Haas School of Business study shows how donations shape nonprofit stances and policies

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Professors from UC Berkeley's Haas School of Business, University of Chicago, Boston University and Ivey Business School have co-authored a study revealing the effects of corporate donations and influence on nonprofits' stances on policymaking and commentary.

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Professors from UC Berkeley’s Haas School of Business have co-authored a study on how corporate donations shape nonprofit stances and government policies.

The study, conducted by Francesco Trebbi, campus professor of business and public policy; Matilde Bombardini, campus associate professor of business and public policy, Marianne Bertrand, University of Chicago professor of economics; Raymond Fisman, Boston University professor of behavioral economics, and Brad Hackinen, Ivey Business School assistant professor of business, economics and public policy, looked into the patterns behind the phenomenon, Trebbi noted.

According to the study, while government officials may view the community perspectives of nonprofit organizations as a counterweight to corporate interests, external donations may actually influence the decisions of nonprofits. 

“This work highlights new channels of influence on government policy that are opaque for most voters, but highly consequential,” Trebbi said in an email. “Firms appear to be able to influence regulatory rule making by creating coalitions of nonprofits that chime in supporting their positions when facing government agencies.”

Using data from the United States’ federal regulatory rulemaking, researchers identified three specific patterns underlying corporate effects on policymaking, according to the study.

The study notes that one pattern they discovered is that after receiving funds from corporations, nonprofits tend to comment on policies that those same firms have taken stances on.

The second pattern they noticed is that nonprofits’ commentary on new policies is more similar to the stances taken by a firm after a donation is received from that company, according to the study.

The final pattern highlighted in the study is that a policy’s federal regulator is more likely to give comments supporting the company’s position when the nonprofits’ recent donors have made comments on the rule.

“We have disclosure laws that make this much more transparent in the US and so you can follow the money and voters can take that information if they choose,” Fisman said. “I think I’m broadly concerned by the various means by which the rule-making process is distorted by hard to observe efforts and influence.”

The researchers’ investigation into corporate influence on policy follows other major instances in which companies have been shown to influence nonprofit stances. In 2003, the American Association of Pediatric Dentistry, which previously described soft drinks as being a “significant factor” in tooth decay, changed their stance after a $1 million donation from the Coca-Cola Foundation, according to the study.

In a separate instance, oil, chemical and utility companies were also found to have donated to local chapters of the National Association for the Advancement of Colored People, soliciting their support for fossil-fuel friendly regulations, according to the study. The issue became so widespread that the organization’s national office had to issue a warning against corporate influence.

According to Fisman, these patterns have many implications for both policymaking and citizens’ involvement in the legislative process. The study’s findings should concern citizens and make them more aware of who and what they are voting for, Fisman added.

“(Corruption) isn’t just in America,” Fisman said. “It’s just that we have it legalized.”

Contact Cindy Liu and Dima Aboukasm at [email protected].