Big Business may have failed to stop Trump from getting the nomination, but CEOs could still be insuring that Clinton wins, according to a new analysis.
In 2008, Senator Barack Obama waited until one of the signatories of campaign finance reform, Senator John McCain, committed to public financing of his campaign, effectively limiting the money he could spend, before reneging on his promise to do the same thing. As a result, he was about to raise and outspend McCain by 2:1 and rode to an easy victory. This year, Clinton has went far beyond that, promising to spend over $1 billion to win - and much of that will be donated by Big Business interests, whereas Trump has a fraction of the donations from PACs and companies.
But even if it were only limited to individuals, Clinton would likely still be ahead, because American employees donate almost three times more money to CEO-supported political candidates and are 11.5% more likely to vote when CEOs make campaign contributions. Individual donations directly to a candidate are capped at $5,400, but CEOs’ contributions and behavior have a substantial effect on employees’ political choices, according to a new working paper by Viktar Fedaseyeu (Bocconi University’s Department of Finance), Ilona Babenko (Carey School of Business at Arizona State University) and Song Zhang (University of Lugano) - Do CEOs Affect Employees’ Political Choices? (doi: 10.2139/ssrn.2814976).
Using a large sample of S&P 1,500 firms between 1999 and 2014 (23,765 firm-year observations for 2,287 unique firms, as S&P constituents vary over time), Fedaseyeu and colleagues find that employees donate almost three times more money to CEO-supported political candidates than to candidates not supported by the CEO.
As the relation between CEOs’ and employees’ contributions could be driven by common interest (“the possibility that both CEOs and employees simply recognize political candidates who are instrumental to the firm’s success and contribute accordingly”), the scholars investigate what happens around CEO changeovers and find that, when the new CEO supports a different set of candidates, employees tend to redirect their donations.
Electoral turnout also indicates that CEOs are a political force, as employees from congressional districts in which CEOs make campaign contributions are 11.5% more likely to vote, and this effect is driven almost entirely by less wealthy and less educated employees. “This suggests that CEOs, in some cases, can act as information providers for the employees who are less likely to seek out election-relevant information,” says Fedaseyeu.
“CEOs’ influence on their employees’ political choices is not necessarily a bad thing,” Fedaseyeu continues. “This influence is a problem when it results from coercion or pressure, but it can potentially have positive effects when CEOs provide employees with relevant information.” The paper provides some evidence that the effect stems, at least in part, from CEOs’ deliberate attempts to advocate for certain political candidates: in firms that publicly report their communication costs in favor of a candidate, the effect of CEOs on employee contributions is five times higher. The scholars also present a case study of Murray Energy, showing that employees increase their contributions to CEO-favored candidates immediately following the CEO’s explicit attempts to advocate for them, but not before.