“In many people’s minds, donations from corporations tend to be corrupt or have the potential to be corrupt, while donations from individuals are seen as mostly ideologically driven,” he says. Eduardo Tessoassistant professor of managerial economics and decision sciences at the Kellogg School.
But does this common distinction reflect reality? After all, many people are connected to companies, and if they are high enough in their organization’s hierarchy, they may benefit greatly from a particular candidate’s victory.
It’s an important question to ask because donations from individuals make up the majority of campaign contributions — by far. In 2018, more than three-quarters of the money raised by congressional candidates came from private individuals, up from 70 percent in 2000.
Teso set out to examine how many individual political donations were made in ways intended to strategically help the donor’s company. He did so by determining the share of corporate executives or board members who are individual donors and then sought to isolate the motivations of this subset of donors. Specifically, he wanted to understand whether this group’s financial contributions to members of Congress were driven purely by political ideology, or whether corporate leaders occasionally made donations with their companies’ interests in mind.
Teso focused on how donations from corporate leaders changed as the power of members of Congress waxed and waned. It found that the likelihood of an individual corporate leader donating to a member of Congress increased by 11 percent when that lawmaker received a committee assignment that made him or her “relevant” to the donor’s corporate politics. And donations increased even more, Teso found, for members of Congress who belong to the party in power at any given time — and even more for powerful committee members, such as committee chairs.
Additionally, it found that a corporate executive’s likelihood of donating to a sitting member of Congress was 31 percent higher during election cycles in which that executive’s company actively lobbied the federal government.
“My interpretation is that these donations are useful because they allow corporate leaders to open the door, and once it’s opened, lobbyists can try to convince politicians of their views,” Teso says. “The fact that actively lobbying firms are those whose leaders are active in donations is consistent with the idea of access-seeking behavior by corporate leaders.”
Tracing donation paths
Early in his investigation, Teso encountered a problem that dogged journalists and other watchdogs also struggle to investigate political donations in the U.S.: Making sense of the Federal Election Commission’s publicly available donation data is much more difficult when the microscope is on individuals rather than corporations and special interest groups.
The problem is the lack of continuity within the database. Although the FEC requires certain personal information from individual donors—including their name, employer and address—employers and addresses can change. In addition, some sponsors (such as corporate executives who sit on various corporate boards) have multiple employers to choose from. This can make it extremely difficult to track a particular person’s donations over time, Teso explains.
It solved this by aggregating data from different sources to create a more complete picture of donors.
First, he drew from a dataset called the Database on Ideology, Money in Politics, and Elections (DIME), which contains standardized information on campaign contribution amounts, recipients, and donors from the FEC and from state and local electoral commissions.
He then turned to a data set provided by a company called BoardEx, which offers detailed information on the full list of corporate executives with past and present employers. BoardEx compiled this employment history on 401,557 corporate leaders from 14,807 of the largest public and private US companies between 1999 and 2018.
By matching BoardEx employment histories with DIME contribution records, Teso was able to summarize contributions made by the same individual, even when they listed different employers across the records. This clarified how much individual corporate executives had donated over time.
Collectively, Teso estimates that the corporate leaders in its data set gave 19 percent of the total dollar amount recorded by the FEC between 1999 and 2018. While less than 1 percent of all Americans donated during that time , 40.5 percent of corporate executives did. “This highlights their prominence in the donor population,” writes Teso, “and the importance of shedding light on the motivations behind their donations.”
Next, Teso needed a way to clarify the possible motivations of these donors.
If a particular executive gave money to a sitting senator during the sample period, for example, how could Teso determine whether the gift was likely motivated by an alignment with her political ideology or by a strategic determination that this financial magnificence could somehow help the company of the executive?
To disentangle these motivations, Teso turned to an analytical approach previously used in political science research. He noted the committee assignments of members of Congress and analyzed whether donors shifted their gifts depending on whose committee positions were most likely to be directly related to the donors’ interests—or rather, the interests of their corporations.
By tracking both committee appointments and donation flows, Teso believed he could speculate with some confidence about donors’ motivations. “If I see that a donor is changing their giving patterns based on committee assignments,” he explains, “I can say with some confidence that the giving was strategic, not personal.”
Indeed, Teso found that for individuals in his sample, the likelihood of making a political donation to a member of Congress increased by 11 percent when that lawmaker took a seat on a committee related to the donor’s industry.
He ultimately concluded that 13 percent of the gap between corporate leaders’ donations to “policy-related” versus other members of Congress was due to a desire to strategically seek influence with that member.
Teso also found that members of Congress received a larger share of these strategic donations if they were more powerful, either because they were members of the party in power or because they held leadership positions on committees.
Additionally, Teso found that the likelihood of a corporate leader making a political donation in the first place increased by 31 percent in election cycles when the executive’s company actively lobbied the federal government.
Teso notes that while collective donations from this group are high, individual donations are relatively small—on average, a corporate leader active in campaign finance donated about $12,000 to members of Congress from 1999-2018, a amount unlikely to “buy a Policy quid pro quo,” as Teso puts it. “These donations are helpful because they open doors.”
An access issue
What Teso finds troubling about these findings is not necessarily that corporate executives are seeking access to powerful lawmakers. He’s more concerned that time on senators’ or representatives’ schedules is scarce, and voters without significant financial means are far less likely to get into those programs.
“Personally, I don’t think lobbying is wrong, per se,” says Teso. “It can contribute to the drafting of more informed policies. But if donations are more likely to give you access to members of Congress, that’s problematic. It would mean that MPs have a partial view on an issue.”
While Teso can envision a potential remedy that includes limits on campaign contributions, he doesn’t have much confidence in its implementation. Recent Supreme Court decisions including Citizens United v. FEChave indicated that the nation’s highest court is open to ensuring that corporate donations are as unrestricted as possible.
A smaller, though useful, remedy, Teso says, involves making it easier to track where political donations come from. Sponsors could be required to disclose not just one employer, but all employers, for example. “Creating more transparency is always a helpful step,” he says.
