The social foundations of corporate political strategy

Abstract

Most traditions within political sociology have long acknowledged the 'central', 'privileged' or even 'dominant' position of business in the politics of liberal democracies. However, the discipline is largely silent on the question of what constitutes the major political divisions within the business community and how they manifest themselves as different, possibly competing, corporate political strategies. This thesis attempts to remedy this situation through an analysis of the most comprehensive dataset on corporate political behaviour that is available today. The dataset includes social, economic and political data for 2005/6 on the 2000 largest enterprises in Australia and their 7,500 directors. Three major dimensions of business politics are explored: political partisanship, political leadership, and political cohesion. A distinct division is shown to exist between conservative 'partisan' corporations, and bipartisan 'hedging' corporations. A closely-related 'insider/ outsider' division is found within the political leadership of business, between a 'core-corporate community' and 'outsider' corporations. The corecorporate community shows a strong tendency towards bipartisan behaviour, while outsider corporations tend to be Coalition-only donors. The core-corporate community is comprised of the largest public listed corporations, and the corporations which comprise it tend to be located in regulated industries and have strong ties to the industrial and political leaders of business. Outsider corporations tend to be smaller, private corporations which have their own distinct business associations. Politically cohesive behaviour was found to exist between Coalitiononly donors, but found to be surprisingly absent amongst bipartisan donors. Instead of displaying any politically cohesive behaviour, the core-corporate community was created by the mutual attraction of high status and highly influential directors and corporations. The strong co linearity of the three dimensions of partisanship, leadership and cohesion has been the source of much confusion within the existing literature. By distinguishing between them many paradoxes can be resolved. The dominant political force driving bipartisan donors, and consequentially the majority of the corecorporate community, is not class-cohesion. The dominant political motive is rentseeking. There is no contagion of bipartisan donation behaviour through interlocks which produces coordinated action (Mizruchi 1992) or 'class-wide' consciousness (Useem 1984). Instead the major correlates of bipartisan donation behaviour are an incentive (such as location in a regulated industry) and an ability (such as large size or super-wealthy directors) to extract rents from the state. Political cohesion is, however, a more important force for understanding conservative partisanship: ties to conservative think tanks, certain super-wealthy individuals, and ties to other Coalition donors are all associated with a trend towards greater Coalition-only donations. However, cohesion is only part of the story. The outsider status of smaller corporations means they have no mechanism for extracting rents from the state, and thus their economic self-interest lies in the election of a conservative government, and, thus, they have a self-interest in undertaking conservative partisan political action themselves. There are six other major findings of this thesis, which also fit into this schema. (1) Defence contractors, and also oil and gas corporations engage in a bipartisan donation strategy but do so because they are political outsiders, with little representation in the political leadership of business. In contrast, (2) while conservative think tanks are strong conservative partisans, they are also insiders drawing some of the most important directors and corporations into conservative politics. (3) Both the corporations of the super-wealthy and large legal and accounting partnerships are both insiders, with strong representation in the political leadership of business, presumably because of the considerable independent power provided by their wealth (in the case of super wealthy directors) or expertise (in the case of legal or accounting partnerships). However, they both also show an increased propensity to engage in partisan and bipartisan political behaviour, again presumably because of their independent sources of power. Both also have significantly fewer interlocks with other company boards, and thus could be considered as having low levels of cohesion. ( 4) Firms that are in industries which face hostile government regulation, such as oil and gas or tobacco have little access to the political leadership of business (outsiders). However, because of the hostile legislation they face, they show a tendency towards either strongly partisan or strongly bipartisan political behaviour. The decision to adopt one orientation or the other appears to be driven by purely pragmatic strategic considerations. (5) Foreign firms face a 'legitimacy tariff' on their participation in publicly observable political behaviour (such as donations), but not on their less scrutinised forms of engagement in the political leadership of business. (6) Within the core-corporate community there exists an 'Inner Circle' of approximately 20 to 40 corporations which face what I term a 'status tariff'. For these corporations, the high status of both their directors and affiliated corporations is such that the risk of making a political donation, even to both major parties, is too high. These very high status firms show a marked absence of donations, but no similar decline in more legitimate forms of political behaviour. Show more