The Reconstruction | January 8, 2022

On anniversary of Capitol attack, stakeholders hold corporations accountable for democracy

Amy Cortese
ImpactAlpha Editor

Amy Cortese

ImpactAlpha, Jan. 6 – Add political stability to the list of systemic risks that keep investors up at night. 

‘Political risk’ has historically been a factor in developing and transitioning countries with autocratic governments and endemic corruption. But at least since a mob of supporters of Donald Trump stormed the Capitol to obstruct the peaceful transfer of power, the threat to the U.S. democratic system has become a material risk for corporations.

The anniversary of the January 6 attack on the Capitol is shining a light on how corporations are managing that risk. And the effort to hold corporations accountable to their commitment to fair elections and voting rights is becoming a test for an emergent “multi-movement engine” of shareholders and other stakeholders.

Majority Action, the nonprofit shareholder advocacy group, is rallying such a coalition to push corporations for transparency and disclosure of their political activities, which are often in conflict with their stated values. The group is readying shareholder resolutions for this spring’s annual general meetings at Exelon, Charter Communications, Eli Lilly and GEO Group, among others, demanding an accounting for political spending and lobbying.

The Center for Political Accountability is filing dozens more political disclosure resolutions at companies including HCA Healthcare, Las Vegas Sands, ExxonMobil, Cottera Energy and DISH Network, and asking them to adopt a code of conduct to govern their political participation. 

The Jan. 6 attack clarified how corporate political contributions can “fuel voter suppression, perpetuate racial injustice and encourage political violence,” said Alphonso Mayfield of the Service Employees International Union, which is working with Majority Action. “It also shows how corporations can weaponize the dollars of hardworking Americans against their financial and economic interests.”

“We’re using the January 6 anniversary to put corporations like Home Depot, Wells Fargo and Chevron on notice that we will not let them threaten the long term savings and investments of workers and endanger democracy,” he added. 

Political contributions

There was a time when that argument was broadly embraced. In the immediate aftermath of the Jan. 6 attack, more than a hundred major corporations voiced concern and pledged to pause contributions to politicians and groups that supported the insurrection, including the 147 members of Congress who objected to the certification of President Joe Biden’s election victory.

Yet corporations are back to giving. Those election objectors, dubbed by opponents “the Sedition Caucus,” received more than $8 million in corporate contributions since last Jan. 6, according to a tally by Accountable.US. Their top corporate patrons: the American Bankers Association, Boeing, Raytheon, Lockheed Martin and General Dynamics. 

That such highly regulated industries would spread the largesse is not surprising. More so are the companies that pledged to halt contributions to insurrection supporters but have resumed giving, either directly or indirectly, to the 147 elected officials. 

Eli Lilly, PriceWaterhouseCoopers, Exelon and American Airlines are among the 58 companies that have overcome any qualms they might have had, feigned or real, to resume direct contributions to legislators that opposed the workings of democracy, according to Judd Legum at Popular Information, who is tracking the political contributions. 

Others, such as AT&T, Comcast, Dell, NextEra and Google, have skirted their promises by donating to organizations that support those objectors such as the National Republican Campaign Committee (NRCC) and the National Republican Senatorial Committee (NRSC).  

Only 79 companies upheld their no-giving pledges, including Allstate, Nike, Target and Walgreens. 

The tally of corporate enablers at the federal level doesn’t include giving at the state level, including the 19 states that have passed voter restriction and redistricting laws that disproportionately impact voters of color. ExxonMobil, for example, donated $61,000 to federal election deniers, but even more to Gov. Greg Abbott, who signed Texas’s new law restricting how and when voters can cast their ballots. 

Systemic risk

Democracy drives economic growth and public health. Shareholders are starting to see that political spending can erode democracy, which is the foundation of long-term value creation, says Eli Kasargod-Staub of Majority Action.

That the threat to fair elections and the rule of law is far from over “causes a level of risk for investors that go above and beyond the need for transparency,” he says. 

A separate effort led by advocacy group The Shareholder Commons, has introduced shareholder resolutions to ask Fox and other media companies to enshrine as their corporate purpose the provision of an “accurate understanding of current events through the exercise of journalistic integrity.” Sensationalized and incorrect information undermines public understanding of critical issues such as climate change, public health and democratic processes, says Shareholder Commons’ Sara Murphy – and thus threatens the economy and diversified portfolios.

Political spending resolutions are gaining traction with investors: such proposals garnered an average 48% vote last year, up from 41% in 2019. Majority Action and its partners filed 34 policy influence proposals last season, with seven receiving majority votes. 

Holding the key to victories this year are the largest asset managers, starting with BlackRock, Vanguard and Fidelity, which together control 25% of shareholder votes at companies represented in the S&P 500. Had the largest asset managers supported last year’s resolutions, an additional 15 proposals could have passed, including at Exxon, Home Depot, Chevron and JP Morgan Chase, according to a recent analysis by Majority Action. 

Instead, BlackRock, Fidelity, State Street, Vanguard, and T. Rowe Price voted against or abstained on more than 70% of lobbying disclosure proposals in 2021, according to Majority Action. In contrast, asset managers Amundi, LGIM, PIMCO and UBS supported all of the lobbying disclosure proposals. 

“The voting behavior of the largest asset managers, particularly BlackRock, Vanguard, State Street and Fidelity, is on balance continuing to shield corporate boards from accountability,” says Kasargod-Staub.

Investors are also increasingly willing to hold individual directors with oversight responsibility accountable by voting against them. Most directors are re-elected with high levels of support. But even a 20% disapproval rating by shareholders can doom them. 

“There’s a broader recognition among institutional investors that voting against directors has become more important,” says Dieter Waizenegger of SOC Investment Group. “It’s no longer so much seen as a vote of last resort, but as an important vote to hold directors accountable.”

Multi-movement engine

Shareholder pressure alone is not enough to hold corporations accountable. Just as corporate commitments to protecting democracy have faded since Jan. 6, so too have commitments to racial justice since the murder of George Floyd and the protests of 2020. 

Majority Action and its coalition partners are pushing companies to undertake comprehensive racial equity audits that can uncover where political giving as well as other corporate policies and activities can harm communities of color.  Racial justice activists ranging from the Rev. William Barber II to the NAACP’s Derrick Johnson last year teamed with Majority Action to publish an open letter to asset managers. 

This week, Black leaders including Rahna Epting of MoveOn and Dorian Warren of Community Change released a video, “Behind the Woke-Wash,” calling out the complicity of corporations and asset managers like BlackRock in the insurrection and suppression of civil rights. 

Said Color Of Change’s Rashad Robinson in the video, “The capitol insurrection doesn’t happen without a wink and a nod from Corporate America.”