It’s War: The New Dilemma For Corporations And Social Issues
After you read the article by Richard Levick below, we hope you’ll also read two articles we wrote for the National Law Review on a companion subject:
- Political Action Committee & Personal Political Contributions Become the Next Reputational Challenge for Law Firms & Their Clients
- Political Action Committee & Personal Political Contributions Revisited – Only of Passing Interest?
And now, from our good friend and colleague, Richard Levick, writing for Chief Executive…
The gauntlet has been thrown.
How do companies maximize shareholder value while minimizing brand risk at a time when a generation demands that brands stand for something while at the same time GOP leaders just announced that “woke” companies are the issue they can win on in 2022. How do we lead?
Brand neutrality is dead. Since the murder of George Floyd and the insurrection of January 6th, everything is different. There is “no middle ground” as Merck CEO Ken Frazier and former American Express CEO Ken Chenault have forcefully articulated. Companies may not want to be pulled into politics because it’s not a winning proposition – but they also cannot avoid it.
Like Missourians caught between the Union and the Irregulars during the Civil War, we’ve become ensnared by the battle.
The Arc of History
In 2010, after Citizens United, we wrote that the unintended consequences of the Supreme Court’s split decision to find First Amendment rights in corporations also meant that companies would have First Amendment responsibilities. Going forward, companies would be judged not just for their brands but for their political activity. The Court majority’s assumption that independent spending would be transparent first proved to be incorrect, but is lately becoming a transparency albatross for companies. Public Citizen just identified the corporations that collectively spent $50 million funding candidates supporting voter restrictions. Popular Information– with their two-person staff – has been doing such a remarkable job tracing the issue of corporate PAC funding since before January 6th that the traditional media follows them. For the past two years, the Center for Political Accountability has been making formerly opaque 527 contributions public. If you fund them, you now own the consequences.
Political contributions have become the new supply chain liability. But so is your DEI, environmental footprint, labor practices and more. Like it or not, corporations may not be the new “woke parallel government” but they are judged by the company they keep and the things they do outside of what they sell.
Last winter, when the federal government failed to act to prevent the growing Covid crisis from devastating America, we wrote that crisis abhors a vacuum and that if the federal government would not act at the start of a national crisis then others would. We saw the NBA, state governors and pharmaceutical companies, to name a few, fill the void like so many boats at Dunkirk. While the Covid infection invasion is the most remarkable example, it comes after more than a quarter-century of a largely ineffective federal government. Constituents look to other venues to fill the abyss. Now, it is common practice for Americans to look to the courts, state governments, athletes and corporations for leadership. Government cannot abandon its federal responsibilities — either out of laissez-faire faith or partisan gridlock – or others will fill the chasm.
Historically, power has conveyed back and forth between Washington and Wall Street. When the federal government doesn’t act, corporations do. And when the government acts, corporations go back to the business of business. In 1907, J.P. Morgan locked the leading bankers in the library of his Madison Avenue home; overnight they developed the Federal Reserve to get the American economy back on track. On the other hand, during FDR’s Administration, Assistant Attorney General for Antitrust, the soon-to-be-great Robert H. Jackson, remade antitrust law in 18 months. He would declare: “We cannot permit private corporations to be private governments. We must keep our economic system under the control of the people who live by and under it.”
Please be sure to read the rest of this article, which includes the ten steps you can take to minimize reputational damage, by clicking here.