Feature of the Week

May 26, 2013 11:34 pm

Shedding light on the role of ‘dark money’ in corruption

Bruce Freed, President of the Center for Political Accountability at his office in Washington©Lexey Swall

Bruce Freed, president of the Center for Political Accountability

Corporate political spending has risen sharply since the US Supreme Court’s 2010 ruling in the Citizens United case removed limits on the donations political groups can accept from companies. Since then, unease has grown at excessive corporate political spending.

As pressure increases on companies to disclose where they distribute their campaign dollars, four schools – the Stern School of Business at New York University, the Wharton School’s Zicklin Centre for Business Ethics Research at the University of Pennsylvania, Baruch College’s Zicklin School of Business, New York and the Ira Millstein Centre for Global Markets and Corporate Ownership at Columbia Law School, New York – have come together to address the topic. Earlier this year they launched an initiative with the US-based Center for Political Accountability to integrate corporate political accountability into the business school curriculums and to create the first online course on the subject. Bruce Freed, president and a founder of the CPA, discusses why corporate political spending should be part of the MBA:

Why do future business leaders need to learn about the implications of corporate political spending?

There’s reputation risk and increasing business risk because of conflicts between company positions and the positions and activities of the trade associations of which they are members – some trade associations are very politically active and are pursing independent policy positions. And with the rise of “dark money”, you have the risk of corruption and legal liability, with companies under greater pressure to engage in undisclosed spending.

What is “dark money”?

In the US, social welfare groups can engage in political spending without publicly disclosing the origins of the money – and they play an increasingly prominent role in elections. Privately key elected officials know who was solicited [for the money] and how they responded. That puts companies in a conundrum as there might be consequences for giving or not giving which could affect what these officials do in terms of helping or hurting a company.

Are MBA students aware of these risks?

My sense is that there is no significant awareness. There’s an awareness that political spending has created issues that business leaders need to address and that it does pose a risk. But there’s not the level of knowledge of the types of risks it poses and of the regulations and laws governing political spending.

What are the challenges for business schools in teaching this topic?

There’s a big gap in business schools – they don’t have political scientists either on the faculty or coming in to talk about where corporations fit in the political process.

Can case studies be developed on corporate political spending?

Yes, there are many situations that we have seen and written about that would lend themselves to case studies. We have spoken to some business schools about developing these kinds of case studies.

How would students benefit from including this topic in the MBA?

It provides students and future business leaders with a framework, which is very important and helps them to ask the right questions. So there’s more to it than the technical and legal side – it’s important that students begin to understand what corporate political participation means and what types of issues they will be grappling with.

How fast could this spread to the broader business school community?

Based on the schools that took part in the roundtable, there’s great interest. Participants said they want to bring this into the curriculum.

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