Analysis & Opinions - Harvard Law School Forum on Corporate Governance and Financial Regulation

Can Business Help Fix Our Broken Politics?

| October 23, 2016

Many business people are appalled at the current state of our politics. Few, however, would admit that the “business community” is responsible, in part, for our dysfunctional political culture. And fewer yet may be prepared to think about how business can take steps—in concert with other political actors—to help soothe the distemper.

But, this dreary campaign season is a good time for corporate leaders to consider specific changes inpolitical processes—less money, more disclosure, fair facts, balanced proposals, broad coalitions, cooler rhetoric, bi-partisanship—which could help fix our broken politics and rehabilitate business’s own political standing. Such process changes proceed from an understanding that there will always be significant substantive policy differences about societal problems but that those differences require a national politics that promotes common sense, civility and compromise to move the country forward, as has happened before in our history.

First a brief background sketch on the sorry state of our current political discourse.

The problem in our political system is not just the cacophony of the campaigns which distorts and obscures the real issues facing the nation. Below the noise, we have a populist revolt among a significant segment of the electorate that is more sharply critical of business than the general anti-corporate undercurrent which has long been present in American politics. That revolt stems partly from genuine problems of recession and a changing economy which is leaving some people behind but partly from the demagogic appeals to latent anger about race, immigration, Islam and trade. Moreover, the two major parties have been dead-locked for a long time on how to deal with major issues of paramount concern to the economy and the country—e.g., taxes, trade, worker dislocation, inequality, stimulus/deficit, infrastructure, immigration, education, energy and the environment—yielding a Congressional approval rating of only 14 percent!

Moreover, the well-publicized problems in the corporate community have added to political dysfunction, leading to low levels of trust in business’ role in policy and politics. These include: a steady drumbeat of corporate scandals (Wells Fargo is only the latest); ever higher executive compensation combined with stagnant real income of average citizens; corporate mistakes relating to leverage and liquidity as a major cause of the Great Recession; the perception that business elites are have disproportionate influence due to money in politics; and an aggregate sense that too much of corporate involvement in policy is in the service of “crony capitalism”, the range of subsidies, loopholes, franchises, concessionset al. that have little or no basis in advancing the broad public interest.

Business is hardly alone in its credibility problems with parts of the electorate. Other prominent actors—for example, unions, consumers, environmentalists and political parties—also have perceived failings. And, while some of the general distrust is due to political hyperventilation, there are, as noted, genuine substantive differences about whether libertarian, conservative, populist or liberal ideas are the right approach to various national problems.

But the rude noise of our current politics and the genuine substantive differences suggest that business ought to consider working with other actors in our political system on at least the following issues of political process to engender more civility and compromise. Each of these subjects is worthy of extended, book-length discussions, but here are the headlines:

  • New substantive limits on campaigns awash in money (more than $7B estimated in 2016 federal elections). Although “independent” spending for educational purposes or in support of candidates is protected speech under the First Amendment, it may be limited under the Constitution if improperly “coordinated” with candidates’ campaigns or if used for “corrupt” purposes. Similarly, “educational” efforts by social welfare organizations authorized by the IRS could be more carefully circumscribed only to include genuine charitable and less partisan activities. Congress could take such narrowing steps or authorize the IRS and a reconstituted Federal Election Commission (which could have a tie-breaking chair appointed by the party in power) to address these issues.
  • More financial disclosure. In elections, the Federal Election Commission and the IRS could require more real time disclosure of contributors and expenditures for “independent” entities organized under their jurisdiction. This timely disclosure (the IRS is particularly slow) would also cover more campaign finance if the scope of campaign activity funded through IRS entities was limited, forcing independent funds into the more transparent FEC Super PACs. And, the IRS could consider whether there should be an exception to the general rule of non-disclosure regarding contributors for trade associations or other authorized 501(c)(3) entities engaged in “education” on campaign issues during a defined political season.
  • Develop fairer, clearer facts in policy disputes. Corporations and other parties could work with public officials to devise better, honest methods for establishing a record of consensus facts in legislative and regulatory disputes and identifying the assumptions underlying contested facts so that the battle of experts is more clearly understood by decision-makers and the public.
  • Acknowledge the need to balance values in conflict. Corporations and other parties should identify and acknowledge the values on both sides of most regulatory and legislative debates and make a good faith effort to give weight to all the values in conflict, e.g. finding a fair balance between the verities of equity and efficiency in social welfare legislation or between access, cost and quality in healthcare legislation or between expedition and safety in drug approvals or between short-term cost and long-term benefit in environmental regulation.
  • Build broad coalitions. Too often business public policy efforts take place in the self-referential echo-chamber of trade associations or other business groups. Working with other interested parties to create coalitions that include, but are not limited to, business allies increases the chances of broad-minded approaches that can secure approval and provide durable benefits. Indeed, there no united “business community,” and disagreements among business actors(e.g. global v. domestic, tech v. industrial) means broader coalition building is necessary.
  • Cool the rhetoric. One of the poisonous aspects of our current political culture is rhetoric that demonizes opponents with words like “hate” or that bemoans an approaching American Armageddon. Business, especially, should use calm and reasoned civil discourse, recognizing that there are usually legitimate opposing values in political debates and helping find a middle ground that does not demand total victory.
  • Avoid Partisanship. Corporations should seek bipartisan or nonpartisan solutions to our most pressing problems to mitigate the anger and hostility exchanged across the aisle on so many pressing national issues which require sensible compromises. Too often relations in Congress or between Congress and the Executive look like an insoluble “blood feud.”

There should be no mistake. These political process issues—relating to money, facts, balance, coalitions, rhetoric and bipartisanship—may be as vexing and controversial for the business community as substantive policy positions. Some companies will resist, inter alia, because they believe their particular substantive position is more important than general process or because they believe gridlock in public policy is better than compromise.

Nonetheless, a timely question is whether corporations, by focusing on these and other process issues, can help heal, rather than exacerbate, the manifest ills in our political system—ills posing serious threats to the maintenance of a healthy constitutional democracy and a sound mixed economy in which vital public goods can be secured and private enterprise can flourish? These issues relating to the process of political participation should be central to a company’s future debates about what constitutes being a “good corporate citizen.” This subject is too vast for a single corporation, but a broad based “coalition of the willing,” extending far beyond corporations, may be the way past the dystopic present—what leading political scientist Francis Fukuyama has warned is American “political decay”—to a post-election future of a vibrant and workable democracy.

For more information on this publication: Belfer Communications Office
For Academic Citation: Heineman, Ben.“Can Business Help Fix Our Broken Politics?.” Harvard Law School Forum on Corporate Governance and Financial Regulation, October 23, 2016.