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If you think 2021 was a tough year for corporate political activity, 2022 may be even more challenging.
That’s according to a recent survey from The Conference Board of government relations executives and managers of political action committees. In the survey,  87% of respondents said they expect 2022 to be at least as challenging as 2021, and 42% anticipate that it may actually be worse. In the aftermath of the January 6, 2021 attack on the Capitol, many companies and CEOs spoke out, signed public statements and determined to pause or discontinue some or all political donations. The heated political climate also heightened sensitivity to any dissonance or conflict between those public statements or other publicly announced core company values and the company’s political contributions, further complicating the political environment for companies and executives. In the survey, respondents cited a number of factors that contributed to the difficult environment for corporate political activity in 2021: in particular, 77% cited the frequent emergence of new social and political issues on which companies faced pressure to take a stance. According to the Executive Director of The Conference Board ESG Center, “With the 2022 mid-term election year bringing sustained scrutiny, companies that engage in political activity need to make the affirmative case for why they do so….They should focus on engaging and educating both internal and external stakeholders on how their activities serve both corporate and societal purposes.”

Shortly after January 6, 2021, a number of companies announced that their corporate PACs had suspended—temporarily or permanently—their contributions to one or both political parties or to lawmakers who objected to certification of the presidential election.  To find out how widely this approach was taken, The Conference Board conducted a survey at that time. It turned out that those announcements reflected only a slice of the actions taken by corporate PACs.  (Remember that a “corporate PAC” is not really funded by the corporation; according to The Conference Board, although “corporate PACs are sponsored and administered by companies, they are funded by employees and their decisions about contributions are generally made by a separate PAC board drawn from employee contributors.”)

In the survey, conducted between January 25 and February 2, 2021, The Conference Board received responses from 84 large companies, primarily from senior members of management.  

The survey found that, among respondents:

  • About 55% suspended their PAC contributions, split almost evenly between those that stopped contributions to all members of Congress (28%) and those that stopped contributions only to lawmakers who voted against election certification (27%)—and only 3% of those were permanent decisions; and 45% took no action, including some that do not have a PAC, some that were still undecided about what action to take and some (19%) that had decided against any response.
  • Only 28% announced the actions they were taking regarding PAC contributions both internally and externally, while 25% announced actions only internally; almost half (46%) made no announcement.
  • Almost half (46%) of companies took no action beyond restricting PAC contributions, while 32% issued a public statement condemning the violence at the Capitol; only 9% issued a public statement against the effort to block certification.
  • Only a de minimis percentage stopped doing business with trade associations or stopped doing business with companies associated with the actions at the Capitol.
  • About 87% reported that they had not taken similar action regarding PAC contributions in the past five years.
  • Why did these PACs say they took these actions? Almost 52% said the actions were driven by senior management’s views, compared to 44% by the CEO’s views and only 32% by PAC contributors’ views; 46% indicated as a reason that a “stable democracy is necessary for a stable business environment,” compared to 25% indicating democracy alone as a reason; and almost 45% cited concerns about company reputation, followed by concerns about company constituencies, such as employees (34%), customers (21%) and investors (17%).
  • With respect to those intending to resume contributions in the future, over 50% were unsure or did not indicate what steps they were planning to take prior to resuming contributions (indicating “other”); 37% said that they needed to gather more information on potential recipients; 21% planned to revise the criteria for contributions “to address supporting democratic processes;” 16% intended to change the approval process; and 8% planned to revise the criteria to address supporting violence.

(See this PubCo post.)

This new survey was conducted by The Conference Board together with the National Association of Business Political Action Committees. The survey respondents included 120 government relations executives and PAC managers, primarily from Fortune 500 companies. 

With regard to the environment for corporate political activity, survey respondents said that unexpected high-profile issues as well as pressure from employees and management made 2021 difficult. When asked to identify factors contributing to the challenging environment, respondents most often (77%) cited pressure on the company to speak out on new hot-button social and political issues. Respondents also cited employee attention (69%); media attention (66%); actions by policymakers that these companies had previously supported (62%); and board/senior management attention (57%). Interestingly, pressure from investors (32%) and activists (27%) was much less of a factor.

As noted above, 42% of respondents anticipated that 2022 (when mid-term elections will be held) will be even more challenging than 2021—with 31% believing that it will be somewhat more challenging and 11% anticipating that it will be significantly more challenging. Almost half of respondents (45%) expect 2022 to be just as challenging as 2021.

With regard to the resumption of PAC activities for companies that paused contributions in 2021, 24% have not resumed contributions, 31% resumed contributions in the second quarter, 19% resumed in each of the first and third quarters and 7% resumed in the fourth quarter. But was it back to the same-old, same-old? Not according to the survey. Rather, “most PACs changed donation criteria and emphasized employee education” in 2021. The survey found that 51% changed criteria for PAC contributions to address issues arising from January 6th and 48% “engaged with employees to educate them on the PAC, why it’s necessary, how it operates.” In addition, 30% percent modified their contribution criteria to address social and environmental issues.

Most respondents (60%) indicated that they do not intend to make further PAC modifications in 2022; only 15% did expect to make further changes and 25% were unsure. Where changes were expected, 44% said that they planned further employee engagement to provide education regarding the PAC.

With regard to changes to political activities outside of PACs, companies that implemented changes to political activities outside of PACs tended to focus on transparency around corporate political donations and lobbying activity (45%).  In addition, many companies made an effort to be more vigilant about their external affiliations, improving their “[v]etting of/support for/membership in” industry trade associations (38%) and in other non-industry organizations or business associations (36%). For 2022, 47% responded that they were not planning additional changes to their corporate political activity outside of PACs, and 40% were unsure.

A 2020 report from the CPA, Conflicted Consequences, looked at corporate political spending through non-profit, tax-exempt “527” organizations, such as state party leadership and legislative campaign committees and the governors and attorneys general associations. These organizations accept “contributions from a variety of sources and then spend it to advance a broad political agenda.” Once a company has contributed to a 527 group, the corporate and other funds are pooled and then channeled to state and local PACs and candidates, to “dark money” groups and to other national 527 groups. As a result, companies no longer control the use of their funds.  The groups determine how the money is used, what the message will be and which candidates or issues to support, regardless of the contributor’s own goals and intentions.

Over the prior 10 years, the CPA found that hundreds of millions of dollars had been poured into six large partisan groups by publicly held companies and their trade associations, destined to help elect state officials who drove “new agendas that have transformed state and national policy.” What’s more, a number of the intermediate organizations that are financed through 527s “often direct that money in ways that belie companies’ stated commitments to environmental sustainability, racial justice, and the dignity and safety of workers.” The report also highlighted companies that voiced their concern for racial injustice and support of diversity, but, through their donations, ended up supporting legislators who were instrumental in implementing racial gerrymandering. These and other conflicts were exposed in various media reports.  As a result, the CPA advised, companies and their boards need to be aware of an “increasing risk…from their political spending. When corporations take a public stand on such issues as racial injustice or climate change, the money trail… can lead to their boardroom door. It can reflect a conflict with a company’s core values and positions” and lead to sometimes humiliating, and perhaps even toxic, unintended consequences. (See this PubCo post.)

With regard to further efforts at educating stakeholder groups about their corporate political activities, for 2022, respondents said that they planned to increase education and engagement efforts primarily among internal stakeholders, including employees (84%), senior management (76%) and board members (48%). Less emphasis was placed on engagement with external stakeholders, notably investors (15%), trade and business associations (14%) and media/general public (8%).

Posted by Cydney Posner

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