Corporations getting involved in politics is a fraught topic. Amit Ron and Abraham Singer have argued that corporations should generally avoid political advocacy due to its potential conflict with democratic principles. Due to their outsized financial resources and influence, Ron and Singer argue, corporate involvement in politics risks undermining the democratic basis of policymaking that is supposed to be the foundation of our political system.
While accepting this argument in the abstract, Ewan Kingston and Jennifer Allyn have raised two counterarguments, concluding that corporate political engagement is appropriate in the special case of advocacy in favor of decarbonization or other policies related to climate change. According to Kingston, the threat of climate change and the need for decarbonization are so pressing that they should override more general objections to political involvement. Allyn concurs and adds that the fact that many energy companies have previously advocated against emissions restrictions, including through trade associations of which they are members, means that advocacy on the other side of the issue now is appropriate.
I would like to raise an additional consideration, distinct from but broadly supportive of the Ron and Singer position. Corporations should hesitate to directly advocate for climate policies because of the risk that such advocacy could result in political backlash.
The very features of corporations that can give them the ability to influence the political process – ample financial resources, access to media and politicians, a well-known brand – can also engender suspicion from the public and from some political figures who may not see eye to eye with the corporation on controversial political topics. This can make corporate involvement in politics less effective or even counter-productive both to the cause itself and to the corporation’s own bottom line.
Anti-corporate sentiment has a long history in the United States and other countries. Populist movements on both the right and left have long seen corporate power as pursuing anti-democratic, elitist agendas that are out of touch with the concerns of ordinary people. The perception that large, powerful corporations are trying to impose their own political vision on the people has inspired political movements and campaigns from the founding era down to our own day.
Backlash can take many forms. Sometimes it is the corporation itself that will bear the brunt. As Michael Jordan famously said, “Republicans buy shoes too.” Companies ranging from Bud Light to Disney have faced informal boycotts or lost sales due to their involvement in social or political issues. Companies may also face the threat of retaliatory action by legislatures or other government bodies.
More broadly, as corporate involvement in an issue becomes politicized, the effects can rebound in unexpected ways. Consider, as an example, the use of Environmental, Social and Governance (ESG) criteria to guide investing and business decisions. Companies can receive ratings based on how well they comply with criteria concerning the environmental impact of their business, as well as other matters ranging from the diversity of their workforce to workplace safety and executive compensation.
On one level, ESG is just the latest iteration of longstanding concepts of socially responsible investing. However, the increasingly polarized nature of conversations around energy and climate change, along with the perception that ESG was being used to penalize companies and individuals for not aligning with particular social and political agendas, spurred a backlash to ESG. Many states soon began to introduce bills restricting the ability of companies to adopt ESG principles or penalizing them for going along with the framework. In Texas, the law now prohibits state and local governments from doing business with financial institutions that use ESG principles to screen potential investments.
As a result of this, many companies have reversed course on ESG, abandoning the label and downgrading the use of ESG-type criteria in their investment decision-making process. What began as a voluntary and laudable attempt by companies to reduce the environmental impacts of their investments became a political hot potato, and the perception that powerful corporate interests were trying to set climate policy without regard for the popular will undoubtedly played a role in this outcome.
Backlash to corporate political involvement is not limited to the right, of course. As Jennifer Allyn has noted, corporate energy interests have in the past donated millions of dollars in opposition to various forms of climate mitigation proposals. I would submit that this activity has helped stoke resentment among parts of the left, to the extent that they oppose climate solutions (such as carbon capture and storage) in part because they would be undertaken by these companies. But it would be a mistake to assume that a corporation could ‘balance out’ its previous political activity on one side of an issue by donating to the other side. More likely they would risk making enemies out of both sides of the political spectrum without appeasing either.
It is hard to draw hard and fast rules here, and even Ron and Singer acknowledge that it is not really possible for corporations to remain politically neutral. Companies can hardly be expected to stay silent when proposals directly affecting their business are made by legislators or regulators. But corporations need to approach any political involvement gingerly, lest they be perceived as trying to use their wealth and influence to subvert the democratic process.
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