History lesson: how companies found their voice
1971: The Federal Election Campaign Act (FECA), amended in 1974 after Watergate, made donor disclosure mandatory and created limits on campaign contributions and expenses. The reporting requirements remain intact. Spending limits don’t.
1976: The limits of the FECA have been contested as violating freedom of expression. The Supreme Court ruled that the restriction on contributions preserved “the integrity of our system of representative democracy”, but that the spending limits of the law were too severe. This laid the groundwork for interpretations that money is talk.
2010: In the United citizens In this case, the Supreme Court granted companies a first amendment right to express themselves politically using money. As a result, companies could raise and spend unlimited funds on “independent spending” as long as they didn’t coordinate with candidates or donate directly to campaigns. In response, so-called super PACs and nonprofits have sprung up to raise corporate funds for political purposes. In the 2020 election cycle, more than 2,000 super PACs spent $ 2.1 billion.
Understanding the U.S. Capitol Riot
On January 6, 2021, a pro-Trump mob stormed the Capitol.
Corporate PAC: press pause
The Capitol Riot forced companies to explain the reasons for their political spending and deal with the consequences of their franchise. This is especially true for companies that have announced a hiatus in donations from their political action committees.
Corporate PACs do not spend corporate money, but collect donations from employees and determine how they are spent, with a limit of $ 10,000 per candidate in an election year. It’s a drop in the bucket, relatively speaking, but because this activity has to be done outdoors, it attracts the attention of the public.
Executives compare their scores to decide what to do with their company PACs. How to support candidates on important subjects for the company without endorsing their other positions which may go against the values of the company? Are direct donations really worth it?
Days after the riot, Morgan Stanley singled out the 147 members of Congress, all Republicans, who challenged the election tally for his break in giving from PAC companies. He took this focused approach after consulting with his government relations, legal and compliance teams, as well as senior executives, including chief executive James Gorman, a person familiar with the matter said. In recent weeks, the bank’s large wealth management arm has faced some setback from clients threatening to take their business elsewhere, the person said.
Microsoft, which initially suspended all donations and held a series of employee meetings, announced Friday that it would suspend donations to those who voted against the certification of the election, as well as to state officials and organizations that “supported such objections.” The tech giant also said it would “foster and participate in a conversation with other companies” on “democracy building.”
Companies whose donations are still on indefinite hiatus, like BlackRock, Coca-Cola and Hilton, are unlikely to avoid having to take further action. Democrats have hinted that they would not look favorably on the companies that cut them off after the riot. At the same time, it’s a big step to avoid leading Republicans like Kevin McCarthy, the party’s leader in the House, who voted against voter certification.