The Political Implications of Corporate Philanthropy: Evidence from Pivotal Politics and Legislator Behavior on Environmental Issues

JC Martinez, Princeton University

In this paper, we explore (I) whether large corporations use charitable giving strategically to influence politics and (II) the extent to which it might be effective in changing legislator behavior. First, we investigate the extent to which a senator’s importance predicts PAC and philanthropic contributions from Fortune 500 and S&P 500 corporations to nonprofits with which the senator is personally affiliated. We conduct this analysis by fashioning a novel measure of U.S. senator importance to firm profitability using the pivotal politics theoretical model of U.S. lawmaking, and exploiting U.S. Senate panel data from the 105th to 113th Congresses. Estimating different specifications of standard and fixed effects regression models, we find little evidence suggesting corporate increases in response to this political incentive; however, (1) the measure does not always predict PAC contributions well either and (2) we do find evidence suggestive of non-politically strategic CSR usage and corporate awareness of the political careers of receiving charity board members. Second, using panel data on the House of Representatives from the 106th to 113th Congresses, we explore the differing extents to which oil and gas companies’ PAC contributions and philanthropic giving to nonprofits linked to House Representatives affect how they vote on environmental issues and talk about climate change during congressional floor speech. Using a two-way fixed effects regression, which accounts for temporal precedence by incorporating lead and lagged values, we find a more robust relationship between energy corporations’ PAC contributions and anti-environmental legislator behavior than we do for philanthropic contributions. Further, we use two instruments to implement a two-stage-least-squares within estimator that also controls for two-way-fixed-effects, finding that—if instrumental variable assumptions hold—PAC contributions cause an anti-environmental shift in behavior while we find little evidence that philanthropic giving does. Finally, the analysis for the second question presents mixed evidence that energy corporations use philanthropy as a tool for political influence.

Read the full paper here.

Leave a Reply