We analyze the role of charitable giving as a means of political influence, a channel that has been heretofore unexplored in the political economy literature. For philanthropic foundations associated with Fortune 500 and S&P 500 corporations, we show that grants given to charitable organizations located in a congressional district increase when its representative obtains seats on committees that are of policy relevance to the firm associated with the foundation. This pattern parallels that of publicly disclosed Political Action Committee (PAC) spending. As further evidence on firms' political motivations for charitable giving, we show that a member of Congress's departure is associated with a short-term decline in charitable giving to his district, and we again observe similar patterns in PAC spending. Charities directly linked to politicians through personal financial disclosure forms filed in accordance with Ethics in Government Act requirements similarly exhibit patterns that are consistent with political dependence. Our analysis suggests that firms may deploy their charitable foundations as a form of tax-exempt influence seeking. Based on a stylized model of political influence, our most conservative estimates imply that around 7 percent of total U.S. corporate charitable giving can be interpreted as politically motivated, an amount that is economically significant: it is 2.5 times larger than annual PAC contributions and about 36 percent of total federal lobbying expenditures. Given the lack of formal electoral or regulatory disclosure requirements, charitable giving may be a form of political influence that goes mostly undetected by voters and shareholders, and which is subsidized by taxpayers.
Published in: American Economic Review
Companies spend almost three times the amount on politically motivated charitable giving than they spend trying to influence politicians through PACs.
How Corporations Use Charitable Giving to Wield Political Influence
