Under the Influence

Strategic corporate donations can sway nonprofits and public policy

Illustration of a hand of a person wearing a business suit with finger puppets on all five fingers. The puppets are calling for some sort of action, denoting corporate influence.

In 2003, the Coca-Cola Foundation announced a $1 million donation to the American Association of Pediatric Dentistry, supposedly to improve child dental health. Shortly after receiving the philanthropic gift, the kids’ dental group changed its stance on sugary beverages, no longer calling them a “significant factor” in causing cavities but instead saying the scientific evidence was “not clear.”

Coincidence? According to new Berkeley Haas research, back-door corporate influence peddling through nonprofit donations is both common and effective.

In work for the Quarterly Journal of Economics, Associate Professor Matilde Bombardini; Professor Francesco Trebbi, the B. T. Rocca Jr. Chair in International Trade; and others provide the first systematic evidence that nonprofits change their stances in response to corporate donations, and government agencies change their rules alongside them.

Comparing data for rules posted by the federal government since 2003 with donations filed with the Internal Revenue Service, they found nonprofits are 76% more likely to comment on a proposed rule in the year after receiving a donation from a corporation that commented on the same rule. Using natural language processing, they found that the comment by the nonprofit was significantly closer to the corporation’s language after receiving a donation—and, even more alarmingly, that the language the government used in changing its proposed rule also became more similar.

“They are distorting the information policy makers receive,” says Bombardini. Nonprofits are often seen as speaking up for citizens or the environment, so “if the message from the nonprofit and the firm are the same, policy makers might weight that position more heavily.” To counteract that distortion, the researchers suggest that nonprofits commenting on a rule be required to disclose any donations from corporations potentially affected by that rule.