It Takes Money to Get Elected: Should Corporations and Unions Contribute?

A lawyer, trained at Harvard and at the University of Chicago, LELAND H AZARD became general counsel for the Pittsburgh Plate Glass Company in 1939, rising to be vice president and a director. A year ago he was appointed professor of industrial administration and law at the Carnegie institute of Technology.

SOME high corporate executives and some powerful labor leaders are determined to become more active in politics. James R. Hoffa promises reprisals at the polls for the labor reform legislation enacted by Congress. Archie D. Gray, senior vice president of Gulf Oil, has announced to fellow employees and shareholders a program for “increasingly active interest in practical politics.” General Electric and Ford Motor Company have extensive projects for the political education of employees. All the trade associations are holding seminars on politics and the corporation.

But just how effective in political activity can either corporations or unions become? They are the only American institutions prohibited by law from making campaign contributions or political expenditures. The bar against contributions by corporations was raised in the Federal Corrupt Practices Act of 1925 and was extended to cover labor unions by the Taft-Hartley Act, which, in addition, banned both corporations and unions from political expenditures. Corporations and unions are two of the most significant institutions in our American political economy. It is strange that they have not been more aggressive in questioning the constitutionality of an act of Congress which bars them from political activity.

Suppose that a corporation or a union takes a full-page advertisement in a newspaper to state its views on inflation. Such an expenditure is lawful. Congress could not legislate to the contrary because the First Amendment guarantees free speech. But suppose that the corporation or union should want to run the same advertisement and add, “Congressman X by his record has well exemplified these views, and we hope that he will be re-elected.” The law forbids such an expenditure. The Supreme Court has not yet said whether this restriction also denies free speech.

Finally, suppose that a corporation or a union should make a direct contribution to a campaign committee for Congressman X in the amount which the newspaper page would have cost. The law directly forbids such a contribution. If the law is constitutional, it must be so on the grounds that Congress has the power to regulate federal elections. Surprisingly, the constitutionality of the application of that power, as embodied in the Federal Corrupt Practices Act, has never been tested.

I believe that the existing laws deprive corporations and unions of free political speech and that these laws should be repealed — except for the provision that such contributions and expenditures should be made public. That provision should be strengthened, and enforcement should be stepped up far above its present level.

Much is expected by government and by the public from both corporations and unions. Corporations, through their managements, are supposed to be trustees for stockholders, employees, vendors, consumers, and the public. They are to pay high wages out of low profits, keep welfare benefits high but prices low, assure growth of the economy sufficient to keep pace with the Russians and at the same time protect schoolteachers’ pensions from inflation, leap to the national defense with arsenals of munitions in wartime, and in peacetime supply goods for the highest standard of living in all history. But in politics, where the social demands upon the corporation are settled, the corporation as such must remain silent.

Or take the unions. Their rights to exist, to organize, to bargain with management for wages and for the conditions of work are the law of the land. In 1937 it was the conservative Chief Justice Charles Evans Hughes who cast the deciding vote in favor of the Wagner Act — Magna Charta of unionism. The late Senator Robert A. Taft, in drafting the Taft-Hartley Act, was as careful to protect the institution of unionism as he was to protect the rights of individual workers against the abuses of union leaders.

We expect much of union leaders. We ask them to be statesmen in times of war and of economic crisis. We expect them to screen, modify, temper, and sometimes reject the demands of eighteen million workers — the elite of our industrial forces. We hold all of the leaders responsible for what the worst of them do. And we remain largely ignorant of their contributions to industrial peace and productivity, because these humdrum accomplishments do not make news.

We are constantly threatening more regulation of unions, additional curtailments of their right to strike, laws to intervene in the process of free collective bargaining. But in all these political debates the law requires unions as institutions to stand mute for lack of the legal right to contribute to campaign costs.

I know that it is widely believed that unions ignore the Federal Corrupt Practices Act and that under various subterfuges they do spend large sums of money in political campaigning. But if laws against financial participation in politics are widely ignored by either unions or corporations, that in itself may be a reason for repeal, as it was in the case of Prohibition.

It may very well be that the antitrust laws should be extended to cover what are loosely termed labor monopolies, that the legal restrictions for holding union office should be greatly tightened, that governmental surveillance should be so strict that men better qualified for the penitentiary than for labor leadership could not come into union power.

It may very well be that additional restrictions should be placed upon corporations. There are bitter complaints that the big companies own too great a proportion of our productive facilities, that profits are too large, that consumers’ needs are disregarded, that public taste is corrupted by pre-emption of television and radio for advertising.

The concern of thoughtful people about both corporations and unions may be well justified. The corporation, they say, is a freewheeling Gargantua, its self-perpetuating management beyond the reach of even its own stockholders, exercising a power over products, people, and the economy beyond that which a democratic society should permit to nonelected quasi government. And the same thoughtful people are concerned about the big union, also a freewheeling Gargantua, its officers contemptuous of members, selfperpetuated by nondemocratic internal manipulations, hungry for power, and ignorant of the economic fundamentals upon which a free economy must rest. In our democracy the complaints and the remedies will be heard in the halls of Congress. The issues will be resolved by political action ending in legislation. I believe that it is morally and legally wrong to deprive the two institutions most involved of the opportunity to influence the public debate and the political action upon such vital issues.

LOOK at some of the suggested remedies for alleged corporate evils. It is proposed that corporate managements be required to consult with some public or quasi-public body on major investments and price decisions, and that there be compulsory publication of such decisions. Under such a law the transcontinental railroad builders could not have risked their capital to open up the West without first enduring frustrating public debates. It is proposed that there should be restrictions on basic research by corporations, upon corporate aid to community services or to education, the argument being that other organizations possess value systems more suited to these important functions. It is proposed that, by legislation — grants, tax benefits, other governmental subsidies — teachers, writers, artists, and civil servants be favored in order to equate their earning power with that of corporate managers. This in essence would be statism. In a democracy, when institutions are put on trial they should have a right to be heard effectively at the polls.

It is unlikely that we shall ever see a time when labor is fully employed at wages entirely satisfactory to labor, when capital is fully employed at returns entirely satisfactory to capital, when interest rates are always as high as creditors wish but no higher than borrowers can afford, when dividends are always rising, when stock market averages are charted in a straight-line curve gently ascending and the consumers’ price index is charted in a straight-line curve gently descending, when schoolteachers‘ salaries are adjusted to the annual average earnings of plumbers, when pensioners save money out of their pensions, when farmers produce all they wish at support prices.

A Utopia combining all of these goodies staggers our imagination. And yet each claim is seriously pressed by some far from impotent group of people. Their irreconcilable claims on enterprise can be disposed of only by government.

OVER the last fifty years, government has been getting more and more into business, but businessmen have been getting less and less into politics. I do not mean that businessmen do not participate importantly in government. They do. In every administration government calls businessmen to Washington. In war, national emergencies, and important economic projects, these men often render indispensable administrative services not obtainable from other sources. But in the grass roots, in the committees, in the caucuses, in the conventions, where congressmen and Presidents are effectively selected long before public fanfare begins, businessmen are usually not participants.

It is often argued that at the turn of the century corporations used money unethically and abused the employer-employee relationship to influence elections improperly. Many would say that, because of the excesses of that period, corporations have barred themselves forever from politics. Undoubtedly there were abuses, but some of the legends appear to have been fabricated by the muckrakers and cartoonists.

John Wanamaker, who raised the money and led his party and Harrison to victory on the tariff issue in 1888, Mark Hanna, who put McKinley in the White House in 1896, and other men like them had a firm conviction about the dependence of enterprise upon government action. They had unquestioning belief in their right to raise and spend money to carry into office political leaders whose views they considered sound. Herbert Croly, first editor of the New Republic, states in his sympathetic biography of Mark Hanna, “Business of all kinds had thus become inextricably entangled with politics.” The Columbia Encyclopedia describes Hanna as “a great party boss who significantly exemplified the union between business and politics for purposes of economic policy rather than for personal graft.” Allan Nevins speaks in the same vein of John D. Rockefeller.

At the turn of the century there was a frank, open, and honestly implemented conviction that the welfare of enterprise was closely associated with the activities and decisions of government. Businessmen therefore took for granted that corporations would participate in politics. There were business-dominated political machines. Collis P. Huntington’s Southern Pacific machine in California was a prime example. Hiram Johnson rose to the California governorship and to the United States Senate on the rebound from the political excesses of that machine. But today the Huntington name stands for California achievement. Today’s businessmen are ill-advised to suppose that they are barred from politics because some of their predecessors of fifty years ago were guilty of political intemperance.

Whatever the moral caliber of businessmen in the robber baron era, today‘s managers are of a different ilk. Usually they own only fractional interests in the enterprises they manage. The graduated income tax sharply diminishes the prospect of great wealth.

In urging repeal of the laws forbidding campaign contributions and political expenditures by corporations and unions, I do not pretend to speak for the whole of business. Many businessmen fear that the corporation’s taking a position on political issues will tend to drive deeper the wedge between management and labor. This to me is a naive assumption. Labor respects nothing so much as a forthright statement of where the boss stands. When he speaks up, they know where he stands; when he is silent, they assume the worst.

Some executives fear that, if the corporation takes a political stand, some customers holding contrary views may be lost. But any salesman knows that people buy when the product is wanted and the price is right.

Some people feel that personal political convictions are private rights and these rights should not be invaded by corporate influence on a political issue. But this rationalization is an abdication of leadership. It involves the assumption that if all potent voices on political issues will just keep still, the facts and the wisdom essential to the right decision will in some way find their way into each individual‘s little ivory tower. That road leads first to mediocrity and then to oblivion. Mill put it correctly: “A state which dwarfs its men, in order that they may be more docile instruments in its hands, even for beneficial purposes, will find that with small men no great thing can really be accomplished.”

My PROPOSAL to release the power of the corporate purse calls also for release of the power of the union purse. For seven recent years one per cent of corporate profits after taxes has averaged approximately $201 million. During the same period, one per cent of the average annual earnings of all union members after taxes and after union dues has averaged $518 million. Obviously, any other percentage would show the same ratio of about 2.6 to one — union resources over corporate resources.

Of course, it will be said that unions cannot marshal the funds of members with the same facility that corporate managers can command disposition of corporate funds. But unions have demonstrated the ability to collect dues in the estimated amount of over $600 million per annum. There is good reason to suppose that they could make assessments for political purposes, the law permitting, in an amount at least equal to any probable amount which corporation management would appropriate for political purposes.

Would corporations run wild if permitted to utilize corporate funds for political campaign purposes? I think not. A reasonable percentage-ofincome ceiling for corporate, union, and personal campaign contributions could be established by law, as in the case of philanthropy. Once the ceiling was established, there should be no objection to allowing the campaign contributions of corporations and individuals alike as deductions for federal income tax purposes. It has been proposed that government itself should pay the costs of political campaigns, but the allowance of private contributions as deductions for tax purposes would seem administratively preferable and would avoid the establishment of another bureaucracy.

It will be argued that corporate and union leaders can and should participate in politics as individuals on their own time and with their own funds. But these leaders are utterly institutionalized. For a corporate or union president to take a position in his own right without reference to the interest of his organization is too much to expect. In general, such men have no time or heart for anything which cannot be done in the name of and for the specific objectives of the enterprise.

It will be urged that, because there are many differing political persuasions among stockholders, corporate management should not have the power to invest corporate funds for political purposes. But stockholders have differing views about equally important matters: price of product, style or kind of product, plant location, expansions, consolidations, and the like; and there are many actions by which management can offend the views, not to say the pocketbooks, of dissident stockholders. Even so, stockholders cannot hold management responsible for the total welfare of the enterprise unless they give it the authority to seek the conditions most conducive, as management sees it, to that welfare. Such is the system.

As a matter of fact, why is it not as much the duty of a corporation to invest in a good political environment as in plants or raw materials? Political developments can render both valueless. A management which carefully plans twenty years of plant and product development but remains indifferent to political trends resulting in inflation of 60 per cent within that period can look quite foolish in retrospect.

In a democratic society which asserts the right to determine the conditions under which enterprise may function, enterprise must have the right to say its piece about what those conditions are to be. This means political action, and political action costs money. It will be suggested that corporations and unions should be content with expenditures for education on the principles for which they stand. But principles do not vote in the Congress or in the state legislatures. Men vote — if they get elected. And it takes money to get elected.

Once the shackles are off, I would not expect corporations, any more than unions, to pick a party and follow it blindly on every issue. We really have four parties in America: liberals and conservatives in each of the two established parties. Corporations, like labor, would probably pick for support the candidates whose views seemed sound regardless of party. Nor would I expect a great flood of additional spending. Professor Alexander Heard of the University of North Carolina estimated that the local and national elections of 1956 cost “close to two hundred million dollars.” The money is being spent now — some of it surreptitiously, some inefficiently, all because of our unrealistic pretense that politicians should get elected without spending money. Product advertising at $5000 a television minute does not disturb us, but a politician with an idea that may save the nation is supposed to get himself elected for nothing.

I would expect that strengthened and betterenforced publicity regulations for campaign contributions would give pause to both political donors and candidate donees. It is an old psychological truth: unreasonable restraint invites evasion; permission begets responsibility.