risk management, has made political disclosure and accountability the norm through “private ordering.” That’s when a critical mass of companies adopting a policy turns it from a practice to a standard.
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Big Philanthropy to the rescue? Think again.
May 10, 2024
Cain has served in leadership roles at numerous foundations, nonprofits and for-profit corporations. He was a founding partner of American Philanthropic.
As the media and elites across America take up a fight to “save democracy,” Big Philanthropy is casting itself in the role of superhero. Since 2011, the University of Pennsylvania’s Center for High Impact Philanthropy reports, some $5.7 billion has gone to programs supporting U.S. democracy, with grant announcements that often depict foundations as stepping up to forestall a doomsday.
The Carnegie Corporation, warning of a “fragility of our democracy ... unimaginable just a few years ago,” has pledged to strengthen social cohesion and combat polarization. The MacArthur Foundation is partnering with Carnegie and the Ford and Knight foundations, among others, in the $500 million Press Forward effort to “address the crisis in local news.” As Knight president Alberto Ibargüen put it to the New York Times: “There is a new understanding of the importance of information in the management of community, in the management of democracy in America.”
Even those typically allergic to Big Philanthropy want to affix capes to the shoulders of megadonors. “Big philanthropists have a potentially transformative role to play in rehabilitating our democracy,” wrote philanthropy scholar Rob Reich and his Stanford colleagues in the Stanford Social Innovation Review.
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There is a strong temptation to dismiss Big Philanthropy’s “transformative role in rehabilitating democracy” or, as Ibargüen put it, “managing democracy,” as a thinly veiled partisan and politically liberal effort to manage electoral outcomes.
After all, the “fragility of democracy” seems to have first appeared around the time George W. Bush ascended to the White House in 2000. Democracy made an extraordinary eight-year recovery during the Obama presidency but became even more frail when Donald Trump won election in 2016. Now democracy itself, as President Biden has campaigned, is on the ballot in 2024.
Let’s take Big Philanthropy at its word, however. After all, many of the largest so-called conservative foundations in America — the Charles Koch, Scaife, and Bradley foundations and the Searle Freedom Trust — also believe that they have a special role to play in architecting the restoration of American institutions. Their work, however, is more often cast in the language of strengthening citizenship, free markets, and America’s founding principles rather than democracy itself. Nevertheless, their philanthropic organizations and methods look like and behave similarly to their liberal counterparts.
Liberal or conservative, the professional philanthropic class shares a fundamentally progressive belief that it can design America and Americans from above: Salvation comes by way of experts and elites, top down, not bottom up.
Should Americans look to the nation’s largest nondemocratic, publicly unaccountable charitable foundations to save democracy?
Americans’ regard for elite institutions, including nonprofit and philanthropic organizations, is in precipitous decline. Gallup records a “historically low faith in U.S. institutions.” Last year Edelman found that trust in nonprofits decreased by 4 percentage points over the prior year and that 26 percent of those surveyed had “low” trust in philanthropy, a 5 percentage-point increase.
What’s more, 20 million households have stopped giving to government-sanctioned charities. Volunteering is in generational decline. And year-over-year charitable giving in the form of nonprofit donations saw its largest recorded drop in 2022, according to “Giving USA.” Additionally, that giving is concentrating at the top. Average Americans are shying away from the very institutions that propose their salvation.
Americans have every reason to be suspicious of Big Philanthropy. It has coalesced and concentered over the past 50 years as income and wealth inequality divided the nation. The ranks of the billionaire class swelled, and their philanthropic machinery and resources grew to scales unimaginable to most Americans. That behemoth philanthropy can somehow right our nation’s underlying economic wrongs and heal the social wounds that fueled its growth is a self-justifying fiction.
Big Philanthropy can’t possibly unite a divided nation for the simple reason that its very being is a symptom of a diseased economic and social order and, by extension, a broken and corrupt body politic. The liberal economic order that propels Big Philanthropy also undermines the equitable scatter of economic, social, and cultural goods. The rise of megadonors and accompanying megafoundations is a flashing red warning light that our system of democratic institutions is broken.
For all its talk about change, equity, and empowerment, philanthropy can’t help but conserve the inequitable structure that keeps it in power. America’s system of tax-incentivized giving encourages the creation of large concentrations of unaccountable wealth in the form of endowments, donor-advised funds, and perpetual foundations that allow powerful individuals to impose their will onto others in a wholly undemocratic way.
That’s why foundations — conservative and liberal alike — band together with America’s largest financial-services corporations to oppose any change to the self-serving laws governing tax-advantaged charitable giving. Before Big Philanthropy saves democracy, it must first preserve its tax advantages.
Herein lies the irony: By ensuring that they have a leg up on their fellow Americans through the tax code and a vast swath of other social and cultural institutions where they command extraordinary privilege, megadonors and the professional philanthropic class embody not democracy’s salvation but its antithesis.
Big Philanthropy’s ascent hastened democracy’s decline and weakened the civic bonds that foundations now aim to mend. The concentration of wealth and power obviates the need for voluntary association because, as Alexis de Tocqueville pointed out in his Democracy in America, it’s in the absence of concentrated power that men and women must band together to accomplish great things. In a democracy, no one person has the power or resources to do great things of themselves, Tocqueville observed. So democratic citizens must unite and work together through the art of civil association.
This is not the case for the aristocracy, Tocqueville observed. Like today’s behemoth philanthropies funded by the superrich and governed by elites, Tocqueville’s rich and powerful had no need to marshal, confer, or band together with their fellow citizens to get things done. They could do great things by commanding they be so. And they did.
Thus, when Carnegie president Dame Louise Richardson pronounces, “We at Carnegie Corporation of New York believe that engaging in national and community service can help to inculcate an appreciation of the value of democracy and bring together people from all races, regions, and backgrounds and thereby strengthen the forces of social cohesion in our country,” we hear the imperial din of an aristocratic age, not democracy’s salvific chords.
This article was originally published in The Commons.
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How your company can follow the model for political spending
May 03, 2024
Freed is president and co-founder, Hanna is research director, and Sandstrom is strategic advisor at the Center for Political Accountability.
With corporate political disclosure and accountability accepted as the norm, the next step for responsible companies is to put in place a framework for approaching, governing and assessing their election-related spending. The framework would establish policies for when or whether to spend and a process for evaluating the benefits and risks associated with a decision to use corporate resources to advance a political cause or candidate.
It would also provide companies with the internal controls to assure that the spending comports with its public values and its duties legal and fiduciary. An added benefit is that it provides corporate leadership with the opportunity and time to reflect on the full consequences of its spending and to resist any undue pressure from powerful political figures to contribute.
The framework spells out the full range of factors that management and the board need to consider when they are deciding to expend shareholder money to support candidates for public office. It assures that the same due diligence is brought to the company’s political spending as the company gives to its charitable giving. As recent events have demonstrated, election-related spending is fraught with risks, legal and reputational.
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Today, the unprecedented rise in the risks companies face makes election-related spending without a well-considered framework a perilous choice. The risks are real and, unmanaged, they can significantly impact the bottom line. The Center for Political Accountability has examined those risks in a series of reports.
To better enable companies to manage these risks, CPA, along with The Zicklin Center for Governance and Business Ethics at the University of Pennsylvania’s Wharton School, developed a Model Code of Conduct for Corporate Political Spending. It was the product of an October 2019 roundtable that included corporate governance experts, academics, corporate executives and investors.
The code opens with a preamble on its purpose followed by 12 provisions that build on the 24 indicators of the CPA-Zicklin index. It goes beyond the disclosure and accountability policies in the index to require companies to know and publicly disclose where their contributions ultimately end up and consider broader factors of societal interests and democracy in company political spending decisions. These additional factors directly affect the environment companies need to operate, compete and grow.
Following are the code’s provisions:
- Political spending shall reflect the company’s interests, as an entity, and not those of its individual officers, directors, and agents.
- In general, the company will follow a preferred policy of making its political contributions to a candidate directly.
- No contribution will be given in anticipation of, in recognition of, or in return for an official act or anything that has the appearance of a gratuity, bribe, trade or quid pro quo of any kind.
- Employees will not be reimbursed directly or through compensation increases for personal political contributions or expenses.
- The company will not pressure or coerce employees to make personal political expenditures.
- All corporate political expenditures must receive prior written approval from the appropriate corporate officer.
- The company will disclose publicly all direct contributions and expenditures with corporate funds on behalf of candidates, political parties and political organizations.
- The company will disclose dues and other payments made to trade associations and contributions to other tax-exempt organizations that are or that it anticipates will be used for political expenditures. The disclosures shall describe the specific political activities undertaken.
- The board shall require a report from trade associations or other third-party groups receiving company money on how it is being used and the candidates whom the spending promotes.
- The board of directors or an independent committee of the board shall receive regular reports, establish and supervise policies and procedures, and assess the risks and impacts related to the company’s political spending.
- The company shall review the positions of the candidates or organizations to which it contributes to determine whether those positions conflict with the company’s core values and policies. This review should be considered by senior management and the full board of directors annually.
- The board of directors shall, independent of this review, consider the broader societal and economic harm and risks posed by the company’s political spending.
Corporate leaders have reached out to CPA to ask about several of the provisions, specifically:
- How a company could adopt or commit to the model code.
- What complying with the expanded reporting entails.
- How boards and management should approach and what should be included in their consideration of the broader impact of a company’s political spending.
To address these questions, CPA recently released a “Guide to Becoming a Model Code Company.” It was requested by leading companies to provide guidance on what the provisions called for and how to adhere to them; it was written in collaboration with senior executives at companies that are among CPA-Zicklin Index “trendsetters.”
The guide’s key points
How does a company benefit from recognition as a Model Code company?
The guide is succinct about how it helps a company:
Due to the growing importance of managing all risks associated with corporate electoral spending, the Center for Political Accountability will give special recognition in the CPA-Zicklin Index to companies that adopt the Model Code or state that their election-related spending policies are consistent with the Code. Becoming a Model Code company is a short step for Trendsetters that already have most of the provisions in place.
In addition, the Erb Institute at the University of Michigan will be recognizing companies that adopt the Model Code in conjunction with the Erb Principles for Corporate Political Responsibility.
How does a company receive recognition as a Model Code company?
There are two ways:
- A public announcement that the company has adopted the Model Code through board action.
- A statement by the company that its policies are consistent with the provisions of the Model Code.
What types of disclosure are required beyond what most companies are doing?
In addition to the disclosure covered by the CPA-Zicklin Index, the Model Code focuses on company giving through third-party groups. These include trade associations, 527 committees, 501(c) (4) groups also known as “social welfare” organizations, and super PACs.
The guide is clear about the disclosures that are required — and that are not required. This is important for ensuring that disclosure is not burdensome while assuring that the company conducts robust due diligence. The key ask is for enhanced disclosure of contributions to third-party groups. The code requires companies to receive reports from the groups to which it contributes on the ultimate recipients of their political money and to post the reports on the companies’ websites.
Lastly, the code calls on boards of directors to, “independent of this review, consider the broader societal and economic harm and risks posed by the company’s political spending.”
As the guide points out, this entails directors:
- Consider the broader policy, political and societal environment the company needs in order to operate, compete, grow and thrive.
- Consider the impact of the company’s election-related spending on this broader environment. This may include more traditional reasons for a corporation’s election-related spending, such as access, regulation and taxation, but Directors also should consider the other consequences of their contributions, including broader societal impacts (for example, gerrymandering, controversial lawsuits, and legislation that creates conflicts with company policies and positions.) This is intended to be an independent and more comprehensive review of the impacts of company electoral spending beyond the immediate moment.
- Address areas of highest risk or greatest opportunity in the long term, based on a thorough annual assessment of these risks and benefits.
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