The Los Angeles Times reports that investors are lashing out at Target Corp. for donating to an anti-gay politician in Target’s home state of Minnesota. The case highlights why the Citizens United decision–which struck down a federal law prohibiting may not have the pernicious effects its detractors fear.
In a nutshell, Target gave a donation to an organization supporting a Republican gubernatorial candidate in Minnesota. The candidate is not a supporter of gay rights, causing pro-gay rights groups to protest the donation and propose a boycott of Target stores. The bad publicity has not yet affected Target’s bottom line, so far as I’ve heard, but Target’s shareholders are concerned that it will, and so several large investment firms that hold sizable shares of Target stock are pressuring the company to reconsider its donation policy.
This is why corporations may be hesitant to rush into the political maelstrom and start backing candidates. Corporations will give donations not because there is a nefarious conspiracy among capitalists to control government, but because each individual corporation expects to receive value in return for its contribution. It is an individual cost-benefit decision, not a collective, class-based one. If the contribution results in losses, the individual corporation will be hesitant to make future contributions.
Keep in mind that Target is in one of the U.S.’s most competitive markets–clothing, sporting goods/toys, and home furnishings. There is no Target in my town, but I don’t lack for places to find those items, having a choice between Wal Mart, K Mart, Meijer, and Kohls. Target simply can’t afford to alienate customers, because they can so easily express their alienation by exiting. That’s why I fully support drawing public attention to Target’s donation, staging protests, and organizing a boycott. I’d even participate in the boycott, had I an actual choice about going to Target.* As one investor notes in the article;
“Imprudent donations can potentially have a major negative impact on company reputations and business if they don’t carefully and fully assess a candidate’s positions,” said Tim Smith, a senior vice president at Walden Asset Management.
A critic might object that this strategy won’t work if all those stores contribute to the anti-gay candidate. But a simple application of game-theory shows that it can. Assume, for simplicity, that the four stores mentioned above, plus Target, are all the relevant stores. Assume also that protesters can only effectively protest/boycott one store at a time. If the protesters randomly select one to boycott, then each store has a 20% chance of the negative publicity and possible lost sales; hence of investor backlash. No store can know that it is safe, and even if it is not selected as the target of protesters this time, it may be in the next election cycle. Investors will easily recognize this, and may demand a discount for investing in companies that regularly make campaign contributions.
The beauty of this approach is that it doesn’t depend on the investors having any sympathy for gay rights (or whatever the particular issue may be). This approach uses the profit-motive that drives the investor as a means of supporting political values the investors may not share. Another investor quoted in the L.A. Times article makes this point very clearly, in a not-so-veiled warning to other companies.
“Target should have carefully considered the implications that direct political contributions can have toward shareholder value,” said Ola Fadahunsi, spokesman for New York Comptroller Thomas DiNapoli, the pension fund’s sole trustee. “It’s troubling to think that they can fund controversial candidates without properly assessing the risks and rewards involved.”
Of course two can play that game, and right-wing organizations could similarly pressure corporations that give to liberal candidates and causes. Liberals should not object to that, however. If both sides play the game vigorously, the outcome will be what liberals want–no corporate campaign contributions.
*Actually, in a small way, I have. There is a Target where we are vacationing at our in-laws’ in California. My wife wanted to go there to pick up a few items, but I steered us elsewhere. Our $30 or so did not go to Target. That’s my middle-class white academic blow at “the man.”