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Focus on Political Spending by Businesses

A growing number of American businesses have reassessed their political spending following last week’s attempt by lawmakers to overturn election results and the attack on the Capitol incited by President Trump. Some of them will no longer give to the 147 legislators who voted against certifying the results, and others are pausing their political spending more broadly. 

It’s an important opportunity to revisit the idea of corporate political spending altogether. Should companies be giving money to politicians at all? And if they do so, what are the principles they should follow? For answers, I spoke with Bruce Freed, president and co-founder of the Center for Political Accountability. Through that non-partisan nonprofit, Freed has for almost two decades been pushing for greater transparency and internal oversight of corporate political spending. Here are excerpts from our conversation, edited for space and clarity:

What do you make of the announcements by companies that they’re pausing their political spending?

The question is, is it for the moment, or does it really signify a real change in behavior? We have to see what they do in six months. What do they do next year? Next year is a seminal year because the House and one-third of the Senate are up again [for reelection.] 2022 is a year where you’re going to have many state legislatures, you’re going to have governorships and attorney generals positions up for election. So we have to see, is this just a reaction of the moment? Does it mean a fundamental change?

Should companies be spending on politicians and political groups at all?

They have to really at this point weigh the risks of that—because the risks have gone up exponentially. Their bottom line risks, their reputational risks—that’s what drives companies. You do have a greater emphasis placed today by companies on their position in society and how they’re viewed. And I do think that there are some executives and maybe even some trade association executives that have been so horrified by what they see that they’re beginning to ask some fundamental questions about what their role should be in the political process. What is their stake? What are their responsibilities and obligations? Some of them will be looking at that much more closely and going beyond giving the contribution to get access. What are the consequences of that beyond just the access? Do you really want the access to that? 

By virtue of their size and by virtue of their importance in the economy, companies will be listened to when legislation is being considered. And when regulations are being considered, they’re going to have the ear of regulators. They’re going to have the ear of members of Congress and their staff. They have the ear of the administration, even if they don’t have political spending. IBM has not engaged in political spending. And you know what? It hasn’t hurt IBM. 

If I’m evaluating political spending at my company, or I’m starting from scratch, what are the first principles you would suggest?

The first question you ask is should we engage in spending? If they decide to, they really need to look at their ethical considerations. That’s important today because people are looking at companies much more carefully. And also because of the power of companies today—with the demise of unions, you really don’t have the type of checks you had in the past. So that places a greater responsibility on them. Companies talk increasingly about societal obligations and responsibilities, and that also includes the environment.

If I’m the CEO, I have a responsibility for the success of my company. And if there is a politician or a political group that is pursuing legislation favorable to my business success—how deep in their voting record do you expect me to go to review their views on every question rather than supporting them for this area that’s clearly good for the success of my company?

That question came up years ago when we were dealing with Merck. Merck back in 2004 contributed to a state judicial race in Mississippi. They gave to a candidate who supported tort reform and they got the advice from local counsel. The candidate who they gave to was white, and was running against an incumbent state Supreme Court justice who was Black. The candidate they gave to was running ads where he was pictured with white people around him, with the tagline ‘He’s one of us.’ That hit the media. And Merck made a decision after that not to give to state judicial races. 

Companies really have to take a look at the broader consequences—because if they give to a candidate for one reason, they can’t disaggregate the other things that the candidate is associated with. Essentially you’re giving to a package and you’re associated with that package.

For more, you can read “A Board Member’s Guide to Political Spending,” which Freed coauthored and the “CPA-Wharton Zicklin Model Code of Conduct for Corporate Political Spending” from Oct. 2020. You can also look up the political spending disclosed by specific companies. 

What Else You Need to Know

Women accounted for all of the net job losses in December. US employers shed 140,000 jobs, and women lost 156,000 while men had a net gain of 16,000 jobs, according to the National Women’s Law Center. And women continue to drop out of the labor force entirely, with nearly 2.1 million fewer employed or looking for jobs in December than in February. 

  • Women represented 91% of the 45,000 government jobs lost last month, while representing 58% of the government workforce overall, according to the NWLC analysis.
  • Just 39% of Americans said they could cover an unexpected expense of $1,000 out of their savings, according to a Bankrate survey. The rest would have to cut spending elsewhere in their budget, borrow money to cover it, or float the expense on a credit card and pay it off over time. 

All international airline passengers will need to show negative Covid test results to be allowed entry to the US. Following the discovery of a new Covid variant recently, passengers from the UK were required to submit negative test results to enter the US. Now a new Centers for Disease Control and Prevention order extends that to everyone, including US citizens, entering the country from abroad. The US currently prohibits entry by anyone traveling from countries including the UK, Brazil, and China, who is not a citizen or permanent resident.

US carbon emissions last year were the lowest since the 1980s. With a pandemic-related dropoff in plane and auto travel, greenhouse gas emissions from transportation fell 15%. They’re the biggest contributor to emissions in the US, and are expected to surge again as the pandemic subsides.

  • More companies divulged their environmental impact last year. About 20% of businesses that were asked by investors to disclose their impact on forests, climate change and water security complied, up from 15%.

Coda

Remote work has created a boom in whistle-blowing. The Securities and Exchange Commission received over 30% more tips about white-collar crime in the 12 months ended Sept. 30 than the previous period. Experts say that’s because remote workers feel more emboldened to speak up when outside of the view of colleagues, and because it’s easier to discreetly collect evidence—such as recording phone calls—when you’re at home. 

People don’t want to perform CPR since the outbreak started. Fear of the virus has led to a significant decline in CPR training and willingness of bystanders to perform CPR on a stranger, according to a recent survey. The American Red Cross says giving chest compressions even without rescue breaths can still save the lives of heart attack victims.

Comfortable shoes of questionable fashion value turn out to be a good business during the pandemic. Crocs said it expected record sales for 2020, and up to 25% growth in 2021. The company makes garish rubber sandals, including a limited-edition design released in July that looks and smells like a bucket of Kentucky Fried Chicken.

The handbook for this new era of business doesn’t exist. We’re all drafting our own as we go along—and now we’d like to start doing so together. You can sign up here to receive this briefing by email. Have a great week!