Hersh and Shah describe three philosophies of the relationship between corporations and the democratic process. The first, associated with old-school Democrats, is strict separation. It holds that corporate influence over public policy decisions — whether through lobbying, campaign contributions or other advocacy — should be kept to a minimum to protect democratic self-government.
The second philosophy, associated with old-school Republicans, allows a limited political role for businesses to influence tax and regulatory policy on behalf of their shareholders. “In this view,” as Hersh and Shah put it, “companies should advocate only insofar as they try to inform and persuade lawmakers and the public of how government affects their own economic interests.”
Finally comes the ascendant philosophy of “stakeholder capitalism,” the most expansive view of a corporation’s political role. It holds that companies can and should influence governance in a wide range of areas, including on issues such as race, democracy, sexuality and climate change. It’s this philosophy that is on the rise, especially among Democrats, changing the contours of political power in the United States.
Hersh and Shah conducted a detailed survey last year of 320 business elites (a sample that they write is “relatively large for elite surveys of this kind”) as well as 670 ordinary people for comparison. According to figures Hersh sent me, 71 percent of Democratic business elites think corporate leaders should be “somewhat” or “very” engaged in political advocacy. Among Republican business elites, that figure was 58 percent. The public at large is less keen on corporate political engagement and evinces a wider partisan gap — 43 percent of Democrats said corporate leaders should be involved in politics, compared with only 25 percent of Republicans.
Both Democratic and Republican business elites agree that corporate America has been drifting away from the GOP. “Business leaders in general, and within every partisan cohort, believe that the national business community, the state business community, and their own business has become more aligned with the Democrats in the last decade,” Hersh and Shah write. Their findings “challenge the dominant narrative in political science that corporations remain a Republican interest group.”
Overall, business elites perceive that their company’s employees, board of directors and executives are pushing the company to be more Democratic. The political influence of customers is seen as balanced between the parties. Disturbingly, Democratic — but not Republican — business elites expressed support for turning away customers “who have views unaligned with the company’s values.” (The authors note that partisan differences between industries, such as Democratic overrepresentation in law and consulting, could be partly responsible for this gap.)
Business elites in both parties think increased political engagement would be bad for their firm’s profitability. But Democratic elites believe it would improve the company’s brand and employee morale. Republican elites think increased political engagement would make those things worse, the survey found.
What Hersh and Shah call the “realignment” of American business runs against the self-conception of many Democrats. After all, Democratic politicians tend to favor higher corporate taxes and greater regulation, which can slow business investment. Many business elites remain firmly in the Republican camp, of course. But some firms welcome certain regulations or benefit from government spending. Moreover, under the philosophy of “stakeholder capitalism,” a corporation’s political identity can be shaped by policies that don’t affect its bottom line.
What does all this mean for partisan politics? To paraphrase political scientist Steven Teles, as corporations have grown more liberal, liberalism has grown more corporate — that is, more deferential to authority and more favorably disposed to bureaucracy and expertise. Conservatism, meanwhile, has moved in the opposite direction, becoming more populist and mistrustful of institutions. Donald Trump has clearly alienated some business leaders who would have fit in Mitt Romney’s GOP.
Corporations, after all, can have an interest in political stability. Two researchers at the University of Nevada at Las Vegas, Kenneth Miller and Tanner Bates, studied the association between corporate PAC contributions to members of the House of Representatives and those members’ votes to certify the presidential election on Jan. 6, 2021. Their paper, published in July, found that “corporate PAC donations are inversely associated with the probability of a Republican member voting to object” to Joe Biden’s election victory in Arizona and Pennsylvania.
In other words, the effort to reject electors after the 2020 election was driven disproportionately by members of Congress who took less money from corporate PACs. This relationship might not be causal. But it’s easy to see how the “decoupling” of business interests from the GOP could leave partisan purists with greater influence.
The merger of corporate and political power has long created concerns about America’s democratic health — see the progressive response to Citizens United v. FEC, the Supreme Court’s 2010 decision affirming that corporations, like individuals, have First Amendment rights. Hersh, the Tufts professor, observed in an interview that “one of the things that people really didn’t like about the idea that a company is a person is that a company endures forever.” But for modern stakeholder capitalists, this concern is turned on its head: Business’s long-term view is seen as potentially superior to politicians’ partisan short-termism.
The old-left view of total corporate separation from politics was never tenable or desirable. But the new-left enthusiasm for wide-ranging corporate politicking can easily shade into a soft repudiation of voters’ democratic prerogatives. Changes to America’s party coalitions are producing a volatile choice, at least at the national level, between imperious corporate liberalism and anti-institutional populism. An effective business class wouldn’t just reflect this polarization but look for ways to keep it in check.