Every year we look forward to the latest update from the Center for Political Accountability about corporate political contributions. They are one of our favorite sources for information about the use of shareholder money for campaign contributions and lobbying.
This year’s study title is blunt: Collision Course: The Risk Companies Face When Their Political Spending and Core Values Conflict And How to Address Them. In the forward, Constance Bagley writes:
Just in time for this fall’s mid-term elections, the Center for Political Accountability, a nonpartisan public policy organization dedicated to transparent and responsible corporate political spending, has issued important guidance for directors and executives navigating the “incendiary new political and digital media environment.” At a time when “many Americans have lost faith in core institutions—public and private alike,” there is, in the words of Norm Johnston, global chief digital officer for Mindshare, “nowhere [for
companies] to hide.”
Even if a firm would prefer to stay out of divisive politics and avoid hyper-charged social issues, increasingly employees, investors, and other stakeholders are demanding that business leaders speak up about social and political matters, ranging from climate change to gun control to LGBTQ rights, and ensure that the company’s actions advance the company’s espoused core values.
As a harbinger of things to come, consider the blowback when it was revealed that the Swiss pharmaceutical giant Novartis and the American telecommunications firm AT&T had paid hundreds of thousands of dollars to hire a consulting firm created by President Donald Trump’s personal lawyer Michael Cohen, who had no prior experience in healthcare or telecommunications.
Los Angeles Times business columnist Michael Hiltzik suggested that “heads should roll” at both companies, arguing that even though the payments were apparently “not technically illegal,” that “doesn’t mean they’re right or that they reflect responsible management of public corporations or of their resources.”
As the ultimate guardians of the firm’s financial, human, reputational, and political capital, corporate directors need to take an informed and proactive approach to winning in both the marketplace and the polls with integrity.
CPA correctly points out that multiple “watchdogs and the media are asking tough questions of companies whose substantial contributions have made possible policies that seem contrary to their professed core values and brand.”
Four decades ago, the Business Roundtable, an organization of the nation’s leading CEOs, provided the following guidance that’s even more timely and relevant for companies as they navigate today’s challenging political environment: “… [I]t is important that each corporation give attention to all the consequences of its activities…. [A corporation] must be a thoughtful institution which rises above the bottom line to consider the impact of its actions on all, from shareholders to the society at large. Its business activities must make social sense just as its social activities must make business sense.” [footnotes omitted]
We note that is is not just a matter of the company’s internal values, the priorities of its board and executives and the ones they want to instill in their employees. As Ms. Bagley notes, the values a company commits to are a part of its brand, prized by customers and investors. When a company does not put its money where its mouth is, it can lose the support of both.
This is underscored in the report’s introduction:
Despite overall economic gains nationwide, “many Americans have lost faith in core institutions—public and private alike. They don’t believe that government or business understand the challenges they face, or are willing or able to address them,” Thomas J. Donohue, president and CEO of the U.S. Chamber of Commerce, said in his annual State of American Business speech in January.
Similar warning signs emerge from public surveys. Trust in U.S. business declined from 58 percent to 48 percent between 2017 and 2018, according to the 2018 Edelman Trust Barometer, and in government, from 47 to 33 percent. A Public Affairs Council/ Morning Consult poll found that “Only 47% of Americans have some or a lot of trust that major companies will behave ethically,” and just 9 percent of Donald Trump voters and 8 percent of Hillary Clinton voters ranked CEOs of major companies highly for their honesty and ethical standards.
When a crisis of corporate reputation is developing, how can U.S. companies regain public trust? The question is especially relevant at a time of extreme political polarization, when companies are increasingly being pressed to take sides on hot-button issues that reach well beyond those immediately affecting their bottom lines.11 In many instances, they’re being urged to participate in America’s culture wars….“Companies respond to reputational risk aggressively. Activist shareholders, public pressure from customers amplified through social media, and business press all combine to move corporate leadership to engage on issues to protect brands,” an anonymous Wall Street executive told Axios.
It is clear that a sea change in civic and political engagement by corporations is underway. It is reflected by CEOs speaking out or resigning from presidential advisory councils following white supremacist violence in Charlottesville last summer and a presidential response perceived by some CEOs as inadequate. Companies have exerted economic leverage to take business away from states with governments perceived to be restricting LGBT rights, or to cut business ties with the National Rifle Association after the Parkland, Florida high school massacre in February. Companies have withdrawn advertising from such venues as Breitbart News, The O’Reilly Factor and The Ingraham Angle to avoid association with controversial opinions or alleged misconduct. Still others have issued
statements reaffirming support for the Paris climate accord following the United States’ withdrawal.
The report has a remarkable list of activist, consumer, and investor initiatives in response to political issues including guns, “religious rights” laws, diversity/civil rights, and climate change.