More Clarity on Corporate Political Spending
I am giving a keynote presentation at the Public Affairs Council meeting next week. I am looking forward to talking about Corporate Engagement and this rising tidal wave of activism that has beset corporate America. Since the start of 2021, political spending has fast become the next full throttled reputation risk.
There has been a recent flutter of companies stopping or pausing political spending due to the violence in the Capitol on January 6th and the denial of election results by certain congressional leaders. As reported in the Washington Post, company after company terminated their political donations with 147 members of Congress who voted against certifying the results of the presidential election. The list of companies is impressive: Marriott, JP Morgan Chase, Twitter, Facebook, Goldman Sachs, the PGA and so on. The gap between politics and business grows narrower and no doubt riskier as the year gets started. There is no more room for ambiguity. You’re either on one side or the other.
A recent survey (January 25-February 2) by the Conference Board among 84 multiple-sized firm senior executives tells an even fuller story about companies halting political spending than is widely recognized. Here are some of the more interesting findings in this timely and illuminating report:
Nearly 90% of the survey respondents said that, in the past five years, their PACs had never taken similar action in broadly suspending or cancelling contributions. This speaks to the new acceptance of companies for standing up for their values when they think they’ve been violated, political risk or not.
Why did companies take PAC action: Multiple drivers played into company decisions to stop political donations to congressional representatives objecting to the final electoral certification. More than half --52%-- said senior management was a factor, 46% did so in the name of democracy and nearly 45% said that company reputation was a driving factor. Democracy leads to business certainty and reputation is a company’s most valuable competitive asset. Fewer senior executives surveyed cited employees (34%), customers (21%) and investors (17%).
Of those companies who did not take any action over their political contributions in response to January events, they said they are still discussing what they are going to do, they do not have a PAC or they have decided not to do anything at all. Surprisingly, only 18% said they were definitely not going to do anything. I expected that number to be much higher. Apparently companies are more willing than they used to be to take a stand.
Only 27% of firms informed their corporate board of directors at the time of the decision, just 11% consulted with their board and 7% informed the board beforehand. In only 4% of the cases did the corporation’s board of directors make the decision. This decision to halt or pause political spending was not debatable among senior executives although maybe it should be since it impacts reputation and political access. The Conference Board explains this low percentage consulting their boards this way: “Under Federal Law, corporations have the power not only to sponsor political action committees, but to exercise control over their PACs, but it is very common for corporate-sponsored PACs, which are funded by employee contributions, to have a separate governing entity that makes decisions about which candidates to support.”
What’s ahead? The report also found that nearly 4 in 10 (37%) plan to gather more information on potential recipients before resuming PAC contributions. About 21% plan to revise the criteria for contributions to address supporting democratic processes, and another 17% plan to adjust the process for approving contributions. Corporate officers have more work to do when it comes to developing criteria for donations, especially if they do not want to be caught in the cross hairs of politics like they just were. It is also possible that the issue will fade until the 2022 elections get underway. Fade but never to be forgotten.