Corporate & Securities Law

Corporations are not Republicans

As I’ve noted elsewhere, corporations are not generally ideological entities. Companies, acting through their managers, want to maximize the value and welfare of themselves, and whatever politics is needed to do this will be their politics of the moment. My favorite example of this comes from railroad magnate Jay Gould:

It was the custom when men received nominations to come to me for contributions, and I made them and considered them good paying investments for the company. In a Republican district I was a strong Republican; in a Democratic district I was Democratic, and in doubtful districts I was doubtful. In politics I was an Erie Railroad man all the time.

So we shouldn’t be surprised that corporate giving to politicians splits evenly between Rs and Ds. We shouldn’t also be surprised that, according to www.opensecrets.org, over the past several election cycles as many large investment houses on Wall Street have given predominately to Democrats as to Republicans. And, finally, we should not be surprised by the reports that the CEO of GE pressured the editorial choices of its NBC subsidiary to be more friendly to the president. Jeffrey Immelt is a GE man all the time, and a Republican when he needs to be and a Democrat when he needs to be to help GE. The claim that the Citizens United case is a windfall for Republicans thus rests on very shaky ground.

This does not mean there are no reasons to be concerned about corporate influence on our laws. As Prof. Ribstein points out in his post on Dodd-Frank, the regulated have enormous influence on regulations, and this could be good or bad. This could be good because the natural instincts of voters are often irrationally skewed in ways that are inimical to social welfare, see, for example, Bryan Caplan, “The Myth of the Rational Voter,” and companies may have strong incentives to counter these biases against free trade, markets, foreigners, and so on. In addition, the tendency of democracy is for the populace to vote itself ever-increasing transfers of wealth, and this can and should be naturally checked by giving those with the wealth a disproportionate say in these matters.

Corporate influence could be bad because regulations can be manipulated to serve selfish interests of a single corporation or group of corporations instead of the welfare of the population as a whole. So, short of ending regulation of most types (can we?), we must be ever vigilant about the influence the regulated have on the regulators. It is therefore a legitimate debate about how we can ensure the optimal voice for corporations in our democratic dialogue, but characterizing all corporations as thinking one way or acting for or against a single party is not helpful in addressing these concerns.

Full post as published by Truth on the Market on August 12, 2010 (boomark / email).