Senator Elizabeth Warren’s recent letter to financial services companies demanding they disclose their contribution to public policy groups continues a troubling new development in the campaign against business participation in the public square. Along with Senator Dick Durbin’s letter this summer to more than 300 companies affiliated with the American Legislative Exchange Council (ALEC) demanding they explain their views on ALEC’s “Stand Your Ground” model legislation, anti-business groups increasingly seek to drive business out of the marketplace of ideas through shame and intimidation campaigns. Through legislation, public campaigns, and shareholder activism, groups hostile to business’s political activity now seek to isolate business and hinder its ability to defend itself against the regulatory state.
Disclosure proponents bring an apparently powerful one-two punch in favor of disclosure. Groups like the Center for Political Accountability argue that secret political spending by corporations exposes investors to legal, political, and reputational risks, which justifies mandatory disclosure rules. And on the other side of the relationship, critics like Public Citizen and the Center for Media and Democracy argue that business funding of public policy groups constitutes a conflict of interest for them.
Both these arguments, however, are mistaken. Consider the interest investors purportedly have in disclosure. In a highly mixed economy, corporations must engage in public policy debates over subjects such as anti-trust, intellectual property, environmental regulation, and numerous others as part of their fiduciary obligations to shareholders. Disclosure of this spending would not only be a costly legal expense to firms—it also may be unnecessary. Individual and institutional investors do not necessarily have an informational advantage over managers and boards of directors to identify political risks facing the company or public policy groups with common objectives to the firm. Firms might want to disclose for fear of shakedowns or political attacks. But a fair accounting of the risks must also include the risks from disclosure itself. Disclosure would undoubtedly invite shame campaigns and attacks on company brands by anti-corporate or other hostile organizations.
While firms should be free to weigh the costs and benefits of disclosure, they should not bow to disclosure rules from fear or curtail their political involvement as a consequence of disclosure. The challenges presented by a mixed economy to business profitability require more engagement with the public policy and political worlds.
Public policy groups and think tanks, for their part, risk the accusation of a “conflict of interest” for engaging with or raising money from the business community. There is certainly a risk of false or misleading research when one party stands to benefit from the outcome of research. But unlike candidates for political office, public policy groups can reward their donors at most by producing white papers or false research. Concerns about conflicts of interest also underestimate the degree to which peer scrutiny and a think tank’s long-term reputation of depend on integrity in scholarship. Within the public policy world, think tanks constantly evaluate one another to expose erroneous and misleading research, and public policy groups risk loss of public credibility should they engage in quid-pro-quo corruption.
At the same time, greater collaboration between business and free market public policy groups is necessary on principled grounds. Business participation in the research process helps public policy groups better document the unseen harms of regulated industries from direct costs of performance and technology standards, uncertainty, and compliance. The experience and research of firms could provide a powerful new perspective on the impact of policies on the ability of companies to innovate, expand, and create value for customers.
Limited working alliances between public policy groups and businesses are essential to the preservation and expansion of economic liberty. On the one side, public policy groups must do more to advance a positive role for business in a market economy by documenting how cronyism doesn’t pay. On the other hand, business needs intellectual allies to help it fend off political interference in a mixed economy fraught with political dangers.
At a time when anti-business groups seek to hamper businesses’ engagement with the public policy world, the case for businesses to find allies and partnerships has never been stronger. Neither business nor the free market public policy world can afford to remain aloof from the other when law and culture threatens to cleave them apart.