Why the US Chamber of Commerce is fighting transparency

It has recently come to light that U.S. Chamber of Commerce President Tom Donohue, along with the presidents of the Business Roundtable and the National Association of Manufacturers, sent a letter last fall to their member corporations urging them to resist efforts aimed at encouraging corporations to make their political, or lobbying and election spending (including donations to trade associations like the Chamber), more transparent.

{mosads}The Chamber itself is an opaque institution. Nowhere does it publish a list of its members. Nor does it publish a list of its donors and how much they contribute to its prodigious spending on lobbying and election campaigns. Because of the Chamber’s unwavering commitment to secrecy, the ultimate sources of well over $1 billion in political spending are unknown. Since 1998, the Chamber has spent more than $1.2 billion on lobbying, making it by far the nation’s largest lobbying organization. And in the 2013-14 election cycle, the Chamber spent more than $35 million to influence elections, making it the seventh largest outside election spending group. In 2016, the Chamber plans to spend much more — up to $100 million to influence elections. It would appear that the Chamber, not content with merely keeping the identity of its donors secret, is urging its donors to keep the secret as well.

To understand the Chamber’s obsession with secrecy, one has to first understand the Chamber’s business model. Donohue has said that the Chamber is in the business of providing “reinsurance” to companies that need help lobbying for positions that aren’t publicly or politically palatable. And key to the Chamber’s ability to provide this “reinsurance” is the fact that it can do the dirty work for its members without them leaving their fingerprints behind. For example, if the tobacco industry wants to weaken anti-smoking laws overseas, the Chamber will lobby for it, allowing the industry to protect its reputation. “I want to give [member companies] all the deniability they need,” Donohue has stated. The Chamber is also one of only a small handful of entities to have written the U.S. Securities and Exchange Commission opposing rule-making that would require disclosure of corporate election spending; approximately 1.2 million retail investors, institutional investors, elected officials and groups wrote in to the agency to support this proposal.

If more companies were to report their political spending — including donations to the Chamber and other trade associations — then the Chamber would no longer be able to provide “deniability” to companies that want to lobby for unpopular policies without harming their public reputations. As such, corporate political spending transparency presents an existential threat to the Chamber’s business model.

The Chamber’s fierce hostility to transparency, whether it relates to the identities of its donors or to corporate political spending, is also immensely hypocritical. In its 2016 agenda, the Chamber advocates transparency no fewer than 15 times — for everything from the over-the-counter derivatives market and the Financial Stability Oversight Council to proxy advisory firms and the Equal Employment Opportunity Commission. If the Chamber is going to preach the gospel of transparency, it should apply this gospel to its own operations and encourage its members to do the same.

But beyond mere rank hypocrisy, there is ample evidence to suggest that the Chamber’s opposition to corporate political spending transparency is also bad for its corporate members. Harvard professor John Coates shows that companies that engage in lobbying and campaign spending have less robust corporate governance practices (like shareholder engagement with the board and proxy access) which may impact shareholder value, than do companies that don’t play in politics.

This comparatively poor performance is not explained by the diversion of resources to corporate political spending; the sums involved, while large in absolute terms, represent a tiny fraction of total revenues at large firms. Rather, Coates suggests that corporate political spending harms companies in two ways: The top brass’s personal goal of developing a higher profile may be unrelated to the best interests of the company and shareholders, and could even conflict with them. And corporate political spending may divert management’s attention from implementing its strategic plan, thereby undermining performance and harming shareholders.

Even if you choose to ignore Coates’s findings, corporate political activity is a complicated and risky endeavor that lies outside the core business competencies of most managers. Corporate political spending transparency is necessary for the efficient functioning of our capital markets and can serve as a risk management tool for shareholders. Corporations claim this spending is necessary to protect their interests, but shareholders have no way to monitor these activities or assess their risks when making investment decisions.

Moreover, many companies have begun to recognize that corporate political spending transparency is good business, with Prudential stating that it “significantly contributes to [the] company’s ability to compete effectively and realize our full value potential.” And Microsoft has stated, “By not being transparent and open, we’d be increasing the risk to the corporation.”

The Chamber is deservedly well-known for its aggressive and blustery advocacy. But when its sounding alarm bells about the hazards of political transparency, it’s time for everyone to recognize what’s going on: It’s representing its own narrow, institutional self-interest, not the interests of the companies it claims to represent.

Dudis is the director of Public Citizen’s U.S. Chamber Watch Program.