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Capitol Riot Emboldens Companies to Embrace Civic Agenda

Jan. 15, 2021, 6:56 PM

Pressure on major U.S. companies to respond to a Trump-incited riot at the U.S. Capitol is spotlighting social responsibility and political spending calculations that are emerging as a priority in executive offices and boardrooms.

Goldman Sachs Group Inc., Inc., Marriott International Inc., and Comcast Corp. are among major corporations choosing to pull political donations to Republicans who objected to the results of the 2020 presidential election. Charles Schwab Corp., Hallmark Cards Inc., and other corporations also made politically charged maneuvers, such as attempting to claw back contributions or closing their political action committees, following the Jan. 6 attack that killed five people.

Sticking out their corporate necks in political matters—regardless of top executives’ party affiliations—invites scorn and backlash, as well as praise and support, all amplified by social media. Publicly traded corporations, given their exposure to disclosure laws and shareholder accountability, are by nature cautious in such matters.

But the disquieting events in Washington, D.C., have forced boards and executives to weigh the financial and reputational impact of their actions —or inaction.

Recent corporate moves following the events on Capitol Hill reflect increasingly frequent boardroom conversations around reputational risks tied to environmental, social justice, and governance (ESG) issues. For other companies that have sat on the sidelines, the latest wave of corporate actions could be a reminder to strategize on ESG issues that are brewing or expected under the Biden administration.

“Corporations now more than ever are defining who they are,” said Davia Temin, CEO of New York-based management consultancy Temin & Co. “And they are willing to take potential fallout to make these decisions. In a moment of national exigency, that’s when the decisions become clearer.”

Risk Calculus

Companies that have political action committees or contribute heavily to candidates will have to reassess their strategies, mindful that status quo or inaction could speak just as loudly as any change, attorneys and consultants say.

“Really, there isn’t a no-risk way to handle it,” said Michelle Lowry, a Drexel University business school professor who researches corporate governance. “Now companies are in this position where they’re almost making a statement either way. If they keep giving, that’s a pretty stark statement. And there are risks if you choose to cut ties as well.”

Companies are mostly focused on reputational risk that has potential business consequences, said Michael Callahan, a Stanford Law School professor and former LinkedIn Corp. general counsel.

The current political climate, lingering social justice issues, and interest groups’ pressure may drive them to think more broadly and boldly about what that reputational risk entails.

Such ESG issues are an entirely new area of reputation risk management, wrote Nir Kossovsky and Denise Williamee, CEO and vice president of corporate services of management firm Steel City Re, in a recent analysis for Bloomberg Law.

“Reputation risk management, however, has too great an upside on protecting presumptive ESG value, and too great a downside, to set aside,” they wrote.

The recent tumultuous events are just the latest reminders for companies that they can take a prominent role in U.S. political discourse, said Temin.

“There are some things that exceed reputational risk,” she said. “Every board is different: they act differently and they assess risk differently. But there’s now the added weight of their civic responsibility.”

She pointed to Merck & Co. CEO Kenneth Frazier’s decision—soon followed by other CEOs—to leave President Donald Trump’s manufacturing council in 2017 after the president blamed violence on “both sides” following an attack on protesters in Charlottesville, Va.

To be sure, companies are aware they they’re often flying blind on the repercussions of such decisions, given varying political differences among employees, suppliers, shareholders, and consumers. “It’s very hard right now to estimate how many people you would be alienating if you cut off certain donations,” Lowry said. “It’s tough to know what the hit is going to be.”

Taking Pause

With risks come opportunities for companies, corporate advisers said.

Boards at companies that stop political spending can use the hiatus to put in place a strategy about what issues their businesses should weigh in on and why, Callahan said.

“If I was advising a board and I didn’t think we had a good process for analyzing these areas of political activity, I think taking a pause would be a good idea,” he said.

Companies also could show they take corporate social responsibility seriously by halting political donations, Temin said. Boardrooms are evolving on this matter, she said.

“There’s more emphasis on corporate social responsibility,” Temin said. “And the risk-reward algorithm changes in these situations.”

Putting in long-term strategy could prove useful as the government considers changes to political spending disclosures in the coming years.

Sen. Sherrod Brown (D-Ohio), the incoming Senate Banking Committee chairman, recently told reporters he expects the Securities and Exchange Commission to work on a variety of ESG issues, including political spending disclosure rules.

The SEC has been under pressure for years to act, but Congress has used legislation that funds the commission to bar the agency from moving forward on rulemaking. A 2011 petition to require companies to disclose their political spending has drawn more than 1.2 million comments.

Brown praised the decisions by companies to stop political contributions.

“I think that tells you where much of corporate America, the way they’re thinking, where they’re going, and I want an SEC that will lead them maybe a little more rapidly in that direction,” he said.

To contact the reporters on this story: Jacob Rund in Washington at; Andrew Ramonas in Washington at

To contact the editor responsible for this story: Roger Yu at