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Charities spend big to defend their board’s corporate agendas, new study reveals
Charities with corporate leaders on their boards spend an average of $130,000 a year lobbying on behalf of their connected companies. That’s according to a first-of-its-kind study that shows how companies benefit from their charitable work — and how charities may be all-too-happy to support their powerful board members in return for lucrative connections. The researchers behind the study say the findings could help policymakers and charity stakeholders keep tabs on a previously hidden form of political influence, but that such arrangements are perfectly legal for now. “Charities stand to gain something by behaving in this way. It doesn’t always have to be corporations pushing charities to behave in a way they don’t want to,” said Sehoon Kim, Ph.D., a professor of finance at the University of Florida and senior author of the new study. “It’s a natural quid pro quo arrangement that arises from the incentives corporations and charities have.” The American Medical Association shows one example of these incentives in action. In the 2010s, they actively lobbied against efforts by federal agencies to curb opioid prescriptions. This benefited companies like Purdue Pharma, the maker of OxyContin widely blamed for exacerbating the opioid epidemic in the U.S. It turned out that Richard Sackler, the former president of the company, sat on the board of AMA Foundation, a relationship viewed by many as controversial at the time. But Sackler had arranged for millions in donations to the foundation, and other charities are likely looking to corporate board members to help engineer large donations for their charitable work by connecting charities to other companies and leaders with deep pockets. Lobbying on behalf of their new friends, then, may simply be the most efficient way to ensure those donations keep flowing. Kim collaborated with UF Professor Joel Houston, Ph.D., and Changhyun Ahn, Ph.D., of the Chinese University of Hong Kong to conduct the analysis, which is forthcoming in the journal Management Science. They painstakingly hand collected data covering more than 400 charities and over 1,000 corporations that identified board connections, donations and lobbying activities that fell both within and outside of the charities’ typical political activity. The researchers focused on larger charities that already engage in some lobbying on their own behalf. These lobbying charities are three times larger than smaller nonprofits that never lobby. After a new corporate board member joined, these charities changed their behavior. They were far more likely to lobby outside of their own interests and to even work to support or defeat legislation that affected their new board member’s company, even when that legislation had nothing to do with their charitable mission. It worked out to about a 14% increase in the charity’s lobbying expenditures. “These were the smoking guns that there’s something going on that’s not supposed to be happening,” Kim said. Because lobbying is such an efficient use of resources, and because charities may lend their friendly brand to these lobbying efforts, this help from charities could significantly benefit these connected corporations. “These are previously unrecognized channels at play in terms of corporate political influence that policymakers need to be mindful of when assessing how influential corporations are likely to be,” Kim said.
