In Defense Against the Dark Arts

I teach business strategy, and I am part of a community of strategy scholars that study what we refer to as “non-market” strategy -- strategies taken by firms to shape their broader institutional environment such as through political lobbying, self-regulatory efforts, and engagement with activists and community groups.  Teaching non-market strategy is like teaching Defense Against the Dark Arts in the ubiquitous world of Harry Potter.  One cannot teach “defense” without discussing the dark arts themselves.

As such, I read with interest the exchange between Ron & Singer (“Acting Responsibly in a Democratic Society”) and Allyn (“Guilt by Trade Association”). On one hand, we have an argument that political engagement by wealthy and powerful corporate interests potentially overwhelms our seemingly quant notions of individual citizen engagement in our democratic system. One person, one vote – not one corporation, many votes.  On the other hand, we have an argument that progressive-minded corporate leaders must engage in the political arena because corporate forces aligned against progress and innovation will certainly engage.  We must be realistic that some corporations will assuredly use the dark arts for their own advancement against the best interests of the citizenry.

This is not a new debate.  Interestingly, some of the most articulate voices denouncing corporate political activity are those most strongly associated with free markets.  Often forgotten in Milton Friedman’s famous opinion piece that “the social responsibility of business is to use its resources and engage in activities designed to increase its profits” is the critical conditional, “so long as it stays within the rules of the game”.  Strongly implied is that it is not the role of business to set the rules of the game.  In Ayn Rand’s infamous paragon to free markets, Atlas Shrugged, the antagonists include corporate leaders who lever their political connections to advance their businesses rather than outcompeting rivals.  True capitalists win on the merits, not by seeking political favor.

Somewhat paradoxically, in recent years, some on the progressive left have arguably been the most passionate for corporate engagement in politics despite their concerns around oligarchy.  As political institutions in the U.S. and abroad have struggled to address the ills of society, there has been increasing calls for the business community to help address Grand Challenges such as environmental sustainability and climate change, human rights and social justice, poverty and income inequality, and global health and pandemics.  Corporate political engagement is seen as a moral imperative to help advance progress on these critical issues.  They argue that the corporate political responsibility of business is to address these grand challenges.

Often unsaid is that these challenges are themselves contested -- not everyone agrees on their criticality with some not even agreeing they are issues at all (see climate change).  While it may be easy to dismiss such voices as either ill-informed or heartless, the fact is that in a democracy we believe in the will of the people expressed through our political institutions with all their checks and balances.  You may passionately disagree with some in society, but you do not have permission to unilaterally impose your views on others.  Even an enlightened despot dedicated to saving the people and planet is a despot nonetheless.  Let us not forget that what is considered “enlightened” is often in the eye of the beholder.  

So where does this leave us?  Do we leverage the dark arts to counter those using the dark arts for what we perceive is ill?  Or do we adopt a principled stand against all corporate political involvement as a defense of democracy and the will of the people?  I am part of a research team that is studying democracy and capitalism at the University of Virginia’s Karsh Institute for Democracy.  Our central thesis is that capitalism and democracy are mutually reinforcing institutions – that it is difficult to have one without the other.  History has demonstrated repeatedly that the failure to maintain free people or free markets leads to the collapse of the other.  This would suggest that it is in the best interest of corporations to support strong democratic institutions including markets free from corporate political influence.

However, we have a classic collective action problem.  Individual corporations may shirk their collective responsibility to disengage from politics and attempt to tilt the institutional landscape in their favor.  How do we defend against those all too willing to use the dark arts?  At some level, we must accept that corporations can and will try to shape their institutional environment.  In some cases, we may wish for them to do so given their expertise on specific policy and social issues.  In other words, we should welcome engagement when they provide legitimate value in the policy setting process.  

In all cases, we should demand transparency in corporate political activity.  In a free and democratic society, corporations should be compelled to reveal how they fund and influence political processes.  We should further demand accountability defined as alignment between their political activities with their espoused values and commitments.  Saying one thing while doing or supporting another is a form of “greenwash” and has no place in a free society.  We cannot have transparency without accountability.

Lastly, corporations must recognize that they do bear responsibility in helping maintain both democratic and capitalistic institutions.  For democracy, this means not trying to thwart the will of the people and undermine the core rule making and regulatory processes enshrined in our constitution and governmental systems.  For capitalism, this means not undermining the functioning of markets by erecting governmental barriers to competition and by setting rules that fix the game for their narrow benefit. We should hold business responsible for maintaining the free exchange of ideas in our polity and the free exchange of goods and services in our markets.

These four principles – legitimacy, transparency, accountability, and responsibility – are the backbone of the Erb Principles for Corporate Political Responsibility.  We should heed them well.  For the students and executives that I teach, I often tell them that is not my job to tell them what their values should be – for example, whether to combat climate change, address income inequality, or support the rights of gun owners. However, it is my job to help them recognize that the choices they make and the strategies they adopt invariably have a grounding in the values they do possess, whatever they may be.  Corporate political engagement may be a form of the dark arts, but our only defense against the dark arts is a collective willingness to hold corporations to a universal set of expectations of how they try to shape the institutional environment, in whatever direction they may choose.