Dangerous Terrain
With attention focused on the money that SuperPACs are spending to influence election results, companies are likely overlooking their own risks in the new campaign-finance system.
By Bruce F. Freed and Karl J. Sandstrom
Bruce F. Freed is president and co-founder of the Center for Political Accountability and co-author of The Conference Board’s Handbook on Corporate Political Activity. Karl J. Sandstrom is counsel of the Center for Political Accountability and of counsel to the political-law practice of the Washington, D.C. office of Perkins Coie. They both serve on the advisory committee of The Conference Board Committee on Corporate Political Spending.
That dreaded season is here, sooner than ever before. Thirty-second political TV spots are beginning to crowd out ads for cars and banks, glossy mailers are infiltrating mailboxes, and robocalls are dropping into voice-mail inboxes. Crossroads GPS and Priorities USA, representatives of a new breed of well-funded, well-connected political players, have already been on the air across the country for two months—their slashing TV ads launched fully a year before the upcoming election.
Over the next eleven months, pundits will lament the profusion and tenor of the ads, along with the astonishing sums of money funding them. And we’ll hear plenty of commentary and speculation about the sources of that money. Candidates will trumpet the number of small donors to their campaigns, but big funding this time around—as a result of a controversial Supreme Court decision—will come by way of third-party advocacy organizations and from corporate, trade-association, and union treasuries. The source of much of that money will be hidden from the public, offering a measure of anonymity for companies looking to influence elections.
This outsourcing of campaign spending is the single biggest change in how corporations must handle their political engagement, and if there were ever a time for businesses to be extra cautious in their political spending, now is that time.
The press, shareholders, and the public will all be closely watching corporate political spending; growing public cynicism about government and politics will cast corporate political spending in the worst light. Executives need to assume that their companies’ political activity will be subject to public scrutiny and debate. Social media, along with heightened shareholder and public concern, make it easier than ever for advocates to mount a noisy protest or boycott. Remember the mess in which Target found itself after giving $150,000 to a pro-business political group that also happened to oppose gay marriage. Or the criticism that Koch Industries has fended off after journalists exposed the extent of the company’s free-market political activism and use of shadowy conduits.
Of course, it’d be easy to counsel that corporations simply stop making political expenditures. But that’s not only unlikely—more on Howard Schultz’s no-contributions pledge later—but naïve. Most companies will continue to play the game because their competitors are staying in.
So the issue is how to manage spending. And the playing field looks very different this election cycle, in ways that carry new risks for companies determined to engage in politics. The risks go beyond a company’s reputation. They also involve exposure to political shakedowns and the danger that the money will be used for purposes that conflict with a company’s values and objectives.
