Roundtable on the Responsibility of Business in a Constitutional Democracy

In an increasingly polarized environment, the relationship between business and democracy is under growing scrutiny. What role—if any—should companies play in supporting constitutional norms, civil discourse, and institutional trust?   

These are questions facing management teams across a wide range of functions, from public affairs, government relations, communications, legal, human resources, risk management, and finance. They are also relevant to investors and asset managers seeking to ensure their portfolio companies are well-prepared and business associations seeking to represent the collective interests of their members. 

For the past decade or so, my work has focused on how businesses manage their engagement in the public sphere – including their public communications, internal communications, lobbying and political spending. On which issues should they engage? What is material to their long-term strategies? What approaches are helpful, defensible and effective? Which are harmful or illegitimate? Through the Erb Institute’s Corporate Political Responsibility Taskforce at the University of Michigan from early 2021 to late 2024 – just after the murder of George Floyd and up through the 2024 election season, our members helped develop and pilot a framework that could be tailored to each firm’s commitments and strategy.  

I am especially excited now to launch the next chapter of our work at Erb Institute, with the launch of Third Side Strategies and The CPR Hub,  which will focus on companies’ internal decision-making processes, including how they develop their Responsible Engagement Policies and collaborate across functions. In particular, you may want to view our overview, Why CPR -- which recaps the argument below in an easily shareable format. 

Today, I would like to explore the evolving expectations surrounding corporate engagement in democratic life and consider the potential risks, responsibilities, and opportunities for business leaders navigating this complex terrain. My hope is that our conversation will help you refine your point of view and prepare you to take responsible action as conditions change.  

Business’ Interest in the Health of U.S. Constitutional Democracy 

In the current environment, making decisions about public affairs is a bit like walking a tightrope in an earthquake. As I have been hearing in various conversations at this Summit, companies and individuals face very high stakes in today’s political environment, with widely diverging views and extreme consequences for any misstep.  Here are some of the tensions and questions I have heard during the Summit so far: 

• Leaders are feeling tension between what is aligned for them as individuals and their responsibilities as leaders and fiduciaries in their organizations.
• Leaders can feel utterly stuck, confronting enormous risks of engaging and taking action in the public sphere, and risks of inaction or holding back. 
• They recognize they are in a prisoner’s dilemma faced when organizations consider action on their own, and confront challenges, critiques or counter-actions on their own.
• And, finally, throughout all of this, the question has been sitting with many of you: Who is looking at the larger systems we depend on? 
   

Given these tensions and the complexity of the topic, it may be helpful to set the stage a little with a few points of context: 

The challenges leaders are describing fit a long-term trend of declining trust in democratic institutions – in the US and around the world.   

• The EIU 2024 Democracy Index’ overall global score fell from 5.52 in 2006 to a historic low of 5.17 in 2024. 130 countries of the total 167 covered by the index either registered a decline in their score or made no improvement.
• In the US, Pew Research Center reports that trust in government has been in a long-term decline. Since peaking at 77 percent in 1964, it fell to an all-time low of 16 percent by 2023, recovering only slightly in 2024.  Long-term data from ANES shows that 83.5% of Americans believed the government was run for the “benefit of a few big interests” and Gallup reported that American’s confidence in institutions remains historically low at 28%, with 9% trusting Congress and 16% trusting big business. 7% of voters chose the winners of the last election and many Americans feel no candidate represents their views.
• According to Ipsos, 68% of Americans surveyed believe “the US needs a strong leader to take the country back from the rich and powerful.” Ipsos also found that 66% believe the economy is rigged to advantage the rich and powerful, while Pew found that 72% of Americans believe the role of money in politics is a top national problem, and a PRRI survey that showed 23% believe “American patriots may have to resort to violence in order to save our country, with an increase from 2021 across all political parties.  

These Trends have contributed to support for populist leaders to represent the “will of the people” AND CORRECT FOR UNRESPONSIVE GOVERNMENTS – BUT WHO TYPICALLY END UP WEAKENING INSTITUTIONS. 

• According to several analyses (see Rachel Kleinfeld’s, “How Does Business Fare under Populism?” and Layna Mosley’s “The Financial and Economic Dangers of Democratic Backsliding), populist leaders tend to redefine democracy as majoritarian rule, ignoring other democratic institutions which limit their ability to represent the “will of the people” – leading them to override the rule of law, the balance of powers and independent media or judiciary. This often leads to increased use of investigations, emergency declarations and the military, decreased oversight -- inviting cronyism, corruption or "pay-to-play” culture – and the politicization of information and statistics.  

These Shifts in the Political Environment have a material impact on individual companies and the overall business environment.  

• Weakening institutions and populist leadership tends to undermine investment and long-term value,  with Kleinfeld’s analysis showing a 1% drag on economic growth per year and Mosley finding a higher cost of capital in less democratic political systems. This is due to higher volatility and uncertainty, balkanized markets and regulations, lack of the trustworthy information needed for decisions, distorted competition, greater concerns over security, reduced gains from trade, and specific threats against individual businesses.
• Individual companies are seeing signs of political risk and stakeholder tensions. The Conference Board found that over 50% of Government Relations and Chief Legal Officers expect backlash over their public affairs activities, SHRM found that 87% of employers are concerned about managing divisive political beliefs, and Chief Executive reported a 36% drop in intent to increase capital spending due to policy uncertainty in early 2025. Unfortunately, only 45% of public corporations are well-prepared to handle political risk to their businesses in the US. 

yet business is also an active participant in democratic institutions – which can exacerbate these trends or help mitigate them 

• Businesses typically participate in the public sphere via multiple channels, including lobbying, political spending, employee communications, and public communications. Business currently accounts for 85% of all lobbying expenditures in the US, and its share has been growing since the 1970’s as business responded to increased regulation. Corporate treasuries are a major funding source for state elected offices – such as governors, state legislators, attorneys general and secretaries of state. Finally, there are signs of more partisan political communications in the workplace as legal restrictions have changed.
• Businesses have also helped uphold democratic institutions under pressure. Following Watergate, the business-led CED published a pamphlet calling for government transparency and campaign finance reform. In 2021, business leaders and associations including the Business Roundtable, the National Association of Manufacturers, and the US Chamber of Commerce called for recognizing election results and ensuring the peaceful transfer of power. In Brazil in 2021, hundreds of business leaders published a letter calling for elections to be respected. German business leaders recently formed an association to uphold democratic institutions. And business played a major role in South Africa’s transition to democracy without the civil war many expected. 

Taken together, these trends of a) weakening institutions leading to support for populism, b) the political risks and volatility populism imposes on business, and c) business’ participation in straining or strengthening democratic institutions, make our original question all the more urgent: What is business’ interest in upholding constitutional democracy?  

The good news is that this is not a partisan question. Indeed, it is important to remember that self-government is a value that the majority of those in the US share, across the political spectrum, and the trends above have been in motion across multiple administrations. 

In light of this, it may be useful for managers, board members and investors to consider for themselves: 

• How does this framing align with your thinking? How concerned are you with the weakening of institutions - personally or professionally?
• How is your organization experiencing this current moment—politically, socially, institutionally? What upcoming decisions or situations might bring these challenges home?
• What questions are emerging for you, around business' interest in constitutional democracy? Does it have any responsibilities to avoid harm, or to uphold institutions? 

Constructive Approaches in a Fraught Environment 

After reflecting on the questions above, I believe you will agree that business has an interest and a responsibility to uphold constitutional democracy when institutions weaken.  But the next question is more difficult – how to take action in fraught environment, where it is difficult to disagree without being partisan or inviting retaliation? I would offer that it requires advanced skills and nuanced action, much of it behind the scenes.   

As you consider your own organization’s approach, here are a few options to spark your thinking. I’ve drawn these from several sources, organized around three categories offered by the Brookings Democracy Playbook. 

Defend against co-optation and capture 

When business complies with pressure or seeks favors -- especially in the midst of weakening institutions -- it exacerbates distrust, tilts the playing field and undermines its own long-term interests. Here are several ways to redirect pressure to more constructive approaches:  

• Prepare – Run scenarios to expand your ability to respond in a crisis. Identify where complying with pressure could put your long-term strategy at risk. (Imagine exaggerated situations where you know you would need to set limits.)Create a Responsible Engagement Policy in advance so you can say no without antagonism. Reconsider practices that increase distrust and reputational risk, such as revolving door hiring or spending from the corporate treasury.
• Join forces – Engage your association and work with others where necessary to uphold long-term value and commitments, such as the American Bankers’ Association working with ALEC to ensure anti-ESG legislation did not violate shared values on limited government and free enterprise.
• Shift to a “Positive No” – Find a shared value with those who have concerns and agree where you can. Then set a simple, non-antagonistic limit where needed to adhere to your responsibilities and commitments and offer a proposal that allows others to advance their interests without compromising on what is essential.
• Be cautious about accepting favors – Watch out for incentives or special treatment that may create an obligation or make it more difficult to shift to long-term strategies in the future. For example, German carmakers operating in Hungary accepted concessions that may tie their hands later should they object to issues such as rule of law.  

Support Democratic Institutions and make democracy deliver 

The Democracy Playbook emphasizes that business can help by making democracy deliver for citizens. Here are several approaches, many drawn from Pat McLagan’s firsthand account of business’ role in South Africa: 

• Elevate shared challenges – In an environment of distrust, where solutions are viewed as driving narrow interests and agendas, it may make more sense to highlight problems and turn difficult decisions over to civil society.  For example, JP Morgan Chase’s recent paper Climate Intuition, highlights the challenges involved in weighing climate change accurately and responding rationally.
• Call for fairer “rules of the game” – leverage your trade associations to call for policies that align market incentives and enable long-term value for business and society. This requires debate but refocuses discussion on which rules of competition best fulfill the value of free enterprise, foster investment, enable jobs and promote shared prosperity.  In so doing, business can help enable faster growth, ensure that democracy delivers and address concerns about unfairness.
• Build bridges – In South Africa, several business leaders went on a “Trek to Lusaka” to meet with leaders of the ANC, despite this being illegal at the time, to understand their thinking. Others helped identify individuals who could serve as a “Bridge to Pretoria” to help opposing groups interpret each other’s actions. Today, groups such as Ceres help business leaders connect with elected representatives across the political spectrum about farsighted approaches to climate change and energy.
• Be available to civil society efforts– In South Africa, once business leaders had built trust with various parties, they formed the Consultative Business Movement which facilitated forums for various sectors to discuss the path to democracy – even conducting research on options for the constitution. Today, LeaderEthics in Wisconsin brings together business and other leaders to help ensure ethics in government.
• Reinforce those addressing distrust – When broad-based groups arise to address the “rules of the game” that affect trust, business leaders can lend their weight with information about how these provisions would impact them. For example, Business leaders supported the Electoral Count Reform Act to reduce future ambiguity and distrust of elections. Today, BFA is helping leaders support a bipartisan effort to eliminate insider trading in Congress as a major cause of distrust. Looking ahead, business could ask Congress and the states to reconsider historical bipartisan legislation to allow a pathway to citizenship. 

Pay attention to role in Social media/information 

Finally, the Democracy Playbook calls on companies whose industry plays a role in how citizens receive their news, data or facts, as to how their products and services amplify distrust and mis- or disinformation (or “fake news”).  

Across all three of these avenues, managers, board members and investors can reflect on their approaches, knowing the stakes are high for both action and inaction. Specifically, they might ask themselves: 

• What actions or channels do you see as most effective and appropriate for business to support democratic institutions, if any? Where is collective action needed?
• What examples might we learn from?
• How might your business be pressured in ways that would truly put its long-term value strategy at risk? What actions would you take then?
• What is the conversation your organization needs to have now? 

Conclusion and Implications for Individuals 

As you make sense of current events in terms of longer-term trends, it will be easier to form a point of view that allows you and your organization to play a constructive role – reducing potential harm and supporting constitutional democracy in more effective ways. As you wrap up your reflections, I leave you with three final questions to consider: 

• Where do you stand on the question of business and constitutional democracy personally?  Why might you want to act? How might your actions impact others in your organization?
• Where do you have questions about what is appropriate or legitimate? How might others view your actions? What concerns might they have?
• In light of these reflections, what feels legitimate, impactful and aligned for you?  

To support you in this journey, you may find the following resources helpful in The CPR Hub: 

• Why CPR – why Public Affairs feels like a “tightrope” and how principles-based decisions can help
• Mitigating the Ultimate Systemic Risk: Key Questions Investors Should be Asking about Public Affairs Governance Right Now
• Recognizing and Countering Authoritarian Threats to Democracy: What Role for Business?
• Acting Responsibly in A Democratic Society – with an invitation to share your responses
• Saying “No” to Empower your “Yes”: Practical Ways to Disagree without Picking a Fight (August 7, virtual) 

I hope you will reach out with your thoughts and experiences, so we can continue to provide tools and resources that are useful. You can contact us here.