Red Corporation, Blue Corporation? Corporate political speech becomes a board issue
After the January 6 attack on the U.S. Capitol, many companies announced that they would halt political contributions, either permanently or for a defined period. Some discontinuations involved a particular political party, some individual legislators and some were complete stops on all contributions.
In the age of “cancel culture,” when social media can circulate calls for boycotts to millions of people in minutes, some companies have begun to act quickly, with either their words or their wallets, to distance themselves from political controversy But there are other companies that have leaned in to a variety of public political positions. This raises the question: Are some companies becoming recognized as “blue” (Democrat-supporting) or “red” (Republican-supporting), or even “purple”? And are such associations good for a company, its shareholders and its stakeholders?
In March, for example, Coca-Cola and Delta Air Lines lobbied Georgia legislators and released statements against the state’s Republican-backed voting law.
“Corporations will invite serious consequences if they become a vehicle for far-left mobs to hijack our country from outside the constitutional order,” said Sen. Mitch McConnell, R-Ky. “Businesses must not use economic blackmail to spread disinformation and push bad ideas that citizens reject at the ballot box.”
A spokesperson from Delta declined to comment on McConnell’s statements and referred to CEO Ed Bastian’s statement against the legislation.
Most board members and governance experts advise against overt political stances for their companies. As Capri Holdings Limited, board member and former secretary of labor, Ann Korologos says, corporations should not be dividing the country any more than it already is.
“Companies having a political identity is not a good idea,” she says. “Corporate America is set to a different standard than Congress. There is no political persuasion. Corporations have neutral territory to protect, which is the larger community and its stakeholders.”
Crisis communications consultant Davia Temin says she often encourages her client companies to take apolitical stands.
During political or social upheaval, sometimes “corporations have to become the adults in the room,” Temin says. Corporations need to maintain some neutrality, “but it’s the difference between making sure that as a corporation you have a purpose and if you’re true to purpose.”
However, she doesn’t usually advise being outwardly political. She says there is a difference between having a “political point of view” and speaking out about a “behavior,” like systemic racism.
“I still think strict political lines are not the way to go,” Temin says.
She also doesn’t support the legal idea behind the Supreme Court’s landmark 2010 decision in Citizens United v. FEC, which said the free speech clause of the First Amendment prohibits the government from restricting corporations’ independent expenditures for political communications. The decision has been popularly associated with the notion of “corporate personhood.”
“Corporations are not people,” Temin says. “They are conglomerations of people, and they need big tents for their clients, employees and other stakeholders.
“That is different than having a sole political point of view.”
Director Lisa Quateman doesn’t think the Citizens United decision is as definitive as some people contend.
“A divided court decided the case,” says Quateman, who serves on the board of Western Asset Mortgage Capital Corporation as well as two private company boards. “There were several additional decisions, and there were dissents as well.
“Companies that want to rely on Citizens United in order to make political speech should consider the nuances” of the intent of the decision.
Not to mention that “just because you can do something doesn’t mean you should do something,” she adds.
Corporations have an opportunity in this moment to encourage cooperation and collaboration rather than further division in the country by taking one side or another politically, Quateman says.
She points to the Business Roundtable’s corporate purpose statement. If a company comes out politically with little consideration for both sides of the aisle, stakeholders may feel unsupported or hindered in expressing their own views.
Quateman adds that the board should support transparency in the company’s political stands and contributions, but says political affiliation hasn’t come up in her board meetings.
Korologos says that labeling a corporation politically based on its leadership is short-sighted.
“Does that mean if you change CEO, you change identity?” she asks.
Most companies have Democrats and Republicans in their leadership, Temin says, and most of them — companies and leadership — support both parties financially through political action committees. “But yes, they would favor people who favor their industry or company.”
It is those contributions that many people use to gauge a company’s political leaning or identity. For example, progressiveshopper.com uses a bar graph to show percentages of corporate donations by party. The left-leaning website urges consumers to patronize companies that support Democratic causes and candidates. However, the data could just as easily be used by someone who would rather buy from Republican supporters.
For example, the site identifies home furnishings store Ikea as 92% Democrat and online shopping company Overstock as 7% Democrat.
“There’s a raging debate in business and legal communities” around how involved in politics corporations should be, says corporate lawyer Ken Najder. But he doesn’t see political activity as a legal risk to directors.
Even if companies are criticized for political statements or donations, Najder says, directors who acted in good faith would be protected under the business judgment rule. Yet in such cases, shareholders might file a lawsuit, which could damage the company.
“I think it’s more about reputational risk,” he says. “Legal risk is secondary.”
Korologos says she’s concerned that judgments from websites or social media can label a company too quickly for the organization to examine any controversy before being boycotted or “canceled.”
It is the best policy for a corporation to have no political identity, says Quateman, but identifying the corporation’s purpose is a part of the board’s role. That can help the organization “walk the talk.” Temin agrees.
“Companies need to identify their moral center and ethical base,” Temin says. “You can see places that have a purpose and their actions are antithetical to that purpose. That is when good governance needs to come in and call that out.”
And, in the end, having a purpose is far different and can be more inclusive than any political stand.
“When you start to plunge a company into a political identity, you’ll have the problem we all have,” Korologos says. “People may feel as though the beliefs they subscribe to are deemed not worthy or, conversely, that their beliefs are the only ones people are going to listen to.
“It’s just not good.”