Should We Be Outraged That GM Has Resumed Political Giving?

It may be a new General Motors, but the company is already getting back to some of its old tricks. After nobly suspending donations to political campaigns after its bailout, the automaker has resumed its giving. Meanwhile, the U.S. remains the company's majority owner. As long as that's the case, the firm giving money to political figures should be forbidden.

Here's Josh Mitchell reporting the story in the Wall Street Journal on some of GM's political targets:

The beneficiaries include Midwestern lawmakers, mostly Democrats, who have traditionally supported the industry's legislative agenda on Capitol Hill, including Sen. Debbie Stabenow (D., Mich.), Sen. Sherrod Brown (D., Ohio) and Rep. John Dingell (D., Mich.).

The list also includes Virginia Rep. Eric Cantor, the House Republican Whip, who would likely assume a top leadership post if Republicans win control of the House in November.

Such political giving should not be permitted. The U.S. government is majority shareholder of GM. It controls the company. This effectively means GM is providing non-dividend money to select decision makers of its biggest shareholder. It would be like if GEICO sought favorable treatment by giving money to select managers of Berkshire Hathaway, its parent company. If securities law doesn't forbid such activity, it certainly should.

Moreover, GM could be using this money for more legitimate business ends. For example, it could be using it to invest in equipment, research, or more workers. Or it could be using it to pay back taxpayers what it owes them for its bailout. Instead, it's "investing in" political favor. Although, admittedly, political giving has resulted in a huge return on investment for GM in the past. (See update below.)

Of course, once the government is no longer a major shareholder in the firm, then it should feel free to give as much money as it likes to political campaigns. But as long as the government has a controlling stake, this is a serious conflict-of-interest. Not only should GM be forbidden from providing these contributions, but the politicians should be forbidden from accepting.

Update: A GM Spokesperson contacted me to tell me that the contributions in question were from GM's Political Action Committee (PAC) which is comprised of voluntary contributions from GM employees. As a result, the section I struck through no longer applies. But you can decide for yourself if this makes the giving less improper. Using the example above, it would be like if GEICO employees voluntarily gave money to a GEICO-run fund that then gave money to select Berkshire management. Is that okay? If nothing else, it would likely have been wise for GM to encourage its employees to give to political campaigns on their own, instead of through the PAC, until the government no longer owns a majority share in the company so avoid the seeming conflict-of-interest.

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Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.

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